The Center for Public Integrity

Independent political groups favoring President George W. Bush or opposing Democratic Sen. John F. Kerry of Massachusetts have reported raising more than $26 million since June, narrowing the gap between them and other groups supporting Kerry, according to an analysis by the Center for Public Integrity.

Democratic-supporting groups have held an overwhelming advantage during the current election cycle – previous analyses by the Center have shown left-leaning organizations out-raising their GOP counterparts by as much as 9-to-1 – but the gap is decreasing. Republican-backing committees involved in federal races now account for one of every four dollars raised, about $42 million.

Reports submitted to the Federal Election Commission by two groups, Progress for America Voter Fund and the Swift Boat Veterans for Truth, account for the $26 million since July. Such groups, known as "527 committees" after the section of the Internal Revenue Code that defines their structure, have raised more than $150 million to influence the presidential campaign and House and Senate races this year. Tens of millions more have gone to state-oriented 527 groups.

Progress for America Voter Fund, which formed earlier this year and has been airing pro-Bush advertisements in competitive states such as Wisconsin and Ohio, has raised $24.7 million since June, according to FEC reports. That includes $5 million each from San Diego Chargers football team owner Alex Spanos and Ameriquest Capital co-chairman Dawn Arnall, $2.5 million from Texas oilman and business magnate T. Boone Pickens and $2 million each from Amway Corp. executives Richard DeVos and Jay VanAndel of Michigan.

In the 2004 campaign season, 22 well-heeled contributors have, for the first time, made Section 527 organizations—the non-profit committees that can raise unlimited donations from individuals, corporations and labor unions—beneficiaries of their largesse, giving at least $200,000 each and a total of more than $26 million since early 2003.

These 22 contributors, while new to the 527 system, have each previously made donations to candidates and parties on the federal level. When contributing to 527 groups, most of these newcomers directed their money to organizations that opposed the re-election of President George W. Bush, according to a study by the Center for Public Integrity.

The infusion of cash from first-time donors, coupled with the recent inactivity of many of the largest contributors to 527 groups since disclosure began in 2000, points to a changing of the guard among individual contributors in the current election cycle.

Every first-time donor has contributed to a 527 that has focused advertising on national electioneering. While new to the 527 system, these contributors have given at least $4.8 million since 1991 to political committees that, unlike 527s, are regulated by the Federal Election Commission. The 527 groups file with the Internal Revenue Service, not the FEC.

Almost 95 percent of their 527 contributions have gone to Democratic-leaning groups—many of which are running issue ads or registering voters to defeat Bush. Joint Victory Campaign 2004, which primarily splits its proceeds between two other anti-Bush committees, has taken in the most from this new club of donors, relying on them for $15.7 million; overall, JVC has raised $41.7 million.

JVC provides money to America Coming Together, which canvases and employs people to increase voting efforts, and the Media Fund, which has run ads criticizing the President entitled: "Bush and Halliburton," "Broken Promises," and "No Oil Company Left Behind."

Disclosure documents from the Internal Revenue Service reveal that political non-profit organizations have amended filings to include previously unreported contributions and expenditures—some in excess of $1 million—yet have faced little, if any, sanction.

IRS records reviewed by the Center for Public Integrity contain three dozen examples in which the difference between the original and amended reports was at least $100,000, including nine where the total gap was $1 million or more. Some of those amendments covered 2002 activity but were not filed until earlier this year, a time lag of more than 15 months. Other committees filed reports on paper when IRS rules required them to submit electronic forms. Yet the forms contain few references to any fines or penalties paid, and none by committees with the largest amounts of late or previously undisclosed activity.

In contrast, some committees that have failed to file reports, whether due to oversight or ignorance of the law, have paid tax penalties, records and interviews show. Critics of the IRS said the agency's enforcement effort was ineffective and uncertain.

Although the tax agency has a formula for calculating fines for non-disclosure, there are few details on the enforcement process or even whether committees are disciplined for making incomplete reports or missing filing deadlines.

Late or incomplete filings of contributions or expenditures trigger a penalty "calculated by multiplying the amount of contributions and expenditures that are not disclosed by the highest corporate tax rate, currently 35 percent," according to a 2003 IRS document. The same applies to non-filers.

"It's just another instance of the IRS exempt organizations division failing to do its job," said Frances R. Hill, a tax expert who teaches at the University of Miami School of Law and studies political non-profits.

America Coming Together, a political non-profit group opposing the re-election of President Bush, spent more than $1.1 million and deployed at least 700 people in Ohio in the six months ending in April, heavily focusing its early efforts on that battleground state, according to a Center for Public Integrity analysis of federal records.

Bush himself made his 18th trip as president to Ohio in mid-June, just days after Massachusetts Sen. John Kerry, his likely Democratic opponent in November, visited the state. But the candidates are just a part of the political activity in Ohio, which has seen get-out-the-vote operations for months.

Groups like ACT, known as 527 organizations after the section of the tax code that governs political committees, have raised nearly $184 million since the end of 2002 to use for get-out-the-vote operations, political advertising and contributions to state and local candidates. Many of the largest such committees oppose Bush's re-election, although conservatives have a handful of 527 organizations, too.

Perhaps the best-known of the 527s focused on the ground game, ACT has raised more than $19 million during 2003 and 2004, the third-largest amount of any 527 organization (the largest, the Joint Victory Campaign 2004, splits its money between ACT and the Media Fund, a related committee).

ACT has paid out $778,829 in salaries in Ohio, accounting for about seven of every ten dollars it spent in the state. Although a majority of the nearly $10 million spent so far by ACT came in the Washington, D.C., area, it has spent more on salaries in Ohio than on any other state in the nation. Excluding the capital area, Missouri, Pennsylvania and Florida have the next largest contingent of paid ACT employees, according to Federal Election Commission records.

Driven by a surge in giving by wealthy individuals, political non-profits raised more than $59 million during the first three months of this year, with much of that money going to groups dedicated to defeating President George W. Bush in November, an analysis by the Center for Public Integrity shows.

Three individuals—film producer Stephen L. Bing, financier George Soros and insurance executive Peter B. Lewis—gave $11 million during January, February and March to several "527 organizations," so-called because of the section of the Internal Revenue Code under which they're organized. Five other individuals, all supporters of liberal causes, contributed at least $1 million each during the same period, according to the Center's analysis of reports filed with the Internal Revenue Service.

The $11 million from Bing, Lewis and Soros during the first quarter boosted their combined total to 527 committees to $26 million since disclosure began in late 2000. Most of that money has come in the past 18 months. Bing's $5.1 million in contributions this year boosted his 527 contributions since 2000 to $9.8 million, second among individuals only to actress Jane Fonda, who gave more than $13 million—mostly in support of abortion rights—during 2000 and 2002.

As Mark Twain once put it, "A truth is not hard to kill and a lie told well is immortal."

In the 21st century in the United States of America, it is still astonishingly easy to assassinate a political opponent's character, with little or no accountability or basis in fact. It is hardly new to politics anywhere that money and the messages it buys often create devastating perceptions. But such smear tactics are more serious and offensive when they benefit major "mainstream" candidates seeking the Presidency, are utilized anonymously by mysterious, outside organizations and they occur in the wake of recent, historic, campaign finance reform and new political disclosure requirements.

It was the morning of November 6, 2002, the day after Democrats had lost control of the U.S. Senate, lost ground in the U.S. House of Representatives and were soundly beaten in several key gubernatorial races.

The man at the top of the party, Democratic National Committee Chairman Terry McAuliffe, had some explaining to do. Standing before the gathered media in Washington, D.C., he returned to a longtime Democratic lament: Republicans simply had more money.

Fundraising figures reported to the Federal Election Commission seemed to suggest he was right. The Republican Party raised slightly more than $691 million in the 2002 election, about $228 million more than the Democrats.

The GOP "had tens of millions of dollars of special interest money on their side," McAuliffe told the assembled reporters, and that had tipped a number of races in their favor.

In fact, the disparity was not nearly as lopsided as McAuliffe suggested. As a new Center for Public Integrity analysis shows, Democrats and their allies funneled hundreds of millions of dollars through backdoor committees designed to influence key elections. In the 2002 race, the Democratic Party's silent partners spent more than $185 million—more than double the money spent by Republican organizations.

National political parties may be banned from raising "soft money" under a new campaign finance law, but partisan gubernatorial associations have gone on accepting unlimited contributions from many of the same corporate and labor union donors for use in statewide elections.

The Republican Governors Association and the Democratic Governors' Association are both organized as 527 committees and legally are not affiliated with their respective national party committees. Because they are associations of elected state officials, they can accept the kind of soft money contributions that are no longer permitted at the federal level.

To do so, the RGA had to break away from the Republican National Committee late last year, when the Bipartisan Campaign Reform Act took effect, and create its own 527 account. The DGA has been a 527 committee since at least mid-2000, after a gradual separation from the Democratic National Committee that began in the 1990s.

This year, the two committees have raised more than $10.1 million combined, according to records filed with the Internal Revenue Service. The RGA has raised the most money in 2003 of any committee—$6.4 million through August 31—while the DGA is second with $3.7 million through June 30.

The money the two groups raise cannot be spent on federal elections, but it can be used for voter mobilization and party organization, as well as for direct contributions to gubernatorial candidates. Because they are not technically party committees, thanks to their separation from the national party structure, the DGA and RGA are not always treated as non-party committees at the state level, due to differences in state election laws.

Some political committees with ties to federal lawmakers and candidates continue to raise and spend "soft money," even as the Supreme Court considers the constitutionality of the new law banning the practice.

The federal campaign finance law that took effect on November 6, 2002, and outlawed fundraising by these 527 organizations (so named because of the section of IRS code that regulates them), has produced a number of responses from affected committees. Some closed down, some reorganized by severing direct links to federal candidates, and others went underground, assuming the garb of other types of non-profits.

Many of these "politician 527s" were leadership committees that raised money for candidates of specific ideologies and were extensions of hard money accounts reported to the Federal Election Commission. FEC guidelines prohibit donations to a federal leadership committee of more than $5,000 per year from an individual or political action committee, but 527 committees can accept unlimited contributions. What's more, it was not until August 2000 that these committees were required to report receipts and expenditures to the IRS.

Before the passage of last year's Bipartisan Campaign Reform Act, there were 119 soft money accounts connected to federal lawmakers that collected almost $50 million during the last three years, according to the Center's analysis of available IRS reports. Of these organizations, only about 110 have reported receiving or spending money during that time period; most took advantage of their status to raise funds that would have exceeded federal limits. In fact, 40 percent of the total money raised was in denominations of $20,000 or more. After last year's midterm elections, only 15 of the politician 527s remain active.

A group made up entirely of college students and recent graduates—the College Republican National Committee—has become one of the most successful youth-oriented fund-raisers in the country, spending more than $10.6 million during the past two years to promote Republican candidates and issues.

Since separating from the Republican National Committee in October 2001 and becoming a Section 527 committee, the CRNC launched an aggressive direct-mail fundraising campaign that relies on thousands of individual donors. The $10 million in spending since mid-2000 puts CRNC in 11th place among the 471 committees the Center for Public Integrity analyzed.

Most of that money was spent on operational expenses: it helped to cover the group's expensive mail fundraising effort, to pay its more than 30 full-time field representatives and to support its at least 1,100 college chapters nationwide. Prominent Republicans credit the CRNC for turning out young supporters in the November 2002 elections that resulted in the GOP's victory in the House and Senate.

"We could not have had such a successful victory if it had not been for all of your efforts," wrote House Speaker J. Dennis Hastert of Illinois in a July 2003 letter to the organization.

As a 527 committee, the CRNC is an independent actor. Its Democratic counterpart, the College Democrats of America, is the "official college outreach arm of the Democratic Party" and remains tied to the resources of the Democratic National Committee. The CDA claims at least 500 chapters on its official Web site and also conducts voter registration drives.