“There are two things that are important in politics. The first is money and I can’t remember what the second one is.” —Mark Hanna, 19th-century mining tycoon and GOP fundraiser
Bill Liedtke was racing against time. His deadline was a little more than a day away. He’d prepared everything—suitcase stuffed with cash, jet fueled up, pilot standing by. Everything but the Mexican money.
The date was April 5, 1972. Warm afternoon light bathed the windows at Pennzoil Company head quarters in downtown Houston. Liedtke, a former Texas wild-catter who’d risen to be Pennzoil’s president, and Roy Winchester, the firm’s PR man, waited anxiously for $100,000 due to be hand-delivered by a Mexican businessman named José Díaz de León. When it arrived, Liedtke (pronounced LIT-key) would stuff it into the suitcase with the rest of the cash and checks, bringing the total to $700,000. The Nixon campaign wanted the money before Friday, when a new law kicked in requiring that federal campaigns disclose their donors.
Díaz de León finally arrived later that afternoon, emptying a large pouch containing $89,000 in checks and $11,000 in cash onto Liedtke’s desk. The donation was from Robert Allen, president of Gulf Resources and Chemical Company. Allen—fearing his shareholders would discover that he’d given six figures to Nixon—had funneled it through a Mexico City bank to Díaz de León, head of Gulf Resources’ Mexican subsidiary, who carried the loot over the border.
Winchester and another Pennzoil man rushed the suitcase to the Houston airport, where a company jet was waiting on the tarmac. The two men climbed aboard, bound for Washington. They touched down in DC hours later and sped directly to 1701 Pennsylvania Avenue NW—the office of the Committee for the Re-election of the President (CREEP)—across the street from the White House.
It was the last gasp of a two-month fund-raising blitz during which CREEP raked in some $20 million before the new disclosure law took effect. Hugh Sloan, CREEP’s treasurer, later described an “avalanche” of cash pouring into the group’s coffers—all of it secret.
At least it was secret until some of that Mexican money ended up in the bank account of a one-time CIA operative named Bernard Barker, one of the five men whose bungled burglary at the Democratic National Committee headquarters in the Watergate complex lit the fuse on the biggest political scandal in modern American history.
Almost 40 years later, mass movements like the Tea Party and Occupy have channeled popular anger at a political system widely seen as backward and corrupt. In the age of the super-PAC, Americans commonly say there’s too much money in politics, that lobbyists have too much power, and that the system is stacked against the average citizen. “Our government,” as one Occupy DC protester put it, “has allowed policy, laws, and justice to be for sale to the highest bidder.”
For many political observers, it feels like a return to the pre-Watergate years. Rich bankrollers—W. Clement Stone then, Sheldon Adelson now—cut jaw-dropping checks backing their favorite candidates. Political operatives devise ways to hide tens of millions in campaign donations. And protesters have taken to the streets over what they see as a broken system. This is the story of how we got here.
For decades, the campaign finance wars have pitted two ideological foes against each other. The self-styled good-government types believe that unregulated political money inherently corrupts. A healthy democracy, they say, needs robust regulation—clear disclosure, tough limits on campaign spending and donations, and publicly financed presidential and congressional elections. The dean of this movement is 73-year-old Fred Wertheimer, the former president of the advocacy outfit Common Cause, who now runs the reform group Democracy 21.
On the other side are conservatives and libertarians who consider laws regulating political money an assault on free markets and free speech. They want to deregulate campaign finance—knock down spending and giving limits and roll back disclosure laws.
In this ongoing battle, the upper hand shifts regularly. Wertheimer and his allies scored historic victories in the 1970s in the wake of Watergate and again in the early aughts. Yet more recently, the deregulation camp has won a series of court decisions—FEC v. Wisconsin Right to Life, SpeechNow.org v. FEC, and, of course, Citizens United—that have toppled more campaign finance regulations in less time than ever before.
Meanwhile, money is flooding the political system. In the 2012 election, experts project spending could top a staggering $11 billion—more than double the 2008 total.
What few people realize is how close Wertheimer and Congress came to blocking the deluge.
The phone call that launched Fred Wertheimer’s four-decade crusade against corruption and corporate money in politics came, of all times, during a nap. It was May 1971 and Wertheimer was then unemployed. The call that day had come from the good-government group Common Cause, where he had applied for a lobbying position. In a recent interview, Wertheimer recalled the warning he received from Common Cause founder John Gardner: “Reform is not for the short-winded.” Even so, Wertheimer quips, “he never told me it was 41 years and counting.”
Luckily for Wertheimer, he had an early taste of victory to keep him going. Watergate and the abuses of the 1972 presidential campaign had left the public agitating for reform, and both Democrats and Republicans in Congress scrambled to introduce new legislation overhauling the nation’s campaign finance laws. By 1974, there were five different campaign finance bills bouncing around in the Senate, four with GOP cosponsors.
Fred Wertheimer was the top lobbyist in the reform push, the broker between lawmakers working on various versions of the historic campaign finance legislation. The five bills were soon boiled down into one that included limits on campaign spending and donations, the creation of a new elections watchdog, and public financing programs for presidential and Senate races. It was as close to the Common Cause ideal as Wertheimer could’ve hoped for.
Wertheimer’s enemies seethed. Rep. Wayne Hays (D-Ohio) and the other conferees ultimately denied Wertheimer his grand slam of reforms by scrapping congressional public financing. Still, the limits on campaign spending and donations and the creation of the Federal Election Commission made for a stunning victory. On October 15, 1974, President Gerald Ford signed into law the amendments to the Federal Election Campaign Act (FECA), the bedrock of modern campaign finance law.
The amendments took effect on January 1, 1975. The very next day, Sen. James Buckley (R-N.Y.)—older brother of conservative icon William F. Buckley—sued the secretary of the Senate, Francis Valeo, in an all-out attack on the constitutionality of FECA. Buckley v. Valeo reached the Supreme Court in September 1975, and in a complex and at times impenetrable opinion, the court upheld the law’s contribution limits, presidential public financing program, and disclosure provisions. But it struck down the limits on spending, including so-called independent expenditures.
Buckley not only wiped out chunks of the 1974 law—it has shaped most major campaign finance court decisions ever since. The Roberts court drew heavily on Buckley in its Citizens United decision, which opened the door to unlimited third-party spending and radically reshaped the political playing field. “Buckley,” says Michael Toner, a former chairman of the FEC and onetime chief counsel to the Republican National Committee, “is a seed that has sprouted a thousand blossoms.”
“It was reported I once called George McGovern a grossly overeducated SOB.” Pause. “I’ve never called him educated.” Laughter filled the Riverview Room at the Watergate Hotel. It was May 18, 1983, and the 200 or so guests, among them luminaries of the Reagan Revolution, doubled over their $110-a-plate dinners and glasses of wine. At a roast in his honor, John T. (“Terry”) Dolan had stolen the show.
The guests had every reason to celebrate Dolan. A Reagan disciple and brash political operative, Dolan was the founder of the National Conservative Political Action Committee, known as NCPAC (pronounced “nick pack”). Freed by the Buckley decision, Dolan forged NCPAC into a formidable political machine. He raised and spent as much money as he could, and he helped pioneer the dark art of the attack ad.
The country had never seen anything like Dolan’s outside attack machine—and he knew it. “We’re on the cutting edge of politics,” he told the Washington Post in 1980. Dolan made no bones about his brass-knuckles style. “A group like ours,” he once said, “could lie through its teeth, and the candidate it helps stays clean.” Democrats branded Dolan a lying “extremist,” while patrician Republicans sneered at his smashmouth tactics. Yet when they weren’t bashing Dolan, his enemies scrambled to catch up. Strategist Peter Fenn urged fellow Democrats to “get down in the gutter with NCPAC” if they wanted to win.
Thanks in part to Dolan’s audacious brand of politics, Reagan was twice elected president. But NCPAC, which faded away in the years after Dolan’s death in 1986, illustrated a larger trend in post-Buckley politics: the rise of the political action committee. At the end of 1974, there were 600 registered PACs; nine years later, there were 3,500. PACs spent $23 million on congressional races in 1976; by 1982, it was $80 million.
The rise of business and corporate PACs—and also innovations like direct mail—helped the Republican Party dominate the arms race of the 1970s and 1980s. In the 1980 campaign, for instance, the GOP spent $5 million in support of Senate candidates, compared to the Democratic Party’s $590,000.
Yet the explosion of new PACs soon ended, and though they remain a fixture of electoral politics to this day, their luster faded. As the ‘80s wore on, a loophole opened by the FEC gave rise to soft money—unregulated, undisclosed, unlimited money given to parties (as opposed to candidates) by unions, corporations, and wealthy individuals. At first, the FEC let the parties raise and spend soft money solely for “party-building activities”: building a new office, say, or a TV studio. But election lawyers and savvy strategists soon widened the loophole.
Politicos remember 1988 as the first election when soft money figured in a big way. That year, the parties raised $45 million in soft money; in 1992, it was $86 million. By then Fred Wertheimer, the reformers, and newspaper editorial boards around the country were decrying what they saw as a perversion of the campaign finance laws. In May 1993, a newly elected President Bill Clinton paid lip service to banning soft money, but a bill to do just that died in conference, after passing both the House and Senate.
The bill’s demise would prove a blessing and a curse for Clinton. Soft money would power his reelection campaign two years later—yet it would also trigger the biggest campaign finance scandal since Watergate.
On September 7, 1995, Bill Clinton joined his top aides and advisers for a pre-election strategy session at the White House. The loudest voice in the room that day belonged to Dick Morris, the charismatic and controversial political strategist. Morris, as usual, had a plan.
The party, he said, needed to saturate the airwaves with TV ads starting now, 14 months before Election Day, in Colorado, Iowa, Michigan, and other swing states. The Democrats’ weapons of choice were so-called issue ads slamming the GOP and its leader, House Speaker Newt Gingrich, for a budget that cut funding for Medicare, Medicaid, and Head Start. The ads would also tout Clinton’s pledge to cut taxes on the middle class, beef up environmental protections, and balance the budget without axing popular programs. In reality, the ads were campaign spots. All that was missing was the “Vote for Bill Clinton” tagline. Why the feint? As long as Democrats claimed they were running issue ads, they could fund them with soft money.
Clinton signed off.
There was just one problem: The DNC was broke. Democrats would need to raise tens of millions of dollars, fast. In the months that followed, the White House and DNC sent a clear message to donors: Bring your checkbooks; we’re open for business. Clinton attended more than 230 fundraising events in the 10 months before the election, sometimes five or six a week. “The White House is like a subway,” said one contributor. “You have to put in coins to open the gates.”
And how those coins added up. The DNC raised more than $122 million in soft money during the ‘96 cycle. The RNC did even better, raking in $141 million. Together, the two parties unleashed $120 million in soft money on faux issue ads.
Yet Morris’ strategy put the Democrats’ soft money to far more devastating use. The ads ran relentlessly: By Election Day of November 1996, the average TV viewer in targeted states saw one Democratic issue ad every three days.
The barrage was later credited with opening a wide lead for Clinton nearly a year before the election. Although the RNC caught on to Morris’ strategy and mimicked it, GOP candidate Bob Dole never closed the gap. Looking back on his ad strategy and the ‘96 election, Morris later wrote, “There has never been anything even remotely like it in the history of presidential elections.”
Then, after Election Day, the details of the Democrats’ fundraising scheme exploded into a full-blown scandal. Sen. Fred Thompson (R-Tenn.), who had worked on the Senate’s Watergate investigation two decades earlier, launched a probe that eventually forced the Clinton administration and the DNC to admit to plying donors with coffee klatches with the president, sleepovers in the White House’s Lincoln Bedroom, rides on Air Force One, and other exclusive perks. It emerged that John Huang, a major Democratic fundraiser and the DNC’s vice chairman of finance, had laundered nearly a million dollars in illegal foreign contributions to the DNC from an Indonesian conglomerate and a Korean electronics company, among other sources. Democrats also accepted $65,000 in illegal donations at a now-infamous luncheon at a Los Angeles-area Buddhist temple. The DNC would later return about $3 million.
For Fred Wertheimer and the reformers, Clinton’s soft money operation marked a return to the dark-money days of Watergate. “Though still on the books, campaign finance laws have been replaced by the law of the jungle,” Wertheimer fumed at the time.
The pendulum was swinging back to reform.
A few days after Republicans recaptured the Senate in the 1994 midterm elections, Russ Feingold was driving through Wisconsin in his blue station wagon. Before the “tsunami of ‘94,” Feingold had ranked last in seniority in his party, but at least Democrats controlled the Senate. Now he had even less clout on the Hill. Somewhere outside Madison the wagon’s hulking car phone rang. The ensuing conversation changed Feingold’s life.
On the line was Arizona’s John McCain. The veteran Republican senator praised Feingold’s work, and suggested that the two men team up on legislation. Feingold suggested campaign finance. Thus began one of the unlikeliest yet most influential partnerships in the history of money in politics.
The two senators had watched in horror at the explosion of soft money in the previous year’s election and following the ‘96 election, Wertheimer had predicted that Congress had only a 90-day window to pass a soft money ban before the public’s anger dissipated. In fact, it took more than five years, by which point McCain had begun calling himself Sen. Quixote.
Wertheimer, who’d moved on to Democracy 21, lobbied relentlessly. More crucial was a decade-long influx of money from the nation’s biggest charities and foundations that started in the mid-’90s—upward of $140 million—to fund reform groups and underwrite new campaign finance research.
But it was serendipity as much as money or momentum that nudged McCain-Feingold over the edge. On May 24, 2001, Jim Jeffords, Vermont’s junior senator and a lifelong Republican, defected from the GOP and declared himself an independent. For the first time in history, control of the Senate changed hands without an election. The rest of 2001 saw McCain, Feingold, and their fellow reformers fight off an onslaught of amendments aimed at kneecapping their bill. Finally, in the winter of 2002, after the House passed its version of the legislation by a 51-vote margin, the Senate easily green-lighted the bill. McCain-Feingold headed to the desk of President George W. Bush.
At 7 a.m. on March 27, 2002, the duo’s seven-year campaign ended as it began: with a phone call. A Bush White House aide phoned McCain at his home in Arizona to inform him that the president had signed McCain-Feingold into law that morning. There was no signing ceremony, no Rose Garden press conference.
That same morning, a few blocks east of the White House, a staffer from a law firm representing the National Rifle Association stood shivering on the front steps of the U.S. District Court and holding a sheaf of papers. The staffer’s instructions were to file the NRA’s lawsuit challenging the constitutionality of McCain-Feingold the minute the courthouse opened. With the ink still wet on the two senators’ crowning achievement, the assault began.
It was then that Sen. Mitch McConnell, one of Washington’s fiercest foes of campaign finance laws, stepped into the fray. A stiff, jowly conservative born in Tuscumbia, Alabama, McConnell was known mostly for two things: his encyclopedic knowledge and mastery of congressional procedure, and his First Amendment zealotry. McConnell slammed McCain-Feingold as a “legislative sledgehammer” that would smash the First Amendment’s free speech protections to bits.
On the day Bush signed McCain-Feingold, McConnell filed a suit of his own challenging the new law’s constitutionality. It wasn’t the first time McConnell had set out to gut the nation’s campaign finance laws. Long before he challenged McCain-Feingold, McConnell had trained his sights on the FEC. If he couldn’t get rid of campaign finance regulations altogether, he knew defanging the nation’s elections watchdog would weaken enforcement.
Throughout the 2000s, McConnell reshaped the six-member FEC by exerting control over the nominating process. Former commissioner Brad Smith, whom McConnell tapped for the post, recalls, “He essentially said, ‘We need to put Republicans on the FEC who favor our point of view on regulation.’” McConnell leveraged his Senate clout to install ideologues hostile to campaign finance law. One of them, Donald McGahn, later told a group of students at the University of Virginia Law School that he simply would not enforce the laws he’d been hired to uphold.
Eventually, McConnell’s FEC strategy would pay off. For much of 2008, the FEC was so tangled that the commission lacked the minimum four-person quorum to even function. Political outfits have capitalized on the commission’s hobbled state. The percentage of groups disclosing their donors dropped by more than 43 percent between 2004 and 2010.
But while McConnell succeeded in his behind-the-scenes maneuver, the fight he’d put his name on didn’t go so well. Conventional wisdom suggested the Supreme Court would side with McConnell in the challenge to McCain-Feingold. Instead, the high court’s 5-to-4 decision, handed down on December 10, 2003, upheld nearly the entire law, humbling McConnell and his legal team. McConnell v. FEC is now remembered as a highwater mark for the reform community.
James Bopp Jr. read the 300-page McConnell decision in disbelief back at his law office in Terre Haute, an old southwest Indiana mining town of 70,000 on the banks of the Wabash River.
Bopp was a central figure in the conservative movement to deregulate campaign finance that, in the 2000s, took the fight to Fred Wertheimer and the reformers, brought the Citizens United case, and helped usher in super-PACs. Before, conservatives and libertarians had struggled to organize themselves on money in politics. “You had the ACLU, a few cranky libertarian sorts, a stray report from the Cato Institute, and some lackeys in the fight trying to preserve their own interests,” Brad Smith says. “That began to change after McConnell.” At the heart of that pushback was Bopp.
After serving as general counsel for the National Right to Life Committee for 15 years, the turning point in Bopp’s legal career came in 1993. Ten days before a statewide election, a Democratic judge blocked two Virginia anti-abortion groups from distributing voter guides on the basis that the pamphlets violated electioneering laws. Outraged at what he saw as a body block on the organizations’ free speech rights, Bopp got the judge to lift the injunction the day before the election. But the damage to their campaign had been done. At the next meeting of National Right to Life’s state chapters, Bopp urged the groups’ leaders to go on the offensive. “Sue ahead of time,” he advised them. “Get rid of these laws so [you’re] not victimized like that.”
Bopp has been in attack mode ever since. With anti-abortion groups as ready-made standard bearers, he has challenged and defeated more than 150 campaign finance laws. In recent years, he’s represented same-sex marriage opponents in California and Washington state in a broader effort to topple donor disclosure laws.
In 1997, Bopp created the James Madison Center for Free Speech to give fellow conservatives a platform in the political money trenches. Elected as an RNC delegate in 2005, Bopp pressed the party to embrace a deregulatory position on campaign finance. Freedom to raise and spend campaign money without restrictions, he says, should be “a central part of our philosophy.”
Bopp and his allies also saw their fortunes radically improve with the arrival of John Roberts and Samuel Alito to the Supreme Court during George W. Bush’s second term. Reformers and legal experts argue, in fact, that the switch from Sandra Day O’Connor to Alito marked the single most crucial moment in the past decade of the money wars. In an instant, the key fifth vote in McConnell was replaced by Alito, a reliable conservative with a libertarian streak.
The effect was near-instantaneous. In 2007, Bopp argued in FEC v. Wisconsin Right to Life that McCain-Feingold’s ban on running issue ads 30 days before a primary and 60 days before an election was unconstitutional. The court had upheld this very provision four years earlier; the Roberts court killed it. Then, in January 2010, the court ruled 5-to-4 in Citizens United—another case brought by Bopp—that corporations and labor unions are entitled to the same free speech protections as people and so can spend directly from their general treasuries on unlimited independent expenditures. Citizens United had arrived at the court as a minor case with few implications for campaign finance. But Roberts and his fellow conservative justices used the case to issue a ground-shaking decision that demolished decades of precedent.
The Roberts court’s hostility to limiting money in politics has forced the reformers to overhaul their strategy. The Campaign Legal Center’s Paul S. Ryan says groups like his now struggle to fund legal defenses of what’s left of campaign finance law. Donors see any legal strategy dead-ending at the Supreme Court—and Ryan agrees. “With the Supreme Court the way it is,” he says, “why bother?”
The reformers have instead taken the fight to Congress with legislation bolstering disclosure in campaign giving and political ads, but they have little to show for it. The 2010 DISCLOSE Act died in the Senate after Republicans, led by McConnell, filibustered the bill. It’s a tough time, Fred Wertheimer admits, to be a reformer in Washington.
Stymied in the courts and in Congress, the fight against super-PACs and dark money in politics is now being waged in the streets. Buoyed by the Occupy movement, activists nationwide are knocking on doors, lobbying state lawmakers, and rallying at courthouses in an effort to ensure campaign finance is not a back-burner issue.
In a recent poll, six in ten people said they disagreed with Citizens United; eight in ten said there was “too much big money” in politics. Reformers know the success of their long-shot campaign means tapping into that sentiment.
At the same time, Bopp and his allies continue their push to dismantle the remaining campaign finance laws. Their latest target: the century-old Tillman Act, which bans corporations from donating directly to candidates. Should Tillman fall, companies won’t need PACs, super-PACs, or shadowy non-profits; they’d simply hand checks to the candidates themselves and could theoretically create innumerable shell companies to skirt the existing $2,500 donation cap.
Absent from this struggle is President Obama. After condemning super-PACs, he bent to the post-Citizens United political reality and urged his supporters to give not only to his campaign but to the super-PAC supporting him, Priorities USA Action. And with his decision to rely solely on private donations in 2008 and 2012 in order to get a leg up on his opponent, Obama has undercut the public financing system created after Watergate.
Super-PACs, seven-figure checks, billionaire bankrollers, shadowy nonprofits: This is the state of play in what will be the first presidential election since Watergate to be fully privately funded. Faced with this money-drenched system, reformers respond: It won’t last. The pendulum is poised to swing once again. “I promise you, there will be huge scandals,” McCain said in March, “because there’s too much money washing around, too much of it we don’t know who’s behind it, and too much corruption associated with that kind of money.” Russ Feingold agrees. “When this kind of money is changing hands secretly, it’s almost automatic that there will be a scandal,” Feingold says. “And this scandal could be the mother of all scandals.”
Andy Kroll is Mother Jones’ Dark Money reporter. He is based in the DC bureau. Excerpted from Mother Jones (July/August 2012), a leading independent news organization, featuring investigative and breaking news reporting on politics, the environment, human rights, and culture.