Soft Money Rudy

Giuliani busts city and federal campaign limits on his way to possible senate run

As someone whose work as United States Attorney laid at least some of the foundation to this [campaign finance] law by the exposure of municipal corruption, I am a very, very strong advocate of it. . . . I believe that it is demonstrable that public officials in New York City very, very often the last 10 or 15 years were incapable of making decisions in the public interest because of the huge amounts of money donated by some. . . . We have to explain to people that, in fact, their generally held notion that you can buy and sell politicians actually does happen, has happened, and will continue to happen if we don't have laws intervene to try to create limits."

Rudy Giuliani, in a 1991 appearance before the NYC Campaign Finance Board

Sixty-five contributors to Giuliani campaign committees last year exceeded the $4500 Campaign Finance Board ceiling, donating $271,116 more than they would legally be allowed to give if the mayor was still abiding by the law he helped create. Most of the donors do business with his administration.

The gifts break no law because the mayor, who is barred from seeking a third term, has no committee currently registered with the CFB, and is instead fundraising through three committees: a federal candidate committee, a federal political action committee, and one state committee. Though he once denounced high state contribution limits as "lawless," in sharp contrast with what he said were "sensible" city restrictions, he actively solicited the $20,000 in individual donations permitted under state law in 1998, as well as the maximum contributions applicable to his two federal committees. As New York Public Interest Group watchdog Gene Russianoff put it to the Voice, "He could voluntarily agree to abide by city limits."

By accepting every allowable donation to each of his three committees, Giuliani has raked in up to $26,000 from some individuals— like real esate magnate Bernard Mendik, who leases office space to a variety of city agencies. That flies in the face of the onetime prosecutor's years of railing against the influence of big money. It also undermines the city's celebrated campaign finance system, which was intended to insulate mayors and other city decision makers from the perception, if not the reality, of "quid pro quo" relationships with donors by sharply reducing the amount anyone could give.

City Council Speaker Peter Vallone became the first city official to grossly exceed CFB limits, adhering to state guidelines when he ran for governor last year. Should Giuliani run for senate, however, he would fundraise outside the limits for three of the four years of his term, in contrast to Vallone's 10 months. Giuliani's advisers say he's seeking $10 million, while Vallone raised half that. And not even Vallone has anything approximating the power of a mayor to handpick the beneficiaries of municipal favor.

This assault on the intent of the campaign finance laws has been coupled in recent weeks with a series of overt actions taken by the mayor to wage war against the CFB. The administration just announced a plan to move board headquarters to Brooklyn. A CFB check bounced when a Giuliani aide initially refused to honor it with bank officials.

Most ominously, the administration has indicated it will not replenish the CFB fund that covers the cost of making matching payments to candidates. The mayor contends that a new law allowing a 4-to-1 match of small contributions, passed by the city council over his veto, has been nullified by the passage last November of an amendment to the charter he backed banning corporate contributions. The CFB insists the new law and charter amendment are perfectly compatible. Giuliani wants the old 1-to-1 match to stay in place.

At first, Giuliani threatened to block 4-to-1 expenditures by the CFB to candidates running in the February 16 election for three vacant city council seats. But the cash for that disbursement was already available in a CFB fund, so those matching payments were made anyway. A January 22 letter from corporation counsel Michael Hess, however, blasted the board for "administering the program in a manner contrary to law" and urged the CFB "to inform candidates of the possibility that they may be required to return the difference between the enhanced matching rate and the matching rate authorized by law."

The apparent reason for Giuliani's sudden interest in the matching formula for a system he will never participate in again is Alan Hevesi. The all-but-certain mayoral candidate of Giuliani ally and Liberal Party boss Ray Harding in 2001, Hevesi indicated at a Chelsea civic appearance last month that he shares the mayor's opposition to a 4-to-1 match, though he said he'd be comfortable with a 2-to-1 ratio. Indeed it was Harding's son, Robert, the Giuliani budget director, who wrote a December letter to the CFB trying to block 4-to-1 matches.

Hevesi— whose office says he merely "raised questions" about the matching provisions at the meeting of the Democratic Leaders of the 21st Century— may well see the 4-to-1 ratio as a benefit to his putative mayoral rival, Public Advocate Mark Green, who has been unable to raise more than two to three million dollars in previous citywide or state elections. With a 4-to-1 match and a $10.7 million expenditure cap, Green may be able to spend almost as much in 2001 as Hevesi, who, as comptroller, can attract many contributions at the $4500 maximum level.

The three Giuliani campaign committees combined spent $655,443 of the $1.2 million they raised since they were formed last March, mostly on staff, consultants, and Giuliani's national meanderings. If the mayor runs for U.S. Senate, however, he can only use the $248,597 remaining in his $1000-a-donation federal candidate committee, Friends of Giuliani. Any direct use for a senate race of the $102,424 in his state committee (Giuliani for New York), or the $256,369 in his $5000-a-contribution federal PAC (Solutions America), would violate the law.

Under an intricate federal formula, Giuliani may be able to shift as much as $2000 from donors who've only given to the state committee or the PAC into his federal candidate committee— $1000 for the primary period and another $1000 for the general election. He may also continue to fundraise through the state committee, eventually transferring the balance to the state Republican, Liberal, or Conservative party. He can also make transfers of up to $5000 apiece from the federal PAC to any party committee.

If Rudy becomes the senate nominee of any or all of these parties, he can then use whatever funds he legally transferred to the party committees to buy commercials, much like Bill Clinton and Bob Dole did through the DNC and RNC in 1996. Of course, the party committees can raise their own money for the same purposes. The only apparent restriction— based on the recent Federal Election Commission (FEC) sanctioning of the Clinton/Dole activities — is that the commercials must fall short of explicitly urging a vote for Giuliani, though they can contain every other element of an election ad. While FEC auditors and attorneys found the Clinton/Dole ads violated federal law, the agency's politically appointed commissioners rejected their own staff findings, legitimizing this extraordinary soft money end run around federal campaign limits.

Indeed the three Giuliani committees have already raised $480,748 in contributions from 107 individuals, unions, and partnerships that exceed the $2000 maximum for a candidate's committee. Should Giuliani continue to seek donations through the state committee and federal PAC, this total may turn out to be only the tip of a soft money iceberg. A candidate of fat cat donors who set records in 1997 for corralling more donations than ever from those who gave the maximum (and more) allowable under city laws, Giuliani now shows every sign of financing a senate race primarily through big-money gifts laundered through these soft money conduits.

The irony is that the very charter provision he is using to try to kill the 4-to-1 match— the corporate contribution ban authored by a mayoral commission chaired by his own alter ego, Peter Powers— contained language urging the CFB to act to regulate soft money evasions of its own system. Giuliani's commission concluded just last August that "soft money undermines the effectiveness" of the CFB, citing as a typical example "contributions to political parties," and "questioned whether the Board has taken every action legally and constitutionally possible to regulate soft money."

In addition, The New York Times, which assailed the FEC reversal of its staff, wrote 109 editorials denouncing soft money and seeking federal campaign finance reform in the last two years. Giuliani may be counting on Chuck Schumer's exploitation of the Liberal Party for $1.7 million in soft money expenditures last year to justify his own future fondness for this gaping loophole, using Schumer to silence the Times and other finance reformers.

But Schumer raised $16 million under the $1000-a-donation strictures of the federal system, resorting to the Liberal stratagem only at the end and for what may turn out to be a paltry sum compared with Rudy. Giuliani seems primed to pivot the financing of a senate campaign around contributions that sidestep federal limits even while they demolish the city restrictions he played such a key role in devising.

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