http://newsweek.com/nw-srv/printed/us/na/a20357-2000may27.htm

NATION
The Secret Money Chase

The race for campaign cash is taking a new turn into the shadows with 'stealth PACs'-- attack operations that don't have to reveal who's paying the bills. A NEWSWEEK Special Report

By Michael Isikoff
Newsweek, June 5, 2000

Trent Lott was angry, and he got right to the point. Early last month the Senate majority leader called in a group of high-tech lobbyists and made a blunt pitch. He said he was outraged over a series of "vicious" attack ads airing in Michigan against Spencer Abraham, a fellow Republican senator considered one of this year's most vulnerable incumbents. Lott, a participant recalls, wanted the lobbyists to pay for hard-hitting counterattack ads. The lobbyists -who knew they were going to need Lott's help to push an upcoming tech bill through the Senate -got the message. "My sense," one wrote in an e-mail later that day, "is that the companies in the room will take care of it."

In hardball Washington, Lott's appeal itself was hardly unprecedented. (The senator's spokesman says the meeting was "not intended to pressure anybody.") But instead of instructing the lobbyists to send the money to Abraham's campaign or to the Republican Party, Lott gave them the phone number and mailing address of an obscure organization few in the room had ever heard of - Americans for Job Security.

Operating from a small unmarked office in northern Virginia, the group bills itself as a "trade association" promoting "business or economic issues." Yet it puts out no newsletter or Web site and pushes only a vague policy agenda. The group -run by a duo of veteran Republican operatives -is what has come to be called a "stealth PAC," a new breed of political-attack operations that work largely in secret. Using deliberately bland names like Shape the Debate or the Coalition to Protect Americans Now, these groups take advantage of loopholes in the campaign and tax laws that allow them to legally raise millions from individuals and corporations for openly partisan purposes-without revealing where the money comes from. About two dozen are active around the country; more pop up almost every week.

Of course, both political parties long ago mastered the art of unabashedly squeezing wealthy donors and companies for millions in unlimited "soft money" contributions used to promote the party and pay for issues ads. Last month the GOP raised $21.3 million at a single fund-raising dinner, a new record. The Democrats topped them last week when Bill Clinton and Al Gore helped the party rake in $26.5 million at a ribs-and-chicken fund-raising bash featuring entertainment by Robin Williams and LeAnn Rimes -and big checks from unions and corporate giants like AT &T, Lockheed Martin and Westinghouse. Yet every dime of that money had to be disclosed. The new groups, by contrast, aren't required to report any of their activities to the public or the Federal Election Commission.

The secrecy has already drawn protests from some Democrats and political-watchdog groups who complain that the anonymous operations are the final collapse of decades-old campaign-reform laws designed to limit the influence of special interests. Voters who flip on the TV and see an attack ad produced by one of these groups have no way of knowing who paid for it -or what political favors the group might expect in return.

Much as Democrats complain about the groups -reformers have already introduced legislation in Congress to outlaw them -campaign-finance experts say it may have been Clinton himself who led the way. During the 1996 campaign the president stretched the limits of the law as never before, taking money intended for party-boosting "issue ads" and using it instead for a multimillion-dollar blitz of ads promoting his own re-election. Though some of the ads were written inside the White House itself, the president insisted the spots didn't violate laws barring the use of party money to promote individual candidates -since they didn't explicitly tell viewers to vote for Clinton or against his opponent, Bob Dole.

As the barrier between "issue ads" and "candidate ads" collapsed, political operatives from both parties saw their opportunity to push the boundaries of the law even further. The AFL-CIO spent an estimated $35 million on attack ads against Republicans in 1996. That same year lawyers for the liberal Sierra Club stumbled on an obscure loophole in the tax laws. By registering with the IRS under section 527 of the tax code, the group could set up a separate "political committee" -and avoid reporting its activities to the FEC. The Sierra Club used the gimmick to pay for $3.5 million in pro-environment ads targeting Republicans -and is currently engaged in an $8 million ad campaign that in part bashes George W. Bush's environmental record in Texas.

But this campaign season, Republicans operatives have taken the idea to a new level. Americans for Job Security plans to spend $8 million to $10 million on ads in the fall campaign. The group's president, Michael Depke, confirmed to NEWSWEEK that it received $2 million in seed money from the American Insurance Association and the American Forest and Paper Association -two big Washington trade groups. According to another source, Microsoft and other high-tech companies have also chipped in undisclosed amounts. (Microsoft declined to comment.) The group has already launched a media blitz against several Democrats -including Abraham's opponent, Deborah Ann Stabenow. (Abraham's spokes-man says the senator has no connection to the group.) Depke says the group's ads will be as negative as necessary to bring down targeted Democrats. "We're not having the Lincoln-Douglas debates anymore," he says. "We don't beat around the bush and we name names."

Some of the new groups appear to operate as loosely disguised arms of the GOP, and are closely tied with Republican leaders in the House and Senate. Last summer House Majority Whip Tom DeLay hosted a yacht cruise for GOP contributors to promote the newly formed Republican Majority Issues Committee. Created by a former DeLay aide, the group plans to spend $25 million backing Republicans in tight races. Sources tell NEWSWEEK that the group was initially funded by a network of conservative, publicity-shy businessmen including Graco founder Robert Cone. (He declined to comment.)

During last winter's contentious Republican-presidential-primary battle, another group, calling itself Republicans for Clean Air, ran $2.5 million in TV ads attacking John McCain's environmental record. The group, it was later reported, was created by two Dallas financiers, Sam and Charles Wyly -two major George W. Bush fund-raisers. Another "527," the Republican Leadership Coalition, was set up by veteran GOP operative Scott Reed to steer Hispanic voters to the party by emphasizing health care. Reed confirmed to NEWSWEEK that the group has been largely bankrolled by former Golden Rule Insurance Co. chief Patrick Rooney, who has promoted health-care savings accounts, a favorite GOP issue. And last week a group called the Coalition to Protect Americans Now, funded primarily by millionaire heiress Helen Krieble, began running ads blasting Clinton and Gore for failing to build a national missile-defense system. The spots came a few days before Bush's announcement that he would vigorously promote missile defense. A coalition official insisted the timing was coincidental.

The groups are careful not to violate two rules: like the political parties, they aren't allowed to use the words "vote for" or "vote against" in their ads, and they can't coordinate their activities with the politicians who benefit from their ads. But they often come close to the line. Take Lott's efforts to help out his colleague Spencer Abraham. A conservative who chairs an immigration subcommittee, Abraham has pushed to increase the number of skilled immigrants allowed into the country each year -a top priority for tech companies desperate for workers. Abraham is now under siege from the Federation for American Immigration Reform, a fierce anti-immigration group. One FAIR ad pictured Abraham alongside international terrorist Osama bin Laden. The ad suggested the Michigan senator was "trying to make it easy" for "terrorists" to enter the country.

Abraham's aides implored tech lobbyists to counter FAIR's $700,000 war chest. "We're being attacked and you guys have to respond," one lobbyist recalls being told. Some of the phone calls were "very, very aggressive," says another. (Abraham spokesman Joe Davis says the senator's aides never asked the lobbyists "to contribute money.") According to one source, when Intel, Motorola, Texas Instruments and Microsoft, among others, collectively put up only $25,000, their lobbyists soon found themselves on the phone with a staffer from the National Republican Senatorial Committee. "Senator Lott wants to see you," he told them. "You get a call to go see the majority leader," says one lobbyist who was summoned, "you take it seriously."

Those at the meeting say Lott never directly linked his pitch for contributions to the fate of the immigration bill. The senator's aides say he checked with his Republican finance lawyer, Ben Ginsburg, to make sure the meeting didn't violate any rules. Ginsburg, who also serves as chief legal counsel to Bush's campaign, knew all about the obscure Americans for Job Security -he's its lawyer, too. So far, none of the lobbyists have publicly confirmed making contributions. And there's virtually no way to find out if they have. The donor list is, of course, a secret.




© 2000 Newsweek, Inc.