Bush, Gore recount forces can raise unlimited cash without disclosure to public

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As the Republican and Democratic parties have frantically sought private money since Election Day to fund their candidates' recount efforts, they have entered an area where the Federal Election Commission has only limited jurisdiction. In this gray zone, the two parties can raise unlimited amounts of cash without necessarily having to disclose the donors or report on the amount of money they've raised or spent, according to legal and political experts. But these same experts warn that in the current, heated political climate, the parties should voluntarily reveal all information to the public.

Since the November 7 election stalemate, both the Bush-Cheney and Gore-Lieberman campaigns have created “recount committees” to pay the expenses of the swarms of lawyers and other observers who have descended upon Florida, New Mexico and other states in recount efforts. But those committees will not have to report their income and expenses to the FEC if they’re filed as separate entities from party and campaign committee bank accounts, according to the FEC and other legal and political experts.

Instead, they would have to report to the Internal Revenue Service under code sections 501 or 527, which apply to tax-exempt organizations.

Both campaigns have indicated that the recount committees are separate entities from the presidential and party campaign committees. The Gore-Lieberman camp has already registered its recount committee with the IRS as a 527 group, a political organization defined by section 527 of the Internal Revenue Code. Representatives from the Bush-Cheney campaign said they did not know what type of organization theirs would be.

Recount committees subject to campaign law

An official from the FEC — the government agency responsible for monitoring national campaigns and their financing — told The Public i that the campaigns have not yet notified the agency how the recount committees will be structured. Until they do, the agency will not know whether the committees will be required to file receipt and disbursement statements with the FEC.

But whether or not the committees file as separate entities, they are still subject to certain provisions of the Federal Election Campaign Act, over which the FEC has jurisdiction, said Sharon Snyder, an FEC deputy press officer.

“I’m not sure if they have to report (to the FEC). It depends on how they set these things up,” Snyder said, noting that the FEC has never before had to handle recount committees in a presidential race. “If they set them up apart from, and not controlled by, their campaigns, that would be a separate entity not subject to FECA reporting requirements.”

Federal Election Campaign Act regulations specify that a “gift, subscription, loan, advance, or deposit of money or anything of value made with respect to a recount of the results of a Federal election, or an election contest concerning a Federal election, is not a (campaign) contribution.” Snyder noted that recount committees for past House and Senate elections had sometimes been separate entities that did not report to the FEC. At other times, they took donations “through an existing (campaign) account,” and therefore did report.

Committees can be set up in various ways

Greg Colvin, an attorney in San Francisco with Silk, Adler and Colvin, a law firm specializing in nonprofit law, explained that if the recount committees are indeed separate entities, the political parties or campaigns have three options to register the recount committees.

“They could be the equivalent of a 527 soft PAC, which would have to disclose donor information to the IRS, but not the FEC,” Colvin told The Public i. Alternatively, “they could also say they are only interested in pursuing a nonpartisan outcome, in which case they would be a 501©(3), where they have to file tax returns, but there is no disclosure of donors.” A third option would be a 501©(4) organization, a sort of “bridge between charitable and political activity,” Colvin said.

Section 501 organizations are not required to itemize donors in their annual filings with the IRS. Section 527 groups, however, are required to disclose the names of donors and their specific contributions, either monthly or quarterly, with the IRS. The IRS makes both 501 and 527 organizations’ filings available to the public, either by request or through the IRS website.

But no matter how the recount committees are structured, one thing is clear: There is no ceiling on the amounts of the donations they can receive, the FEC’s Snyder said. This contrasts with the $1,000-per-contributor “hard money” limit that applies to individual and PAC donors to campaign funds. Snyder said the law is also clear that recount committees cannot accept funds from corporations, labor unions or foreign sources, as described in section 441 of the Federal Election Campaign Act.

“Contribution limits do not apply. They can take any amount from an individual or a PAC,” she said.

Experts say parties should disclose

The Bush-Cheney campaign has promised to release its recount donors’ names on its website within days of receipt, according to media reports. When this report was posted, however, the information was not available there.

Gore-Lieberman staff members said they were not sure whether they would volunteer disclosure beyond legal requirements. “We will make the names of the donors available — but I don’t have a timetable on that — in an IRS quarterly report,” a Gore-Lieberman spokesman said. “I’m not sure if it will be on a website as well.”

But independent sources say that party executives should go above and beyond what is required in terms of disclosure, particularly given the atmosphere in this year’s presidential race, when campaign finance reform became an agenda item.

“If the law doesn’t require it, I think that each of the parties has to be smart enough to have self-disclosure. Any time you don’t have to report to the FEC, that raises all kinds of red flags,” said Professor Dennis Johnson, associate dean of George Washington University’s graduate school of political management. “The whole process of having the FECA amendments of 1974 is to keep track of money, where it’s coming from and what sources are behind it. When you have soft money — which this is sounding like it’s drifting off into — you have to have reporting.”

There are no limits on soft money, which involves corporate, individual and union contributions to political parties.

Recount committees are unprecedented for a presidential campaign, although they have been created for U.S. House and Senate races. The focus on the committees this time could prompt further amendments to FECA, Johnson added. “Amendments are made because of events we never think of, and this is the kind of election we hope will never come along in our lifetimes again.”

William Trezevant, a lawyer with Krupin Greenbaum & O’Brien in Washington, and a former New York Democratic campaign manager, added that the onset of presidential recount funds could change campaigns’ financial planning in the future.

“The parties in the future could budget (recounts) into their campaign plans, especially if early polls suggest a tight race,” Trezevant said. “It’s an open question whether all the traditional rules regarding campaign fund raising apply, because it (a recount committee) is not a campaign.”

“What’s the FEC for?”

He added that, if the recount committees report only to the IRS as a 501 or 527 organization, it would be “another example that the FEC has been rendered largely neutered” by loopholes and common practice. “If a recount committee becomes merely another organization over which the FEC doesn’t have any authority, we have to ask ‘What’s the FEC for?’” he said.

Gore’s campaign started its quest for a special recount kitty the morning after the election and reached its $3 million goal in less than 24 hours, according to several media reports. One donor was Daniel Abraham, the founder and outgoing chairman and CEO of Slim-Fast Foods Co., who was already a major Democratic Party campaign contributor. The diet-planning franchise and food company is headquartered in West Palm Beach, Fla., one of the nerve centers of the election aftermath.

Neither Democratic nor Republican staffers would reveal other donors’ names, but independent sources say those offering up emergency cash will be endeared to the parties. “I suspect it’s no different from any other relationship between lobbying and campaign contributions,” Trezevant said.

A senior Democratic fund raiser told The New York Times, “This is crisis money. This is the time when whatever you give is really going to be remembered.” The Democratic Party has transferred existing campaign space and staff in Washington, D.C., and Florida to the recount effort, and both camps have enlisted several high-profile legal stars and former politicians. Most notable are former secretaries of state James A. Baker III and Warren Christopher for the Bush and Gore teams, respectively.

The Gore camp has also assembled for its legal team Harvard law professor Alan Dershowitz, a member of the O.J. Simpson criminal trial defense team; David Boies, who spearheaded the antitrust case against Microsoft for the Justice Department and more recently defended Internet song-swap site Napster against the recording industry. The Democrats also have Kendall Coffey, a former U.S. attorney who represented Elian Gonzalez’s Miami relatives earlier this year. Coffney is also known for defending Miami mayoral candidate Joe Carollo against election fraud charges in 1998; a state court reversed the election result after finding that scores of dead people and other fraudulent absentee voters had cast their ballots for Xavier Suarez.

Meanwhile, Republicans have tapped George Terwilliger III, a former deputy attorney general under President George Bush; Theodore Olson, former head of the White House Office of Legal Counsel under President Reagan; Bush campaign counsel Benjamin Ginsberg, a partner at the D.C. law firm Patton Boggs; Roberto Martinez, a former U.S. attorney for South Florida; and Barry Richard, a Tallahassee partner of Greenberg Traurig.

The Bush-Cheney campaign, which had expected a speedier resolution to the Florida recount, started the push for its recount fund the weekend after the election, with a mass e-mail sent by campaign Chairman Don Evans asking for amounts of up to $5,000, a self-imposed restriction. “These contributions, in keeping with Governor Bush’s ‘full disclosure’ policy on financial contributions, will be posted on the Bush-Cheney website. Any funds not spent will be returned on a pro rata basis,” Evans wrote. The Bush-Cheney Recount Fund had amassed $2.4 million as of November 15.

The next, and final, FEC deadline for campaign committees to report receipts and expenditures is December 7, which will cover the October 19 to November 27 period, Snyder said.

At the time of this report, the IRS website did not have the Bush-Cheney recount committee registered as a 527 organization. Section 527 groups are required to file a “statement of organization” with the IRS within 24 hours of their creation. If the committee is registered as a 501, disclosure will not take place until tax returns are due next spring.

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