FEC, Overruling Counsel, Declines to Fine Chamber-Funded Group

By Jonathan D. Salant

Dec. 29 (Bloomberg) -- The Federal Election Commission, in a party-line vote, has overruled a recommendation by its counsel to fine a U.S. Chamber of Commerce group accused of illegal spending practices in attacking the Democratic vice presidential nominee in 2004.

The Republican members of the FEC opposed the penalty against the chamber’s November Fund, creating a 3-3 deadlock that rejected the counsel’s recommendation.

The November Fund was accused of violating federal campaign spending limits by using $3 million it received from the chamber to attack Democratic vice presidential nominee John Edwards, a former trial lawyer, in 2004. The FEC deadlock in the November Fund case was announced last week.

“The FEC has transformed itself from a merely dysfunctional agency to one that now openly thumbs its nose at the law,” said Paul Ryan of the Campaign Legal Center, a Washington-based watchdog group headed by former FEC Chairman Trevor Potter.

FEC Chairman Donald McGann, one of the three Republicans to oppose penalties against the November Fund, had no immediate comment. None of the three Republicans have publicly explained their votes.

The FEC party-line vote to reverse its counsel’s recommendation is highly unusual. The commission has three Democrats and three Republicans, with four votes needed for any enforcement action.

There were 12 instances in which groups like the November Fund -- so-called 527s named for a section of the tax code -- were accused of violating campaign finance rules in the 2004 presidential race. Only the November Fund avoided any fine. The potential size of the penalty wasn’t revealed by the FEC.

Open Criticism

Two of the three Democratic FEC commissioners, Cynthia Bauerly and Ellen Weintraub, issued a rare public criticism of the decision not to penalize the November Fund. They said the action is a “dramatic departure” from “the commission’s prior enforcement efforts and the law itself.”

The November Fund marked the chamber’s first foray into presidential politics. Some of the best-known independent groups in the 2004 presidential election, including Swift Boat Veterans for Truth and America Coming Together, paid more than $3 million in fines.

The commission initially agreed in March 2005 that the November Fund illegally accepted contributions in excess of the $5,000 limit for political action committees and that the chamber made illegal corporate contributions. In November 2007, the commission authorized its counsel to negotiate a settlement, including an agreed-upon fine.

New Members

Four new members joined the commission the following year, and in October 2008 the three Republicans balked at approving the final agreement.

“The law has not changed,” Ryan said. “All that has changed is the commissioners themselves.”

“It is a pretty stark reversal of the commission’s interpretation of the law,” said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, a watchdog group that filed the complaint with the FEC. “The 3-3 vote on this enforcement matter may indicate that the newly reconstituted commission is ideologically split along partisan lines.”

Under the election law, CREW can appeal the FEC’s decision in U.S. District Court.

Chamber spokesman J.P. Fielder applauded the FEC’s action.

“We’re very pleased with this decision,” Fielder said. “We’re looking forward to having the matter behind us.”

The 527 groups weren’t as active this year. Spending dipped to $216 million from $442 million in 2004, according to the Center for Responsive Politics, a Washington-based research group.

While this year’s Democratic vice-presidential nominee, Joe Biden, was a strong supporter of trial lawyers and opposed efforts to limit lawsuits, the November Fund was inactive and the chamber stayed out of the presidential race.

To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net .

Last Updated: December 29, 2008 14:52 EST

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