Campaign finance reformers carry on without their leader

As Sen. Russell D. Feingold left the Capitol for the last time just before Christmas, allies from his 18 years of fighting big money in politics vowed to press on with the cause, despite an unsympathetic Supreme Court and a more conservative Congress.

Feingold, who believed that those with money and power should not “drown out the voices of average Americans,” was best known for legislation that banned large donations to candidates and political parties.

The Wisconsin Democrat was defeated in November in a midterm election that saw more than $400 million spent nationally by tax-exempt organizations collecting large checks, often from undisclosed donors.

Feingold’s departure is a source of cheer to conservative activists who saw his approach to regulating money as unwieldy and unconstitutional. And they applaud the recent freedom granted by the Supreme Court to corporate and union contributors — and they have their own agenda for further undoing Feingold’s legacy.

Feingold’s allies, while acknowledging they face a tough fight, say they have a three-part plan for 2011: Push legislation that would end the secret-money loophole by requiring groups to disclose their donors; seek aggressive enforcement of Internal Revenue Service rules governing political groups that operate as “social welfare organizations”; and fight lawsuits and legislative proposals that could further undermine regulatory gains made during Feingold’s years in the Senate.

The high-water mark of the senator’s career came in 2002 when Congress passed legislation written by Feingold and Sen. John McCain (R-Ariz.) that limited the flow of large donations to candidates and parties. It also restricted hard-hitting issue ads funded by corporations and unions close to an election.

It was a victory that has been unraveling ever since, largely because of a series of Supreme Court decisions. In 2007, the court struck down McCain-Feingold rules limiting issue ads that named a candidate within two months of an election. Last January, in Citizens United vs. Federal Election Commission, the court ruled that the Constitution’s guarantee of freedom of speech allowed corporations and unions to spend unlimited sums on election ads, as long as they were technically “independent” of the candidate.

Feingold called the most recent decision a “tragic error” that would give “corporations greater power to sway elections.”

The ruling emboldened previously hesitant wealthy donors to pour money into new tax-exempt groups that did not disclose the identity of contributors. As a result, organizations such as Crossroads GPS, founded in part by GOP strategist Karl Rove, collected tens of millions of dollars from undisclosed donors in 2010 — and are poised to spend far more in the 2012 election.

“We operate like a hedge fund,” said Steven Law, a former aide to Senate Minority Leader Mitch McConnell (R-Ky.) and president of American Crossroads, a nonprofit group that funds political ads. “We look for opportunities where we can invest and make a difference.”

Long-standing tax-exempt groups such as the U.S. Chamber of Commerce also expanded their fundraising. The upshot was a record for midterm election spending, a portion of it from undisclosed donors.

“This simply can’t stand,” said Fred Wertheimer, a campaign reform advocate who played a key role in passing the McCain-Feingold bill and other landmark legislation. “We can’t go forward allowing secret money to corrupt the political process.”

In response to the Citizens United ruling, Democrats unsuccessfully sought to pass a law to require identification of donors in ads funded by organizations such as Crossroads GPS and the U.S. Chamber of Commerce. Republican opponents countered that the proposed Disclose Act provided an advantage to labor unions and placed unrealistic burdens on corporate donors.

In 2011, Wertheimer and his allies say they hope to persuade Republicans to sponsor new disclosure legislation, and they already have identified several legislators who they think may embrace the concept.

Near the top of the list is Illinois Sen.-elect Mark Kirk, who said during the campaign that he opposed secret donations that flooded into his state’s Senate race. Also of interest is Alaska Sen. Lisa Murkowski, who won as a write-in candidate. She benefited from spending by independent groups but has since told reporters she favored disclosure.

They will probably face opposition from business groups.

“ ‘Disclosure’ may be the public rallying cry of those seeking to silence the business community,” U.S. Chamber of Commerce President Tom Donohue warned in a recent speech to the group’s board of directors. “Their real purpose is to find out all they can about our supporters and then target them for intimidation and harassment.”

Wertheimer and his allies also plan to press the Internal Revenue Service to examine whether some politically active groups are breaking tax rules. They have filed a formal complaint against Crossroads GPS, saying that the organization does not fulfill the requirements of IRS statute 501c(4), which gives tax advantages to organizations whose primary purpose is promoting social welfare.

To justify their tax status, organizations like Crossroads run “issue” ads rather than political ads that explicitly support or oppose a candidate. Last month, Crossroads GPS announced a $400,000 advertising campaign urging members of Congress to break with Nancy Pelosi and to back tax cuts that provide benefits to the wealthy. The ads targeted 11 Democratic House members who won reelection in November by slim margins.

While liberal reformers campaign for new limits, some conservatives say political parties should be freed from regulations. Parties are at a “competitive disadvantage” with independent groups, said the Center for Competitive Politics.

“Congress should consider reforms to ensure parties remain relevant,” said Allison Hayward, the group’s vice president of policy.

The reform coalition vows to watch efforts that might undermine other gains that Feingold helped achieve. For example, they are prepared to oppose efforts in the House to remove the limits on how much money corporations can contribute to political parties or to dismantle the presidential financing system.

Wertheimer and other reformers also hope that citizen-backed public funding initiatives can prevail in congressional and presidential races. That goal looks to be far off, and the Supreme Court could deal a blow to the reformers’ hopes in a pending case from Arizona. Candidates for state offices there who opt for public funding and agree to forego private money can ask for more if they run up against a big-spending opponent.

But the big spenders sued and said such awards of extra money were unfair and unconstitutional, and the Supreme Court voted to hear their appeal in March.

tom.hamburger@latimes.com

david.savage@latimes.com