McCain’s camp tests fundraising limits

By MICHAEL LUO

updated 12:13 a.m. ET Sept. 20, 2008

Senator John McCain toiled for years to push a campaign finance overhaul through Congress. After the measure finally passed, Trevor Potter, a lawyer and vigorous advocate for reforming the system, was instrumental in defending the law from challenges and pressing for strict enforcement.

Now, as Mr. McCain makes his final sprint for the White House, Mr. Potter is again helping Mr. McCain, but this time by maneuvering to wring the maximum out of campaign finance laws in ways that some contend are at odds with the spirit of the reforms they championed.

The tactics appear to be legally permissible. And some argue that the McCain campaign is simply doing what is necessary in the face of the record fund-raising by his Democratic rival for president, Senator Barack Obama, and Mr. Obama’s decision to bypass public financing and its attendant spending limits.

But critics point out Mr. McCain is capitalizing on legal loopholes that a watchdog organization headed by Mr. Potter has fought against.

“There are very, very few lawyers in the country that are better at exploiting campaign finance loopholes than Trevor Potter,” said Bradley A. Smith, a former Republican chairman of the Federal Election Commission. “Of course, that’s one of the odd things about the McCain campaign: ‘Here’s the rules we want, but we’ll play by the rules that are here.’ ”

Finessing the limits
Mr. McCain was an author of the Bipartisan Campaign Reform Act of 2002, known as the McCain-Feingold law, an ambitious measure that supporters hoped would help drive big money out of politics. He has also helped sponsor legislation to improve the public financing system for elections and attacked Mr. Obama for backing away from a pledge to participate in it for the general election if his opponent accepted public money as well.

But now, as Mr. McCain’s top legal adviser, Mr. Potter, a former F.E.C. chairman, and his team have been helping the campaign finesse the strict spending limits it faces under public financing. Although Mr. McCain is supposed to be out of the business of private fund-raising after he received his $84 million infusion from the Treasury this month, it is sometimes difficult to tell.

This month, the McCain campaign began running banner Web advertisements asking for donations to the McCain-Palin Compliance Fund, a fund-raising vehicle rooted in a 1980s F.E.C. ruling that candidates who accept public financing can still collect private donations for legal and accounting costs for complying with campaign finance laws.

Only a careful observer, however, would have noticed the advertisements’ fine print, which said donations to the fund would be used to pay for “a portion of the cost of broadcast advertising,” as well as other expenses.

That would seem to be a far cry from the legal and accounting exemption. But the F.E.C. issued an advisory opinion last year that said Senator John Kerry’s presidential campaign could use its compliance fund to cover up to 5 percent of its advertising costs, because of the several seconds candidates must devote in their advertisements to a disclaimer.

The Campaign Legal Center, founded by Mr. Potter, joined with Democracy 21, a watchdog group, to file a strongly worded brief opposing the practice, warning that it would be exploited.

'Reserves the option'
The McCain campaign declined to make Mr. Potter available for an interview. Brian Rogers, a spokesman for the campaign, said in a statement that the campaign had not yet paid for advertising with its compliance fund but “reserves the option to do so under this recent, clear F.E.C. precedent.”

The centerpiece of McCain-Feingold was its efforts to rein in “soft money,” or unregulated contributions, in national elections. But McCain fund-raisers continue to build much of their efforts around the solicitation of large contributions of up to about $70,000 for a special joint fund-raising account for the Republican National Committee and several state parties, which can spend money on behalf of the campaign, called McCain-Palin Victory 2008.

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Campaigns have used the joint fund-raising committees in the past, but the McCain campaign took the practice to a new level by linking them with state party accounts, which can accept contributions of $10,000, on top of the $28,500 collected for the national party, $2,300 for the compliance fund and, until recently, $2,300 for the campaign’s primary coffers.

Critics have contended that the large donations to the joint fund-raising accounts amount to a form of soft money. The Obama campaign has been using its own joint fund-raising committee with the Democratic Party, but it only recently created a separate account for the state parties, so the checks are not nearly as big.

“The real irony here,” said Craig Holman, a lobbyist for Public Citizen, a watchdog group, “is we fought so hard to get B.C.R.A. through, McCain-Feingold through, with the whole intent of getting rid of those large donations, which everyone, including McCain, realized were potentially corrupting. And we’ve gone full circle with these large donations for the joint fund-raising committees.”

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