Poking Loopholes in Reform Laws : White House Hopefuls Try New Fund-Raising Ideas

WASHINGTON — Twelve years after Watergate shocked Congress into enacting strict limits on spending and giving for presidential campaigns, White House aspirants gearing up for 1988 have developed a series of disturbing techniques for widening old loopholes and poking new ones in those campaign reform laws.

And among the most prominent of the candidates skirting the spirit if not the letter of the new rules are the current presidential front-runners in both parties--Republican Vice President George Bush and Democratic Sen. Gary Hart of Colorado.

Bush has created an entity called the Fund for America’s Future, a political action committee established by the vice president ostensibly to help other Republican candidates. But the fund is also active on Bush’s own behalf, especially in Michigan, where that state’s August primary begins the process of selecting delegates for the 1988 Republican National Convention.

Hart, meanwhile, has created the Center for New Democracy. Described as a nonpartisan educational foundation and financed by tax-deductible contributions, it states its mission is to find answers to domestic and international problems. But the activities of this “think tank” also benefit Hart, especially by bolstering the claim, essential to his White House ambi tions, that he is the candidate of new ideas.

It may be true, as Bush, Hart and other hopefuls insist, that they conform to the letter of the law. But the PACs and tax-exempt foundations--by enhancing their founders’ prestige, expanding their contacts, testing their ideas, sometimes paying expenses that seem likely to advance their political fortunes--raise troubling questions about whether they comport with the lofty, cleaner-than-a-hound’s-tooth spirit of the reforms.

In broadest terms, the reforms sought to prevent wealthy individuals and special interests from distorting the political process by using their money to gain undue influence on candidates. The effort was two-pronged: Individual contributions were limited to $1,000 each and restrictions were imposed on what presidential candidates could spend in each state and in their overall campaigns.

But by using such foundations and so-called multicandidate PACs while remaining undeclared candidates, aspirants for the White House can advance their political fortunes unencumbered by the fund-raising and spending restrictions of the reform laws. And in the cases of the foundations, there is no mandatory public accounting on who contributes or how much.

What critics fear from this eruption of political ingenuity is that confidence in government and the political system will be eroded if voters see presidential candidates begin their quest for the nation’s highest office by squirming through legal loopholes. And the increasing circumvention of the reforms could even bring back the free-and-easy campaign financing that contributed--during the Richard M. Nixon era--to the worst political scandal in U.S. history.

No Quick Answer

Because the PACs and the think tanks operate in a fuzzy area of the campaign finance and tax laws where both the Federal Election Commission and the Internal Revenue Service are reluctant to tread, no one sees any quick answer to the problem. “I think it’s only going to get worse,” says FEC Chairman Joan D. Aikens of the trend toward PACs created by prospective presidential candidates. “I am sure that there are going to be more committees formed, they’ll probably be formed earlier and they’ll raise more money.”

A solution, Aikens says, may come only through new federal legislation. But Fred Wertheimer, chairman of Common Cause, which monitors campaign finance law compliance, contends that the FEC itself is part of the problem.

Specifically, Wertheimer cites an advisory opinion issued last March in which the FEC overruled its own legal staff and approved the activities of Bush’s PAC in Michigan. The majority contended that the August vote there for Republican precinct delegates is mainly a state party activity, and not really part of the presidential nominating process, even though the winners will ultimately shape the Michigan delegation to the 1988 GOP convention.

‘A Very Basic Issue’

Whatever the reasoning behind the FEC ruling, Wertheimer contends, “The vice president faces a very basic issue here--whether he is going to go on and evade the law with his PAC or whether he is going to comply with the spirit and integrity of the law.”

Bush, however, is quite content with the FEC decision--just as other presidential hopefuls see no problem with their activities. “We’ve got a clean bill of health,” says Bush, referring to the FEC ruling.

Similarly, Hart says his think tank “has avoided not only the reality but also the appearance of serving my interest,” even though he is chairman of its board of directors and his sister-in-law, former Rep. Martha Keys (D-Kan.), is executive director.

The FEC ruling that efforts by Bush’s PAC in Michigan need not be counted against the financial limits imposed on Bush as a candidate for President, startled many political professionals who have all along viewed the Michigan competition as the first skirmish in the 1988 GOP campaign.

PAC to Spend $100,000

David Keene, an adviser to Sen. Bob Dole (R-Kan.), another 1988 GOP hopeful with a PAC, notes that Bush’s PAC has four full-time and nine part-time staffers in Michigan and plans to spend $100,000 there before the August vote.

“Before the FEC decision I cautioned Dole against letting his PAC become too active in Michigan to avoid trouble with the election law,” Keene recalls ruefully. “Now I discover the loophole is so big you can drive a truck through it.”

Former Tennessee Sen. Howard H. Baker Jr., still another 1988 GOP prospect, sought to avoid conflict by setting up a political action committee to help out other candidates, and a separate organization, called the Baker Exploratory Committee, to test support for himself.

“When you set up a multicandidate PAC you are telling contributors that you will be a conduit to other candidates,” says Tom Rath, director of the exploratory committee, which has so far raised about $300,000. “To then turn around and use those dollars for a personal political organization runs contrary to that proposition.”

FEC Requirements

Under FEC regulations any money spent or received by Baker’s exploratory committee would be counted against the contribution and expenditure limits of his presidential campaign organization, should he become a declared candidate. That is one reason, Baker’s aides believe, that so far he is the only 1988 prospect to have such a committee.

By contrast, a good number of potential White House candidates have started multicandidate PACs. On the Republican side, besides Bush and Dole, there are New York Rep. Jack Kemp and television evangelist Pat Robertson, and among the Democrats, Gov. Bruce Babbitt of Arizona and Missouri Rep. Richard A. Gephardt.

Bush’s PAC is by far the biggest and richest, with 25 staff members in Washington alone and receipts of more than $7 million, according to counselor Ede Holiday. That figure is more than twice as much as Walter F. Mondale’s PAC took in while he was warming up for his presidential candidacy and helping Democratic candidates in the 1982 election.

Giving to Others

So far, Bush’s PAC has given only about 8% of its total receipts, some $570,000, to other Republican candidates. For some of the other PACs, the percentage is even smaller. Bill Phillips, executive director of the Bush PAC, contends that the pace of PAC contributing to candidates will pick up when the intraparty primary contests have been concluded and the general election campaign nears.

John Buckley, a spokesman for Kemp, who has raised $1.47 million while contributing only about 3% of that, or $45,000, says these figures do not take into account money Kemp has helped other Republicans collect by appearing at their fund-raisers--a total of about $1.4 million by Buckley’s reckoning.

“I would acknowledge,” Buckley adds, “that anything Kemp does prior to running for President could accrue to his benefit.”

William Romjue, director of Gephardt’s PAC, the Effective Government Committee, says that by paying Gephardt’s way around the country, the committee with its eight staffers is helping him to become “a better drawing card” for fund-raisers. So far, Gephardt’s PAC has taken in $461,000--more than any other Democrat--while contributing only $6,800--about 1.5%.

Gephardt’s Travels

Gephardt visited 31 states in 1985 and 17 this year, including Iowa, where the 1988 Democratic delegate selection process will begin and where Gephardt has made nine stops. “I’m not trying to be too cute,” says Romjue. “Somewhere out there is the possibility of a presidential race.”

Compared to PACs, tax-exempt think tanks such as Hart’s Center for New Democracy are relatively new among presidential prospects but they are increasing in number. Last year, Hart’s potential Democratic rival, Babbitt, set up an organization called American Horizons while associates of Republican prospect Robertson established the National Perspectives Institute.

In addition, two educational foundations set up in 1981 have taken on added salience because of their founders’ presidential ambitions--Kemp’s Fund for an American Renaissance and the Freedom Council set up by Robertson, which recruits Christians to get into politics on a nonpartisan basis.

Book of Kemp Speeches

Kemp’s fund, with a budget of about $175,000, is publishing a book of his speeches and producing a television documentary highlighting such Kemp proposals as urban enterprise zones. The Freedom Council spends about $1 million a year on field operations; it has dispatched eight of its 28 staffers to the Michigan battleground. Its recently hired state coordinator, Marlene Elwell, was Michigan field director for the Reagan-Bush campaign in 1984.

In an effort to keep within the law, the Michigan Freedom Council has not sought commitments to any specific candidate. Yet Robertson, because of his prominent identification with religious conservatives, stands to benefit from an upsurge in their political activity.

Such groups are granted their special tax status because they claim to operate “exclusively” for educational purposes. They are prohibited from participating in political campaigns.

As educational foundations, these think tanks have special advantages over PACs. Not only are contributions to them tax exempt, but they can accept money without any limit, including funds from domestic and foreign corporations, which are prohibited from contributing to political campaigns. Moreover, as tax-exempt groups they can take advantage of discounted postal rates to build up mailing lists of contributors.

Baucus Sees Abuse of Law

“It seems clear to me that the law is being abused,” says Democratic Sen. Max Baucus of Montana, a member of the Senate Finance Committee, who wants to hold hearings on the issue. “It was not intended to promote presidential campaigns.”

No one disputes that these foundations serve an educational purpose. They sponsor conferences and symposiums and publish books and papers on a wide variety of public concerns. But they also appear to benefit their founders, not only by paying some of their expenses but by providing research material on key issues and heightening the perception of them as men of ideas.

“We’re in an era of politics where ideas, or the perception that one has ideas, is important and that is what has spawned these things,” Hart points out, although he argues that the think tanks are “not just a means to skirt the campaign finance laws.”

Hart’s center, which has a $500,000 annual budget, has sponsored a symposium on dealing with the problems of a potential future recession and a conference on U.S. trade with Asian nations, financed in part with $5,000 contributions from such companies as American Express, Korean Air, Nike Inc. and Nippon Steel.

Hart participated in both events, his role duly publicized. And he has cited the center’s work to potential supporters as evidence of his continuing “search for new policies for the future.”

“I would hope that the center would contribute enormously to his (Hart’s) presidential campaign if he runs,” says center director Keys, who adds: “But our work is not done for that purpose alone.”

Critics also point to concrete benefits to White House hopefuls. “A potential candidate can write off travel expenses, and shelter his whole issues operation this way,” says Richard Moe, former top aide to Mondale. “It’s a whole new system for political financing.”

One of the most frequently heard complaints about the use of tax-exempt foundations by political figures is that these groups are not legally required to disclose details about the contributions they receive. “You have no idea who the contributors are,” says Baucus, who points out that such disclosure is one of the cornerstones of campaign finance reform.

Blunting Criticism

To blunt such criticism, Babbitt’s foundation says it discloses the names of its contributors. Hart promises a full list and Kemp’s foundation also plans to disclose the names of future contributors after putting them on notice that their identities will be revealed.

In the short run, the best chance for curbing the use of such organizations appears to depend on a negative public reaction.

Yet for his part, Bush professes not to be worried about such a backlash. “This is not an issue that people are getting upset about,” says the vice president, who late last month spent three days in Michigan under the auspices of his PAC, meeting with candidates for precinct delegates in the August vote.