Cranston Pioneers Tax Aid Technique for Contributors

It is the inescapable spiral of modern political campaigns: Costs mount, rules grow tighter on fund raising and spending, politicians develop ever more ingenious ways to skirt restrictions.

And, when it comes to ingenious fund-raising devices, Democratic Sen. Alan Cranston of California is in the vanguard.

Cranston, who is seeking reelection to a fourth Senate term in 1992, has pioneered the development of a new system for raising money to strengthen his own voter base, help his party do likewise and make the whole thing tax deductible to boot.

Over the last four years, Cranston has established six organizations that raised a whopping $7 million to register citizens to vote. Although ostensibly nonpartisan, the groups have concentrated overwhelmingly on registering potential Democrats--especially potential Cranston supporters.

There is nothing novel about voter registration drives as such. The League of Women Voters has This article was reported by Dan Morain in San Francisco, Kenneth Reich in Los Angeles, James S. Granelli in Orange County and Paul Houston in Washington. It was written by Houston.

been running them for years. So have civil rights groups, the major political parties and others.

What makes the Cranston-backed organizations stand out is that, apparently alone among such groups that have been supported by political officeholders, five of the six have gained tax-exempt status by pledging to act on a nonpartisan basis.

That status makes it easier to raise money because the contributions are tax deductible; in effect, part of the donations are underwritten by the government. In addition, the severe legal limits on contributions to political candidates do not apply to the nonpartisan voter registration groups.

But interviews, public records and even some of the working documents of the voter registration organizations associated with Cranston show that they have taken special pains to register voters who would be likely to vote Democratic.

Indeed, in a 1986 letter soliciting funds for one of the tax-exempt groups, Cranston cited "keeping my Senate seat in the Democratic column" as the first of four issues of "great national significance" at stake in the 1986 elections.

The groups do not refuse to register individuals as Republicans if that is their desire--state law and Internal Revenue Service regulations would prohibit such refusals--but, in searching for unregistered voters, they target areas and segments of the population most likely to yield high proportions of new Democrats.

Leaders "got upset if too many Republicans" were registered, recalled Terrie Monaghan, a former business manager at the Center for Participation in Democracy, a tax-exempt California-based group affiliated with Cranston that registered at least 233,000 voters in the state last year.

Center for Participation in Democracy leaders expected that Democrats would make up about three-quarters of the names that each worker collected, said Monaghan, herself a Democrat. Carl Pope, a board member of the center, said that about 70% of the voters it registered were Democrats, with the rest divided among Republicans, independents and those who refused to state their affiliation.

The IRS has raised no objections to Cranston's voter registration efforts. Without discussing Cranston's groups directly, IRS spokesman Larry Wright said: "There's nothing in the law that says you can't target certain areas, even if you know they are preponderantly of one party or another. But if, while you are there, someone wants to register in another party, then you are obligated to accept that registration."

Getting Out the Vote

The California Fair Political Practices Commission is considering ways to regulate voter registration drives without frustrating "the laudable purpose of getting out the vote," John Larson, executive director of the agency, said. He said the commission's decision to look into the matter was prompted by the activities of a variety of groups, not just those linked to Cranston.

Apart from the tax-exemption issue, the voter registration groups enable Cranston to raise funds unfettered by limits on giving to particular candidates. Donors to the voter registration groups, unlike contributors to political campaigns, are not restricted by the $2,000 federal limit on campaign contributions by individuals and the $10,000 ceiling on contributions by the political action committees of special interest groups.

Moreover, unlike most political contributors, the identities of donors to the tax-exempt voter registration groups do not have to be disclosed, although three of the Cranston-backed groups allowed their donations to be listed in California public records.

Among the donations shown in these records was a total of $850,000 from Charles H. Keating Jr., the former head of bankrupt Lincoln Savings & Loan of Irvine.

Although he has since tried to distance himself from Keating, Cranston and three other senators met with Edwin J. Gray, then chairman of the Federal Home Loan Bank Board, in 1987 about the bank board's lengthy investigation of Lincoln and about a proposed regulation of S&L; investments that Keating opposed, Gray has said.

Lincoln has since been seized by federal regulators, and Keating has been subpoenaed to testify before the House Banking Committee on Nov. 7.

Cranston recently acknowledged that he did "a pretty stupid thing politically" in creating at least the appearance of a conflict of interest in his relationship with Keating.

Common Cause, the citizens' lobbying group, recently called for investigations by the Justice Department and the Senate Ethics Committee of the help provided to Keating by Cranston and Sens. Dennis DeConcini (D-Ariz.), John Glenn (D-Ohio), John McCain (R-Ariz.) and Donald W. Riegle Jr. (D-Mich.).

Common Cause President Fred Wertheimer said in an interview that Cranston's use of tax-exempt voter registration groups opened up new opportunities for abusing fund-raising limitations.

"We see another avenue where large contributions can be made at the request of, and to the benefit of, public officials, with the possibility that the money can be used to buy access and influence," he said.

Cranston, responding to the Common Cause action, said he had merely tried to accelerate federal regulators' decisions on what to do about Lincoln S&L.; "I did not violate any ethics rules or standards," he said.

Records in Sacramento show that other major donations to the Cranston-backed voter registration groups include $100,000 each from Hollywood producer Frederick (Ted) Field, the E&J; Gallo Winery, the Teamsters Union and the Assn. of Trial Lawyers of America.

Also, the Sheet Metal Workers International Assn. gave $125,000, Drexel Burnham Lambert Inc. gave $35,000, a company owned by Beverly Hills developer Albert H. Gersten contributed $25,000 and $20,000 came from a foundation set up by Walt Disney Co. President Frank G. Wells.

A Helping Hand

In addition to assisting Keating, Cranston intervened with federal regulators on behalf of Drexel Burnham. He asked the Securities and Exchange Commission in a letter to drop its effort to force Drexel Burnham to move its junk bond department from Beverly Hills to New York; the SEC ultimately abandoned that effort.

Before Cranston interceded on Drexel Burnham's behalf, he solicited $35,000 for two of his voter groups from Michael Milken, the then-head of the investment house's junk bond department, who has since been indicted on insider-trading charges.

Cranston and his aides said that the senator extended no favors in return for contributions. And interviews with several federal officials found no indication that Cranston had interceded on behalf of any of his contributors other than Keating and Drexel Burnham.

At the same time, some of the major donors said they hoped for less tangible benefits as a result of their contributions. Several said they expected improved access to Cranston and perhaps extra help on legislation.

"We felt we'd do something good for the country as well as something helpful for us," said Alan Parker of the trial lawyers' association. "He's always been friendly to us." Parker helped Cranston with voter registration drives in the late 1950s when Cranston was president of the California Democratic Council and Parker was treasurer.

Cranston described his interest in voter participation as a "major driving force in my life," one with deep roots. He said he recently found an old newspaper clipping in which his father, William Cranston, called in 1909 for changing voter registration laws.

The senator said he created the six voter registration groups to offset the efforts of Vote America, a tax-exempt organization that, he argued, was designed to sign up mostly Republicans. However, Vote America was prominently endorsed last year by the then-chairman of the Democratic Party, Paul G. Kirk Jr.

Cranston and his aides said the organizations set up under Cranston's sponsorship were nonpartisan in the critical sense that, although they targeted areas likely to produce mostly new Democratic voters, they accepted Republican registrants also.

The Center for Participation in Democracy's board of directors met late last month in Los Angeles and, after questioning Kim Cranston, the senator's son, and other organizers for the center, found "no evidence" that the effort was unduly skewed toward potentially Democratic voters, board member Pope said.

However, there are allegations that efforts were made to discourage Republican registrants. A paid worker of the Center for Participation in Democracy, a Democrat, said that it was common for new voters in low-income areas to be given registration forms with the word "Democrat" already entered on the line for party affiliation.

Kim Cranston, who helped organize and run the center, said that, if its supervisors and workers engaged in such practices, they did so on their own. There was no direction from the top, he said, to slant the registration drive toward Democrats.

The first tax-exempt group that Cranston helped start was the California Center for Voter Education and Participation in 1985. Later, it was renamed the Western Center for Voter Education to satisfy an IRS requirement that such tax-exempt groups must be active in more than one state, said board member James C. Gross, who said the center "interacted with a group in Colorado or the Midwest."

In a letter soliciting donations for the California Center, Cranston cited "keeping my Senate seat in the Democratic column" as the first of four issues of "great national significance" at stake in the 1986 elections. The others were protecting the state's 27-member House Democratic delegation, preserving the Democratic majorities in the state Legislature and reclaiming the governorship of California for his party.

Roy Greenaway, Cranston's top Senate aide, said it was legal to make a partisan fund-raising appeal as long as the actual registration of voters was nonpartisan.

"You can target areas," he said, "but you can't influence registrants. You can't fill in a party affiliation for them."

The group wound up raising $327,500, including $100,000 from Field, $80,000 from labor unions, $25,000 from Drexel Burnham and $10,000 from a foundation set up by Maurice H. Stans, a Pasadena business consultant and, as a Republican, a former Richard M. Nixon fund-raiser.

Where Money Went

At least one board member of the group was a Republican, and the Sacramento law firm that incorporated the group long has served as counsel to the GOP in California.

When the California Center, renamed the Western Center, folded in 1987, after Cranston's reelection, it donated its remaining cash--$32,000--to a new tax-exempt Cranston group, the Center for Participation in Democracy.

Cranston aggressively sought contributors. Donations went not only to the Center for Participation in Democracy directly but also to three other groups based in Washington. Those groups, in turn, distributed large sums to the center, as well as to about 40 voter registration organizations in 20 states.

The Washington groups were the Forum Institute and the Citizens Participation Project--both tax-exempt--and USA Votes, a taxable organization. All three were formed by Rob Stein, a political consultant and philanthropist who contributes heavily to Democratic causes.

The Center for Participation in Democracy and USA Votes reimbursed Cranston for 25 fund-raising trips he made on their behalf to Atlanta, New York, Chicago, San Antonio, Minneapolis, Phoenix, Seattle, Denver and Jackson, Miss., in 1987 and 1988, records show. On a trip to Phoenix, he picked up a $400,000 check from Keating.

But another group, the Organizing Institute of Pacific Grove, Calif., received nearly $800,000 from the Forum Institute and trained registrars for its biggest client, the Center for Participation in Democracy.

Cranston's son, Kim, a longtime worker in liberal political movements who is now a top aide to California Democratic Lt. Gov. Leo T. McCarthy, helped organize and run both the center and the Organizing Institute.

Both the center and the Organizing Institute were helped by a political fund-raising firm that assisted Cranston's reelection campaign in 1986 and is now aiding his 1992 campaign. The groups each paid Lucille A. McCoy more than $32,000 to consult on fund raising. She served as a fund-raiser for Cranston's 1986 reelection campaign and now is working out of the senator's Los Angeles headquarters on his 1992 campaign. The campaign committee paid her firm, McCoy Associates, more than $25,000 in the first six months of this year, records at the Federal Election Commission show.

A Center for Participation in Democracy training manual contained guidelines for registrars working in the field, mostly in low-income areas. It instructed registrars to tell people who were declaring party affiliation on a registration form: "Please mark your political party right here, like Democrat." If the person hesitated, the manual added, "explain (that) if you are for Nixon and Reagan, that's the Republicans. If you are for Kennedy or Jesse Jackson, that's the Democrats."

The center sought to raise $3 million and register a million new voters in California and four other Western states, Kim Cranston said in an interview. It targeted minorities, the poor and low-income young people in an effort to "empower" the disenfranchised.

As it turned out, the group raised about half the hoped-for money and registered between 233,000 and 365,000 new voters in California (county and state estimates differed), the younger Cranston said. No party breakdown was available.

Some workers charged that the effort was a highly partisan attempt to help Democrats in 1988.

"They weren't being honest. They weren't saying who they were," said a worker at the center, who requested anonymity. She said directors of the group never explicitly stated that registrars were to home in on Democrats, "but it was certainly implied. It was an unwritten truth."

Another worker, who also requested anonymity, said that he had worked in every election since 1972 but had never found a campaign as distasteful as the one run by the Center for Participation in Democracy.

"It was supposed to be nonpartisan, but they told me they wanted Democrats," he said.

Who Was Targeted?

Some workers were told they would get jobs with the Democratic presidential nominee after the registration drive concluded in October, a third worker said.

Several contributors to Cranston-backed groups assumed that the registration efforts would be partisan.

Ellen Scott, a spokeswoman for the Sheet Metal Workers International Assn., said that the union gave $75,000 to two groups last year because "the senator is always in the forefront of getting more people interested in voting for the Democratic Party. It is very hard to catch up with the Republicans as far as money spent on grass-roots campaigning."

In an interview, Kim Cranston said that any implication that the center or the Organizing Institute were actually campaign organizations is false.

"It is unfortunate that a few disgruntled employees can cast a shadow on what the center accomplished," he said, noting that some critics were fired and that others had persisted in disagreeing with the targeting of low-income areas. "I attended three training programs and told them what nonpartisan meant. With over 400 employees, a few people aren't going to pay attention."

"We never refused to register anybody," said Lance King, who ran the San Francisco office of the center.

Cruz Reynoso, a former California Supreme Court justice who is chairman of the Center for Participation in Democracy, said that the group "targeted areas where we could find young people and minorities." In general, he said, blacks tend to register as Democrats, Latinos less so and young people "about even."

Activities Applauded

Several voter-participation activists applauded the senator's activities, contending that his fund raising helped several nonpartisan registration groups outside California and that a bill of his to allow registration by mail would probably have a neutral political impact.

"We need more people like Cranston who are dedicated to strengthening the democratic process," said Sandy Newman, head of Project Vote, a tax-exempt group that registers voters in 15 states outside California.

Tax-exempt groups offer contributors the advantage of writing off their donations on income tax returns. To a wealthy contributor, the federal tax deduction is worth as much as 33 cents for every dollar donated, and state income taxes increase the value.

"The money is easier to raise because it is tax-deductible," observed Herbert E. Alexander, a campaign finance expert at USC.

Donations to the groups offer another opportunity, too: access to a powerful figure in Washington. Cranston acknowledges this. "Obviously, people who make huge contributions do have some advantage over those who don't," he said. "It gives them access."

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