Making a Capitol investment: Business magnates bank on 527s

As 527 groups have slowed their political activity since their record-setting role in the 2004 election, the groups have sought to swing today’s midterms with a broader base of high-dollar individual donors – many of them well-known in the business world – than in the 2002 season.

As 527 groups have slowed their political activity since their record-setting role in the 2004 election, the groups have sought to swing today’s midterms with a broader base of high-dollar individual donors – many of them well-known in the business world – than in the 2002 season.

Named for the section of the tax code that allows them to operate independent of McCain-Feingold campaign-finance rules, 527s have raised $291 million this cycle, according to the Center for Responsive Politics, a Washington-based watchdog group. Only about half of that, or $151 million, is designated for federal campaigns and issues.

While total 527 activity has dropped off since the 2004 campaign, when 527s raised more than double that amount, individual donors have eclipsed corporations as the force driving 527 political spending. More than 60 individuals have exceeded $175,000 gifts to 527s this cycle, twice as many as did in 2002.

Despite the perception of 527s as the province of ideology-driven individual donors such as George Soros, the liberal investment guru whose 527 gifts dropped from more than $23 million in 2004 to $4 million this cycle, some individual donors have potential business interests riding on today’s outcome.

John Pitney, a government professor at Claremont McKenna College in California, said, “There are a variety of motives [for donating to 527s] … many executives have ideological motivation. In other cases, they’re trying to influence broad public opinion, or they might have a very special interest in a particular election.”

The top individual 527 donor this cycle is Bob Perry, a Houston-based homebuilder and longtime fundraiser for President Bush. Other donors who have given at least $1 million to 527s are Richard DeVos, founder of Amway and father to Michigan GOP gubernatorial candidate Dick DeVos, and William Ulm, the director of MLU Services, a Georgia-based company that won a hefty reconstruction contract after Hurricane Katrina. Ulm’s entire $1 million went to the Republican Governors Association.

With the high cost of lobbying in Washington, some donors may see 527 donations as a relatively inexpensive investment in political influence.

“Some people give to causes that further their economic interests; some give to causes that would appear counter to their economic interests,” said Massie Ritsch, communications director for the Center for Responsive Politics. “I think it’s generally understood that business interests need at least some friends in both parties.”

AT&T, Pfizer and the Phillip Morris Companies’ Altria Group have each donated between $750,000 and $1.3 million to political 527 organizations. While all three companies donated to both sides of the aisle, they gave more heavily to Republican groups, favoring them by an average ratio of 2 to 1 in donation amounts. Wal-Mart, notably, donated $778,000, all of it to conservative 527s. Other corporations supported conservative 527s over liberal ones, to varying degrees.

The Senate Majority Fund LLC, managed by a Colorado Republican strategist who was indicted late last month on unrelated tax charges, snagged donations from Altria, Wal-Mart, and southwest-centered energy company KP Kauffman. The group sent more than $250,000 since July to another 527, The Trailhead Group, which has made several independent ad buys on behalf of Rep. Bob Beauprez’s (R-Colo.) gubernatorial campaign.

While corporations tend to give to 527s on both sides of the political spectrum, albeit with more donations overall to conservative 527s, individual donors have a more partisan giving trend, even when closely identified with companies.

Perry, owner of Perry Homes, was the largest benefactor of the Swift Boat Veterans for Truth Committee during the 2004 presidential race, giving the group $4.5 million. This election cycle, he has bankrolled three new 527 organizations, giving $5 million to the Economic Freedom Fund, $2 million to Americans for Honesty on Issues and $1 million to the Free Enterprise Fund Committee, a new 527 named for its affiliated pro-business nonprofit.

The Economic Freedom Fund has run negative advertising against incumbent Democratic Reps. John Barrow (Ga.), Alan Mollohan (W.Va.), and Leonard Boswell (Iowa). Americans for Honesty on Issues has made independent expenditures opposing Democratic challengers Baron Hill (Ind.), Brad Ellsworth (Ind.), Joe Donnelly (Ind.), Patricia Madrid (N.M.), Bruce Braley (Iowa), Ken Lucas (Ky.), Ed Perlmutter (Colo.), Gabrielle Giffords (Ariz.) and Heath Shuler (N.C.).

The Campaign Legal Center (CLC), a campaign-finance watchdog group, filed a complaint last month with the Federal Election Commission (FEC) against the Economic Freedom Fund, one of several complaints the group has filed alongside Democracy 21 calling attention to the FEC’s failure to comply with a court order to clarify its regulation on 527 spending.

“The Economic Freedom Fund is ignoring those campaign finance laws that are meant to regulate spending on elections,” CLC spokesman Paul Ryan said. “We believe the Economic Freedom Fund is by definition a political committee and should have registered as one with the FEC.”

The Economic Freedom Fund did not return phone calls for comment.

The elder DeVos’s 527 contributions have become a flashpoint in the Michigan gubernatorial race, with Democratic incumbent Gov. Jennifer Granholm accusing the GOP nominee DeVos of working with his father to secure a provision in a 1997 U.S.-China trade bill that saved Amway and four other companies $19 million. DeVos has denied any involvement in that effort.

Despite the high-profile investment of business executives in 527s this cycle, Pitney believes most business people focus on lobbying over 527 contributions because lobbying proves more effective. “If you are just trying to get your way on a bill, it probably makes more sense to spend money on lobbying [than on 527s] if only because there is more of a direct connection between your money and particular issues,” says Pitney.

 

Top Individual Donors to 527 Organizations

Name, Amount, Political Leaning
Bob Perry, $6,650,000, Republican
Jerry Perenchio, $5,450,000, Republican
George Soros, $4,067,500, Democratic
Linda Pritzker, $2,746,000, Democratic
Peter Lewis, $2,664,458, Democratic