Big Cash Gifts to Parties Skirt Election Laws

Times Staff Writer

If you thought post-Watergate crackdowns on fat cats had forced George Bush and Michael S. Dukakis to rely mainly on federal funds to run their presidential campaigns, you haven’t heard about all the “soft money” from the likes of Nicolas Salgo, Nathan Landau and the Atlantic Richfield Co.

Salgo, a former ambassador to Hungary and now a special ambassador in the State Department, has contributed $503,263 to the Republican Party. His is the biggest of many such gifts from wealthy people that are being used to mobilize potential voters for Bush in the Nov. 8 election.

Landau, a Washington-area real estate developer, is one of more than 125 rich patrons who have written $100,000 checks to the Democrats for similar party efforts to benefit Dukakis.

Atlantic Richfield, the major oil company, has hedged its bets. Not only does its name top a long list of corporate contributors to the GOP--into which it has pumped $135,000--it also has given $35,000 to the Democrats.


Such super-giving will bring the Democrats an estimated $42 million and the Republicans $20 million this year--money that represents huge supplements to the $46.1 million each presidential candidate will receive in federal funds.

This private cash has been dubbed “soft money” because it is being raised and spent through a loophole in federal law. The law prohibits corporate contributions to presidential campaigns and sharply limits individual contributions, but individuals and corporations are free to give as much as they choose to political parties--which may spend the money on get-out-the-vote drives and other activities that benefit the presidential candidates, but not directly on their campaigns.

In this way, the “soft money” skirts the campaign-finance rules enacted 14 years ago in the wake of the Watergate scandal to curb special-interest influence on the system by which the nation chooses its President.

Shades of Watergate


“All this harkens back to the days of Maury Stans raising money by the bucketfuls and Herb Kalmbach selling ambassadorships,” said David Mallino, an AFL-CIO lobbyist who is critical of the billowing growth of “soft money” even though labor unions also make vigorous use of it.

Maurice H. Stans and Herbert W. Kalmbach were fund-raisers for President Richard M. Nixon. They pleaded guilty, respectively, to secretly accepting illegal corporate donations and to promising ambassadorial posts to large contributors.

Party officials contend that soft money is not reviving Watergate-style corruption because no favors are being proffered and there is at least some disclosure of the massive cash flow. The donors claim nothing but the noblest of motives.

“It’s very exciting to be involved in a presidential race, to pick your horse and run with him,” said Landau, one of 44 men and women committed to raising at least $500,000 each for the Democrats. “I believe in Dukakis’ ideas and want change . . . . You can’t buy the White House for $100,000.”

For better or worse, though, the practice calls into question the effectiveness of the federal restrictions. The rules ostensibly limit each presidential campaign’s spending to $46.1 million in public funds and $8.3 million in tightly controlled private money, cap individual gifts at $25,000, prohibit corporate contributions and require full disclosure of campaign receipts and expenditures.

Loophole in Limits

The soft-money loophole was opened by Congress in 1979, after local party leaders complained there was too little money allowed, in the first publicly financed campaign in 1976, for contacting voters at the grass roots. The loophole permits private gifts that otherwise would be prohibited under federal laws--but allowed under looser state laws--to be used by local party committees for certain activities that aid candidates for federal office.

The political parties are using most of their soft money for registration drives and efforts to get out the vote in critical presidential battlegrounds. Financing this “ground war” with soft money (and about $33 million in other private funds raised the conventional way) has freed Bush and Dukakis to devote most of their public funds to the expensive “air war” of television commercials.


The Democrats are placing unprecedented emphasis on soft money in a bid to gain equal financial footing with the Republicans for the first time since 1976. But the Republicans have struck back in kind, escalating a furious money chase that could more than triple the amount of soft dollars collected in 1984.

Lump Sums Solicited

“We have attempted to put ourselves on a level playing field with the Republicans,” Alan M. Leventhal, finance chairman of the Dukakis campaign, said. Although he asserted that Democrats are building a “very broad base” of donors, big-giver (and fund-raiser) Landau said that “the main emphasis has been toward the big contributor (of) $25,000 and up.” He added: “I’ve never seen the extent and intensity of it before.”

Fred Bush, a GOP official accustomed to soliciting gifts in the $10-to-$10,000 range, said Republicans feared they would “get clobbered fund-raising-wise” if they didn’t match the Democrats’ plan to rake in $100,000 from each of hundreds of backers.

According to Bush (not related to the vice president), Republicans organized Team 100 and told their prospective contributors: “If you already gave $10,000 to the Presidential Trust and $10,000 to the Eagles (two other GOP accounts), all you have to do is come up with $80,000. It doesn’t have to be a fresh $100,000.”

As the flow of soft money increases dramatically, critics protest that it undermines the idea of public financing of presidential campaigns, the system Congress established in 1974 after Watergate investigators turned up massive secret donations to Nixon from individuals and corporations.

Room for Abuse Seen

Common Cause, the citizens’ lobby that led the fight for public financing, believes soft money “creates the opportunity for fat cats and special-interest givers to buy influence with the President of the United States,” in the words of President Fred Wertheimer.


Acting on a Common Cause lawsuit last August, U.S. District Judge Thomas A. Flannery cited potential abuses of soft money and ordered the Federal Election Commission to clarify the regulations. The panel later made various proposals for tightening the restrictions, but they would not be effective until after the November election.

“Soft money has radically transformed the presidential campaign finance law,” Ed Zuckerman, editor of the campaign finance newsletter PACs and Lobbies, said. “The law was originally enacted to put candidates on (equal) financial footing and allow them more time to woo voters instead of fat-cat contributors. The soft-money loophole has turned spending ceilings into floors.”

Positive Side Cited

Some political scientists are more sanguine about soft money, however.

Herbert E. Alexander, director of the Citizens Research Foundation at USC, contends that it could have a positive impact on elections if its sources and uses were more fully disclosed, so that the public could spot any links between campaign gifts and official favors granted.

“In an era of low voter turnout, it is easy to justify more activity by state and local party committees to register people and get out the vote,” he said. “What is corrupt and venal about expanding volunteers’ participation in elections?”

Nevertheless, Alexander, who supports public financing, conceded that “these massive efforts to raise soft money do violence to the rationale for public funding. They will feed legislation by Sen. Mitch McConnell (R-Ky.) to repeal the checkoff (on income tax returns) and spending limits.”

Some Voluntary Disclosure

The states have widely differing rules on the disclosure of soft-money contributions, and federal law has no requirement for reporting them in a handy, centralized way. Although national party officials have begun volunteering some soft-money data to reporters, most of the information is being withheld until after the election.

Some of the biggest soft-money donors named in records reviewed by The Times say they give for the fun and goodness of it, not because they expect special treatment.

St. Petersburg, Fla., builder Joe Zappala, a charter member of the Republican team of $100,000 contributors, acknowledged that large cash gifts could ease an individual’s access to officials.

“But George Bush doesn’t make deals,” he said. “He’s concerned with good government, and that’s the benefit I get out of this: good government.”

Smith Bagley, the Democrats’ national finance vice chairman, said the most a $100,000 contributor such as himself could expect is to be “invited to a White House dinner or to meetings from time to time with senior staff people and the candidate and his wife. . . . As far as getting a job, actually, it could very easily work against somebody. There might be questions raised.”

Won’t Talk About Gift

Salgo, a businessman, former ambassador to Hungary and now a special ambassador negotiating State Department property purchases overseas, did not return phone calls inquiring about his donation of $500,000 to the GOP. His wife said: “My husband doesn’t want to do any talking because he is an ambassador and not partisan.”

Atlantic Richfield’s soft-money donations are “our way of making a contribution to the two-party system,” said a spokesman for the corporation, Albert Greenstein. Beyond that, he added, “there’s not an awful lot we can say.”

Although the Democrats accept soft money from corporations, labor unions and political action committees (PACs), Dukakis “is not involved in soliciting those contributions” and has maintained a $100,000 limit on individual gifts, Democratic spokeswoman Julie Anbender said. The GOP has no such limit.

Corporations and labor unions are prohibited by law from giving directly to candidates for federal office, but their soft-money contributions may be used within states, such as California, that permit them.

Unions have been contributing soft money for years, mostly through services such as manning telephone banks and distributing literature to their members in the name of political education. Indeed, campaign finance scholar Alexander estimated that labor spent $20 million on the Democrats and $2 million on the Republicans in this fashion in 1984, most of it unreported to official agencies.