Democrats' money transfers place donors in violation Supporters unwittingly exceed contributions cap


WASHINGTON -- In a practice that placed some of its most cherished donors in violation of federal election laws, the Democratic National Committee took at least $2 million in contributions restricted to generic use by the party and spent it directly on the re-election campaign of President Clinton and other candidates.

The money transfers in 1995 and 1996 often were made without the permission or knowledge of Democratic contributors, according to Federal Election Commission records and interviews with contributors.

The transfers were not in themselves illegal, but they caused at least 62 donors to give more than the lawful annual maximum of $25,000 in contributions to all federal campaigns, exposing them, at least theoretically, to civil fines.

In many instances, the contributors, who included lawyers, bankers and corporate executives well versed in the intricacies of federal election law, were angry to learn that their own party had caused them unwittingly to break the law. Some donors demanded that the party return their transferred money immediately.

"I can't believe it," said Paul Goldenberg, a contributor and electronics retailer from La Habra, Calif. "I never gave that kind of permission, and no one asked. I'm certain if someone asked, 'Would you like to do this but it would put you over the legal limit,' I would have said, 'No, thank you, I'd rather obey the law.' "

Under federal election laws, there is no limit to what wealthy givers can contribute to political parties for generic purposes, such as get-out-the vote efforts and advertising that promotes the party itself. This is what campaign operatives call "soft money," and it cannot be used directly on the campaigns of specific candidates.

By contrast, "hard money" is strictly limited by federal election law, but can be used directly by candidates for their election. Hard money is considered more difficult to raise, but it is more valuable because it goes directly to the candidates for such things as television time and campaign literature on their behalf. Federal law, however, puts a cap of $25,000 on all "hard money" donations a person can give in a year -- and donors are limited to giving only $1,000 for each candidate's primary race and election campaign.

But by shifting contributions from soft money accounts into hard ones, the Democratic party shoved many contributors over their hard money limits, according to a computer analysis of campaign records conducted for the New York Times.

Goldenberg, for example, exceeded the legal limit in 1995 after the Democratic committee took $20,000 from his soft money contribution of $50,000 and deposited it into a hard-money account in his name, records show.

Democratic Party officials said yesterday that it was their policy to seek written permission from contributors before depositing a portion of a contribution into hard money accounts, but they denied the committee engaged in systematic diversion of funds.

Pub Date: 9/10/97

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