'Legal laundering': Politicians use local political party committees to get around campaign financing laws

In Missouri, hiding the source of a campaign contribution by funneling the money through a middle man is illegal.

But strict limits on campaign donations from most sources have led the state Democratic and Republican parties and their big-dollar donors to look for creative ways to get their money to candidates. The result is millions of dollars moving through local political party committees, money that comes from donors who have already given the legal maximum to their favored candidates.

"It is a lawful form of money laundering because it allows someone to make contributions in one place and it ends up in some other place," said state Senate President Pro Tem Michael Gibbons, who wants to stop the practice cold. The Senate voted overwhelmingly in March for a bill that would do just that as well as impose rules for much more frequent reporting of contributions. But with two weeks left in the current session, the legislation has yet to reach the House floor for debate.

Prior to 1994, local party committees were a backwater of Missouri politics, established by law but with few duties except to pick new candidates when a ballot vacancy occurred as a result of death or withdrawal. But when a law limiting campaign donations took effect, the importance of local party committees was magnified by a provision allowing them to become a source of large contributions.

Contribution limits for political party committees are much looser than those for other categories of donors. Party committees may donate up to 20 times the amount any other entity can give, and there are no limits on the size of contributions they may accept.

Interviews with the treasurers of local party committees show that donors sometimes earmark their contributions so they will be given to particular candidates, a practice that raises questions about whether such donations violate the law.

The Southeast Missourian, over weeks of analyzing hundreds of campaign reports, has found many instances of money being designated to specific candidates through local political committees. However, leaders of the two major parties said they don't earmark contributions.

"There cannot be a directive sent with the money," said Jack Cardetti, spokesman for the Missouri Democratic Party. "That is clearly illegal."

Republican Party consultant John Hancock said the GOP follows the law precisely.

"We actually send a letter out whenever we make a donation explaining that we cannot direct what they do with the money," Hancock said.

A Republican consultant who handles money for dozens of local committees in the St. Charles County area said he won't handle money that is earmarked. Sometimes "suggestions" accompany the donations, said Tom Smith of St. Charles, but he doesn't consider them binding. "They are not allowed to direct who the money goes to," he said. "They can't say, here is the money and I want you to do it for so-and-so."

During the 2004 campaign, all donors except political party committees were limited to giving $1,200 to candidates for statewide office. A donation could be made for both the primary election and the general election.

Political party committees could give much more, $48,400 in all, to a statewide candidate who won an opposed primary. The money, split between primary and general election donations, was in hundreds of instances donated to the local committees in amounts matching the maximum the committee could give to a candidate.

The 2004 governor's race illustrates the impact of local party committees on important campaigns. Democratic gubernatorial candidate Claire McCaskill received more than 130 donations from local party committees in the days after her primary victory over incumbent Gov. Bob Holden. The money, most of which was donated in $12,000 amounts, replenished her depleted treasury for the fall campaign.

And Republican Matt Blunt, who won the 2004 race, received 65 large local party committee donations -- many for approximately $12,000 -- during the last week of the campaign, a rush of money that helped pay for the crucial final push.

In all, local party committees gave $6 million to the 10 statewide candidates of the Democrats and Republicans in 2004. Of that $6 million, local party committees received $4.8 million from he Republican and Democratic statewide parties. That amount was supplemented with $1.2 million from other contributors making large donations. Local party committees also became a conduit for other large sums that went to candidates for the legislature.

The transactions are all duly recorded in the campaign finance reports on file with the Missouri Ethics Commission. The commission, which enforces campaign laws by auditing reports and by investigating complaints, has watched the practice grow of money moving through local committees.

"We are not naive," said Mike Reid, compliance director of the ethics commission. "We do see that lots of money goes through, funneled from the state committees to local committees to various individuals. That is the pattern that happens with the law the way it is."

The commission usually uses civil actions -- such as the recent $104,000 fine levied against the House Democratic Campaign Committee -- to enforce violations. Those penalties can result in committees' being forced to pay the commission up to double the amount of money improperly handled.

But no fines have been levied for the growing practice of sending money to local political parties. That the practice is growing isn't in doubt -- the number of local party committees actively engaged in fund-raising nearly doubled from 176 in 2000 to 328 in 2004 -- and it has caught the attention of state lawmakers, who are seeking to stop it. The state Senate vote to rein in the local party committees also included a provision to eliminate the caps on direct donations to candidates and require clear reporting of campaign donations.

"This will get us back to where the candidate committees are dominant," said Senate Majority Leader Charlie Shields, R-St. Joseph. "Over a period of time, it has come to the point where it is difficult for people to look in from the outside and follow where contributions come from and where they are going."

The current rules were enacted in 1994. Legal challenges only brought them fully into effect in 2002, when a federal court ruled that limits on party donations were constitutional. Political observers said they haven't seen any change in the amounts donated by the largest contributors, only that those dollars go to party committees today instead of to candidates as they did in the past.

"Both sides are doing it, and they have figured out the loopholes and they are exploiting it to the hilt," said Rick Hardy, a University of Missouri political science professor.

Hardy, a Republican, ran for Congress in the early 1990s and refused donations from political action committees. He was also a leader in an attempt at statewide ethics reform in the late 1980s and 1990s.

"The money is flowing, and the campaign law is kind of a farce," Hardy said. "Really, it is being circumvented."

Governor Blunt, State Auditor McCaskill -- who is running for U.S. Senate -- Attorney General Jay Nixon and Lt. Gov. Peter Kinder, who either have or are currently making use of the local party committees, were asked to comment on the practice.

Blunt's office and McCaskill directed questions to the state political parties or to people designated as spokesmen. Nixon and Kinder declined to comment.

Specific transactions during the 2004 election campaign illustrate how the money moves in ways that make it difficult to trace the original source:

* The Missouri Association of Trial Attorneys PAC gave $422,000 to Safer Families for Missouri, which also raised $564,000 in other donations, most of it from trial attorneys. The Safer Families PAC gave $835,000 to the 90th Legislative District Democratic Committee -- a committee created under law to handle party business in that district -- which in turn gave $300,000 to the Missouri Democratic Party and $160,000 to other local party committees. Money given to local committees often was distributed directly to candidates. Money given to the state party was combined with other donations, and the state Democratic party gave $3.1 million to local committees.

* Two casinos, Harrah's and Ameristar, gave a combined $87,575 to the Senate Majority Fund, the PAC organized to help Republicans maintain control of the state Senate. The Senate Majority Fund raised about $1.5 million for the 2004 elections and gave $606,886 to the Missouri Republican Party. The GOP state committee contributed $1.7 million to local party committees.

* The Missouri Republican Party gave $48,400 to the Eighth Congressional District Republican Committee, headquartered in Cape Girardeau, in October and November 2004. On Nov. 19, 2004, the Eighth Congressional District Republican Committee donated $24,200 to Blunt's campaign and $24,200 to the campaign of Catherine Hanaway, who had lost a bid for secretary of state. When Blunt and Hanaway reported the contributions, their reports said it came from the Eighth Congressional District Republican Committee, not the state GOP.

* Davis, Bethune and Jones LLC, a Kansas City law firm, gave $7,500 to the Cape Girardeau County Democratic Central Committee in early October 2004. The money was sent to the Cape Girardeau Democratic committee so it could send $7,500 to McCaskill's campaign, committee treasurer Rick Althaus said. McCaskill's campaign reported the money as a contribution from the Cape Girardeau County Democrats.

Local treasurers' varying accounts

Local party treasurers give varying accounts of how they made decisions for using the money. In some cases, they said, the local committees had discretion to use the money as they saw fit. Some said they received "suggestions" from donors, or that candidates called seeking a donation at almost the same time the money arrived.

Still others said they get clear instructions from donors for using the money.

On Nov. 12, 2004, the Camden County Central Committee received $24,200 from the Republican State Committee, along with a request to send the money on to Blunt's campaign. At a meeting on Nov. 16, 2004, the committee agreed to make the donation, according to an attachment to its January 2005 disclosure report.

"We tried to ascertain the proper usage of the money," said committee treasurer David Chase of Gravois Mills, Mo. "There was some research done to understand that it was something that was fully within the parameters of the law."

Convinced they were acting legally, the committee voted to abide by the state GOP's request and send the money to Blunt.

Althaus, the Cape Girardeau County Democratic Party treasurer, said a telephone call would accompany each check from state party headquarters. "The first time or two I got a call, they were very concerned that the money get to the appropriate campaign treasury," Althaus said.

Althaus, a professor of political science at Southeast Missouri State University, said he checked the legality of the transactions before completing one.

"The first time you get a check from the state committee, and they ask you to send it along, you know, it is just kind of odd," he said. "Under the law they can't require you to send it along. But we are all on the same team, and as a teammate down here, we just will."

The Missouri Ethics Commission has issued only one legal opinion on the practice. In July 2000, the commission said a candidate could raise money for a local committee and ask that committee for a donation. But the candidate could not request that contributions be made to a political party committee for the express purpose of passing those donations on to the candidate.

State party leaders said they won't give up a practice that works.

"All parties will use that until the door is closed," said former Gov. Roger Wilson, chairman of the Missouri Democratic Party. "Your readers know that. You know that. Your readers know that all parties will use every legal means to support their candidates."

The Republican Party is playing by the rules, Hancock said.

"What looks to you like a violation is precisely the opposite," Hancock said. "It is the manner in which the law allows candidates to be supported. It is not an efficient system. It is not a system that is helpful for transparency."

Despite the denials, political science professor Hardy said he believes the widespread use of the in-and-out campaign donations isn't a coincidence. "Obviously it has to be orchestrated from the top and, of course, as long as the they are within the law it is hard to say there is a particular infraction. But being legal and being ethical are not always the same thing."