Firms Utilize Loophole for Election Donations : Politics: Companies give so-called ‘soft money’ to state parties. It is spent on campaigns for federal office.

Even though corporations are prohibited from making direct contributions to candidates for federal office, the Republican and Democratic parties exploited a legal loophole and collected nearly $3.5 million from American firms during the first four months of 1991 to help elect such candidates, according to federal records.

Corporate contributions, previously made entirely in secret, are now being reported to the Federal Elections Commission on a monthly basis under regulations that took effect on Jan. 1.

Records show that the Republicans collected more than $2.6 million and the Democrats received nearly $780,000 in corporate contributions during the first four months of the year. The Democrats also collected nearly $40,000 directly from labor union treasuries.

Among the most generous corporate contributors during this period was Slim Fast Foods Co. of New York, which gave $100,000 in January to the Republican Party. The contribution occurred at a time when the Federal Trade Commission was known to be investigating the advertising of the company’s primary product, Ultra Slim Fast, a diet food.

For decades federal law has prohibited direct contributions to candidates from corporations. But, over the last 10 years, the FEC has in effect created a category of so-called “soft money” contributions that permit federal parties and candidates to tap corporate coffers as long as the money is spent by the state parties.

Fund raisers define “hard money” as funds raised under the restrictive federal campaign laws, which for example effectively set maximum individual contributions to a candidate at $2,000. “Soft money” is the contributions raised under more lenient state laws, which, for example, generally do not ban direct corporate giving or limit individual contributions.

Campaign reform groups contend that the has FEC has failed to uphold federal law by permitting this loophole in the law. “I argue to this day that those contributions are illegal,” says Fred Wertheimer, president of Common Cause, a lobbying group that advocates reform of the campaign finance system.

Until Jan. 1, there were no requirements for these so-called soft money contributions to be reported to the FEC by the national parties, which are required to disclose all other contributions collected on behalf of candidates in federal elections. The disclosure rules were issued in response to a Common Cause lawsuit.

Reports filed recently under the new FEC rules show that, since Jan. 1, corporate contributions made up 89% of all soft money contributions made to 10 accounts set up by the national Democratic Party. Corporate contributions accounted for 60% of all soft money collected by the Republicans.

Slim Fast and R.J.R. Nabisco surpassed all other corporate donors by giving $100,000 each to the Republican National Committee. R.J.R. Nabisco reportedly has been a major soft money contributor in previous years as well.

Although Slim Fast owner S. Daniel Abraham has been a regular contributor to political candidates of both parties, the company apparently has never made any soft money contributions until this year. When asked to explain why Slim Fast contributed $100,000 in January, two months after the last election, Barri Rafferty, the firm’s public relations manager, said that Abraham was traveling abroad and could not be reached for comment.

“No one really knows what prompted that donation,” Rafferty added.

Big corporate contributors to the GOP soft money funds since the beginning of the year include Limited Service Corp. of Columbus, Ohio, $90,000; Litigation Sciences of Rolling Hills Estates, Calif., $82,500; Irvine Co. of Newport Beach, Calif., $55,000; Builtland Partners of New York, $50,000; Bengal Chemical Inc. of Baton Rouge, La., $30,000, and A.G. Spanos Construction Inc. of Stockton, Calif., $25,000.

American Financial Corp., a holding company owned by Carl Linder, who was the business mentor of Lincoln Savings & Loan owner Charles H. Keating Jr., has given $45,000 to the Republicans since the beginning of the year, according to FEC reports. Linder is known to have been a perennial soft money giver in the past.

Firms giving $25,000 to the GOP include Cablevision Industries Corp. of Liberty, N.Y.; Castle & Cooke Inc. of Los Angeles; Coastal States Management of Houston; W. Clement Stone Enterprises, Lake Forest, Ill.; Devcon Realty Corp. of Miami; First Factors Corp. of High Point, N.C.; Hardee’s Food Systems Inc. of Rocky Mount, N.C.; Krupp Co. of Boston; Marriott Corp. of Washington; R.D. Hubbard Enterprises of Ft. Worth, and Ryan Holding Corp. of Chicago.

The Democrats’ biggest corporate contribution was an in-kind contribution of $50,100 from Connell Co. of Westfield, N.J., for transportation expenses. The Tobacco Institute of Washington contributed a total of $42,500 to two Democratic soft money accounts, and U.S. Tobacco of Greenwich, Conn., contributed $30,000. Archer Daniels Midland Co. of Decatur, Ill., contributed $31,500.

BACKGROUND

Since 1907, federal law has strictly prohibited corporations from making direct contributions to presidential or congressional candidates. The law was enacted originally in order to prevent corporations from buying influence from politicians. Since 1971, corporate officers have been able to contribute personally through political action committees.