National GOP exchanges soft money for hard in Florida

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The National Republican Senatorial Committee sent more unregulated soft money to the Republican Party of Florida than to any other state party this election cycle, despite the fact there is no Senate race there this year.

The NRSC, which aids party candidates running for U.S. Senate, transferred a total of $3.2 million from its soft money account over five days to the soft money account of the Republican Party of Florida. Soon after each transfer, the Florida GOP transferred slightly lesser amounts of federally regulated hard money $2.7 million in all back to the NRSC in Washington. On three separate occasions, the funds moved on the same day, records show.

While Florida does not have a Senate race, the contest between Democrat Bill McBride and Gov. Jeb Bush, the Republican incumbent and brother of President George W. Bush, is a close race.

The transactions between the NRSC in Washington and the Republican Party of Florida are beneficial on both sides. Under Florida election law, direct contributions to candidates are limited, but there are no limits on soft money transfers to the state parties.

Meanwhile, the NRSC is able to transfer the hard dollars from Florida to battleground states around the country. The stakes in this year's midterm election are particularly high given that Democrats hold a majority in the Senate by a single vote.According to state records, the top recipient of the state GOP's money* is the MPGH Agency, a Falls Church, Va., political communications consulting firm that has been producing advertising for Jeb Bush. The firm received a little over $8 million through August, according to state campaign spending records.

According to a Center for Public Integrity analysis, Florida's GOP received more money from the NRSC than any other state party in the first six months of 2002. The committee transferred $8,072,589 to all state GOP parties from January through June 30, the latest information available, with $3,165,750 going to Florida, or 39.2 percent of the total.

Every other state that received large transfers is host to a competitive U.S. Senate race. Second in transfers is Minnesota with $825,729 where Democratic Sen. Paul Wellstone is fighting a tough battle for re-election. Third is Oregon at $610,978, home to another tight race. Fourth is South Dakota, yet another battleground at $502,313 and rounding out the top five is Missouri at $436,947.

The timing leaves little doubt the transfers are related:

  • On Jan. 17, 2001, the NRSC wrote two checks to the Florida state party one for $276,000 and one for $1 million. One week later, the state party transferred $1.1 million back to Washington in hard money.
  • On March 9, 2001, the NRSC transferred $406,000 to Florida. On the same day, a hard money transfer of $350,000 was sent back to Washington.
  • On April 30, 2001, the NRSC transferred $240,000 in soft money to the Florida party, and $200,000 in hard money was sent back the same day.
  • On June 27, 2001, the pattern changed. A total of $275,000 in hard dollars was sent north and two days later, on June 29, 2001, $343,750 in soft money was transferred to Florida,

Finally, on Feb. 5, 2002, $900,000 in soft money went to Florida and $750,000 in hard money came back the same day.

Soft money is raised by national party committees in unlimited amounts, often from corporations and labor unions. The use of soft money is limited. It can't be spent to directly advocate the election of a candidate, but can be used to pay for so-called issue advertising.

Hard money is hard because it's hard to raise and it is more valuable, said Robert Biersack, who tracks soft money spending at the FEC. In simple economic terms, if you are going to give up that hard money, you're going to get something in return.

Critics of soft money say these types of transfers amount to a type of money laundering. One former Federal Election Commission chairman deemed the practice a money exchange. The fund shifts allow the national party committee to leverage unregulated soft money - which is easier to raise - to acquire much more valuable hard dollars, without violating election laws.

Robert Stern, president of the Center for Government Studies in California, called the example one of the highest forms of money laundering. Stern's group is currently working on a study regarding disclosure of campaign finance information in state and federal campaigns. This is not small potatoes, he said, referring to the large amounts that are going back and forth.

Following the Nov. 5 elections, the Bipartisan Campaign Finance Reform Act, better known as McCain-Feingold or Shays-Meehan after its Senate and House sponsors, bans soft money contributions to the national parties.

While the Florida transfers are impressive in scale, the practice of trading hard dollars for soft is hardly a GOP-only activity, according to Towson Fraser, press secretary for the Republican Party of Florida.

Transfers between national and state party committees are completely legal, we follow the law precisely, and the Democrats do it as much if not more than Republicans, Fraser told the Center.

For example, the Democratic Senatorial Campaign Committee transferred $1.1 million to the Michigan Democratic State Central Committee through June 30, even though the Democratic incumbent, Sen. Carl Levin, is considered a shoo-in for re-election. FEC records show the party transferred $917,000 in hard dollars back to the DSCC in Washington.

It's not like the Republicans have cornered this, Democrats do just as much as we do, but more said Dan Allen, spokesman for the NRSC.

But at least Michigan actually has a Senate race this year, unlike Florida. Bob Poe, chairman of the Democratic Party of Florida said the practice is not terribly unusual, but called the Republican money exchange in Florida blatant.

They're able to make money on money, he said. It's arbitrage.

The practice is not illegal because the two types of funding hard and soft money are segregated. State and national political parties have two main types of accounts. The hard money account is regulated by the FEC and is subject to strict federal campaign laws. The soft money account, also known as the nonfederal account, is subject to state laws. The NRSC sent money from its nonfederal account to Florida's nonfederal account, while Florida transferred money from its hard money account to the NRSC's hard money account.

Why shouldn't this be illegal, and why isn't it illegal? asked Stern. Biersack of the FEC said the only way it would be illegal is if a person made a soft money donation with the intent of it being used to trigger a hard money contribution. If it's a contingency for the contribution in the first place, then yes, that would be illegal, he said.

While the Bipartisan Campaign Reform Act, which prohibits the six national party committees from raising soft money, will eliminate such transfers, there is nothing to prevent such exchanges between states, depending on state laws.

For example, Virginia, with virtually no campaign finance limits, could act as a de facto NRSC, and make the same kinds of currency exchanges with Florida and other states with lax campaign finance laws. The only difference is, such transactions will be much harder to track.

According to Florida Secretary of State records, the last NRSC transfer to the Republican Party of Florida was back on Feb. 3, more than eight months ago. But according to the state party's hard money filings with the FEC, it has continued helping senatorial candidates.

On Sept. 5, a hard money transfer of $475,000 was made to the South Dakota Republican Party. On Sept. 23, a hard money transfer of $105,000 was made to the New Mexico Republican Party. On Sept. 5, the day of the South Dakota transfer, the Republican National Committee transferred $975,000 to the Florida GOP's nonfederal account.

* Excluding transfers to the state's federal campaign account.

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