Business Efforts to Ban ‘Soft Money’ Turn Squishy

After fund-raising scandals marred the 1996 elections, a handful of business leaders vowed to put an end to one of Washington’s biggest growth industries: unlimited political donations.

Four years later, the movement is faltering. A record number of companies have donated record amounts of so-called soft money. Companies that stopped giving these largely unregulated donations to political party organizations have resumed. Industry executives say there is still no corporate consensus that soft money is bad.

” . . . I’m disappointed,” said Jerome Kohlberg, the former Wall Street financier in charge of one of the business-backed groups opposed to soft money. “We’ve gotten less than what we had hoped--I wish the CEOs had more courage.”

That big business failed to rally behind campaign finance reform reflects the difficulty inherent in overhauling a system that benefits those who give as well as those who receive.

It is also a measure of the pressure political parties are putting on industry during one of the most competitive election cycles ever, with control of the White House and both houses of Congress up for grabs.

Leaders of the business-backed campaign reform movement have given up on this election and turned their attention to the months after Nov. 7. They point to hopeful signs: Vice President Al Gore’s pledge to work to ban soft money if he is elected president, and campaign finance reform advocate Sen. John McCain’s early success in challenging George W. Bush during the Republican primaries.

One of the leaders has been the Committee for Economic Development, whose members include some of America’s most powerful companies. The CED gathered endorsements from top business leaders last year to reform campaign finance laws.

In response, Sen. Mitch McConnell, a Kentucky Republican who is one of the strongest defenders of soft-money donations, wrote a threatening letter urging the signatories to resign from the committee.

Charles Kolb, head of the CED, said McConnell’s threat had no effect and pointed to the growing number of business leaders who have joined in the demand for reform. The huge push for cash this year has disgusted many top corporate officials, he said.

“The spectacle being created is probably going to be counterproductive for the future of soft money,” Kolb said. “Soft money is basically doomed.”

But an examination of the approximately 250 people who have endorsed the committee’s reform plan shows that nearly one-third are retired CEOs or academics with no direct control over corporate practices. Of the remaining two-thirds, slightly more than two dozen represent Fortune 500 firms that make some of the largest soft-money donations. And many of the other companies on the list continue to give soft money despite their CEOs’ objection to the practice.

The heads of MGM Mirage and Biogen Inc. endorsed the CED plan, which would ban soft money and increase the limits on donations to individual candidates. But both firms donated soft money this election, with MGM Mirage giving more than $300,000 and Biogen $15,000.

Ed Kangas, the recently retired chairman of the accounting firm Deloitte Touche Tohmatsu, was co-chairman of the CED task force that wrote the plan to abolish soft money. But he couldn’t persuade his own firm to cease such donations. In the last two years, according to the Campaign Study Group, a consulting firm specializing in campaign finance research, Deloitte Touche has contributed more than $190,000 to the Republican Party.

“At this point in time, I would say there’s a broad consensus that we don’t want to be a big soft-money player, but there may be times where it is to our advantage,” said Kangas, who still consults for the company. “At some level, we feel like we have to play.”

Kangas said more and more corporate leaders are becoming tired of the endless donations. But absent some legislative effort, he said, there is little hope that big companies will give up soft-money donations of their own accord.

“There is clearly no consensus,” Kangas said. “Most business today would prefer not to give. But there’s not going to be unilateral disarmament. That’s not going to happen.”

Quite the contrary: Some businesses have withdrawn their vows to make no political contributions.

After Congress began looking into the 1996 fund-raising scandals, for instance, defense contractor Lockheed Martin suspended its soft-money donations. The company has roared back, giving $834,000 to Republicans and Democrats the past two years, according to Campaign Study Group records. Company officials declined comment.

The trend has been most noticeable among technology firms, once famous for their reluctance to get involved in politics. Sun Microsystems, which made no soft-money donations through 1996, has already given almost $50,000 this year, $40,000 of it to Democrats. Company officials could not be reached for comment.

Corporate lobbyists say they receive weekly phone calls from Republicans and Democrats alike for $10,000, $100,000, even $500,000 contributions. There are fishing trips, golf tournaments and weekly dinners to attend. And always there is the implied threat: Your competitors are giving. Why not you?

“That’s the whole shakedown,” Kolb said. “Politicians aren’t shy in letting [companies] know who else is giving.”

General Motors publicly vowed in 1997 to stop giving soft money from its corporate accounts, though the company’s political action committee, funded mostly by top executives, still makes such contributions.

Still, a newly hired company lobbyist plunked down $350 this year to play in a golf tournament hosted by the National Republican Congressional Committee, which is raising record amounts of cash in an effort to maintain GOP control of the House.

When company officials learned of the donation from a Times reporter, they made the employee pay back the money out of his own pocket and issued a reminder to GM workers about the soft-money ban.

The mistaken donation indicates the difficulty of escaping the parties’ multifaceted fund-raising techniques. “It just goes to show how tricky some of these contribution policies can be,” said Mia Walton, a GM spokeswoman.

Three other companies have also broken their vows to cease soft-money contributions, according to Campaign Study Group records.

Monsanto gave $20,000 to the Republican Governors’ Assn. Company officials said they didn’t consider the donation soft money since the group is focused on races for state office. The Federal Election Commission classified the donation as soft money, however, since the Republican National Committee maintains the account.

In contrast, Honeywell, which merged with Allied Signal last year, also gave $15,000 to the governors’ association as a membership fee. When Honeywell found out the donation could be used as soft money, the firm decided to cease such contributions to the organization, said Tom Crane, a company spokesman.

Phone company Ameritech, which promised in 1997 to stop soft-money donations, instead became one of the most aggressive soft-money donors in the country, according to Campaign Study Group records. It gave more than $23,000 to Republicans in 1999 before merging with SBC Communications. The last donation, for $5,649, came one week before the merger’s completion.

Company spokesman Selim Bingol said Ameritech executives were upset when they learned of the contributions, made from local offices of the telecommunications firm, and were “very vigorous” in warning against future donations.

Time Warner not only gave up soft-money donations late last year but plowed the $2 million budgeted for such donations into increased political coverage by CNN and other of its news outlets. Although the media giant continued to ask its top executives for donations to its political action committee, which continues to give soft money, it has apparently stuck to its pledge to stop giving soft money as a corporation.

As far as Time Warner can tell, no other company has done the same.

“Most of them are very reluctant to give up a gun in their arsenal,” said Timothy A. Boggs, a top Time Warner lobbyist. “They feel it is very valuable to them, although every one of them knows the system is broken.”