The New Fat Cats

Meet the fund-raisers who are finessing the campaign-finance law -- and raising more dough than ever

Laurie David doesn't consider herself part of a special-interest lobby seeking political favors. She's just a determined environmentalist who's raising gobs of money to defeat President George W. Bush. What does she want in return? For starters, stronger pollution-control laws for utilities and tougher fuel-economy standards for Detroit. Oh, and she would also like the next President to sign the Kyoto treaty committing the U.S. to significant cuts in greenhouse gases.

For years, David, 45, has raised money for environmental causes, but her new gig is political fund-raising. Operating outside the campaign-finance laws, she is drumming up heaps of soft money -- the unlimited contributions that political parties once thrived on but are now barred from accepting -- by bringing hundreds of prominent people from the entertainment, media, and fashion worlds into her Beverly Hills home. There, they listen to Democratic activists lay out their strategy for defeating Bush. There is no fancy meal and no admission charge. But afterward, David, a former talent coordinator for The Late Show with David Letterman and wife of comedian Larry David, discreetly mentions that she has given $100,000 -- and could her guests please do the same? "My job is to do everything I can to take the country back from the right wing," she vows.

And how. David has raised some $2 million for liberal 527 committees -- nonprofit groups named for a section of the tax code -- whose purpose is to bypass the 2002 McCain-Feingold campaign-finance reforms. That makes her part of a new breed of fund-raiser taking advantage of chinks in the law to keep the cash coming. Call them the New Fat Cats. The reform measure has also given rise to a handful of even more effective fund-raisers: "super fat cats" such as billionaire George Soros, who support the 527s with huge gifts. Soros alone has given some $15 million to liberal causes.

Equally important, the act has spawned mega-bundlers: high-powered executives and lobbyists who mine the money veins within their industries on behalf of a candidate. By corralling thousands of employees, partners, and friends, each of whom can give up to $2,000, such GOP bundlers as Merrill Lynch & Co. (MER ) Chairman E. Stanley O'Neal, and Kerry bundlers such as Ivan A. Schlager, partner at law firm Skadden, Arps, Slate, Meagher & Flom LLP, have raised huge sums.

THE ART OF BUNDLING. Tally it all up, and the 2004 Presidential election is taking place against a backdrop of record fund-raising and record-shattering influence by the same special interests that the reforms sought to stifle. By Mar. 1, Bush and the 10 Democrats who sought his job had garnered $316 million, or 72% more than the $184 million raised at the same point in 2000. Both Bush and Democratic nominee-in-waiting John F. Kerry raised so much in March that they've almost met their fund-raising goals for the year -- $170 million for the Prez and $80 million for Kerry. After a slow start, Kerry is catching up: He was expected to announce on Apr. 1 that he pulled in more than $40 million between January and March, bringing his total close to his target and beating even Bush's single-quarter record of $29 million.

BUSH'S CORPORATE BUNDLERS. For the GOP, corporate bundlers reign supreme. Bush's bundlers have raised the practice to a fine art by opening the taps at Wall Street firms, health-care companies, manufacturers, and oil-and-gas outfits. The President has 188 "Rangers," who have brought in upwards of $200,000 each, followed by 270 "Pioneers" who have raised at least $100,000. Health-care interests have raised $7 million, while high-tech companies have kicked in $4 million. But it is Wall Street that has dug deepest for Bush: Employees of securities, banking, and insurance firms together have produced $15 million.

Indeed, seven out of Bush's top 10 donor sources are from financial services firms, led by Merrill Lynch's $458,000. O'Neal, a Bush Ranger, last year co-hosted a party that netted $4 million. He sent a letter to top Merrill execs' homes, urging them to support Bush.

Financial firms have produced more Pioneers and Rangers than any other industry -- 73 in all, 15 of whom are heads of firms, says the Center for Public Integrity, a watchdog group. Besides O'Neal, the Rangers include Joseph J. Grano Jr., CEO of UBS Wealth Management USA; American International Group Chairman Maurice R. Greenberg; and Crédit Suisse First Boston Corp. CEO John J. Mack.

Why the generosity? O'Neal's support "reflects his personal belief in President Bush," says a Merrill spokesman. Moreover, the company says Merrill employees are encouraged to give to the candidate of their choice. Critics aren't buying that: Eighty percent of Merrill's largesse is flowing to Bush, and donations from other Wall Street firms are running heavily in his favor. "It's pure self-interest," asserts William B. Patterson, director of the AFL-CIO's Office of Investment, which oversees $400 billion in union pension funds.

Business bundlers find less to like in Kerry. Instead, Washington law firms, lobbyists, and the entertainment industry provide his bedrock support. Kerry's top fund-raisers are less numerous, and their monikers less colorful: His 59 vice-chairs have raised $100,000 or more, while 123 co-chairs have brought in at least $50,000 each. The Democrat's richest treasure trove has been Washington lawyers and lobbyists, which account for 4 of his top 10 donors. His single-biggest cash source: Skadden Arps, whose lawyers have given a total of $106,000. The Beltway buck-rakers tap a vast network of colleagues, trade groups, and government workers. Capitol Hill connections are key. Schlager, the Skadden Arps partner, served as chief counsel to a Senate Commerce subcommittee on foreign trade, which Kerry chaired in the early '90s.

The entertainment industry has also been generous. On Mar. 30, former grocery-chain magnate Ron Burkle raised $1 million at a lunch at his La Jolla home and another $3 million at a dinner that evening. Among the stars: actors Jennifer Aniston, Leonardo DiCaprio, and Dustin Hoffman, and director Oliver Stone. "The right wing is getting its way in a manner that I have never seen before, like picking judges," fumes movie producer and ex-Universal Studios Chairman Tom Pollock. And although some on Wall Street also support Kerry, the $2 million he has gotten is far less than Bush's haul, largely because of Street worries that Kerry will raise taxes.

Kerry's bundlers have helped him stay competitive in the money race, after early fears that he might lack the funds to respond to withering Bush attacks. Kerry has raised $80 million himself, the Democratic National Committee expects to raise another $75 million, and at least $100 million will go to 527 funds. So altogether, the Kerry campaign figures it can count on a minimum of $255 million. "This is an even-steven campaign in votes and money," says University of Virginia political scientist Larry J. Sabato.

Still, it's not as easy as it once was to shake the money tree. Consider high tech. The industry, which had been a strong backer of Bill Clinton and Al Gore, is on the mend after a three-year meltdown, and hasn't been as generous as the Kerry camp expected. As of Mar. 1, he had raised $301,000 from computer and Internet companies, vs. Gore's $587,000 in 2000, according to the Center for Responsive Politics, a nonpartisan, pro-reform group.

Some tech leaders aren't thrilled with Kerry, especially after his populist primary campaign and the current fulminations about outsourcing. Such talk rankles Netscape Communications Corp. co-founder Marc L. Andreessen, now chairman of software firm Opsware Inc. (OPSW ) Kerry "is just running in the wrong direction" on trade, says Andreessen, who gave Democratic candidates $300,000 in 1996 and 2000 but hasn't given them a dime this time. Despite such misgivings, Kerry may be gaining favor among techies. At a Mar. 29 San Francisco fund-raiser, Kerry pulled in $3 million alone, though his campaign won't reveal how much came from tech interests.

LOTS OF LITTLE GUYS. It's not just $2,000 contributors propelling the election-year money machine. Small contributors also played a huge role. Howard Dean led the way, but by Mar. 1, all the Presidential candidates combined had raised $78 million in under-$200 chunks, more than double the take in 2000.

Yet it's still the big bucks and influence peddlers that count most. Bush and Kerry each have gotten more than 65% of their money from $1,000-plus donors. But Kerry is catching up fast to Bush by holding Dean-like meetups and challenging online contributors to meet daily fund-raising goals. It seems to be working: On Mar. 26, Kerry said he had raised $20 million in 20 days online, beating even Dean's record and far outstripping Bush's $4 million in Net donations.

Perhaps reform's most controversial outcome has been the liberal 527 groups, and the political entrepreneurs behind them. The most prominent 527s are the ones that Laurie David is supporting: the Media Fund, run by ex-Clinton aide Harold M. Ickes, and America Coming Together, run by ex-AFL-CIO political director Steve Rosenthal. Big Labor has also steered millions to 527s, such as Partnership for America's Families, which gets money from 10 unions.

The liberal 527s supporters have no common theme other than a burning desire to unseat Bush. So when EMILY's List founder Ellen R. Malcolm asked David to raise money for ACT and the Media Fund, she signed on. She views her work as a noble calling, but others think she is undermining the intent of the McCain-Feingold law. "The only objective is to influence the outcome of a federal election," says Thomas E. Mann, a senior fellow at the Brookings Institution. "The 527s should register with the Federal Election Commission like other political action committees."

Just as troublesome, the 527s have led to the rise of the super fat cat, or donors who write megamillion-dollar checks. Among them are such ACT and Media Fund supporters as RealNetworks Inc. (RNWK ) CEO Robert Glaser ($745,000), Progressive Corp. (PGR ) Nonexecutive Chairman of the Board Peter B. Lewis ($3 million), and hedge-fund impresario George Soros, who donated a record $10 million and gave an additional $5 million to, which is also sponsoring anti-Bush ads.

So far, there is no evidence that corporate dough is rushing to the 527s or that candidates are shaking down execs for money, says Charles E.M. Kolb, president of the Committee for Economic Development, a pro-reform business group. He believes that this election season's river of cash reflects strong voter sentiment and the high stakes involved -- not campaign reform thwarted. The money may be flowing, but the corrosive effect may turn out to be far less in 2004, Kolb insists.

But that assumes Laurie David won't seek tougher anti-pollution laws if Kerry wins in November or that Wall Street won't lobby for new retirement savings plans if Bush triumphs. In any case, the special interests can be expected to call in their chits one way or the other.

By Paula Dwyer in Washington, with Robert D. Hof and Jim Kerstetter in San Mateo and Ronald Grover in Los Angeles

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