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.
