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Giant Firms Find Laws Toothless Top Federal Contractors Poured $23 Million Into Last Campaign

A decades-old law banning campaign contributions by federal contractors is so toothless that 59 top government contractors were able to pour $23 million into the 1996 campaign.

The giant defense, space and energy contractors did it all legally - without causing so much as a raised eyebrow among Federal Election Commission regulators.

Washington wrings its hands over the $1.5 million in tainted foreign cash that went to the Democratic Party and had to be returned. But the largest federal contractors openly funneled 15 times that amount to lawmakers in both parties who make multibillion-dollar decisions affecting their companies.

Meanwhile, small government contractors continue to be held to the letter of the law forbidding contributions.

The $23 million in contributions were tallied in a study by The Orlando Sentinel, which ran the names of the U.S. government’s top 100 contractors through the FEC’s database.

Five contractor-contributors broke the million-dollar mark in campaign cash. They were the Federal Express Corp., with $1.88 million in contributions; AT&T; with $1.82 million; Atlantic Richfield Co., with $1.41 million; Lockheed Martin Corp., with $1.26 million; and General Electric, with $1.08 million.

The loopholes contractors use - allowing them to sponsor “political action committees” and to give “soft money” to political parties - have so shaped the modern fund-raising landscape that the mountains of contractor campaign cash are taken for granted.

But there was a time when contractor funds were considered a breed apart - and not part of the accepted routine.

“It is very transparent bribery,” former U.S. Sen. William Proxmire said in reaction to the study. “The spirit of the law was to prevent people from buying government spending … which is exactly what they’re doing.”

In 1973, the Wisconsin Democrat led a losing fight on the Senate floor to keep loopholes out of the ban on contractor campaign cash. But most of his colleagues shut him down, voting 51 to 38 to allow contractors to create PACs.

That loophole, ironically, became law a year later as part of the post-Watergate campaign finance reforms and helped fuel the proliferation of corporate PACs from just 89 in 1974 to 1,642 today.

A campaign finance reform bill, which President Clinton has urged Congress to pass by July 4, would ban all soft money and PACs.

A co-sponsor of the bill, U.S. Sen. Russ Feingold, D-Wis., expressed surprise at the extent to which federal contractors use those loopholes. He said the issue might require special attention.

“I’d be willing to broaden this bill to address things like that,” Feingold said. “I look at that as a very logical thing to crack down on.”

The top 100 contractors together did $99.8 billion worth of business with the government in the 1995 fiscal year, according to the Federal Procurement Data System’s most recent report.

That figure represented about 55 percent of all federal contracting in 1995.

The major contractors, like all corporations, are prohibited from contributing company funds to federal campaigns. Like all corporations, however, they can contribute through PACs known as “separate segregated funds” - that are financed by contributions from stockholders, executives and employees.

The PAC can then give lawmakers up to $5,000 for each primary, runoff or general election. By the time the money reaches a candidate’s campaign chest, the distinction between a corporation’s own funds and its PAC funds is blurred at best.

In the 1996 campaign, the top tier of contractors used the PAC loophole to give $13.6 million directly to congressional candidates, the Sentinel study found.

The GOP, thanks to its control of Congress and its multicandidate presidential primary, raked in more than 70 percent of the contractors’ PAC contributions.

The overwhelming share of contractor PAC money $11.6 million - went to incumbent lawmakers. Of that total, $4.3 million was targeted to senators and representatives on key defense panels that oversee the biggest federal contracts. And $663,300 flowed to a handful of Senate and House leaders.

U.S. Sen. John Warner, R-Va., was the king of contractor PAC money in 1995 and 1996. The second-ranking Republican on the Senate Armed Services Committee, Warner pulled down $231,541 in PAC contributions from the contractors in the study.

The top House recipient of contractor PAC money was U.S. Rep. Bob Livingston, R-La., chairman of the House Appropriations Committee, who received $148,450.

Technically, U.S. law still makes it illegal for a federal contractor “to make, either directly or indirectly, any contribution … to any political party, committee or candidate for federal office.”

But the contractor ban specifically exempts “contributions or expenditures in connection with state or local elections.” That is the soft money loophole.

In the 1996 election, the top tier of government contractors poured $9.4 million through this loophole, the newspaper review of campaign data found.

Here again, the Republican Party outperformed Democrats in drawing cash from contractors. The GOP raised $5.6 million - or 60 percent - of the government contractor soft money.

Soft money contributions are to be used only for “party building” activities at the state and local level - not directly to influence federal elections.

But the wall between “federal” and “non-federal” uses of campaign money has all but collapsed in the 1990s as soft money grows more pervasive.

Television ads paid for by various Democratic and Republican party organizations out of unregulated, soft money accounts are almost indistinguishable from ads pushing specific presidential and congressional candidates.

Advocates of campaign finance reform say such practices have reduced the prohibition on contractors to a sham.

“It makes a mockery of the intent of the law,” Kent Cooper, a former FEC official, said of the contractor money. Cooper heads the Center For Responsive Politics, a non-partisan research group that tracks campaign contributions.

Many of the top contractor-contributors, of course, have legislative interests that sprawl far beyond their federal contracts.

AT&T;, for example, was preoccupied with Congress’ major overhaul of telecommunications law in 1995 and 1996.

Likewise, the money from Federal Express reflects its intense lobbying on a variety of regulatory matters - not the $300 million in federal contracts that represent only a fraction of its business.

“We direct our support to individuals we feel will best represent our issues … allowing the maximum economic freedom for companies in our field to pursue their operations,” said Fed-X spokeswoman Shirlee Clark.

Cooper, of the Center for Responsive Politics, noted how difficult it is to show that specific contributions lead to specific federal contracts. He conceded it is unlikely that an individual senator, for example, could be swayed by one $5,000 contribution.

Likewise, contributions are publicly disclosed - so lawmakers getting them can be held accountable.

But critics compare the open flow of cash to a baseball game in which every player on one team has handed the umpire $1,000 before the game, right under the crowd’s nose. Whether or not the umpire remains impartial, will fans think they’re watching a fair contest?

In 1995, center researchers linked a key House vote on the gigantic B-2 bomber program to campaign contributions from the contractors and subcontractors reaping profits from it.

Their study found that the 219 lawmakers who voted for the B-2 that year had received an average of $3,285 from prime contractor Northrop Grumman’s PAC and subcontractor PACs in the previous election. By contrast, the 203 House members voting against the B-2 had received just $1,305 from the sources.

The spirit of the law banning contractor cash may take a beating, but the letter of the law is still very much intact. It has been enforced by the FEC in cases that are comparatively picayune.

In 1980, for example, the FEC ordered U.S. Rep. Charles Stenholm, D-Tex., to refund $1,025 in contributions from Alan Ritchey of Valley View, Texas. The reason? Ritchey’s trucking firm was under contract to haul mail for the U.S. Postal Service.

Kenneth A. Gross, who directed the FEC’s enforcement office from 1980 to 1986, said the contractor prohibition has “zero effect on incorporated federal contractors.” He noted the lack of loopholes for smaller contractors is unfair.

“Sometimes you get these people who run a rural post office out in Podunk and they can’t give their congressman 100 bucks,” Gross said.

xxxx ONE FIRM’S VIEW Lockheed Martin, the government’s largest contractor, gave more than $1 million via PACs to congressional campaigns. How does such a sum square with Congress’ original intent in banning contractor cash? “It’s not for us to comment on the intent of Congress,” said Lockheed Martin spokesman James Fetig. “It’s up to us to follow the rules.” Contributions are “one part of our overall effort to tell our story to those who can effect the well-being of our company, its employees and its shareholders,” Fetig said. “We never ask for more than a fair hearing for our views.”