Donations Flow Through Virginia PACs

In the grand tradition of offshore banking come the political action committees of Virginia.

Across from the graceful capitol designed by Thomas Jefferson, in a nondescript ground-floor office, out-of-state politicians have registered PACs to haul in huge contributions from across the land. The donations arrive in chunks as large as $35,000, $100,000, even $400,000--many times the federal limit.

The money gets plowed into campaigns outside Virginia--for traveling in early primary states or supporting local candidates. Some of the cash has made its way to California.

No one can trace the original source of the donations without traipsing here to the state Board of Elections to inspect committee documents. Unlike federal PACs, the donations are not posted electronically.

And it’s all perfectly legal.

“We’re America’s laundry now. It’s clear that Virginia is to campaign finance what the Cayman Islands are to banking,” said Steve Calos, executive director of Common Cause of Virginia, who called the arrangement “embarrassing.”

The state has never imposed restrictions on political committees, but it was only in the last election cycle that politicians, many of them serving in nearby Washington, seized on the opportunity to set up PACs in Virginia.

The practice of funneling large sums of money through Virginia has taken off in the last two years, with more than a dozen groups sending at least several million dollars through the system.

Most of the Virginia committees are linked to Republican candidates and causes. Records show that most Democratic committees that collect large sums appear to spend the money on Virginia races.

During the presidential preseason, Republicans Dan Quayle (of Arizona), John Ashcroft (of Missouri), Lamar Alexander (of Tennessee) and George Pataki (of New York) all established Virginia-based PACs that helped bankroll their national ambitions.

The Democratic state committees of Indiana and Missouri created small Virginia PACs too. So did the national committees and congressional campaign committees for both major political parties.

But none of the front-runners in the 2000 presidential race--Republicans George W. Bush and John McCain and Democrats Al Gore and Bill Bradley--have created them.

The Bradley campaign roundly dismissed the idea, spokesman Eric Hauser said. He called the tactic “one of those clever loopholes designed to get around the spirit of campaign finance laws.”

Reformers Frustrated by Virginia PACS

Reformers react to the Virginia committees with fury and frustration.

The PACs “don’t want people following their footprints. They’re flying under the radar,” said Larry Makinson, executive director of the Center for Responsive Politics, a nonpartisan campaign finance reform group studying the phenomenon. “It’s important to see the full range of financial influences.”

The Virginia PACs are governed by regulations that are among the most lax in the country. While federal rules prohibit any corporate contributions and cap individual donations at $5,000 per year, Virginia places no restrictions.

Only four other states--New Mexico, Oregon, Illinois and Missouri--are similarly lenient, although in some cases ballot initiatives and legislators have pushed for new restrictions.

Defenders of the practice say that Virginia PACs were set up to ease the difficulty and expense of maintaining separate committees in numerous states with different regulations. But they could accomplish the same thing by forming a federal PAC, which allows spending in both national and state races.

Virginia “makes it easier and quicker to raise money, and, frankly, that’s the bottom line,” said Tony Trimble, a Minneapolis lawyer who is counsel to American Values, Ashcroft’s PAC.

Here are some examples of how the process works:

As a former vice president contemplating a run for president, Quayle created a federal political action committee called Campaign America in 1997. He also has a non-federal Campaign America in Virginia.

At first, the Virginia group made small grants to state candidates, such as the $500 apiece dispensed in October 1997 to Barnes Kidd of North Tazewell and Kathy Byron of Lynchburg.

The next year, the size of donations swelled and they poured in from around America: $40,000 from Joseph S. Schuchert, a leveraged-buyout specialist, of Big Horn, Wyo.; $105,000 from investor Gary Brinson of Chicago and his wife, Suzann; $100,000 from Dan Phillips, Dallas-based president of Firstplus Financial; and $250,000 from Wilshire Financial Services of Portland, Ore. All of these donations would have been barred under federal rules.

The contributions to the PAC never actually got to Virginia. Disclosure reports show that deposits were stored in banks in Indiana, Quayle’s native state, and Arizona, where he lives now. In 1998 and this year, as Quayle launched his quest for the nomination, the Virginia PAC transferred more than $584,000 to his federal committee with the same name.

Quayle’s Virginia committee also started making $1,000, $1,500 and $5,000 donations at a rapid clip to more than 65 state candidates in New Hampshire and Iowa, as well as $15,000 to the New Hampshire Republican Party.

“The decisions were made at a level higher than me,” said Wesley T. Foster, who authorized expenditures and submitted the PAC’s disclosure forms. He is now with the Bush campaign. Other former Quayle campaign officials declined comment.

The Virginia PAC gave $10,000 to Dan Lungren’s campaign last year for California governor--and lesser amounts to candidates in other states, such as Illinois and South Carolina. Lungren also received $40,000 from Jack Kemp’s Virginia Freedom and Free Enterprise PAC.

Ashcroft also was exploring a presidential bid when he set up shop here. His American Values PAC collected $400,000 in a single contribution from the House of Lloyd, a Grandview, Mo., home-shopping company founded by a longtime friend. The single donation accounted for 69% of the Virginia PAC’s receipts.

Oddly, Ashcroft could have accepted the donation in his Missouri PAC. The only restriction there is that money spent within the state must come from a Missouri PAC.

But the days of unlimited donations may be numbered there. In 1994, Missouri voters overwhelmingly approved a ballot initiative imposing tough restrictions, which later was ruled unconstitutional. The Legislature passed a less stringent alternative, still stalled by court order while legal challenges run their course.

Ashcroft spent some of his Virginia PAC money in key primary states: at the Embassy Suites in Des Moines and the Budgetel Inn in Sioux City, Iowa. He also used it to pay for advertising at the New Hampshire Center for Constitutional Studies.

New York Gov. Pataki’s 21st Century Freedom Fund in Virginia took in $50,000 from a Houston oil firm, I.R.I. Corp. I.R.I. Chairman Hushang Ansary, an American citizen and former Iranian ambassador, gave an additional $15,000.

Tobacco Firm Among the Donors

The New Republican Majority Fund, founded by Senate Majority Leader Trent Lott (R-Miss.), brought in $20,000 from Silicon Valley venture capitalist L. John Doerr and $10,000 each from cigarette manufacturers R.J. Reynolds and the U.S. Tobacco Co.

R.J. Reynolds also gave $50,000 to the Virginia-based Committee for Effective State Government. The PAC is run by New Right paladin Paul Weyrich, who used some revenue to pay himself and fund Free Congress, his Washington-based advocacy group.

Many Republicans with Virginia PACs have another common bond: Virginia consultant Stan Huckaby. Several Republican PACs list the Alexandria address of his firm, Huckaby-Davis, as their own and company employees as committee officers. Huckaby said he does not comment about his clients.

Authorities in other no-limits states see little evidence of similar activity. But, said Missouri Ethics Commission campaign finance director Joe Carroll, “we obviously have to keep an eye out.”

*

Times staff writer Stephen Braun contributed to this story.