Posted August 29, 2007 by J. Gerald Hebert and Fred Wertheimer

FEC Finally ACTs, But Its Too Little, Too Late

The FEC has entered into a settlement with America Coming Together (ACT), a pro-Democratic 527 group that raised approximately $137 million during the 2004 presidential campaign. Under the settlement, ACT agreed to pay a $775,000 civil penalty and to cease and desist from violating the campaign finance laws by using soft money to pay for federal campaign activities.

The settlement arose out of two FEC complaints filed by Democracy 21, the Campaign Legal Center and the Center for Responsive Politics against ACT on January 15, 2004 and June 21, 2004 for illegally spending soft money to influence the 2004 presidential campaign.

We are pleased that the FEC has taken action to hold ACT accountable for its illegal expenditures in the 2004 presidential election and that the FEC found most of the expenditures made by ACT in 2004 involved the illegal spending of soft money to influence the 2004 election.

We are concerned, however, that this action comes more than three years after our FEC complaints were filed and nearly three years after the 2004 presidential election was held. We similarly are concerned that the amount of the penalty imposed against ACT in this case represents only a tiny fraction of the nearly $100 million that the FEC found ACT illegally spent to influence the 2004 election.

The settlement with ACT, and previous similar FEC settlements with other 527 groups that made illegal expenditures in the 2004 presidential election, sends a stark warning that unless clear regulations are adopted and other steps are taken to signal much tougher enforcement by the FEC we are facing potential huge illegal expenditures being made by 527 groups in the 2008 presidential and congressional elections, for the third federal election in a row.

Both the long delay in resolving the ACT case and the relatively small fine imposed on ACT for almost $100 million in illegal expenditures make a powerful case for why case-by-case enforcement by itself will not work and why without proper regulations and prohibitive fines the illegal activities of 527 groups in federal elections will continue to undermine the nation's campaign finance laws.

Democracy 21, the Campaign Legal Center, and the Center for Responsive Politics still have an FEC complaint filed in 2004 pending against The Media Fund, another pro-Democratic 527 group, for making illegal expenditures to influence the 2004 presidential election.

Additionally, Democracy 21 and the Campaign Legal Center have two complaints pending at the FEC against four pro-Democratic and pro-Republican 527 groups for making illegal expenditures to influence the 2006 congressional elections.

FEC complaints filed by Democracy 21, the Campaign Legal Center, and the Center for Responsive Politics against two pro-Republican 527 groups, Swift Boat Veterans for Truth and Progress for America Voter Fund, for making illegal expenditures in the 2004 presidential election were previously addressed by the FEC through settlements similar to the ACT settlement.

The ACT case involved a 527 group that was registered as a federal political committee and also had a soft money account, unlike most other 527 groups spending money to influence federal elections that did not register as federal political committees.

Also, unlike many other 527 groups that spent their funds on campaign ads involving federal candidates, ACT spent its funds on voter mobilization efforts.

As a registered federal political committee, ACT was required to pay for voter mobilization efforts that directly supported federal candidates solely with contributions that complied with federal contribution limits and prohibitions. ACT was also required to pay for generic voter mobilization activities with a mixture of federally legal contributions and soft money to reflect that these generic expenditures were being made to influence both federal and nonfederal elections.

The FEC found that ACT had illegally treated $70 million of its expenditures as having been made for generic voter drive activities, paying for them mostly with soft money, when according to the settlement the expenditures were ''made on behalf of, and thus were attributable to, clearly identified federal candidates in a manner that could only be paid for with federal funds.''

This means that almost all of these $70 million in expenditures were illegally financed with soft money.

The FEC further found that ACT had improperly allocated almost all of an additional $30 million in administrative and generic voter drive activities to nonfederal or soft money expenditures, using an allocation formula of 2 percent federal expenditures and 98 percent nonfederal expenditures. The FEC found that ''ACT's allocation ratio failed to account for millions of dollars of federal expenditures that constituted direct support for John Kerry.''

The FEC concluded that whereas ACT ''used only $3.4 million in federal funds and $26.4 million in nonfederal funds for these allocated expenses,'' ACT should have paid for these administrative and voter drive activities ''with approximately $27 million in federal funds and approximately $3 million in non federal funds.''

In other words, the FEC found that 90 percent of ACT's generic voter drive activities involved federal elections and should have been paid for with federally legal funds, while ACT improperly treated only 2 percent of these activities as involving federal elections and paid only 2 percent to finance these activities.

The bottom line here is that almost all of ACT's voter drive activities in the 2004 election were required by federal law to be financed with federally legal funds, and ACT, instead, financed almost all of these voter drive activities with federally illegal soft money.

In order to deal with the issue of misuse of the allocation formula for generic voter drive activities, the FEC adopted a regulation requiring that at least 50 percent of the expenditures for such generic activities be paid for with federally legal funds. This regulation, which limits the use of soft money to pay for generic voter drives affecting federal elections, is being challenged by EMILY's List in a lawsuit pending in federal district court in Washington, D.C. The Campaign Legal Center and Democracy 21 are participating in this case as amici curiae in support of the FEC regulation.

In another case, Representative Christopher Shays (R-CT) and then-Representative Marty Meehan (D-MA) brought a lawsuit to require the FEC to issue regulations making clear that 527s spending soft money to influence federal elections are required to register as federal political committees and to comply with federal campaign finance laws, including limits on the contributions they could receive. This case is also pending in federal district court in Washington, D.C.   

The FEC also found in the ACT matter that there was no illegal coordination of activities between ACT and the DNC or ACT and the presidential campaign of Senator John Kerry (D-MA) during the 2004 presidential campaign and closed these cases.