David S. Bernstein

See How They Fund

One year ago, conventional political wisdom held that the Democratic presidential nominee would be in trouble right now. After spending all his cash in a tough primary battle, the thinking went, the candidate would have to spend April through June scrambling to raise money for the general campaign. In the meantime, Bush's team would be free to use that three-month window to define the Democrats' front-runner through attack ads the latter couldn't afford to counter.

Things turned out differently: the attack ads flung at Senator John Kerry have not gone unanswered. In fact, in addition to Kerry's own ads, more than $15 million of political advertising has run in the past three months, most of it bashing Bush, most of it in key battleground states–without costing the Kerry campaign a dime. The ads have been created and paid for by organizations known as "527s," named for the tax-code section that defines them. These groups do not fall under Federal Election Commission (FEC) regulations, as long as they limit their activities; most significantly, they cannot support a candidate directly or coordinate their efforts with a candidate's campaign.

They can, however, accept contributions of unlimited size, from anybody. Depending on your perspective, this is either an unsavory back-door maneuver around campaign-finance reform, or an exciting new outlet for political discourse.

Either way, it's probably a big reason why John Kerry entered July in a dead heat in the polls despite the tens of millions of dollars spent on negative advertising against him–and one of the reasons why Bush's favorability ratings are at an all-time low.

The best-known of these 527s is probably the MoveOn.org Voter Fund, formed last September by the progressive California-based MoveOn.org; its most recent television ad, running in Ohio, blames George W. Bush for losing American jobs to outsourcing. The most ambitious group, however, is an interrelated trio planning to spend more than $100 million on this election: Americans Coming Together (ACT), the Media Fund, and Joint Victory Campaign 2004, all operating out of Washington, DC. Its TV and radio ads include "No Oil Company Left Behind" and "Bush and Halliburton."

Another Washington group, New Democrat Network, is taking in and spending about a million dollars a month. Among its projects is an effort to recruit Hispanic voters into the Democratic Party. For the young and hip, there's Music for America and PunkVoter. Several well-known political-action committees, or "PACs," have started separate 527s (such as EMILY's List Non-Federal Fund, and Sierra Club Voter Education Fund). And there are issue-specific 527s, including one focused on labor (Voices for Working Families), one devoted to decriminalizing marijuana (Marijuana Policy Project Political Fund), and several committed to environmental issues (League of Conservation Voters, Environment 2004, State Conservation Voters Fund). In all, more than a hundred 527s filed a quarterly report with the IRS by the July 15 deadline.

The people funding these 527s, with millions of their own dollars, are arguably the Democrats' 2004 MVPs. Yet with the exception of financier George Soros, who has contributed a total of $12,481,250 in the past 18 months and who has been called to task in no uncertain terms by the GOP, they remain surprisingly unknown to the public and uncovered by the media.

The Phoenix has compiled a list of 12 donors (see below) who chipped in more than $1 million each during the first 18 months of the current campaign cycle–the start of 2003 through the end of June–to Democratic-leaning 527s. Collectively, this dozen has donated just over $50 million.

They include a range of people, from the business elite (George Soros, Lewis Cullman) to the glitterati (Stephen Bing, Susie Tompkins Buell), from the well-born (Anne Getty Earhart, Alida Rockefeller Messinger, Linda Pritzker) to the self-made (Andrew Rappaport, Marcy Carsey, Agnes Varis). There's even a drug-reformer billionaire (Peter Lewis)–and an environmentalist (John A. Harris).

Thanks largely to their largesse, 527s are, and will continue to be, major players in the 2004 campaign.

"The 527s are independent. I'm not familiar with what their plans are," says Democratic heavy-hitter Alan D. Solomont, of Boston, a major fundraiser for the Kerry campaign. "What they're doing, I think is terrific."

Congress created 527s 30 years ago, in the wake of Watergate. But only in the mid '90s did nonprofits (both liberal and conservative) begin to take advantage of them, according to Public Citizen, a public-interest watchdog group, and it took Congress until 2002 to require 527s to fully disclose their donors.

Today's 527 fever, which is predominantly liberal, is driven partly by anger with the Bush administration, but it's also been pushed by what former Massachusetts lieutenant-governor candidate Chris Gabrieli calls a "privatization of political activity." He's referring to the McCain-Feingold campaign-finance law that greatly reduced the amount of money individuals can give to party PACs–and what those PACs can do with the cash. Although 527s had existed previously, most large-money donors preferred to give directly to the party until that law passed in 2002.

"With the advent of McCain-Feingold, suddenly the [political] party wasn't running the kind of soft-money ads they had in the past," says Deb Callahan, president of the League of Conservation Voters, which operates a 527. "So donors are actively seeking out organizations like mine."

But that means donors must entrust their money to independent groups, many with no history or track record. That's why Cambridge social activists Greg and Maria Jobin-Leeds, for example, ended up hiring political consultant Mike Folgerberg to help them sort through the dizzying array of 527s before they gave $100,000 to Progressive Majority in January. "There are a lot of them, and almost all of them are new," Maria Jobin-Leeds says. Progressive Majority, founded in 1999, is positively ancient among 527s; dozens have been created in the last 12 months.

Steve Grossman, former co-chair of Howard Dean's presidential campaign and onetime candidate for governor of Massachusetts, says he's had three meetings with 527 executives. He's decided to work with the Kerry campaign instead, but he likes what those groups are doing. "At the beginning of this campaign, the Republicans thought they would have a three- or even five-to-one money advantage," Grossman says. "The 527s grew out of a deep concern that the values of the Democratic Party couldn't compete."

Grossman had to choose between Kerry and the 527s, because 527s are absolutely not allowed to coordinate their activities in any way with the Democratic Party. But how much coordination do you really need? "Anybody with any brains knows where the battleground states are, and where to spend the money," Grossman says.

Besides, these organizations aren't run by hicks–a lot of their leaders are former party insiders, like Harold Ickes at the Media Fund. Former Kerry campaign manager Jim Jordan is a strategy consultant for the Media Fund and America Coming Together. Or, take the New Democratic Network (NDN). Its president, Simon Rosenberg, is a veteran of the Democratic National Committee and former adviser to the Bill Clinton and Michael Dukakis presidential campaigns. Senior vice-president Maria Cardona is a former Democratic Party communications director. The NDN advisory board includes former chairs of the Democratic National Committee, Democratic Congressional Campaign Committee, and Democratic Leadership Council, as well as a former White House chief of staff and a former White House press secretary.

These organizations are sophisticated enough to have found a way to wriggle out of a legal straitjacket, a rule requiring 527s to spend less than half their money on federal campaign activities. They move the money around. The Media Fund runs advertising campaigns that are considered federal spending; its sister 527, Americans Coming Together (ACT), does "grassroots" polling and voter registration that counts as state and local spending. The Media Fund gives just over half its contributions to ACT, which counts as spending on local activities, and thus complies with the rule. Contributions to Joint Victory Campaign are split between Media Fund and ACT.

Needless to say, campaign-reform advocates, such as Common Cause, call this money-laundering, a dirty scheme for getting around the law. Republicans, meanwhile, had been caught napping; their success with "bundled" fundraising (in which "pioneers" reap rewards for soliciting contributions from many other individuals) led them to overlook the potential in 527s. This is one time liberals seem to have outfoxed the right. Thus far, the Republicans' vigorous legal efforts to stop 527s have failed, and now they're scurrying to set up their own.

To those who dislike the fact that 527s can accept limitless donations, supporters like Callahan point out that givers are cut off from the candidate completely, and thus cannot be involved in any sort of quid pro quo or pay-for-access arrangement. That claim's a stretch–a half-million donation to a Democratic-leaning 527 surely has more value to John Kerry than $2000 given to his personal campaign. But in reality, the wealthy have always given huge sums to progressive organizations–through 501(c)(3) organizations, which are your common, everyday foundation.

Even so, with such large amounts of money involved, the question remains whether these mega-donors are in the game to advance their own self-interest. Grossman, who knows "some of the individuals" on the $50 million-Dems list, says that the ones he knows give based purely on ideology. "They have a passionate belief in America, a passionate belief in inclusion, and a passionate belief that people should participate in a democracy," he says. "I have an enormous respect for what they are doing."

So does Scott Klinger, co-director of Responsible Wealth, a Boston-based organization through which rich people lobby against their own financial interests–in favor of the estate tax, for example. "People giving to 527s, they're not looking for a payoff," Klinger says. "George Soros has enough money, he could buy a small island and never deal with any of us again."

Corporations have been known to cover their bets by contributing to both the Democratic and Republican Parties, but the donors on our list are not playing both sides. Not one of the 12 has given to a Republican or conservative cause in this election cycle.

For their trouble, these big givers are setting themselves up as targets for the right wing. So far, Soros has been the only one publicly hit: the National Republican Senatorial Committee has labeled him an "out-of-touch, left-wing radical" with an "extreme agenda." Ickes says he has had meetings with people who would like to give, but don't want that kind of public grief. "They're not naive–when you weigh in against this president, that's what you'll get."

And lastly, remember that the jaw-dropping chunks of cash listed below should be viewed in context. A few years ago, Peter Lewis bought a yacht for $16.5 million; that he is willing to spend as much on the future of the free world should perhaps not be so surprising.

The $50 Million Club
The following list of a dozen donors contributed a total of $50 million to "527" organizations in the last 18 months.

1) Peter B. Lewis, Chair, Progressive Corp., Cleveland, Ohio

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