Online NewsHour: Fund-Raising Investigation -- March 24, 1997

WHIFF OF SCANDAL

MARCH 24, 1997

TRANSCRIPT

In the first of a three part series on campaign finance, special correspondent Hedrick Smith looks at how campaign funds were used in the ‘96 election.

A RealAudio version of this segment is available.
March 11, 1997:
Senators Dick Durbin (D-IL) and Thad Cochran (R-MS) discuss the Senate fund-raising investigation.
March 6, 1997:
Two former White House lawyers discuss the legality of Vice President's fund-raising.
March 4, 1997:
Presidential historians, journalist/author Haynes Johnson and William Kristol, editor and publisher of The Weekly Standard discuss money and politics.
March 3, 1997:
Vice President Gore said he did nothing illegal or wrong when he solicited funds for the 1996 presidential campaigns.
February 27, 1997:
Jim Lehrer leads a discussion on the accusations against the White House campaign financing team .
February 25, 1997:
Elizabeth Farnsworth discusses the growing DNC fund raising scandal with White House Special Counsel Lanny Davis.
November 28, 1996:
Margaret Warner discusses campaign finance reform with three members of Congress.
November 28, 1996:
The NewsHour's Kwame Holman reports on this year's efforts to reform campaign financing and how "soft money" may have been the biggest story of this election.
November 18, 1996:
House Minority Leader Dick Gephardt (D-MO) discusses campaign finance reform and his party's role in the 105th Congress.
October 25, 1996:
Mark Shields and Paul Gigot discuss the role of money in this election year.
October 24, 1996:
Ross Perot blasts what he sees as President Clinton's corruption.
October 21, 1996:
Margaret Warner examines campaign money and its sources.
October 21, 1996:
A panel debates campaign finance reform and allegations of illegal foreign contributions and egregious misuse of lots of "soft money".
October 18, 1996:
Margaret Warner reports on the recent emergence of campaign finance issues on the campaign trail.
Oct. 18, 1996:
Ellen Miller, director of the Center for Responsive Politics, participates in an Online Forum on campaign finance reform.
Browse other specials by Hedrick Smith on the political process.
Browse the Online NewsHour's Congressional coverage.

HEDRICK SMITH: Public mistrust and cynicism toward Washington have never been greater, and one big reason is the tidal wave of money that poured into the 1996 election, a record, more than $2 billion. Now, there is a pervasive whiff of scandal, potentially illegal donations, access to the President marketed widely, both political parties finding ways around spending limits. With the investigation focusing on legal wrongdoing, some politicians worry that what gets lost is the larger question of whether the entire system of fund-raising has gotten out of control.
BILL BRADLEY, Former Democratic Senator: The campaign finance system in this country is a disaster. It's distorting democracy. It's preventing the voices of average people from being heard.
JACK KEMP, GOP Vice Presidential Candidate: It is turning off the electorate. It's leading to not only despair but leading to confusion and I'm going to use the word "corruption.
SEN. JOHN McCAIN, (R) Arizona: If there's anybody that doesn't believe that this system is badly broken, terribly broken, then they haven't seen or read newspapers or magazines or watched television over the last year.
HEDRICK SMITH: Or seen newspaper headlines like these: "Vice President Gore Admits Soliciting Campaign Donations from his White House Office"; "First Lady's Top Staffer Accepts a $50,000 Check at the White House"; "Democratic National Committee Returns $3 Million in Questionable Gifts, Mostly from Foreign Donors"; "Dole Campaign Finance Vice Chairman Convicted of Money Laundering and Fined $6 Million."
ELLEN MILLER, Public Campaign: You know, the newspaper headlines can be distracting. I mean, they do tell us the details of what we always suspected what was happening. But behind the daily headlines a system which is corrupt to its core.
HEDRICK SMITH: Ellen Miller is executive director of Public Campaign, an organization that advocates public financing for candidates.
ELLEN MILLER: The problem with the campaign finance law is not what's illegal. It's what's legal. It's part of the system.
HEDRICK SMITH: Veterans of Capitol Hill like recently retired Georgia Sen. Sam Nunn contend that Washington's obsession with fund-raising interferes with governing.
SAM NUNN, Former Democratic Senator: I think the corruption is not corruption of quid pro quo, corruption of time and energy and focus, and it has its toll. It has its big toll because people are so absorbed with raising money, and the Senate has moved from about a five-day week to about a three and a half day week. And that puts enormous pressure on Senators in terms of committee work versus voting on the floor, and meeting with constituents, and all of that means you simply don't have time to form the kind of friendships that are necessary, in my view, if people are going to occasionally going to rise above the partisan splits and the philosophical differences and come together in a way that makes government work.
HEDRICK SMITH: Even if the President complained about the burdens of fund-raising to his campaign strategist, Dick Morris.
DICK MORRIS, Former Clinton Adviser: He once turned to me and said, I can't think, I can't act, I can't govern; all I do is raise money. We called it trial by handshake because he--it was physically exhausting for him to do that. Donors basically give money because they want to be the President; they want a photo; they want a handshake; they want a pen; they want a memento.
HEDRICK SMITH: Or they want it stay in the White House overnight?
DICK MORRIS: Right. They want bragging points. But the basic point is that the Lincoln bedroom and Air Force One may have been for sale, but the President never was.
HEDRICK SMITH: Like President Clinton the Republican ticket courted big donors in 1996, troubling Arizona Senator John McCain, an advocate for reform.
SEN. JOHN McCAIN: We now have a procedure in the Republican Party where if you give $250,000 and you get what I read is a "season pass," which gives you access to literally every elected official in the Republican Party.
HEDRICK SMITH: And what do you think of that?
SEN. JOHN McCAIN: Obviously, I don't think it's proper.
HEDRICK SMITH: Kentucky Republican Senator Mitch McConnell sees nothing improper with big political donations. And he defends the current system, saying it protects voters by identifying political donors.
SEN. MITCH McCONNELL, (R) Kentucky: Disclosure is the best disinfectant. That is the heart of the post Watergate reforms under which we've operated for the last 20 years.
HEDRICK SMITH: In 1974 campaign finance reform followed the Watergate scandal and President Nixon's resignation. Congress enacted and President Ford signed a law that curbed the influence of fat cat donors on government officials. For that reason the 1974 law imposed very low limits on donations to candidates from individuals and from Political Action Committees of corporations, unions, and other organizations. Presidential candidates were offered large public subsidies if they voluntarily accepted campaign spending limits. In the climate of reform that new system worked well for about a decade through the presidential elections of Jimmy Carter in 1976 and of Ronald Reagan in 1980 and ‘84. After that, politicians began testing the limits of the law. Those limits have been dramatically narrowed by a Supreme Court decision that equated political spending with free speech and barred fixed limits on spending by individual candidates or independent groups. In addition, the Federal Election Commission, composed of three Democrats and three Republicans, proved to be a weak watchdog as even former Chairman Trevor Potter concedes.
TREVOR POTTER, Former Chairman, FEC: When it hits the really important big cases, there is a temptation to gridlock. It doesn't always happen.
HEDRICK SMITH: So what you're saying at the moment is the law doesn't have teeth in it?
TREVOR POTTER: What I'm saying is that there is no serious penalty for breaking the law.
HEDRICK SMITH: What's more, here at the FEC the commission opened a huge legal loophole by ruling that political parties could raise and spend unlimited money on party building and issue advertising, provided there was no direct connection to Kennedy. That cleared the way for unlimited and uncontrolled donations, so-called "soft money." Although Michael Dukakis in 1988 and George Bush in 1992 explored that opening, the real explosion of these uncontrolled soft dollars came in 1996. Clinton campaign strategist Dick Morris saw the huge potential of this tactic and pushed for what became a $40 million ad campaign, funded with soft money outside the regular spending limit.
DICK MORRIS: I learned that there was something called issue advocacy advertisements you could do. That would not be paid for by the normal campaign funding which was sharply limited.
HEDRICK SMITH: Describe how the ads were prepared and the President's involvement in that.
DICK MORRIS: We met with the President every week, and the President was very involved in conceptualizing, writing, and editing the advertisements that went on.
AD ANNOUNCER: America's Values, the President bans deadly assault weapons. Dole-Gingrich vote "no."
HEDRICK SMITH: The rules require candidates and parties to operate independently. But Clinton and the DNC work hand in glove, the President raising the money, the party producing the ads.
JACK KEMP: They did it with the President's full knowledge and his instructing the DNC to do that, and that has to be fully investigated and I'm going to use the word penalized.
HEDRICK SMITH: Don Fowler, then head of the Democratic National Committee, disagrees.
DON FOWLER, Former Chairman, Democratic National Committee: It's perfectly legal really. I mean, you can call it a loophole or a dodge or if you want to, but, you know, those are terms that have some kind of pejorative meaning, I think. It's perfectly legal within the law.
HEDRICK SMITH: But Fowler did concede Democrats had taken some questionable donations.
DON FOWLER: We made some mistakes that we wouldn't make again, and we've corrected those mistakes. We have a different system.
HEDRICK SMITH: Is it an individual, or is it a system?
DON FOWLER: I don't like to talk about this, okay, but I was in the army a long time, and a commander in the army is responsible for his unit, in military terminology, a commander is responsible for everything his unit does or fails to do. And I was head of the DNC. If the DNC screwed up, that was my responsibility.
HEDRICK SMITH: After Bob Dole clinched the Republican nomination, the Republicans copied the Democratic tactics of using party money to run ads for Bob Dole's presidential campaign, like this one.
AD ANNOUNCER: Dole grew up in Russell, Kansas. From his parents he learned the value of hard work, honesty, and responsibility.
BOB DOLE: It all comes down to values.
ANN McBRIDE, Common Cause: There was a bio ad, a biography of Bob Dole. Bob Dole was born in Russell, Kansas. He was in the war. He married Elizabeth Dole. Nothing but a bio. And at the end it said, "Write your Congressman." About what?
HEDRICK SMITH: Ann McBride is head of the public interest group Common Cause.
ANN McBRIDE: What they did was claim that these were ads about issues. These weren't about Clinton and weren't about Dole. And it was a scam. And we believe it was a knowing and wilful violation.
HEDRICK SMITH: Would you contend that all the abuses were sins of the Democrats, Republicans weren't involved?
JACK KEMP: Let's take the perception of politics. I think the American people are saying a pox on both houses. Both people, both sides do it; let's clean it up, and let the chips fall where they may. There's been a suit filed. There's been a criminal investigation, and there's a congressional investigation. And that's how our system works, and I'm willing to push it forward as fast as we possibly can and look at both political parties. The President or anybody should not be able to conduct soft money campaigns tied to a political agenda, whether it's right or left, whether it's Republican or Democrat.
HEDRICK SMITH: So that's how vast sums of uncontrolled soft money now flow into presidential campaigns through the political parties. Tens of millions of more dollars in soft money flow into the battle for Congress not only through political parties but through independent organizations which have a high stake in the outcome. In 1996, the most visible independent campaign was waged by the AFL-CIO. Peggy Taylor is the Labor Federation's legislative director.
PEGGY TAYLOR, Legislative Director, AFL-CIO: The AFL-CIO overall in the Labor ‘96 Issues Campaign spent $35 million. Of that $25 million was for media campaign, the issues ads that we ran.
AD ANNOUNCER: What's important to America's families?
WOMAN IN AD: Taxes. I don't mind paying my own fair share, but I want everybody else to pay theirs too.
AD ANNOUNCER: And where do the candidates stand? What's important to America's families?
ANOTHER WOMAN IN AD: I'm very concerned about Medicare. I just can't afford--
HEDRICK SMITH: Issue ads? Well, you can call them that, just so long as the ads don't say the magic words "Vote for Candidate X," or "Vote Against Candidate Y." But, listen to what they did say.
AD ANNOUNCER: Call Congressman Hostettler. Tell him it's time to start rewarding work. Tell him it's time to raise the minimum wage.
AD ANNOUNCER: Call J.D. Hayworth and tell him not to destroy Medicare.
HEDRICK SMITH: In fact, all across the country many of the AFL-CIO ads were targeted at defeating highly conservative freshman Republicans such as J.D. Hayworth of Arizona. Hayworth was first elected in 1994 and became a close ally of Newt Gingrich. Steve Owens, the Democratic candidate, was the beneficiary of the AFL-CIO ad.
AD ANNOUNCER: Congressman J.D. Hayworth voted with Newt Gingrich to cut college loans, while giving tax--Congress will vote again on the budget. Tell Hayworth, don't write off our children's future.
REP. J.D. HAYWORTH, (R) Arizona: I was carpet bombed. Think about it. Seventy-five thousand spots, three hundred times a day.
HEDRICK SMITH: Now they say that's issue advocacy. What do you say?
REP. J.D. HAYWORTH: --when you move from issues to talk about a person.
HEDRICK SMITH: Late in the campaign came a counter attack from the Republican Party and business groups.
AD ANNOUNCER: The big unions spend big money on ads because they want Steve Owens to vote their way.
HEDRICK SMITH: Although the unions were spending big money, business ultimately out-spent labor seven to one, according to the non-partisan Center for Responsive Politics. Steve Stockmyer is head of the National Association of Business PAC's.
STEVE STOCKMYER, National Association of Business PAC's: There was an effort in the business community independent of our group to try to raise money to counter the union ads, and they were--and put on ads of their own basically supporting the Republican cause.
STEVE OWENS, Former Congressional Candidate: The issue in the campaign became labor's involvement and outside parties' involvement. So I think that in the end it became difficult for voters to try to figure out exactly what was going on.
HEDRICK SMITH: That final pro-Republican ad blitz helped Hayworth to a very slim victory and key Republican strategists like Vin Weber say that same pattern worked in districts all across the country.
VIN WEBER, Former Republican Congressman: I think it saved the House. I think that a few weeks out of the general election the Republicans probably would have lost control of the Congress.
HEDRICK SMITH: And what about the legal requirement that business, labor, and the political parties keep their efforts independent of the candidates?
VIN WEBER: These Washington-based independent expenditures overwhelmingly are not independent in the sense that the public would think of them even if they may meet the legal criteria for independence. And that's questionable too.
HEDRICK SMITH: All those legal distinctions so important to the power players inside the beltway get lost on ordinary voters. Many people across the country sense what Washington has trouble owning up to--the campaign finance law enacted 23 years ago no longer controls the money game in American politics.

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