Indictment of a system

Introduction

Hours after Rep. Tom DeLay, R-Texas, was indicted by a Texas grand jury, he went on national television to refute the charges and to tell viewers that he was not alone: other members of Congress had made transactions similar to those that led to his prosecution.

“The Democrats do it. The Republicans did it,” he told a commentator for Fox News, adding that such transactions are not only common but “very legal.”DeLay was indicted by a Texas grand jury in late September on charges of conspiracy to violate state campaign finance laws, which prohibit the use of corporate money in state elections. The indictment alleges that his non-federal group—Texans for a Republican Majority—accepted $190,000 from six corporations and transferred the money to the Republican National Committee, which then used it to fund state candidates.

While the Texas courts have yet to decide if DeLay broke any state campaign finance laws, a study by the Center for Public Integrity1 shows that the former House majority leader was right about one thing: his committee’s actions are hardly unique.

At least 30 other current members of Congress accepted a total of $7.8 million in corporate donations to their non-federal leadership committees from 2000 to 2002, the study has found. These organizations then transferred a combined $3.5 million to national party committees, which later gave $14 million to candidates in state elections.

The state laws governing such transactions are not uniform: 23 states prohibit corporate donations to candidates in state elections, while 27 allow some use of corporate funds. Of the $14 million contributed by national parties to state candidates, $5 million went to those in states which ban corporate donations.

Until 2002, members on both sides of the congressional aisle—13 Democrats and 18 Republicans—accepted such corporate donations. Those ranks include former Senate Minority Leader Tom Daschle, D-S.D., (DASHPAC – non-federal Account), Senate Republican Conference Chairman Rick Santorum, R-Pa., (America’s Foundation Non-Federal Account), and Senate Majority Leader Bill Frist, R-Tenn. (Volunteer PAC – Non Federal).

That year, a federal law went into effect forbidding federal lawmakers to have 527 organizations. Such committees—nicknamed for the section of the tax code under which they receive a tax exemption—are political nonprofits that can spend money in support of specific issues, but not on behalf of particular candidates.

Some of the corporate donors giving the most money to these congressional leadership 527s included AT&T, which contributed $716,000; SBC Corp., which gave $698,000; and Philip Morris (now Altria), which donated $486,000.

The Center has also found that another DeLay 527, Americans for a Republican Majority Non-Federal Account, received close to $1.7 million in corporate money and made almost $250,000 in transfers to national party committees.

Similarly, Rep. Roy Blunt, R-Mo., who has temporarily replaced DeLay as House Majority Leader, accepted more than $1.1 million in contributions from corporations to his organization Rely On Your Beliefs Fund. Unlike Texas, Missouri allows corporate donations to state candidates, political action committees and parties. While there is no limit on the amount a state party can take in, there is a $1,200 limit on corporate donations to candidates, according to the Missouri Ethics Commission.

The donations to Blunt’s 527 group include contributions from four of the same companies that were implicated in the DeLay indictment: Diversified Collection Services Inc. ($50,000), Bacardi U.S.A. Inc. ($5,000), Sears, Roebuck and Co. ($4,000), and Cornell Companies Inc. ($5,000).

Blunt’s 527 organization sent only a small amount of money to a national party committee. Instead, the group sent $661,000 directly to the Missouri Republican State Committee. The study also found that many of the same companies named in the DeLay indictment made large donations to leadership 527s run by other members of Congress. Twelve other members accepted a total of more than $300,000 from four of these six companies.

DeLay’s Americans for a Republican Majority Non-Federal Account also accepted $50,000 from these companies. The donations included $25,000 from Sears Roebuck and Co., $20,000 from Bacardi USA Inc. and $5,000 from Diversified Collection Services Inc. These transactions and this 527 group, however, were not named in the DeLay indictment.

The Center for Responsive Politics assisted this report with federal campaign contributions from national party committees.

1This report initially incorrectly credited the findings as in cooperation with the Center for Responsive Politics. In fact CRP assisted with research but did not cooperate in the study’s findings.