527s attract new donors as others abandon system in wake of BCRA

Introduction

In the 2004 campaign season, 22 well-heeled contributors have, for the first time, made Section 527 organizations—the non-profit committees that can raise unlimited donations from individuals, corporations and labor unions—beneficiaries of their largesse, giving at least $200,000 each and a total of more than $26 million since early 2003.

These 22 contributors, while new to the 527 system, have each previously made donations to candidates and parties on the federal level. When contributing to 527 groups, most of these newcomers directed their money to organizations that opposed the re-election of President George W. Bush, according to a study by the Center for Public Integrity.

The infusion of cash from first-time donors, coupled with the recent inactivity of many of the largest contributors to 527 groups since disclosure began in 2000, points to a changing of the guard among individual contributors in the current election cycle.

Every first-time donor has contributed to a 527 that has focused advertising on national electioneering. While new to the 527 system, these contributors have given at least $4.8 million since 1991 to political committees that, unlike 527s, are regulated by the Federal Election Commission. The 527 groups file with the Internal Revenue Service, not the FEC.

Almost 95 percent of their 527 contributions have gone to Democratic-leaning groups—many of which are running issue ads or registering voters to defeat Bush. Joint Victory Campaign 2004, which primarily splits its proceeds between two other anti-Bush committees, has taken in the most from this new club of donors, relying on them for $15.7 million; overall, JVC has raised $41.7 million.

JVC provides money to America Coming Together, which canvases and employs people to increase voting efforts, and the Media Fund, which has run ads criticizing the President entitled: “Bush and Halliburton,” “Broken Promises,” and “No Oil Company Left Behind.”

527 First-timers

Peter B. Lewis, chairman of the board of the Progressive Corp., an insurance company located in Mayfield Village, Ohio, was the largest new donor. In fact, in the last ten months, Lewis became the largest disclosed donor in 527 history. Lewis has given more than $14.1 million to largely pro-Democrat organizations, including Joint Victory Campaign 2004 ($7.75 million); America Coming Together ($2.99 million); and MoveOn.org Voter Fund ($2.50 million).

Lewis’s largesse dwarfs that of his fellow first-time donors, whose combined contributions amount to $2.2 million less than Lewis has personally given. Lewis’s recent foray into soft money donations complements his traditional philanthropy which includes endowments in the tens of millions. His donations include: $50 million to the Guggenheim Museum, $24 million to Case Western University and $55 million to his alma mater Princeton.

In addition to groups that benefit Democratic candidates, this 70-year-old conservatively dressed insurance company executive has supported other organizations like the Marijuana Policy Project Political Fund ($630,000) and Punk Voter Inc. ($50,000).

Lewis was on an extended trip on his boat, according to his secretary, and could not be reached by the Center.

The second largest new donor to the 527 system literally wrote the book on giving money. Lewis Cullman—the author of Can’t Take it With You: The Art of Making and Giving Money—and his wife Dorothy are well-known philanthropists. Cullman is also the chief executive officer of Cullman Ventures, Inc. Over the years, he and his wife have made major contributions to not-for-profit institutions like the New York Public Library, the American Museum of Natural History, and the Lincoln Center for the Performing Arts.

But Cullman also has made his share of donations to political committees like Joint Victory Campaign 2004 ($1 million); America Coming Together ($500,000); and the MoveOn.org Voter Fund ($100,000).

The front cover of Cullman’s book showcases a quote from George Soros, a longtime philanthropist and chairman of the Open Society Institute, who has donated $13.1 million to 527 organizations. Though Soros and his wife Susan are the second-largest donors to 527s since disclosure began, some of his contributions took place during the 2002 election cycle, keeping him off the newcomers list. The largest of Soros’s donations went to America Coming Together – Nonfederal Account ($5 million); Joint Victory Campaign 2004 ($4.5 million) and MoveOn.org Voter Fund ($2.5 million).

Other large first-time donors include Richard Rosenthal, the president of Uptown Arts from Cincinnati; Dan Lewis of Coconut Grove, Fla.; and Anne Getty Earhart, an investor from Corona del Mar, Calif. These three, who are tied for third place among the new contributors, each gave $1 million to the Joint Victory Campaign 2004.

Standing on the Sidelines?

But even as first-time large donors are entering the fray, others who gave to 527s in previous election cycles appear to be biding their time.

Roughly one out of four of the 115 largest donors to 527s since 2000 have yet to make a single contribution during the current election cycle, according to the Center’s research. These 28 donors gave a total of almost $10.3 million to 527 committees between 2000 and 2002.

That may be due in part to the Bipartisan Campaign Reform Act—otherwise known as McCain-Feingold—which forbids federal candidates and national parties from raising unlimited contributions from individuals, corporations and labor unions. Since lawmakers and parties used 527 committees to raise the kinds of funds now banned by BCRA, the law effectively put many 527 committees run by federal lawmakers out of business. In fact, only 13 of the 69 IRS-regulated committees to which these 28 donors gave are still raising money.

Most of these 28 donors, however, have found other ways to contribute to the political system: 23 of them have donated a total of more than $1 million to FEC-regulated committees during the last two years.

Even Jane Fonda, who was the largest 527 donor until being recently surpassed, went from contributing more than $13 million between 2000 and 2002, to only making a single donation of $300 to the Democratic-leaning MoveOn.org Voter Fund, which has been known for its controversial ads against Bush.

Steven T. Kirsch, one of the largest donors in previous cycles who has stopped making donations to 527s, cited the economy’s effect on his personal business for his decision.

“The reason for me, personally, is a money issue,” Kirsch, the founder of the dotcom company Infoseek, told the Center. Kirsch, the ninth-largest reported donor in 527 history, gave $1.8 million between 2000 and 2002.

Major New 527 Donors during the 2003-2004 Election Cycle

• Lewis, Peter B. OH $14,175,000
• Cullman, Lewis B. & Dorothy NY $1,650,000
• Rosenthal, Richard OH $1,000,000
• Earhart, Ann Getty CA $1,000,000
• Lewis, Dan FL $1,000,000
• Sandler, Herb & Marion* CA $954,050
• Pritzker, Linda TX $900,000
• Brunckhorst, Frank FL $750,000
• McKay, Rob CA $505,000
• Lewis, Jonathan D. FL $500,000
• Singer, Paul NY $500,000
• Foos, Richard & Shari CA $430,000
• Soros, Jonathan NY $401,000
• Ortenberg, Arthur & Elisabeth Claiborne NY $395,000
• Resnick, Stewart A. & Lynda Rae CA $300,000
• Maltz, David OH $282,000
• Recanati, Michael NY $250,000
• de Kooning, Johanna Liesbeth NY $240,000
• Rauner, Bruce IL $200,000
• Lieberman, Leonard NJ $200,000
• Polis, Jared Schultz CO $200,000
• Singh, Dinakar NY $200,000

* — Full Disclosure: The Sandler Family Supporting Foundation has provided financial support to the Center for Public Integrity.