McCain Able to Skirt Limits of Federal Financing

By Matthew Mosk
Washington Post Staff Writer
Wednesday, September 17, 2008

Democratic presidential nominee Barack Obama put his fundraising machine on display in Beverly Hills last night, tallying more than $9 million at star-studded events that included a $28,500-per-person dinner and a private concert by Barbra Streisand.

Obama's record $66 million haul in August and the money that poured into his campaign last night have helped feed the impression that the senator from Illinois will have a substantial financial advantage over Republican Sen. John McCain (Ariz.) heading into the final weeks of the presidential campaign. But presidential strategists and campaign finance experts expressed surprise yesterday that Obama's decision to become the first presidential nominee to swear off public funding for the general election -- and McCain's decision to finance his bid with a single $84 million infusion from the federal government -- has not given Obama a clear financial edge.

"Senator Obama's advantage is not emerging as people thought," said Lawrence M. Noble, a former Federal Election Commission general counsel and an Obama supporter.

The reason has less to do with Obama's fundraising -- he has now raised $440 million, more than any presidential candidate in history -- than it does with McCain's ability to maneuver within the confines of the Watergate-era funding program, Noble said.

With backing from the Republican National Committee, McCain has taken advantage of loopholes such as "hybrid" television advertisements and joint fundraising committees that may keep him close to financial parity with Obama.

McCain's campaign team has argued privately for months that he would be able to raise enough money to be competitive in the fall, and RNC officials announced earlier this week that the party would enter the general-election period with $110 million in its various accounts. Combined with McCain's federal infusion, the Republican candidate had about $200 million at his disposal. When his total is added to funds held by the Democratic National Committee, Obama began the month with about $94 million at his disposal and the ability to continue raising as much as he can.

But publicly, Republicans have not hesitated to cast McCain as being at a disadvantage, and during an appearance yesterday in Vienna, Ohio, the GOP nominee used the occasion to note that his rival's hard-edged comments about McCain and the economy came "just before he flew off to Hollywood for a fundraiser with Barbra Streisand."

"Let me tell you, friends, there's no place I'd rather be than here with the hardworking men and women of Ohio."

While McCain had to stop raising money for his campaign committee after he accepted the GOP nomination in St. Paul, Minn., earlier this month, he has hardly been idle. On Monday night, he helped bring in more than $5 million at a Miami hotel, and his campaign has found ways to both raise money and spend it through coordinated efforts with the RNC. According to Republican sources, money is pouring in to a joint fundraising committee that can legally accept up to $70,000 from a single donor. Contributions made through McCain's Web site have quadrupled in recent days, according to party officials. The site routes potential donors to a separate page that collects money for the joint committee, distributing money to the RNC, state Republican party accounts, and a compliance fund that pays the McCain campaign's legal bills. The message on the site says, "The best way to help our campaign is to give to McCain-Palin Victory 2008."

Joint committees are not new. But the way the McCain campaign is using them, in the view of some election lawyers, makes it hard for donors to tell the difference between a contribution to the joint fund and a donation directly to McCain's campaign.

"One cute issue lurking within all of this joint fundraising is whether campaigns are getting away with having people basically give to party committees what technically is money earmarked to help a particular candidate," said Scott Thomas, a former FEC chairman.

Under FEC rules, Thomas explained, the party cannot tell donors that contributions will be used expressly to help a single candidate. That practice, called earmarking, would circumvent contribution limits and, in this case, the prohibition on McCain raising private money.

Trevor Potter, who is McCain's lawyer and a former FEC chairman, said the language soliciting for the victory fund was, in part, modeled on wording used by the 2004 Democratic nominee, Sen. John F. Kerry.

Potter objected to the assertion that money is being "earmarked" for McCain and his running mate, Alaska Gov. Sarah Palin, because the Web site clearly states that donations will go only to the RNC, the participating state parties and the compliance fund.

The campaign is also finding more latitude in how it can spend money during the final weeks. Under federal rules, the candidate can control only how his campaign's $84 million is used, and how $20 million in coordinated funds are spent in tandem with the RNC.

But McCain aides and the RNC are also working together on "hybrid" ads, which purport to advance the cause of his campaign and the fortunes of other Republicans. The RNC and the campaign split the cost of the ads, with the only requirement being that the ads mention, in some fashion, other elements of the GOP ticket.

Candidates from both parties first used such hybrid ads in 2004, and members of the FEC deadlocked over whether they should be allowed. Some lawyers considered the ads a way to bypass coordination rules and stretch the amount of money a presidential candidate could legally spend.

Fred Wertheimer, who heads the campaign finance reform group Democracy 21, called the use of the ads in 2004 "a scheme to evade the presidential public financing spending limits and the coordinated party spending limits," adding: "We urged the FEC in June 2007 to end this abuse, but they failed to take any action to do so."

David Mason, a former FEC chairman whose efforts to address the issue were derailed by a deadlocked commission, said, "There was a lot of discussion as to what standard should apply in terms of the content of the ad. Did you have to make an explicit appeal to the Republican ticket in a specific, identifiable way?"

The hybrid ads McCain and the RNC have aired to date offer quick, passing criticisms of Democrats such as Senate Majority Leader Harry M. Reid (Nev.), but there is little doubt they are intended to promote McCain, Mason said.

The hybrid ads and the use of joint fundraising committees are, in Noble's view, "the final distortion" of a presidential financing system that many have considered outdated for years. Because McCain has found other ways to both raise and spend money during the general-election race, Noble said, "it effectively means he is getting an $84 million subsidy for his campaign."

Obama advisers said this week that these efforts by McCain have only added pressure to the finance team to produce significant fundraising totals in upcoming weeks. "It's safe to say that is a fundraising record in Los Angeles," said Chad Griffin, a Hollywood political consultant. "This was billed as the last time Senator Obama was expected to be in Los Angeles before Election Day, so there was a tremendous amount of excitement."

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