How Presumed Presidential Candidates Skirt Contribution Limits & the FEC Turns a Blind Eye: Legal Center Releases White Paper


Today the Campaign Legal Center released a white paper taking an in-depth look at the legal issues surrounding likely 2012 presidential candidates, who so far are calling themselves anything but that.  The white paper looks at what the laws are, which ones are actually enforced, when the $2,500 limit contribution limits kick in and how state committees and federal leadership PACs are used to skirt that limit. Finally the paper makes recommendations about what can be done to close this long-existing loophole in federal campaign finance law. 

The paper, They Claim They’re Not Ducks: Federal Campaign Finance Law and Presidential Pre-Candidacy Activity, was written by Campaign Legal Center FEC Program director Paul S. Ryan.

To read the full white paper, click here.

The executive summary follows below.

Executive Summary

 For months, reporters have been writing about prospective presidential candidates raising and spending millions of dollars through a myriad of political organizations other than presidential campaign committees (e.g., 527 organizations, state PACs, federal leadership PACs), focusing their activities in early presidential caucus/primary states, and accepting contributions in amounts that far exceed the federal candidate $2,500 contribution limit and from sources, namely corporations, that are prohibited from making contributions to federal political committees.  Remarkably, until March 3, 2011, not a single major player had admitted they were even “testing the waters” for a presidential run.

 We have all heard the adage: “If it walks like a duck and quacks like a duck, you can be reasonably sure it is a duck.”  Well these folks are walking like prospective candidates, talking like prospective candidates, but claiming they are not “testing the waters” of candidacy.  They are in denial because if they admitted what is obvious to all, that they are “testing the waters,” they would be subject to a whole set of federal rules and restrictions that they want to avoid for as long as they can.

When do the federal law candidate contribution restrictions kick in?  Federal law requires an individual who is “testing the waters” of a federal candidacy—i.e., spending money “for the purpose of determining whether [the] individual should become a candidate”—to pay for those activities with funds raised in compliance with the federal candidate contribution restrictions ($2,500 per individual donor, no corporate/union contributions).

Yet, for example, a political advisor to Mississippi Governor Haley Barbour has acknowledged that Barbour “is giving active consideration to running” for president, but Barbour is raising and spending funds through a Georgia PAC—funds that would be illegal under federal law (e.g., $25,000 corporate contributions)—to buy the Republican Party of Iowa’s voter list.  Barbour is not alone.  Mitt Romney has set up PACs in Iowa, New Hampshire, South Carolina, Michigan and Alabama and is spending millions on staff and consultants focused on early caucus/primary states.  Other prospective Republican candidates, as well as prospective Democratic candidates in past election cycles, have done the same thing.

The notion that these individuals are not spending money for the purpose of determining whether they should become candidates strains credulity, yet they continue to ignore the federal candidate contribution restrictions applicable to such activities, which amounts to a refusal to acknowledge that they are “testing the waters” of a presidential campaign.

Why does this matter?  For more than 100 years federal law has restricted contributions to candidates and the Supreme Court has consistently upheld such restrictions as vital to reducing the threat of corruption that results from unlimited contributions.  Effective “testing the waters” regulations are crucial to protecting the integrity of elections by preventing prospective candidates from accepting potentially-corrupting unlimited contributions.

However, for decades prospective presidential candidates, both Democrats and Republicans alike, have skirted candidate contribution restrictions with an astoundingly high degree of success.  Ronald Reagan opened the door to this abuse in 1977 with his “Citizens for the Republic” PAC, which he used to lay the foundation of his 1980 presidential campaign outside the candidate contribution restrictions.  By the 1988 election cycle, virtually all serious contenders for the major parties’ presidential nominations were raising money outside the candidate contribution restrictions to fund their pre-candidacy activities, prompting one member of the FEC to write in dissent to Advisory Opinion 1986-6:

In its rulings on unannounced presidential aspirants the [FEC] has, step by step, gotten itself into the absurd position that it refuses to acknowledge what everyone knows: that Vice President Bush is running for President and is financing his campaign through the Fund for America’s Future, Inc., which he organized and controls.  . . .  Only persons just alighting from a UFO can doubt that activities of these sorts, which are engaged in over a period of many months, will promote the candidacy of the founding father.  That, of course, is why so many would-be Presidents, of both parties, have created and utilized PACs of this sort in recent years.

In terms of enforcement, little has changed since 1986, but it is time for change.  After detailing the activities of some of the most talked-about likely 2012 presidential candidates in Section I, putting these prospective candidate activities in historical context in Section II, and explaining the relevant federal laws and FEC guidance in Section III, this paper offers some ideas to close this long-existing loophole in federal campaign finance law in Section IV.  Specifically, the Campaign Legal Center recommends:

1.  More rigorous enforcement by the FEC of existing regulations requiring “testing the waters” activities to be paid for with funds raised under the $2,500 per election candidate contribution limit, subject to the ban on corporate and union contributions, 

2.  Amendment of an existing FEC regulation that creates a presumption that certain activities (e.g., setting up and staffing offices in states other than the candidate’s home state) by candidates participating in the public financing system constitute “testing the waters” of a presidential candidacy, to apply to all presidential candidates and any “person” paying the expenses covered by the current regulation, not just to federal leadership PACs covered by the current rule, and

 3.  Demand honesty from prospective candidates through pointed questions by journalists and voters.  Likely 2012 presidential candidates should be asked, point blank, whether they are spending any money for the purpose of determining whether they should become candidates—i.e., “testing the waters.”  If they deny that they are “testing the waters,” they should be asked why they are traveling repeatedly and often primarily to early caucus/primary states, buying voter lists in those states, staffing offices in those states, etc.  Likely 2012 candidates should be required to explain their activities in a manner that passes the smell test.  Just because the FEC may let abuse of the law slide, does not mean that voters and journalists have to.  A little honesty is not too much to ask of those desiring to become our next president.