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The Fat Cats' Fat Loophole

March 10, 2003

Every campaign finance reform plan seems to wind up with some sort of loophole. California's Proposition 34, approved by voters in November 2000, has a doozy. That's why we learn only now that a Southern California insurance company gave nearly $1 million to the Republican Party in the waning days of last year's campaign. And we learn too that the GOP channeled the money, via 15 county Republican committees and the state party, into six close legislative races around the state -- all six ultimately won by the GOP.

One Senate candidate got $128,000 from five county committees, including counties that are not part of the Senate district. Some of the county chairmen said they didn't even know about it. And never mind that Proposition 34 clamped a $3,000 limit on the amount a donor could give to a legislative aspirant in an effort to reduce the influence of big contributors.

How could this happen? One part of the mystery is simple. 21st Century Insurance Group wrote its checks, ranging from $25,000 to $250,000, on Oct. 21, one business day after the cutoff for reporting such gifts within 24 hours. The law then gave 21st Century until Jan. 31 to report the contribution to the secretary of state. Still, not much became public until Times staff writers Virginia Ellis and Dan Morain reported the scam late last week.

This part of the law can easily be fixed. And it must. Such contributions should have to be posted on the Internet daily -- right up to election day. If 21st Century had given the money directly to a candidate, it would have had to report it within 24 hours. Happily, both Senate President Pro Tem John Burton (D-San Francisco), the author of Proposition 34, and Gov. Gray Davis say they will support legislation to do that. They should. Fast. The bigger problem is Sen. Tom McClintock's (R-Thousand Oaks) allegation that the transactions amounted to money laundering, in that the funds were routed through party committees to hide their origin. A party official who participated has as much as admitted that's what it was, although he claimed it was "neither shady nor illegal." Let the courts decide the legality. A child could figure out that it's as shady as Saddam's favorite bunker.

Proposition 34 prohibits a contributor from earmarking more than $25,000 of a gift to a party for any one candidate's campaign. The GOP evaded the limit by spreading the money through the county committees. The Legislature should find a way to better regulate this process to keep the parties from serving as fat-cat donors' Laundromats .

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