Flood of money drowns election finance reform Large, legal donations obliterate the limits imposed by 1974 law; Millions in 'soft money'; Campaign reforms are effectively dead, authorities say


WASHINGTON -- In spirit, as well as in practice, the sweeping campaign finance reforms put in place after the Watergate scandals are effectively dead, according to politicians and election-law authorities.

The last gasp may have come when the Democratic National Committee decided not to file a pre-election disclosure report for the first time since the reform law took effect in 1974.

That decision, reversed under intense pressure, capped a 1996 campaign season in which record amounts have been raised and spent -- much of it in the form of large donations from corporations, labor unions and wealthy individuals -- effectively obliterating what was left of the limits put in place two decades ago.

"This campaign has made a mockery of that [law]," says Michael Malbin of the Rockefeller Institute of Government at the State University of New York at Albany. "It is not one thing that's broken through the boundaries. The dike has 12 gaping holes in it.

"The worst problem is that presidential candidates can raise money in huge amounts with all of the questionable practices that led people to want reforms in the first place during Watergate," he says.

The post-Watergate reforms had four major goals: to limit campaign contributions and candidate spending, require disclosure of both, and establish a new agency, the Federal Election Commission, to police the law.

Sen. John McCain, an Arizona Republican, says those reforms ** have been "completely shredded. I don't think there's anything left of them."

Republicans and Democrats are equally to blame, says McCain, who tried unsuccessfully to overhaul the campaign finance system in the last Congress.

Other would-be reformers, such as Rep. Benjamin L. Cardin, a Baltimore Democrat, say voters regard the worst abuses as "inside baseball," which gives lawmakers less incentive to change the system that put them where they are.

"I don't think my constituents know what soft money is," Cardin says.

But suddenly, in the closing days of the presidential race, campaign finance has become a hot topic. Public opinion analysts, who note that voters are disgusted with both parties over the issue of political reform, do not believe the spreading controversy will change the outcome of the election.

There are indications, however, that Ross Perot has begun to get a small boost. The Reform Party candidate has been railing against the special-interest money in Washington, and polls show him gaining ground as the issue has begun grabbing headlines.

"We're picking up a little surge toward Perot right now," says Neil Newhouse, a Republican pollster. The Texas billionaire, who got 19 percent of the vote last time, is moving into the low double digits in the polls, after languishing for weeks around 5 percent.

Geoffrey Garin, a Democratic pollster, says Perot appears to be siphoning support from both Dole and Clinton. Some voters, Garin suggests, may have concluded that the result of the presidential race is no longer in doubt and that "it's safe to cast a protest vote."

A top White House aide, Douglas Sosnik, says Dole and Perot appear to be fighting over the dwindling batch of undecided voters, and that Perot appears to be winning.

These late shifts toward Perot follow a flurry of reports over the past three weeks, including:

An illegal $250,000 contribution from a Korean company that the Democratic Party was forced to return and other alleged abuses involving John Huang, a former Clinton administration official with ties to an Indonesian billionaire.

A Justice Department criminal investigation into whether an American diplomat pressured Taiwanese businessmen to contribute to Clinton's re-election campaign.

A $20,000 contribution by a Cuban-American drug dealer who was charged with cocaine trafficking only a few weeks after attending a reception for major Democratic donors at the White House.

And a $6 million fine against a former vice chairman of the Dole campaign, who admitted making $120,000 in illegal contributions, including at least $69,000 to Dole's campaign.

But these individual controversies are dwarfed, experts say, by the breakdown in the system put in place 22 years ago to end the large Watergate-era giving of donors such as W. Clement Stone, an insurance magnate who contributed more than $2 million to the 1972 Nixon re-election campaign.

The 1974 law limited individual contributions to $1,000 and donations by political action committees to $5,000. It also restricted spending by presidential candidates who accept taxpayer money for the campaigns, as Clinton, Dole and Perot have done.

Those rules are still in effect, but court decisions and congressional actions have blunted their effectiveness. Today, rich donors, along with labor unions, corporations and other interests that are barred from giving directly to candidates, are pouring gifts of $100,000 or more into campaigns.

These donations, known as "soft money," are legal: The money goes to the Democratic and Republican parties under rules designed to encourage party-building activities, such as get-out-the- vote and registration drives. The debate is over how they're used.

Starting in 1988, soft money has increasingly flowed into presidential campaigns, directly benefiting the candidates by paying for television ads that promote the nominee -- or attack his opponent -- without explicitly asking viewers to vote for anyone. This year, for the first time, hefty soft money contributions are fueling House and Senate campaigns.

In the first half of October, the period covered by the report the Democratic National Committee initially refused to file, more than $10 million in soft money was raised by the two major parties combined. Among the biggest donors has been Integrated Health Services Inc. of Owings Mills, which, along with its DTC chairman, Dr. Robert N. Elkins and his wife, Shirlene, has given a total of $514,000 to the Democrats, according to a study by Common Cause, a liberal campaign reform group.

Through mid-October, a record $207 million in soft money had been raised by the two major parties in the 1996 campaign season -- nearly three times the previous record set in 1992. Millions were used by Democrats, beginning last year, for TV ads designed to boost Clinton's chances. Republicans used their soft money to help tide Bob Dole's campaign over for several months last spring once he hit the limit on primary spending.

The overall tab for the presidential election will be about $800 million, more than twice the $311 million total of four years ago, according to the Center for Responsive Politics, a watchdog group. Another $800 million is expected to be spent on House and Senate races, also a record, bringing the total cost of the federal election to an unprecedented $1.6 billion.

In addition to the soft money campaigns of the major parties, special-interest groups have waged "independent expenditure" campaigns that manage to get around laws that bar them from giving directly to a campaign. Instead, corporate money and union dues, to take the most prominent examples, are used for "issue ads," thinly disguised, and often highly negative, commercials that try to sway voters without actually calling for the election or defeat of a specific candidate.

Perhaps the best known of these campaigns is a pioneering $35 million effort by the AFL-CIO aimed at defeating dozens of Republican senators and congressmen and returning control of the Congress to Democrats.

This month, Common Cause, alleging "the most massive violations of the campaign finance laws since the Watergate scandal," demanded the appointment of an independent counsel investigate whether the Democrats and Republicans had committed criminal violations of campaign spending limits this year. The Justice Department has yet to rule on the request.

Pub Date: 10/31/96

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