McCain Skilled at Using Finance System He Reviles

In his 1998 U.S. Senate race, Arizona Republican John McCain pledged to limit his spending to the maximum allowed under one of his old campaign-reform proposals. But he never promised to limit how much money he raised.

Although he had a virtual lock on reelection to a third term, McCain pleaded for cash in his campaign’s final weeks.

So on election day he reaped not only a landslide victory but also more than $2 million in leftover cash, nearly all of which he soon rolled into his presidential campaign war chest.

The maneuver, while perfectly legal, did more than jump-start his presidential bid. It also enabled more than 200 of his supporters to contribute, in effect, more than the limit allowed under the law to his current quest for the White House.

McCain has made cleaning up the campaign finance system the centerpiece of his surging bid for the Republican presidential nomination. Yet McCain has proved remarkably adroit at hewing to the rules while taking advantage of the very process he decries as corrupting and corrosive. The linkage between his Senate and presidential campaigns offers a case in point.

As in the Senate general election campaign, federal law limited individual contributions to McCain’s presidential exploratory committee to $1,000. But 250 McCain backers in effect gave more than $1,000 to his presidential committee by also donating to his Senate campaign.

The additional contributions beyond what would be allowed under the $1,000-per-donor ceiling totaled $223,000, according to an analysis for The Times by the Campaign Study Group, a nonpartisan firm that tracks political donations.

‘It Takes Money to Run Campaigns’

“Sen. McCain is not critical of people raising funds for their campaigns,” explained spokesman Howard Opinsky. “It takes money to run campaigns.”

McCain is continuing to push campaign finance reform. He and Sen. Russell D. Feingold (D-Wis.) have jointly sponsored a bill banning soft money, a first step in minimizing donors’ influence on politics.

Staking out the high ground, he plans to shake hands today with Democratic candidate Bill Bradley in a mutual forswearing of so-called soft money--unlimited contributions to political parties for party-building activities and issue ads.

“There’s no naivete in John McCain’s body when it comes to the ins and outs of campaign finance,” said Larry Makinson, executive director of the Center for Responsive Politics, a Washington-based campaign finance reform group. To Makinson, McCain knows exactly how to manipulate the rules to his advantage.

McCain’s allies and opponents alike argue that he can’t behave like a white knight while running for the nation’s highest office--especially when Texas Gov. George W. Bush, the Republican front-runner nationally, has amassed record-shattering piles of money.

McCain “couldn’t even be in the race” if he alone declined to take advantage of the rules now on the books, said Rep. Christopher Shays (R-Conn.), a Bush supporter who is a co-sponsor of the House version of the McCain-Feingold bill.

Though he doesn’t expect purity, Scott Harshbarger, president of the citizens’ lobby Common Cause, criticized McCain’s transfer of Senate funds to his presidential campaign as the kind of legerdemain that leaves voters “cynical and alienated from the system.”

“He certainly was exploiting the system by pretty clearly knowingly hitting the same donors twice,” Makinson added.

State, Federal Rules Differ

Bush and other state officeholders cannot legally make similar transfers because their campaign money was raised under state rules, which differ from the federal rules. And of course, those who never held public office have no old campaign treasuries to draw on.

McCain won his 1998 Senate race against political novice Edward Ranger with more than two-thirds of the vote. He outspent his Democratic opponent by $2.4 million--the limit he had vowed to respect--to $371,000 and still had more than $2 million left over for his presidential bid, compared with Ranger’s $100,000 debt.

Even as the Arizona Republic showed the incumbent with a huge lead in the polls, the newspaper quoted an Oct. 19 letter McCain sent to potential donors: “I need to raise $82,000 in the next seven days.”

He worried, he said then, about a last-minute ad blitz from cigarette manufacturers angered by his sponsorship of tough anti-smoking bills. Tobacco companies had attacked those bills as including “the McCain cigarette tax.”

Ranger thought he spied a different motive. “You know what he’s doing?” he asked local reporters after a debate. “He’s running for president.”

Several donors who gave the legal maximum to both funds said they meant their Senate campaign gifts for McCain’s reelection, nothing more. Others had different reasons.

“I don’t really care about Arizona,” said David Helfet, a New York physician who gave the maximum individual donation, $1,000, in December 1998 and another $1,000 three months later to McCain’s presidential committee.

“He was thinking about running for president,” Helfet said. “I don’t think anybody said to me that he was, specifically, but that’s what we surmised.”

“There’s no question that my interest was in him as a potential president,” said attorney Terry Giles of Rancho Santa Fe, Calif., who gave $1,000 to each of McCain’s funds. “Normally I wouldn’t take an interest in an Arizona senator.”

Bob Dole Rolled Funds Into Presidential Bid

McCain was hardly the first to transfer funds from one federal campaign to another. In 1996, Sen. Bob Dole (R-Kan.) rolled about $242,000 in Senate leftovers into his presidential campaign, Sen. Richard G. Lugar (R-Ind.) used $85,000 and Sen. Arlen Specter (R-Pa.), $17,000.

Sen. Phil Gramm (R-Texas) raised the tactic to an art form, moving $4.8 million from his Senate campaign treasury to a 1996 presidential bid notable for its ability to attract money but not voters.

While McCain didn’t rival Gramm, a strategist for another Republican candidate this year said McCain’s early pile of cash gave him “a competitive advantage over all the other second-tier candidates.”

Yet McCain rejected another avenue for obtaining early money that other candidates employed, Opinsky noted. A handful of presidential aspirants established separate political action committees, which raised money to support other politicians in key primary states--politicians who could then offer campaign help in return.

Those responding to McCain’s late call for Senate cash and again for the presidential race included employees and PACs of telecommunications, railroad, television, banking and gaming industries. As chairman of the Senate Committee on Commerce, Science and Transportation, McCain deals with legislation affecting all these industries, and he has not hesitated to tap them for cash and other favors.

During his 1998 reelection campaign and the first nine months of his presidential race, McCain pulled in more than $500,000 from telecommunications interests, more than $200,000 from shipping, more than $300,000 from entertainment and more than $1 million from financial services, a Times analysis shows.

Even with the rollover from his Senate campaign, McCain trails far behind Bush in money raised for the presidential contest.

Through Sept. 30, Bush had raised $57 million to McCain’s $9 million. And while McCainreportedly added more than $3 million since then, Bush raised $4.2 million more.

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THE ISSUES

On the Money

In an unusual joint appearance by presidential candidates from different parties, Democrat Bill Bradley and Republican John McCain meet today in New Hampshire to emphasize their mutual commitment to campaign finance reform. They differ, however, on some specific proposals.

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Bill Bradley

* Ban so-called soft money donations--the unrestricted contributions to national political parties by individuals, corporations and unions.

* Prohibit state parties from spending their soft money to influence federal elections.

* Increase public financing of elections.

* Require TV broadcasters to give candidates free time.

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John McCain

* Ban soft money contributions to political parties.

* Ban contributions by political action committees, which can make larger donations to candidates and causes.

* Limit money spent on ads that are supposed to advocate a position on an issue but which critics say actually promote specific candidates.

* Require unions to get members’ permission to use their dues for political purposes.

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Sources: Associated Press and the candidates’ campaigns

compiled by MASSIE RITSCH/Los Angeles Times

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Times researcher Sunny Kaplan contributed to this story.