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'Soft Money' Ad Ban Upheld

Judges' ruling focuses on the key component of campaign finance reform passed last year. The Supreme Court will have the final word.

May 03, 2003|David G. Savage and Nick Anderson | Times Staff Writers

WASHINGTON — In the first legal test of last year's campaign funding reform, a special three-judge court Friday upheld the key part of the McCain-Feingold law that blocks the flow of corporate and union money to political parties to pay for thinly disguised campaign ads.

In a 2-1 decision, the court said congressional reformers had made a convincing case that the "sham issue" ads must be stopped.

The significance of Friday's ruling lies mostly in helping to define the broad legal issues of the case, which goes directly to the Supreme Court for a final judgment.

In an unusually complex and exhaustive decision -- the three judges' opinions and a long introductory section approached 1,700 pages -- the law's proponents and critics both found things they liked as some portions of the statute were struck down. But the section that matters most to reformers was upheld.

For most of the 20th century, corporations and unions were forbidden from funding candidates for federal office. After the Watergate scandal of the 1970s, Congress also limited how much individuals can give to candidates.

But the dam that had blocked the flow of money broke in the 1990s when Democrats and Republicans realized they could collect unlimited amounts of money from corporations, unions and wealthy donors -- so long as they used it for veiled campaign ads.

As long as the TV and radio ads did not say "Elect Smith" or "Vote Against Jones," they were judged to be "issue ads," not campaign ads.

This became known as the "soft-money loophole" in the campaign funding laws. This soft -- or largely unregulated -- money flowed freely in recent election cycles and made a mockery of the elaborate campaign finance restrictions.

Last year, Congress voted to close that loophole in the McCain-Feingold law.

But the legality of the ban has remained in doubt. Opponents, led by Sen. Mitch McConnell (R-Ky.) and the Republican National Committee, said the restriction amounted to an unconstitutional limit on free political speech.

On Friday, the reformers won a significant but not a final victory.

Congress may seek "to prevent actual and apparent corruption arising from the funding of sham issue advertisements," said U.S. District Judge Richard J. Leon, a recent appointee of President Bush. He proved to be the swing vote in a badly divided court panel that took nearly a year to decide the case.

The reformers "have more than adequately demonstrated the constitutionally necessary basis ... to restrict the use of soft money donations by national, state and local parties to fund certain types of campaign contributions which are designed to directly affect federal elections," Leon said.

District Judge Colleen Kollar-Kotelly, a President Clinton appointee, voted to uphold the soft-money ban entirely. Appeals Court Judge Karen Henderson, an appointee of President Bush's father, voted to strike it down.

Although Leon upheld the key section that forbids the use of soft money for campaign ads, he voted to strike down the ban on soft money to "fund a variety of election activities that do not directly affect federal elections."

The Republicans and some Democrats say they want to collect money to build their parties, even if they cannot use these funds to pay for campaigns or ads in federal elections.

In another significant ruling, the court said Congress can regulate some "attack ads" funded by corporations and unions. However, the court struck down other limits on corporations and unions as unconstitutional.

Reform advocates said they were pleasantly surprised by Friday's decision.

"They have upheld the core provision of the law. The national parties can no longer serve as conduits for truckloads of corporate and union soft money," said Joshua Rosenkranz, an election law expert at the Brennan Center in New York who helped defend the law.

The Supreme Court will have the last word.

Under a special clause written into the bill, the legal battle goes directly to the high court now, and the justices are required to rule on it.

But the long delay in the district court has pushed back the final test. The justices are unlikely to take up the issue until the fall. That means a ruling may not come until early in the election year of 2004.

'This Is a Mixed Bag'

Friday's thick set of opinions is likely to keep party officials and election law experts busy for awhile.

"This is a mixed bag. They upheld some of the soft-money bans and struck down others," said professor Richard Hasen at Loyola Law School in Los Angeles. "I also don't know if this will matter a great deal since the Supreme Court will make up its own mind."

Both sides found cause for celebration and dismay.

The congressional sponsors of the law, Sens. John McCain (R-Ariz.) and Russell D. Feingold (D-Wis.) and Reps. Christopher Shays (R-Conn.) and Martin T. Meehan (D-Mass.), gave a mixed assessment in a joint statement.

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