Democrats’ $28-Million ‘Soft’ Money Monument

When Democratic Party chairman Terry McAuliffe unveiled the final drawings of his $28-million “arsenal” of brick, mortar and high-tech before party stalwarts in a casino meeting room here over the weekend, it was anything but a gamble.

The plans for the party’s Washington headquarters were embraced as a win-win deal for Democrats--a recipe, its backers say, for the party’s very survival.

But the 51,000-square-foot bastion in the heart of the nation’s capital also will be a singular monument to “soft” money--a concrete endgame for unregulated campaign dollars that will be illegal as of Nov. 6.

Indeed, Federal Election Commission records show--and key party operatives who gathered here in the desert for the Democratic National Committee’s summer meeting this past weekend confirmed--that McAuliffe, who once mastered the fine art of raising soft money, has now perfected a way to permanently preserve it for decades beyond the Bipartisan Campaign Finance Reform Act that outlaws those contributions later this year.

He will be using the soft money--unregulated contributions to political parties from labor unions, corporations and wealthy special interests--that Democrats raise before the deadline to build the block-square building, complete with state-of-the-art TV and radio studios, and to buy the computers that will fill it.

“We are going to get hundreds of millions of dollars of hard donations with an investment of just $28 million in soft dollars,” McAuliffe proudly proclaimed in an interview.

Republicans and campaign-reform activists have condemned the project--which is being financed in part by $12 million in soft money from Los Angeles mega-millionaires Haim Saban and Stephen L. Bing--as violating the spirit behind the campaign finance reform law that most Republicans opposed and that Democrats themselves pushed through Congress this year.

In fact, a last-minute amendment by Republicans that soft money cannot be spent after Nov. 6 is forcing Democrats to pay every dime of the construction costs up front--before contractors even begin the project Dec. 16. The three-story structure on prime downtown real estate isn’t scheduled for completion until August 2003.

At stake for the Democrats, McAuliffe says, was nothing less than the future of the party itself: “If we had not done this--but for two members who live in Los Angeles, but for their contributions--there’s a good chance you could have just shut the front door to this party.”

McAuliffe insists that the headquarters project, rather than exploiting a loophole in the McCain-Feingold campaign finance reform law, far predates the bill’s passage, in timing and intent. The project, he says, was well underway a full year before the act passed Congress in February. McAuliffe says he launched it soon after he was elected chairman of the DNC in February 2001.

The battle plan behind it grew out of the basic arithmetic of 21st century U.S. politics: a vast technological gap that had grown between the Republicans and Democrats in increasingly costly, high-technology campaigns, and the clear advantage that technology had given the Republicans in drawing the individual “hard money” donors who are the future of national politics.

“We had 400,000 donors when I was elected, and Al Gore got 50 million votes. We’d obviously been doing something wrong,” said McAuliffe in explaining the chasm between donors and voters.

McAuliffe’s first step was to use some of the soft money in the party’s coffers to hire former DNC communication staffer-turned-consultant Laura Quinn to design a strategy for the party to close the technology gap, which, she said, had left the Democrats “light-years behind.” And Peter O’Keefe, McAuliffe’s senior advisor, was hired to raise the soft-money war chest that would fund it.

Among Quinn’s initial findings: In the 2000 presidential election that Vice President Al Gore lost by a whisker, the Democratic Party’s electronic database of voter and potential donor e-mail addresses totaled just 70,000 nationwide. The Republicans’ hard-money donors list topped a million, Quinn said.

In his keynote speech to the DNC here Saturday, McAuliffe acknowledged that his party was “stuck in the horse-and-buggy era.”

“Eighteen months ago, we didn’t have enough e-mail addresses to fill a modern football stadium,” McAuliffe said.

“Today, we can, with the push of a button, send information almost instantly to 1 million Democratic activists all over the country.”

At the core of the gap, Quinn soon discovered, was that the Democrats had entered the new millennium with a vintage-1980s IBM database and mainframe computer system she said “was like having a tractor-trailer holding a ream of paper.”

While Quinn became the project’s virtual general contractor, orchestrating a multimillion-dollar spending spree on leading-edge software, hardware and a new staff of young “gear heads” to design and run it, O’Keefe had little trouble finding a handful of key people to bankroll the project.

Saban’s record $7-million cash contribution to the “DNC Building Fund” made headlines in March, when the party officially reported it in FEC filings. But O’Keefe said the “Mighty Morphin Power Rangers” guru, who made a cool $1.5 billion selling his share of Fox Family Worldwide Television, had committed the funds at a Washington dinner in July 2001.

Beyond his generous gift, Saban, whom Gov. Gray Davis named to the University of California Board of Regents this year, also assumed the position of official chairman for the new headquarters building fund.

Bing, the 37-year-old publicity-shy heir to a real estate empire estimated at $600 million, weighed in with two hefty contributions for the project in January. He gave $3 million to the building fund and $2 million to a separate DNC fund to comply with current campaign finance laws. Those laws allow 100% soft-money purchases only for computer hardware but require a 60-40 split of hard and soft money from the DNC account for software.

Other key donors to the building fund this year include Houston trial lawyer John O’Quinn, with a $1-million gift; millionaire New Jersey Sen. Jon Corzine, with a $250,000 donation; and the Federal Home Loan Mortgage Co.--the privatized national mortgage company better known as Freddie Mac--with $100,000, FEC records show.

Among the selling points party operatives said they used to coax the contributions was the pitch that they would be the last. Their onetime investments in the centerpiece of a new system would replace their handful of big donations with a new database and political bank of small, hard money donors.

Under the new law, individuals can give $2,000 to individual candidates and $25,000 to a political party each year.

Besides, key party stalwarts such as chief counsel Joe Sandler argued, the building’s biggest benefactors represent none of the special interests that the reform bill’s sponsors say have corrupted the political system.

“Haim Saban doesn’t even have a job,” Sandler said.

“So where’s the special interest corruption?”

Throughout last year’s intensive planning, fund-raising and high-tech spending spree, McAuliffe insisted, “I didn’t even think McCain-Feingold had a chance of passing.” Neither, in fact, did most political analysts on Capitol Hill--not until Enron Corp.’s messy bankruptcy in December exposed a vast array of special interest politicking and the corporate millions that lay behind it.

But McAuliffe and other party strategists concede that the reform law, which had been looming for nearly a decade in various forms over a political system seen as increasingly corrupted by huge special interest money, was among the party’s key motivators in pursuing the new building plan.

It was only a matter of time before Congress got around to banning soft money, they said. And McAuliffe recently described the effect of that ban in a word: “Drastic.”

“From Nov. 6 on, there’s no soft money allowed within the federal party system. Period,” he said, conceding that his party has relied far too heavily on it. “What that means is, we had $100 million in 2000 that we’re not going to have in 2004. That’s dramatic.”

It could have been much worse. In fact, House Republicans attempted to add eleventh-hour amendments to the reform bill that would have specifically targeted and scuttled McAuliffe’s headquarters plan.

The riders, dubbed “poison-pill” or “anti-McAuliffe” amendments by several Democrats, came up for debate literally under the darkness of night--at 1 a.m. Feb. 14, the day the House passed the reform bill.

One of those amendments would have banned outright the party’s ability to use any soft money raised this year to fund a building or buy infrastructure it would use after Nov. 5. That one failed. But a milder amendment narrowly passed. It added the provision that banned political parties from spending any soft money after Nov. 6.

The original bill would have permitted the parties to spend soft money raised before the deadline indefinitely. And it was the last-minute amendment that has forced the DNC to prepay all contracts on a building it won’t see for a year from now.

McAuliffe’s strategy dodged another major hurdle in June, when the bill reached the politically divided FEC. The six-member regulatory body adopted a series of controversial amendments in setting the rules and regulations that will implement the reform law, which the act’s congressional authors say weaken it.

But FEC Commissioner Bradley A. Smith, a conservative Republican, introduced one amendment that would have toughened the act--but only for Democrats. Smith’s proposed rule change was nearly identical to the House amendment that would have torpedoed the new DNC headquarters building. In a recent interview, Smith said he ultimately decided to withdraw the amendment to avoid “the appearance of partisanship” on the part of the FEC.

Reflecting on the political minefield that he so far has navigated en route to his party’s future soft-money citadel, McAuliffe insisted that he bears his opponents neither ill will nor bitterness.

“In the end, it all worked out,” concluded the often brash and always aggressive entrepreneur.

“I don’t blame the Republicans. If I were them, I, too, would want to stop the Democrats from building an arsenal that will obliterate them for the years to come.”