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Low-tax group goes political with merger
FreedomWorks will spend $10 million on GOP candidates
STEVE LAW Statesman Journal July 24, 2004
One of the rising stars of Oregon’s conservative political movement just got more formidable.
Citizens for a Sound Economy, which helped overturn Oregon’s $1.2 billion tax increase in February, is merging with a kindred national group called Empower America.
“It makes our organization that much stronger,” said Russ Walker, a Keizer resident and Northwest director of Citizens for a Sound Economy.
The new organization, called FreedomWorks, expects to spend $10 million this year helping conservative Congressional candidates, Walker said.
The group will target U.S. Sen. Patty Murray, D-Seattle, and may back Lake Oswego Republican Jim Zupancic, who is challenging incumbent U.S. Rep. Darlene Hooley, D-West Linn, for the Congressional seat that represents the Salem area.
FreedomWorks will seek to become a conservative powerhouse in the emerging field of so-called 527 organizations, which were created to circumvent new federal campaign spending limits. Named after IRS code section 527, such organizations engage in political activities, often through unregulated contributions.
So far, that field has been dominated by liberal groups such as MoveOn.org., Walker said.
The merger unites several conservative luminaries, including former House leader Dick Armey, former housing secretary Jack Kemp and former education secretary Bill Bennett, all Republicans. It also combines the grassroots strength of Citizens for a Sound Economy with the fundraising and policy prowess of Kemp’s Empower America, Walker said.
Citizens for a Sound Economy has specialized in campaigns and lobbying on the state level. Oregon has become one of the group’s strongest political bases, especially on the heels of the campaign against the Measure 30 tax package in February.
Citizens for a Sound Economy emerged from relative obscurity in Oregon to take the mantle of the state’s tax revolt in the past year. It filled a vacuum caused by a series of setbacks for Bill Sizemore and his Oregon Taxpayers United.
Walker’s group spearheaded the campaign to put Measure 30 on the ballot in February and then helped overturn the tax measure. It also helped unseat popular incumbent Rep. Vic Backlund, R-Keizer, in the May primary, after Backlund supported the tax package.
The petition signatures used to place Measure 30 on the ballot are being used by Walker to appeal to conservatives on other issues.
For example, Walker has offered to mobilize conservatives to put independent Ralph Nader on Oregon’s ballot, to aid President Bush’s re-election chances by siphoning votes from U.S. Sen. John Kerry, the Democratic candidate. Walker also advised the initiative campaign seeking to ban gay marriage in Oregon.
Many Republicans initially opposed the McCain-Feingold campaign finance limits in Congress. Then they cried foul when Democrats led the way to get around the spending caps, by taking advantage of Section 527 in the tax code.
The largest 527 committees all are liberal groups.
However, if FreedomWorks spends $10 million, it would vault to the top of the conservative 527 committees, according to a list compiled by the Center for Responsive Politics.
The 527 committees wouldn’t be needed for state races in Oregon because there are no spending limits in this state, said Andi Miller, executive director of Common Cause of Oregon, which advocates campaign finance reform.
“Obviously, they’re doing this for federal campaigns,” she said.
“I think what we’ll see is a lot more national corporations trying to call the shots in Oregon,” said Tim Nesbitt, president of the Oregon AFL-CIO. slaw@StatesmanJournal.com or (503) 399-6615
To understand the Kerry money machine, The Washington Post interviewed many of his chief fundraisers, campaign and party officials, political scientists, and donors themselves. It reviewed studies by watchdog groups and campaign finance Web sites, including the Center for Responsive Politics, Public Citizen and PoliticalMoneyLine.
The analysis shows:
• Lawyers, especially trial lawyers, are the engine of the Kerry fundraising operation. Lawyers and law firms have given more money to Kerry, $12 million, than any other sector. One out of four of Kerry's big-dollar fundraisers is a lawyer, and one out of 10 is an attorney for plaintiffs in personal injury, medical malpractice or other lawsuits seeking damages.
• Much of the seed money for the Kerry presidential campaign was collected through previous donors to his Senate campaigns, including lobbyists with interests before two of the Senate committees on which Kerry serves, the Finance Committee and the Commerce, Science and Transportation Committee.
• Fueling Kerry's money surge has been credit card collections on the Internet, a technique pioneered by his onetime rival Howard Dean in 2003 but used with even greater success this year by the presumptive Democratic nominee. Kerry has been raising more than $10 million a month on the Internet, for a total of more than $65 million, compared with $8.7 million for Bush in the past year, according to officials with both campaigns.
• Kerry appears to have succeeded in creating a new class of donors for the Democratic Party. Dozens of his fundraisers are relative neophytes in big-money politics and have not been active in making their own contributions. A review of federal campaign contributions of the big Kerry fundraisers shows that one-third of them have not made more than $20,000 in campaign contributions since 1990.
• Kerry's donor base is overwhelmingly bicoastal. Almost half of the big-money fundraisers hail from either California or New York. Seventeen of the fundraisers are from Kerry's home of Massachusetts. Kerry has substantially outraised Bush in California and New York, $39.7 million to $28.5 million; Bush has crushed the Democrat in Florida and Texas, $36 million to $8 million.
After he accepts the Democratic Party's nomination Thursday in Boston, Kerry has indicated, he will take $75 million in federal funds for the general election. Under federal campaign law, he will be not be permitted to spend any private funds on the campaign, although he may transfer to the Democratic Party any unspent money as of his nomination.
Still, his fundraising success has helped transform the presidential contest. Instead of an overwhelming financial advantage for Bush, who has raised $228 million, Kerry has achieved rough parity, especially when the money of pro-Democratic independent groups is factored in.
At the beginning of 2004, such parity could scarcely be imagined. At the time, Kerry was being heavily outraised by Dean, and his effort to preempt the Democratic field by raising more money than anybody else was a bust. The ironclad rule of Democratic nomination battles seemed likely to hold: The candidate with the most money raised by Dec. 31 in the year before the election, Dean in this case, would be the party nominee.
Instead, thanks to the Internet, an energized liberal base and his good fortune in Iowa, Kerry rewrote the rule.
Old assumptions prove false As the start of 2003, Kerry's campaign assumed he could capitalize on his front-runner status to outraise his Democratic opponents, thereby demonstrating the inevitability of his presidential bid to watchful Democratic constituencies. "We operated on the assumption that money trumped everything," one of Kerry's strategists recalled about those early days.
To make this plan a reality, Kerry turned to a small collection of Democratic high -rollers, many of whom had been active in his four Senate campaigns and in national party politics. His campaign treasurer was Bob Farmer, a legendary party fundraiser who had been crucial to former Massachusetts governor Michael S. Dukakis's success in winning the 1988 Democratic nomination. Another major fundraiser was Alan Solomont of Massachusetts, the owner of a chain of nursing homes and former finance chairman of the Democratic National Committee.
As Bush did in 2000 with his Pioneer program, the Kerry campaign also established a system for recognizing successful fundraisers: Those fundraisers who raised at least $100,000 for the campaign were given the title "vice chairs." Unlike the Bush campaign, which conducts rigorous tracking of fundraisers, Kerry campaign officials said they have an honor system for monitoring someone's claims of success.
The Kerry campaign has periodically released the names and home towns of these vice chairs, also known as "bundlers," so it is possible to see who his backers were before his campaign took off and who came on board as his nomination became more of a certainty.
In the early months of his candidacy, Kerry's fundraising strategy enjoyed mixed success, as he secured the support of 29 $100,000 bundlers. Among the trial lawyers who raised money for Kerry early in the campaign were Michael V. Ciresi of Robins, Kaplan, Miller & Ciresi LLP, who represented Blue Cross and Blue Shield of Minnesota in its successful $6.5 billion suit against the tobacco industry, and Michael T. Thorsnes, who recently retired from his San Diego law firm after winning $250 million in settlements and verdicts.
Longtime Kerry donors, such as partners of the Boston law and lobbying firm Mintz Levin, also kicked in considerable sums; employees of the firm have given $102,301 to his presidential campaign, according to the Center for Responsive Politics. Kerry's brother Cameron is a telecommunications specialist at Mintz Levin, and his former chief of staff David J. Leiter, a bundler for the campaign, is a lobbyist there.
A number of lobbyists with business before the Senate Finance Committee, on which Kerry served, were also on the senator's presidential bandwagon from the start. For example, the law and lobbying firm Piper Rudnick was among the early enlistees, with four Kerry bundlers -- former Michigan governor James J. Blanchard, John F. Merrigan, Matthew C. Bernstein and Jeffrey F. Liss, the firm's chief operating officer. Among Piper Rudnick's clients with interests before the finance panel are Merrill Lynch, Lehman Brothers, Northwest Airlines, the Federal Home Loan Bank Board of Indianapolis, the National Association of Home Builders and the Federal Home Loan Mortgage Corp.
Also among the early vice chairs was Joseph H. Flom, name partner of Skadden, Arps, Slate, Meagher & Flom LLP. The New York-based firm, which has four Kerry vice chairs, represents more than a dozen telecommunications, transportation and manufacturing firms with interests before Kerry committees.
By the end of 2003, Kerry had raised $19.2 million, not bad by traditional Democratic standards. But his strategy did not take into account the intense animosity toward Bush within the liberal base of the party and the willingness of thousands of smaller donors to back up their hostility with cash. And so Kerry lagged badly behind the candidate who recognized these new phenomena, former Vermont governor Dean, who collected $40 million.
"If we had had the Secret Service back in November and December, our code name would have been 'Dead Man Walking,' " said Kerry's finance chairman, Louis Susman, vice chairman of Citigroup Global Markets.
With the odds against him, Kerry mortgaged his house in Boston's Beacon Hill neighborhood and put $6.4 million of his own money into the campaign. The decision saved his candidacy, allowing him to continue to compete in Iowa and New Hampshire, leaving him positioned to capitalize on the collapse of Dean and Rep. Richard A. Gephardt (D-Mo.), another early leader in Iowa.
After Kerry won the Iowa caucuses, followed by victory in the New Hampshire primary a new precedent was created: Money flowed after victory, instead of victory going to the candidate with the most money.
"The world changed for us on January 19," Susman said.
A flood of support Iowa transformed Kerry into a money magnet. "There had been somebody I had been trying and trying to reach, but he never returned my calls," Susman said. "After Iowa, he called and wanted to know if I had changed my cell phone, that he had been trying to call me."
From Oct. 21 to March 18, the number of $100,000 bundlers for Kerry more than doubled, from 29 to 60, according to the campaign. The campaign gained more momentum after March 18, when Kerry effectively locked up the Democratic nomination and began picking up major fundraisers from the losing Democratic campaigns, the entertainment industry and veterans of the Clinton campaign such as D.C. fundraiser Beth Dozoretz and industrialist Bernard L. Schwartz.
One trend was a sharp increase in the number of trial lawyers joining the Kerry fundraising campaign. Among those soon joining as major fundraisers were John P. Coale, one of the nation's most prominent trial lawyers, whose better-known cases include the Union Carbide disaster in Bhopal, India, and at least 16 plane crashes; Robert L. Lieff, founding partner of Lieff Cabraser Heimann & Bernstein LLP, a San Francisco-based firm that lists four class-action settlements in 2004 alone totaling $176.5 million; and San Francisco lawyer Arnold Laub, whose firm Web site lists its participation in the $3.7 billion fen-phen settlement, a $185 million toxic chemical award and $4.5 million for a pedestrian accident case.
Trial lawyers acknowledge a clear self-interest in a Kerry victory. With Bush in the White House, the climate for trial lawyers is inhospitable. Bush has repeatedly declared that one of his top priorities is enactment of legislation restricting trial lawyers, capping damage awards and pushing many class-action claims into less favorable federal courts.
John Morgan, an Orlando lawyer whose firm specializes in medical malpractice, said he has helped raise more than $500,000 for Kerry. Speaking of the Bush administration, he said: "What they're trying to do is take away people's access to the courts. . . . If it becomes not profitable and not feasible, people aren't going to be represented."
Farmer said another striking development has been the surge of support for Kerry in the gay community. Farmer himself is gay. Many of Kerry's top fundraisers are active in the gay community, including Tom Daley, a consultant to Hotels.com; D.C. investor Claire Lucas; and Jeff Anderson, finance co-chair of the Alice B. Toklas Lesbian, Gay, Bisexual, Transgender Democratic Club, and his partner, Jeff Soukup.
As in past Democratic campaigns, the Jewish community is also playing a major role in raising money for Kerry, despite aggressive GOP efforts to woo Jewish voters and donors. One official at a leading Jewish organization estimated that one-third of Kerry's vice chairs are Jewish, compared with about 10 percent of Bush's major fundraisers. Among the leading donors with an interest in Jewish issues, particularly U.S.-Israeli relations, is Haim Saban, the chief executive of Saban Capital Group and creator of the Mighty Morphin Power Rangers.
Yet another major source of funds has been Wall Street: About 15 percent of Kerry's fundraisers work in the financial services industry. Financial industry backers have raised about $10 million for Kerry, according to Public Citizen.
Overall, Kerry's fundraising base is much different from Bush's. Kerry draws heavily on professionals with advanced degrees, academics, scientists and technology workers, in contrast to Bush's strong base in the business community. Bush has close to 100 major fundraisers -- Pioneers or Rangers, as the president's campaign calls them -- from the agribusiness, energy and power, construction, and transportation industries, compared with no more than half a dozen for Kerry.
According to PoliticalMoneyLine, five times as many corporate CEOs, presidents and chairmen gave to Bush as Kerry: 17,770 to 3,393. Conversely, the number of professors who gave to Kerry is 11 times the number of those who gave to Bush, 3,508 to 322. Actors split 212 for Kerry, 12 for Bush; authors, 110 to 3; librarians, 223 to 1; journalists, 93 to 1; and social workers, 415 to 32.
As great as the impact of major donors has been the role of the Internet. Even before Kerry won in Iowa, his campaign was moving to capitalize on the technology that helped Dean to his early lead. Josh Ross, a Silicon Valley executive, was brought in to restructure Kerry's Web site.
Kerry's campaign abandoned the use of impersonal appeals for cash. Instead, visitors to his Web site were greeted with e-mails from individual officials such as campaign manager Mary Beth Cahill asking for help to meet specific fundraising targets or to blunt Bush campaign attacks. Supporters were asked not only for money but also to give house parties for Kerry and to attend local campaign events.
The changes in the Kerry Internet operation has been noticed by professionals in the field. Wes Boyd, founder of MoveOn.org, said "there was a change in receptivity," a shift toward the interests and activities of online supporters and prospective donors.
Handling party factions So far at least, Kerry has managed to assuage the battling factions of the Democratic Party.
Trial lawyers are working side by side with corporate CEOs. Civic reformers opposed to patronage are planning events with lobbyists who thrive on political dealmaking. Advocates of affirmative action have joined with those who see such policies undermining Democratic Party values. Environmental activists are working with building and construction union leaders determined to extract natural resources. Severe critics and ardent backers of the Ariel Sharon government in Israel have subordinated their differences, at least through Nov. 2. Cultural liberals committed to sexual privacy, reproductive freedom and gay rights work hand in hand with those concerned about the fallout from the sexual revolution.
"I don't care if you were for Howard Dean at one end of the spectrum to Joe Lieberman at the other," Susman said. "Everybody is just so anxious to get this administration out. It's unanimous."
Still, the balancing act could get more difficult for Kerry. Since wrapping up the nomination, he has tried to move toward the center, away from what campaign finance experts describe as his more ideologically motivated donors.
"The real question is whether they can sustain it," said Gary Jacobson, a political scientist at the University of California at San Diego. "If the Democrats don't have Bush as the target, is this money still available? It could be sustained if the current level of political conflict is sustained, with Republicans in power with small majorities pursuing a quite conservative set of policies. If the Democrats actually win, it may be more difficult to sustain."