Passing the bucks

House majority leader exploited legal campaign cash loophole

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Representative Steny Hoyer, an aggressive fundraiser for the successful 2006 campaign for Democrats to take control of the House, raised nearly $1 million for congressional candidates by exploiting what experts call a legal loophole, according to records analyzed by the Center for Public Integrity.

Campaign finance disclosure records show that the Maryland Democrat used his leadership political action committee ­— AmeriPAC — as a conduit to collect bundles of checks from individuals, and from business and union interests. He then passed more than $960,000 along to 53 House candidates and another quarter of a million to the Democratic Congressional Campaign Committee, data compiled from the Center for Responsive Politics website show.

Hoyer has taken credit for helping fellow Democrats raise more than $8 million in campaign funds, but his use of bundling techniques, which sidestepped statutory limits on leadership PAC contributions, has never been closely examined.

Hoyer’s spokesman said all donations were properly disclosed but did not respond to more detailed questions.

Federal law generally prohibits political action committees, including leadership PACs, which are run by politicians, from receiving more than $5,000 each year from a single donor or giving more than $10,000 to a single candidate ($5,000 each for the primary and the general election). But Hoyer collected as much as $136,000 from one labor union committee and distributed more than $86,000 to a single Congressional race.

“This is like bundling,” said Stephen Weissman of the Campaign Finance Institute, a nonprofit research group.

Weissman was referring to the controversial technique used by intermediaries who accept many small contributions designated for particular candidates and forward them to those campaigns. It allows the bundlers to take credit for a larger amount than they could donate themselves under campaign finance limits.

And “it’s perfectly legal,” said Bob Biersack, spokesman for the Federal Election Commission.

But experts in campaign finance and ethics are troubled that bundling helps candidates bypass funding limits.

“It’s a problem; there is that threat of corruption that campaign limits serve to guard against,” said Paul Ryan, an attorney with the Campaign Legal Center. He is equally concerned when a member of Congress acts as a bundler. “I think the threat of corruption is very similar in both scenarios.”

The bundling technique could enable special interest groups to curry favor with Hoyer, and, in turn, put Hoyer in good stead with the ultimate recipients.

“Because in addition to him being a bundler, it makes him look awfully good to his colleagues,” recently retired Representative Joel Hefley said of Hoyer. Even though someone else wrote the checks, “it was Hoyer who actually got it to [the candidate], so it enhances his position with his colleagues,” says Hefley, a Colorado Republican, and former House ethics committee chairman.

On FEC disclosure forms, Hoyer’s leadership PAC described each contribution as designated, or “earmarked,” by the donor for a specific candidate.

Biersack of the FEC said as long as donors, rather than Hoyer, decide or at least approve of which candidates to support, the $5,000 annual limit for contributions to leadership PACs does not apply.

Hoyer isn’t the only incumbent who has used his leadership PAC as a conduit, but he passed through more identifiable earmarked contributions in the 2005-2006 election cycle than any other House member, according to a review of contribution records compiled by the Center for Responsive Politics.

His fundraising efforts are credited with helping his party win the majority in the House. They could have helped his political career, too, because when the time came for fellow Democrats to elect a majority leader, colleagues voted for Hoyer over Speaker Nancy Pelosi’s choice, John Murtha, D-Pa.

The biggest winner

The top recipient of Hoyer-bundled checks was Representative Melissa Bean, D-Ill., who received $10,000 from his PAC and an additional $76,900 in earmarked contributions that passed through the PAC.

Bean had defeated a Republican incumbent two years before, making her suburban Chicago district race one of the most hotly contested in the nation. Shortly after winning re-election, she supported Hoyer in his bid for majority leader.

Bean’s communications director, Brian Herman, said the two have been political allies for years and that suggesting Hoyer’s financial support influenced her vote “is not even a valid argument to make.”

Another big winner of earmarked funds was Representative Jim Matheson, D-Utah, who collected $72,250 through Hoyer’s bundling efforts and another $10,000 directly from the leadership PAC. Matheson was a potentially endangered incumbent in a Republican-leaning district.

Democratic Party leaders had designated Bean, Matheson, and eight others as the “Frontline 10” — 10 House incumbents whose seats Democrats most needed to protect. Records show that Hoyer bundled and passed along nearly $480,000 for all 10 races, beyond the $105,000 in legally capped leadership PAC contributions made to the same 10.

Like Bean, Matheson voted for Hoyer as majority leader. His communications director said the choice wasn’t related to fundraising, but rather because they are aligned in philosophy. Matheson won re-election.

The biggest source of contributions for Hoyer’s bundling operation was the PAC set up by the United Transportation Union, which represents railroad workers. The union’s PAC gave Hoyer’s staff 38 checks, ranging from $1,000 to $5,000 apiece, and adding up to $136,000.

James Brunkenhoefer, UTU’s national legislative director, says the union’s political action committee has a history of supporting Democrats, and Hoyer in particular.

“The Democrats are the friends of labor. [Hoyer] is a friend of labor. He is in a leadership position. Helping him move the Democrats from the minority to the majority [in Congress] would help the members of my union,” said Brunkenhoefer.

Picked from a list

The union official, also vice chairman of the union’s PAC, picked candidates from a list drawn up by Democratic Congressional Campaign Committee, which targeted races critical to winning party control of the House.

When he had checks to deliver, Brunkenhoefer says he would call a Hoyer staffer, tell him “I’ve got contributions for you,” and meet at the DCCC offices or “wherever it was convenient” to drop them off. It was more convenient, he says, to deliver batches of checks to Hoyer’s staff than to send them to individual candidates.

He doesn’t remember handing over checks to Hoyer directly, but says the congressman acknowledged receiving them and expressed appreciation that the union’s PAC was “one of the biggest supporters of the party.”

“I think the leadership PACs are a disgrace and a scandal just waiting to break open.” — Retired Representative Joel Hefley, R-CO

But nothing specific was promised.

“No. Never a quid pro quo. You don’t want him to say things like that,” said Brunkenhoefer.

He described contributions as the means to gain access with members of Congress.

“Because as our legislation moves through, we would like to have our phone calls returned,” said Brunkenhoefer.

In addition to the UTU PAC, committees representing the cable industry, accounting firms, postal workers, carpenters, and a highway materials company that lobbies for road-building appropriations all wrote checks that passed through Hoyer’s organization.

Some examples:

The Oldcastle Materials Inc. PAC supported five candidates in amounts up to $2,000. A total of $8,000 in bundled Oldcastle PAC contributions passed through Hoyer’s leadership PAC.

The D.C.-based road construction materials company sells supplies such as asphalt and ready mix concrete, and lobbies for federal transportation bills. Its lobbyist, Steven O. Palmer, of the firm Van Scoyoc Associates, is also the treasurer of the company PAC. The company urges its employees to supplement lobbying efforts by writing their representatives in Congress, posting a sample letter on its Web site. The current constituent letter complains that proposed $3.4 billion reductions in 2007 federal road and bridge building appropriations would threaten their jobs.

The voice of the cable industry, the National Cable & Telecommunications Association, also made contributions that were bundled and disbursed by Hoyer’s PAC. AmeriPAC reported 22 earmarked contributions at $5,000 a piece, all on Sept. 23, 2005, for a total of $110,000 in donations.

The contributions supported 11 candidates in their primary and general elections. The cable industry has interests in a variety of legislative and regulatory issues involving television and the Internet.

Different from DeLay

Fundraising to help one’s party capture a legislative majority caused legal trouble for the former Republican House majority leader, Tom DeLay, though there are important distinctions between DeLay’s alleged tactics and Hoyer’s. DeLay was indicted for allegedly laundering corporate contributions to state representative candidates in Texas through a PAC, then through the Republican National Committee. Corporate donations are banned in Texas campaigns.

In Hoyer’s case, the activity is akin to bundling rather than money laundering. He has used his leadership PAC as members of Congress typically do, that is, to gain party leadership stature by raising campaign funds on behalf of candidates facing hot races.

What is different is that Hoyer has raised more money from each donor than typical leadership PACs, by using the pass-through earmarking technique.

Retired Representative Hefley says Hoyer’s fundraising exploited a loophole in campaign finance law.

While still in Congress, Hefley sponsored legislation to eliminate leadership PACs. He was troubled that members of Congress used their PACs to raise campaign funds so they would be rewarded with leadership positions on important committees and within their parties.

Hefley’s proposed “Leadership PAC Prohibition Act of 2006” had no co-sponsors and died in committee.

“I think the leadership PACs are a disgrace and a scandal just waiting to break open. This is one example, where you use this to get around the campaign finance laws,” he says. “I think it’s legal but I don’t think it should be.”

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