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Hoyer Exploited Campaign Finance Law Loophole, Report Says

Posted on March 21, 2007:

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The Southern Calvert Gazette Newspaper

When you have two willing partiespeople willing to give money and people willing to accept itthey're going to find a way. It's a little like prostitution. Gazette political columnist Blair Lee

By PATRICIA M.MURRET, Capital News Service

WASHINGTON - Rep. Steny Hoyer, D-Mechanicsville, followed the law and common practice when he accepted "bundled" checks through his political action committee last election season and sent the money nationwide, campaign finance experts said this week.

The analysts were responding to a report from the Center for Public Integrity issued Friday that said Hoyer "exploited a legal campaign cash loophole" to gain political power for his party, which took over the House, and himself. Hoyer was elected majority leader.

"That's like saying somebody who deducts mortgage interest on their taxes is exploiting a tax loophole," said Nathaniel Persily, a campaign finance expert and University of Pennsylvania Law School professor. "What exactly is the problem?"

"Bundling is very common," said Steve Weisman, of the George Washington University's Campaign Finance Institute.

What Hoyer, a lawyer, did was perfectly legal, the Federal Election Commission said, too. In fact, his insistence on detailed reporting made tracking the funds easier.

But CIP researcher Sandy Bergo said in her report, "Passing the Bucks," that Hoyer "exploited a legal campaign cash loophole" by using his leadership political action committee, AmeriPAC, as a conduit to collect nearly $1 million for congressional candidates nationwide in 2006 through "bundles" of earmarked checks from individuals and from business and union interests hoping to gain political clout.

Contributions to leadership PACs are subject to the same contribution limits and prohibitions that would be in place if the contributions were sent directly to the campaign, the FEC said.

This year, for example, an individual can contribute $2,300 per election to a candidate or $5,000 to a political action committee in a given year, spokesman George Smaragdis said, whether he or she sends that money to the candidate directly or sends it to him or her through a PAC.

"Leadership PACs are essentially what we call non-connected committees . . . not established by any corporation or unions," said Smaragdis. "One of the things that these PACs can do is to collect and forward earmarked contributions."

However, PACs may not accept more than $5,000 from any single source, nor can they give more than $10,000 to any other candidate each year.

The center's report said the strategy Hoyer employed, called "bundling," is designed to "sidestep" those campaign finance restrictions. The report found that unions and other donors dropped off bundles of checks to Hoyer's staff to help fund the Democrats' takeover of the House.

The checks were earmarked by their donors for a particular Democratic congressional candidate, which Hoyer's staff listed in FEC disclosure forms, Bergo said.

Hoyer then handed over the designated checks to the congressional candidates' campaign committees.

In one case, Hoyer's AmeriPAC funneled as much as $86,000 to one congressional race, the report found.

Groups like the United Transportation Union, a railroad workers' union, gave AmeriPAC 38 individual checks in denominations from $1,000 to $5,000 that totaled up to $136,000, FEC disclosure forms showed.

The "bundling" process is something members of Congress typically do to gain party leadership stature, the report said. Hoyer's tactics not only helped Democrats win a majority last year, it may have also helped the congressman gain power in the political race of his life -- last year's run for House majority leader against Rep. John Murtha, D-Pa., who was backed by House Speaker Nancy Pelosi.

Hoyer distributed close to $1 million to 53 congressional candidates in key congressional races, and gave another quarter-million dollars to the Democratic Congressional Campaign Committee, the report said.

Bergo said that Hoyer was among "six or eight" political candidates that she found to have used a leadership PAC to bundle and distribute funds, and that Hoyer's fund tallies were the highest.

She also noted that AmeriPAC's 2005-2006 bundled earmark contribution collections were considerably higher than in the last election cycle.

Hoyer's concerted efforts to be scrupulous in campaign finance disclosures have brought him under fire, Hoyer's office said this week.

"It's unfortunate that the Center for Public Integrity would use Congressman Hoyer's efforts to be more transparent to attack him," said spokesman Stephanie Lundgren.

And Rep. Chris Van Hollen, Jr. D-Kensington, is pushing legislation to require lobbyists to disclose the amount of contributions they collect or arrange for federal candidates, leadership PACs and party committees -- the ''bundled'' contributions.

While Hoyer followed the law, all agree, it is the appearance of influence that is the problem with the technique.

"It would seem that in the case where you have a leadership PAC associated with a congressman, that the bundling has more danger of corruption, or the appearance of corruption," Weisman said. "Why? Because a leadership PAC is a congressman . . . and in a bundling operation the congressman is grateful for the checks that he's passing on to other candidates . . .

"Unlike other PACs, the congressman can do something for the people who gave him $100,000 to $200,000."

Rules and prohibitions surrounding leadership PACs are designed by congressmen, Weisman said, and moreover, were installed before the practice was known. "When you have two willing parties -- people willing to give money and people willing to accept it -- they're going to find a way," said Gazette political columnist Blair Lee. "It's a little like prostitution."

RELATED INFORMATION:

Hoyer Most Dependent Congressman on Special Interest Money, Study Says, October 18, 2006.

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