New FEC Rules Add Loopholes in Soft-Money Ban

The Federal Election Commission on Thursday ended two days of bitter debate over landmark campaign-finance reform legislation by crafting a set of enforcement regulations that reformers and the bill’s sponsors said have written new loopholes for soft money into a law that was meant to close them.

In a joint statement Thursday night, the bill’s authors accused the FEC of “rewriting” the law, which took them seven hard-fought years to get through Congress, through a series of amendments that “ignore” the law.

“The FEC’s job is ... to enforce the law, not undermine it,” declared Sens. John McCain (R-Ariz.) and Russell D. Feingold (D-Wis.) and Reps. Christopher Shays (R-Conn.) and Martin T. Meehan (D-Mass.).

McCain earlier had warned that if the commission violated the soft-money ban, the law’s centerpiece, his group had three options: Bring the regulations before Congress to disapprove them, further amend the law and even introduce new legislation “to change the entire Federal Election Commission.”

Their statement Thursday night offered no hint which, if any, option they would pursue, but several FEC sources and independent analysts said it was unlikely that the sponsors would bring the law back to Congress for another round of agonizing debate.

Before adjourning Thursday, the six commissioners adopted the last of half a dozen key amendments that narrowed the law’s effect on soft money even beyond a final draft of the rules that the sponsors rejected as too watered down. The commissioners are to hold a final technical session Saturday, when they are expected to formally approve the rules.

The rules must be published by June 25 and take effect Nov. 6.

McCain has defined the law’s principal aims as banning national political parties from having anything to do with soft money, restricting state parties’ use of it in federal campaigns and banning “federal officeholders and candidates, national party officials and agents from soliciting soft money.”

Even with the commission’s amendments, the main thrust of the law--to ban the massive infusion of soft money for national parties and candidates--remains intact.

But at the very end of an extraordinary session that lasted until nearly midnight Wednesday--long after most of the audience of reporters and watchdog groups’ members had left--the commission voted, 4 to 1 with one abstention, to narrowly redefine the word “solicit” in a way that bars federal officials only from directly asking for such money.

On Thursday, the commissioners, by a 4-2 vote, expanded exemptions for federal officeholders and candidates in a new rule that would permit them to be featured guests and speakers at state political party fund-raisers, so-called cattle calls. These fund-raisers are designed to raise vast amounts of soft money, which is generally defined as unregulated contributions from corporations, labor unions and other wealthy special interests.

“The effect of these new definitions,” the law’s sponsors said Thursday, “could be to allow federal candidates and party leaders to continue to raise soft money for the state parties using careful language or a ‘wink and a nod.’ ”

Mirroring earlier votes, the bipartisan FEC passed the latest amendments by 4-2 votes, with the three Republicans and Democrat Karl J. Sandstrom voting to adopt them.

“What you have is four commissioners who view the new law as a problem,” said Larry Noble, who worked for the FEC for 23 years and now heads the watchdog group Center for Responsive Politics.

“They’re writing the loopholes into the law, and these loopholes will leverage and broaden between now and the 2004 elections,” Noble said, defining the unusually heated rulemaking process as “both an ideological problem and a political problem.”

Noble, who was the FEC’s chief counsel for a decade, conceded the commission played a major role in creating the soft-money loophole through its rulings.

But he added: “It took 20 years to build the early loopholes into the law, and here they’re doing it in two days.”

Sandstrom flatly denied that in an interview after Thursday’s session.

“It’s not creating a loophole. It is keeping open the ability of state and local candidates to run their own campaign outside of federal regulation,” said Sandstrom, who believes the new law may violate basic principles of federalism.

As the commissioner who cast tiebreaking votes, Sandstrom has been accused by lawmakers and other critics of weakening the soft-money ban. But he insisted, “I think I’ve strengthened our political process by giving a more reasonable reading to what would have been an extreme reading.”

Commissioner Bradley A. Smith, a conservative Republican who sponsored several of the more hotly debated amendments, also responded to outside criticism at the start of Thursday’s debate.

Smith called the reaction to the FEC’s new definition of “solicit” “near hysteria in the press and the so-called reform community.” He said the definition merely “rejects the extremist position ... that we should look at the ‘wink and the nod.” ’

To the commission’s critics, he added, “Just relax.”

Later, following another contentious debate, Sandstrom withdrew an amendment so controversial that Smith had warned it would be “a lightning rod” for “hysteria.” The proposed rule would have allowed national political parties to continue to raise and spend soft money for their legal defense funds.

Even the FEC’s chief counsel’s office argued--as its lawyers did several times on other amendments Thursday--that Sandstrom’s proposal would blatantly violate the language and intent of the reform law.

One of the longest-serving commissioners, Democrat Scott E. Thomas, attempted to make the same case before voting against the most substantial new rules.

Before one rare, unanimous vote, Thomas spoke on behalf of fellow Democrat Danny Lee McDonald and quipped, “Just to show the spirit of great cooperation, we’ll approve this. Besides, we’ve already approved this approach, and there’s nothing we can do about it.”