‘Issue Ads’ Let Dnc Skirt Limits On Spending

The Democratic National Committee quietly transferred at least $32 million to state Democratic parties in the last election as part of an elaborate plan to spend more money than federal election law appeared to allow on a massive advertising campaign that indirectly helped re-elect President Clinton.

The plan was conceived and coordinated by the Clinton-Gore campaign staff and Democratic Party officials as an end-run around legal spending limits, according to documents and interviews with Democratic officials. The Clinton campaign had agreed to the limits in return for accepting millions of dollars in public financing.

The state parties played almost no role in deciding on the details of this arrangement and were simply used as a vehicle for the Democratic National Committee to funnel more money than they could have spent directly on an advertising campaign that benefited the president’s re-election effort, according to the interviews and documents.

Justice Department and Senate investigators, who until now have primarily focused on how the Democrats raised money, have widened their investigation to look at whether the Democratic Party may have violated the law in the way they used money they had gathered from coffees, sleepovers, dinners and phone solicitations.

The money transferred by the DNC to the states was used to pay for “issue ads,” which are supposed to support the party’s agenda rather than specific candidates like Clinton. The investigators are re-examining the ads, which might be thinly veiled candidate ads for the Clinton-Gore effort. The DNC can buy issue ads but not ads for a specific candidate. However, the issue ads, must be paid for with a blend of legally restricted donations and unrestricted contributions. The DNC channeled money through the states because they are permitted to spend more unrestricted money on the ads.

The money the DNC transferred to state parties also came with specific instructions on how to spend it, state party officials said.

Within days of receiving the transfers, the state parties dutifully sent checks to the consulting team hired by the Clinton-Gore campaign and the DNC. The $32 million transferred went to the 12 key battleground states.

For instance, $1.4 million was sent to Colorado by the national party and was used to pay for issues ads within a matter of days. “Basically, we’d receive instructions from the DNC and an amount would be transferred to us,” recalled Dan Morris, the former state party treasurer, “and we would then transfer the money for the media buy. Folks out of the DNC sent us the money and they would give us instructions about where to send it from there.”

Money transfers from the national party to the state parties can be legal, but Justice Department and Senate investigators are looking into whether the transfers were purposefully used to evade the legal limits on campaign spending.

Even Dick Morris, the former presidential campaign adviser who orchestrated the president’s media campaign acknowledged that the television effort was directed by the DNC and not the states. “It was a charade to say those were ads of the state parties,” said Morris in an interview. “I never spoke to anyone from any state.”

Among the legal issues under examination is whether this arrangement allowed “soft money,” contributions made to the national party in unlimited amounts by corporations, unions and individuals, to be used in ways that would otherwise violate federal election law. Such donations cannot be used to support the re-election of individual candidates.

Another question is whether this arrangement allowed the Clinton re-election effort to evade the $62 million spending limit it agreed to in 1996, when it accepted the same amount in public funds.

“There has always been an attempt by both parties to push back the edges of these laws,” said Trevor Potter, a former Federal Election Commissioner and election law expert. “But, in the past, it was in the margins of political activities. Here we are talking about a wholesale blowing of the legal spending limits.”

Moreover, investigators are reviewing the conversion of candidate advertising into issue ads through a few deft changes in wording and message, allowing them to be paid for with DNC money. That permitted the Clinton-Gore campaign to conserve its financial resources. The consulting team that created the issue ads also worked for the ClintonGore campaign.

“This was a coordinated effort to evade the limits of how much a campaign can spend,” said a senior Republican lawyer involved in the Senate Governmental Affairs Committee’s inquiry. “It was a strategy formed inside the White House. They knew they were in a legal gray area.”

Lanny Davis, a spokesman for the White House, said he was confident that no laws had been broken: “This program was reviewed by the DNC and the Clinton-Gore campaign and found to be legal and appropriate.” And, the DNC’s general counsel, Joseph E. Sandler, called the arrangement “absolutely legal and appropriate.” Clinton-Gore campaign lawyer Lyn Utrecht agreed.

Harold Ickes, the former White House deputy chief of staff who is scheduled to testify before the Senate Governmental Affairs Committee on Tuesday, was deeply involved in directing the DNC’s fund raising and expenditures, according to interviews and legal documents, including frequent memorandums he wrote to Clinton and various party officials. Neither Ickes nor his lawyer returned calls.

The impetus for the money transfers came from Morris, by all accounts, the Clinton adviser and strategist, who launched a search for a fund-raising plan to pay for a $40 million television campaign he proposed in 1995 for the Clinton-Gore campaign.

According to Morris’ 431-page deposition to Senate lawyers, he was “thrilled” when he learned that DNC money could be used for the advertising campaign he envisioned, if the ads were slightly altered.

“I was delighted,” said Morris in his deposition, because the issue ads “completely fit the purposes that I had in mind.”

Had Morris not stumbled on this “issue ad” solution, the Clinton-Gore campaign could not have complied with legal spending limits and also have afforded the expensive ad buy Morris envisioned.

While Morris was a key player, Ickes worked in tandem with a little-known party official, Brad Marshall, on the financial end of the arrangement. Marshall moved Democratic money around the country with the sophistication of a Wall Street player, according to interviews with Democratic Party officials. The DNC would not make Marshall available for an interview.

The Republican Party, too, used similar strategies, including transfers of money to state parties for ads that echoed the campaign message of its presidential nominee, Robert Dole. But the Republicans transferred less money to the states, and later in the election cycle, according to election records. The Justice Department task force is reviewing some Republican expenditures.