In 2004, Swift Boat Veterans and POWs for Truth played a highly visible role in the presidential campaign by running ads in key states questioning the Vietnam War record of the Democratic candidate, Sen. John F. Kerry, and charging that "he cannot be trusted."
Likewise, the MoveOn.org Voter Fund criticized President Bush, repeatedly referring in its ads to his "failure of leadership."
Both operated as "527" organizations independent of political parties. That designation, from the tax code provision governing their activities, allowed them to solicit unlimited amounts of cash, which they could use to raise the public's awareness of issues.
But those overtly partisan activities crossed the line, the Federal Election Commission ruled Wednesday, fining both groups -- along with two affiliated with the League of Conservation Voters -- for failing to register as political committees, which have much stricter fundraising rules, and for raising millions of dollars over the limits that apply to such committees.
The Swift Boat group was fined $299,500, the MoveOn group $150,000, and both League of Conservation Voters groups $180,000.
Campaign watchdog organizations scorned the action as "too little, too late" and an example of a broken campaign finance system.
"Effective enforcement of the campaign finance laws cannot be established through a case-by-case approach that resolves massive violations of campaign finance laws more than two years after a presidential election with a fine that is a small fraction of the millions of dollars illegally spent to influence the election," officials of Democracy 21 and the Campaign Legal Center said in a statement. They had joined a third watchdog organization, the Center for Responsive Politics, in filing a complaint against the Swift Boat group in 2004.
The fines were among the first arising out of 527 groups' activities in the 2004 campaign. Those cited Wednesday agreed to the fines to settle charges that they had violated campaign finance laws.
In the case of the Swift Boat group, the FEC disputed its assertion that it merely wanted to shed light on Kerry's record, saying its goal was clearly the Democrat's defeat. The FEC concluded the group should have registered as a political committee and come under the $5,000-per-year donor limit.
The FEC found that the group accepted about $12.5 million in individual contributions in excess of the limit for political committees and more than $715,000 in prohibited corporate donations.
The MoveOn.org Voter Fund spent more than $14 million on advertisements attacking the president, the FEC found. "Contributions received in response to MOVF's solicitations that clearly indicated the funds received would be used to defeat George Bush in the 2004 general election caused MOVF to surpass the ... statutory threshold," the commission said.
As for the League of Conservation Voters groups, the FEC said their fundraising efforts "clearly indicated that the funds received would be targeted for the election or defeat of specific federal candidates."
Roy Hoffmann, a retired rear admiral and the founder of the Swift Boat group, said in a statement that it was "far better to end this legal confrontation now rather than continue a costly battle against government bureaucrats in an area where the law is unconscionably vague."
Kerry spokesman David Wade said Wednesday of the Swift Boat campaign: "History will give them a far harsher punishment than the FEC ever can even dream of."
It was unclear how the fines would affect 527 groups, which rose in prominence after a 2002 overhaul of campaign finance laws placed limits on direct contributions to political parties but allowed unlimited contributions to groups that advocated on behalf of issues.
"Under this new test, if it looks like a campaign ad and it sounds like a campaign ad, it's a campaign ad -- and those can only be paid for with hard dollars raised from individuals in increments of less than $5,000 per year," said Brett G. Kappel, a Washington lawyer who specializes in campaign finance law.
"Unfortunately, these decisions don't mean there will be an end to 'Swift Boating' candidates -- running ads that attack the character of a candidate," he added.
"The FEC found in this case that the Swift Boat Veterans and POWs for Truth raised over $25 million, and the vast majority of that came from small contributions from individuals. If the Swift Boat Veterans had been organized as a [political committee] rather than a 527, they could have legally run the exact same ads."
Others said the cases did not provide clear guidance on 527s.
"The law is clearly not settled ... leaving those who are committed to engaging in lawful political speech to risk a crapshoot when interpreting in good faith the existing incomplete guidance," Gene Karpinski, president of the League of Conservation Voters, said in a statement.
MoveOn.org said it had done away with its 527 organization in 2004 and was now relying on smaller contributions.
Wes Boyd, a MoveOn.org founder, said he welcomed the FEC "clamping down on pop-up 527s, set up just to influence elections and funded only by big money."
The Swift Boat group said that it too had discontinued its 527 group but was keeping open the option of creating a political action committee "to reengage in voter education if warranted."