Shays-Meehan Lawsuit Deals Blow to ’04 Soft Money Spending
By Adam Kredo
WASHINGTON, March 30 – Reps. Christopher Shays, R-4, and Marty Meehan, D-Mass., scored a legal victory Wednesday against so-called 527 organizations-tax-exempt, unregulated issue-advocacy groups-when a federal district court judge ruled that current Federal Election Commission practices do “not reflect reasoned decision making.”
The 527 groups, organized under section 527 of the U.S. tax code, spent large sums during the 2004 election. They are unregulated by the election commission because their expenditures, in the commission’s view, do not directly advocate the election or defeat of any particular candidate.
The 527 groups focus mainly on issue advocacy and voter mobilization. One of the groups, Swift Boat Veterans for Truth, aroused controversy in 2004 when it challenged John Kerry’s record in Vietnam.
Labeling the court’s decision “a great ruling,” Shays said in an interview that the “bottom line with 527s was that “we won in the court today and we think we would win in the appeals court and the Supreme Court, if the Supreme Court ever heard it.”
The Shays-Meehan lawsuit, filed in September 2004, directly challenged the commission’s regulatory stance and sought to implement a concrete policy on 527s. The suit was consolidated with the Bush-Cheney ’04 Committee lawsuit.
The suit mainly questioned the Commission’s 2004 decision not to issue rules requiring 527 groups to register as federal political committees, arguing that the money they spend influences nationwide campaigns.
The commission said it prefers to operate on a case-by-case basis rather than issue a blanket rule covering 527 groups. But in the lawsuit, Shays and Meehan asserted that the commission acted arbitrarily and contrary to the law when it failed to adopt such a rule during the 2004 presidential campaigns.
The commission “can take years to complete an administrative action, and penalties, if they come at all, come long after the money has been spent and the election decided,” the court stated in its decision.
In his ruling, Judge Emmet G. Sullivan of the U.S. District Court for the District of Columbia, sent the case back to the commission, ordering it either to “articulate its reasoning for its decision to proceed by case-by-case adjudication or to promulgate a rule if necessary.”
A commission spokesperson said of the ruling, “We’ve received it, we’re reviewing it and we’ll take appropriate action.”
The commission’s central argument was that it was not required to issue a guideline forcing 527 groups to register as political committees. It said it could diligently enforce clean practices on a case-by-case basis.
But Judge Sullivan disagreed.
“Judging from the FEC’s track record in the 2004 election, case-by-case adjudication appears to have been a total failure,” he said.
“Cases arising from the 2004 campaign have languished on the commission’s enforcement docket for as long as 23 months, with no end in sight, even as the 2006 campaign has begun,” Sullivan said. “This merely demonstrates the patent inadequacy of the case-by-case approach.”
Fred Wertheimer, one of the lawyers for Shays and Meehan and the president of Democracy 21, a nonprofit, nonpartisan advocacy organization, said in a statement he was “very pleased with Judge Sullivan’s opinion.” Wertheimer said he would like to see the commission recognize “it has no choice now but to issue new rules to regulate 527 groups.”
In February 2005, Shays and Meehan joined with Sens. John McCain, R-Ariz., Russell Feingold, D-Wis., Trent Lott, R-Miss., and Chuck Schumer, D-N.Y., in an attempt to close what a press release termed “the 527 loophole.”
Their bill would bring 527 groups “working for the election or defeat of a federal candidate under the same set of rules by which every other political committee has to abide,” by implementing three new rules, according to a Shays press release from February 2005.
It would require 527 groups to register with the commission as political committees. It would set a formula for allocating spending by 527 groups between regulated federal accounts and unregulated non-federal accounts. And it would cap annual contributions to non-federal, or “soft-money” accounts at $25,000 per donor.
Shays said the bill would be on the House floor Wednesday and that an amendment will be offered to allow increased coordination between 527 groups and candidates’ committees. Shays said while he is not advocating the amendment, he is “comfortable with it.”
