With 527s, New Power Players Take Position

Software entrepreneur Terry Ragon didn’t want to wake up Wednesday morning in Cambridge, Mass., and wonder whether he’d done enough to help defeat President Bush. So he and his wife donated $3 million to America Coming Together.

Texas investor T. Boone Pickens, a lifelong Republican, couldn’t stand to see the millions pouring into the Democratic 527 groups. So he gave $5 million to two conservative groups, one of which was lashing Sen. John F. Kerry about his service in Vietnam.

Silicon Valley venture capitalist Andrew S. Rappaport and his wife Deborah were disenchanted after the 2002 midterm elections. So they poured more than $4.2 million into small liberal groups, including some reaching out to minorities and voters with an affinity for punk rock.

These large givers are among the power players in today’s political money world. The 2002 McCain-Feingold law was supposed to prohibit unlimited corporate, union and individual contributions -- known as “soft money” -- which surpassed the $2,000 individual limit. But the emergence of so-called 527 groups this year changed that notion, perhaps forever.

Through the creation of 527s, named for the Internal Revenue Service tax-code section that governs them, Democratic and Republican supporters found a new way to circumvent the law. And several groups, including America Coming Together, plan to remain on the scene long after this year’s presidential race with help from some of the richest people in the country.

Their supporters include well-known billionaires like George Soros. Lesser-known million-dollar donors include independent filmmaker Jeffrey Levy-Hinte, whose company Antidote Films has produced such movies as “Thirteen” and “Laurel Canyon.”

“I think I managed to galvanize the opposition to President Bush and I’m really proud of what I’ve done,” Soros, 70, said last week in Washington.

If Bush gets reelected, “I shall go into some kind of monastery to reflect. And frankly, I will be asking, ‘What’s wrong with us?’ ”

At last count, 45 individuals or couples contributed a million dollars or more apiece to 527 organizations this election cycle.

They tend to favor Kerry more than Bush. Seventeen of the donors are on the Forbes list of the 400 richest people in America. Eleven live in California, having made their money in business, real estate, Hollywood or through family wealth.

Together, million-dollar donors contributed about $167 million, the Center for Public Integrity says, most of it spent on the presidential race.

One man -- West Virginia coal company executive Don Blankenship -- poured $1.7 million into an independent group called And for the Sake of the Kids, which was formed to help defeat a state Supreme Court justice.

“What is surprising is how much a relatively small group of individuals has been willing to give,” said campaign finance expert Anthony Corrado, a political science professor at Colby College in Maine.

The McCain-Feingold legislation led the Rappaports, who had long been active in politics and philanthropy, to become more creative in their participation. Before, they simply wrote a check to the Democratic National Committee every year.

“What’s changed is the appetite of people like Deborah and myself cannot be satisfied by contributions to the party,” Andrew Rappaport said.

The 47-year-old venture capitalist said it made sense to him to give money to smaller 527s, where he could encourage group leaders and give them advice on how to get their messages across.

“It’s hard to think of anything more important than Tuesday,” said his wife, a local school board member and president of the San Jose Museum of Art. “But what this is going to translate into in the longer term is a more robust progressive movement in this country.”

The phenomenon began in the summer of 2003 after Democratic strategist Harold M. Ickes, a former deputy chief of staff to President Clinton, began worrying that Democrats would not have enough money to challenge Bush. The new soft-money ban included corporate and union donations that had been a mainstay of the Democratic Party.

So Ickes figured out a way around the restrictions: He would create a group of interlocking 527 organizations, independent from the Democratic political machine, that would operate in battleground states.

Although 527 groups had existed for years, no one had capitalized on them like this before.

America Coming Together, or ACT, would concentrate on getting people registered to vote and to the polls, while the Media Fund would run political advertising. The Joint Victory Campaign 2004 was established largely to raise money for the other two organizations.

Joining Ickes were Steve Rosenthal, the former political director of the AFL-CIO, and fundraiser Ellen Malcolm, president of Emily’s List, a political action committee for women who support abortion rights.

Ickes, Rosenthal and Malcolm gathered potential financial backers at the Southampton, N.Y., home of Soros, who immediately pledged $10 million. His friend, Cleveland insurance magnate Peter Lewis, 74, vowed to match Soros’ contributions.

The two are an unlikely duo. Lewis, who acknowledges that he is a longtime marijuana user, likes to spend time on his 255-foot yacht, the Lone Ranger.

Soros, who made much of his money through currency speculation, runs a global foundation promoting democracy; he just finished a 12-city speaking tour about the elections.

For this year’s presidential race, he and Lewis have donated more than $23 million each to liberal 527s. The groups can raise as much as they want, but they cannot coordinate activities with the parties or the presidential campaigns.

In the beginning, the major donors to the new liberal groups all knew someone in common.

San Francisco foundation head Rob McKay, a Taco Bell heir who pitched in an early $500,000, had worked with Rosenthal before.

Agnes Varis, a 74-year-old Brooklyn pharmaceutical company owner, knew Soros, who introduced her to Ickes. She described Ickes as “better than chocolate ice cream” and ended up contributing $2 million.

But other donors were new to the Democratic money world.

Ragon, 54, first met the ACT team at the Four Seasons Hotel during the Democratic National Convention in Boston.

When he watched television he “felt like screaming” when the news would go on about the war in Iraq, the economy and other Bush policies, he said. Ragon, whose software business often takes him overseas, said he believed Bush had made the world a “more dangerous place.”

So he contributed $3 million to ACT, and recently went door-to-door in New Hampshire, talking to prospective voters.

“We have far more million-dollar donors than the DNC has ever had in any cycle,” said Miami entrepreneur Jonathan Lewis, ACT’s national finance co-chairman and the son of major donor Peter Lewis.

The Media Fund proved crucial to Kerry’s campaign in March, just after he became the presumptive Democratic nominee. Although Bush spent $40 million on ads that month, the 527 ads helped blunt his message. The Bush campaign and the Republican National Committee filed a complaint with the Federal Election Commission, saying the groups were illegally coordinating with Kerry.

But when the FEC took no action, the Republicans began forming their own 527s.

By August, conservative 527s, led by the Progress for America Voter Fund and Swift Vets and POWs for Truth, were in full swing. Spending by 527 groups overall topped $50 million in August and stayed at that level each month through October.

Taking a cue from Democrats, GOP insiders helped solicit money for conservative 527s. Two of Progress for America’s $5-million donors -- San Diego Chargers owner Alex G. Spanos and Orange County mortgage bankers Dawn and Roland E. Arnall -- were big fundraisers.

Thomas J. Synhorst, a Republican strategist, met with oilman Pickens on behalf of Progress for America. Pickens, who has known the Bush family for 25 years, agreed to donate.

Pickens had also contributed to the Swift Boat group after he was visited by its founder, Houston lawyer John O’Neill. Pickens said he became convinced the veterans had an important story to tell.

Yet Pickens, 76, thinks the 527s are bad for the system. He says they have become exactly what McCain-Feingold banned, getting “influence out of the hands of wealthy people.”

“That’s the blood, guts and feathers of it,” he said. “You don’t like them, but you feel you have to help out on them because of the other side.”

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Top donors to 527s

The independent groups known as 527s were a huge factor in this year’s presidential race. The groups were largely funded by a small number of wealthy individuals, many among the richest people in America. Here is a list of donors who have contributed $3 million or more to 527 groups this year, including how much each contributed and to which groups.

George Soros; New York; Philanthropist; $23.7; America Coming Together, Media Fund, Joint Victory Campaign 2004, MoveOn.org Voter Fund and others

Peter B. Lewis; Cleveland; Progressive Corp. (insurance); 23.1; America Coming Together, Media Fund, Joint Victory Campaign 2004, MoveOn.org Voter Fund and others

Stephen L. Bing; Los Angeles; Film producer; 14.0; Joint Victory Campaign 2004, MoveOn.org Voter Fund and others

Herb & Marion Sandler; Oakland; Golden West Financial (banking); 12.5; MoveOn.org Voter Fund, Citizens for a Strong Senate, Joint Victory Campaign 2004 and others

Bob J. & Doylene Perry; Houston; Home construction ; 6.6; Progress for America Voter Fund, Swift Boat Vets and POWs for Truth, Club for Growth and others

Roland E. & Dawn Arnall; Beverly Hills; Ameriquest Mortgage; 5.0; Progress for America Voter Fund

T. Boone Pickens; Dallas; Investor; 5.0; Progress for America Voter Fund, Swift Boat Vets and POWs for Truth, and others

Alex G. Spanos; Stockton; Real estate, NFL team owner; 5.0; Progress for America Voter Fund

Andrew S. & Deborah Rappaport; Woodside, Calif.; August Capital, venture capital firm; 4.3; New Democrat Network, Music for America, Compare Decide Vote, Punk Voter Inc. and others

A. Jerrold Perenchio; Los Angeles; CEO, Univision; 4.0

Progress for America Voter Fund

Harold Simmons; Dallas; Investor, waste companies; 3.7; Swift Boat Vets and POWs for Truth, Progress for America Voter Fund, Club for Growth

Jeffrey & Jeanne Levy-Hinte; New York; Antidote Films; 3.2; America Coming Together, New Democrat Network, MoveOn.org Voter Fund and others

John McHale & Christine Mattsson; Austin, Texas; TippingPoint Technologies ; 3.1; Media Fund

Terry & Susan Ragon; Cambridge, Mass.; InterSystems Management; 3.0; America Coming Together

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Sources: Center for Public Integrity, PoliticalMoneyLine, Times research