Legal Status of 527 Groups Provokes Debate

April 9, 2009

By Benjamin Dangl

9/30/04

In many ways, this election year has served as the testing ground for a newly popular political phenomenon: so-called 527 committees. Named after the tax code they fall under, “527s” operate as shadow political campaigns working indirectly for or against a particular candidate. They coordinate voter outreach and education, ad campaigns, and fundraising efforts. Leading 527s include the anti-Bush organizations Media Fund, America Coming Together, and anti-Kerry groups like Swift Boat Veterans For Truth and the Progress for America Voter Fund.

Their position is as precarious as it is effective. Prominent think tanks and campaign finance reform lobbyists say 527s are “illegal loopholes” that enable the privatization of political campaigns.

Spokespeople for 527s describe their organizations as harnessing political enthusiasm for this year’s election through canvassing, registering people to vote and persuading more citizens to get involved in the political process.

The popularity of such groups is an ironic byproduct of the 2002 McCain-Feingold campaign finance law. Mark Glaze, Director of the Government Ethics Program at The Campaign Legal Center in Washington, DC, explained, “The point of the McCain-Feingold court decision was to get corporations, labor unions and large donors out of campaigns.”

Glaze said now that such entities can no longer give to political parties, they give to 527s instead, since 527s can accept unlimited amounts of money as long as they do not coordinate their efforts directly with any particular campaign.

For instance, America Coming Together reaches out to undecided voters in a canvassing campaign focused on criticizing the Bush administration’s policies in health care, education and the economy. Meanwhile, through television ads, the Swift Boat Veterans for Truth attack the way John Kerry has portrayed his service in Vietnam.

Glaze believes 527s are illegal. “Under federal election law, any organization that has a purpose of influencing elections is also a political committee,” he said. “We’ve asked the Federal Election Committee [FEC] to rule on this and they won’t.” Glaze believes 527s should register with the FEC as political committees and submit themselves to the same regulations. “America Coming Together, the Swift Boat Veterans — if you look at what they are doing, their prime motive is to influence a federal election.”

As political committees, those groups currently classified as 527s would have to “disclose all donors, amounts and addresses of donors to the FEC,” Glaze adds. “They would also be subjected to contribution limits.”

If the 527s were to register as political committees, they would be forbidden from accepting contributions from corporations and unions. Additionally, they could only accept up to $5,000 per year from any one individual and they would have to disclose information about how they spend their money.

Instead, 527s enjoy remarkable freedom, and the FEC does not plan to take action on this issue of 527s until after the elections in November, Glaze said.

Not surprisingly, the 527s dismiss critics like Glaze. “They don’t understand the law or they are misleading,” said Sarah Leonard, a spokeswoman for America Coming Together, in response to accusations that her organization’s actions are illegal. “[America Coming Together] has always and will always follow the letter of the law.”

Many 527s see themselves as grassroots organizations that offer a way for interested citizens to participate in this year’s campaign. They say they do not perceive their existence as the product of a loophole in campaign finance law meant to eliminate precisely the role they serve.

In response to suggestions that America Coming Together and other 527s should register as a political committee and submit to regulation by the FEC, Leonard said, “They’re entitled to their opinion, but the president and Congress passed a campaign reform bill that allows America Coming Together and other organizations to participate in the political process in the manner that we are.”

The groundswell of interest in this year’s election has empowered 527s with thousands of volunteers and paid staff. In an effort to sway voters away from Bush, America Coming Together has mobilized canvassers to knock on doors in swing states across the country. Through their outreach efforts, the group has pledged to contact more than seventeen million swing voters by Election Day 2004.

“We have thousands of people in fifteen states asking people to take this election seriously,” Leonard explained. “The goal is to increase voter participation in this election. Hundreds of thousands of voters have been registered so far. In some states, America Coming Together encourages neighbor-to-neighbor interaction and there are some organizational meetings on the local level. The goal of the meetings is to organize the neighborhood to help elect progressive candidates in all levels of government.”

Craig Holman, the legislative representative of the Washington, DC-based think tank, Public Citizen, said the image of 527s as grassroots phenomena is outdated. “That image of a 527 only applies to MoveOn, which was started up by funding from Peter Lewis and George Soros, but now relies heavily on small, individual donations.”

Through MoveOn, advocacy groups are developed around such issues as the environment, media consolidation and war. MoveOn then helps facilitate meetings, letter-to-the-editor campaigns, petitions and marches around the specific issues. Claiming a network of over 2,000,000 online activists, MoveOn has helped register tens of thousands of new voters.

Other 527s, including America Votes and the New Democrat Network have been reaching out to youth and Hispanic voters, in an effort to bring them more directly into the political process. EMILY’s List mobilizes young women voters to help elect progressive candidates. The group also recruits and funds women candidates and helps them run an effective campaign.

Holman says that 527s like America Coming Together, the Media Fund and the Swift Boat Veterans for Truth are not grassroots organizations because they are all “relying heavily on money from rich individuals, corporations and unions.”

By operating outside the regulations of campaign finance reform and allowing wealthy individuals, corporations and unions to donate large amounts of money, Holman believes the 527s are subverting the democratic process.

“We turn into a system where we select representatives and president based on money,” he said. “The wealthy individuals and organizations choose who gets elected. It’s not a system based on one person, one vote.”

But according to Leonard, her group, America Coming Together, is a grassroots organization. She said more that $80 million has been donated “by more than 100,000 contributors at all levels, from five dollars on up.”

According to the non-partisan Center for Responsive Politics, which based its analysis on records released by the IRS, funding for America Coming Together has also come from international financier George Soros, who donated $5 million, and from the Joint Victory Campaign, to the tune of $13 million. The Joint Victory Campaign acts in part as a fundraising tool for America Coming Together and the Media Fund, which runs anti-Bush ads in swing states. The IRS reported that the Joint Victory Campaign has received nearly $8 million from Peter Lewis, Chair of the Progressive Corp., an automobile insurance company, and $4.5 million from George Soros.

Mike Russell, a spokesman for the Swift Boat Veterans for Truth, said his group relies heavily on small donors as well. “The Swift Boat Veterans have received $6.7 million, much of it from individual contributions,” he said. “We’re made up of citizens and supported by citizens around the country.”

According to a report filed with the Federal Elections Commission disclosing the funding sources for $1.9 million of the group’s money, the largest contribution to the Swift Boat Veterans was made by Boone Pickens, the founder of Mesa Petroleum, the largest independently run gas and oil producer in the US. He donated $500,000. Aubry McClendon, also in the oil industry, contributed $250,000. The majority of donations listed in the disclosure were $1,000 or more.

Another criticism of 527s is that they are collaborating directly with candidates’ campaigns. Though it is very difficult to prove that an organization is illegally coordinating its efforts with the official organizers of a political campaign, there are some very close ties between both Bush and Kerry’s campaigns and key 527s.

Perhaps the most infamous example of such relationships is the connection between the Swift Boat Veterans for Truth and the Bush campaign. Benjamin Ginsberg, who worked as outside counsel for the Bush campaign and the Swift Boat Veterans resigned amidst controversy and accusations that the Swift Boat Veterans were coordinating with the Bush campaign.

According to Russell, “Ginsberg chose to step down from the Bush campaign because he didn’t want this to be a distraction for the Bush campaign.” Ginsberg continues to work for the Swift Boat Veterans.

News organizations and critics of the Kerry campaign have been quick to point out ties between 527s and the Democratic ticket as well. For instance, Harold Ickes, a previous Clinton aide and member of the Democratic National Committee, runs the Media Fund.

During the height of the Swift Boat controversy, Bush, while refusing to condemn the specific actions of the Veterans working on his behalf, called for a cessation of 527 activities. But for reform activists like Holman of Public Citizen, Bush’s condemnations rang hollow. “The majority of 527s are pro-Democratic party,” he said. “If they were pro-Republican, you wouldn’t hear them complain.”