New Reform Bill Keeps Soft Money Loophole

Revised Ellis bill allows unlimited and undisclosed campaign donations

January 10, 2005

Madison - Wealthy special interests and phony front groups like All Children Matter, Americans for a Brighter Tomorrow and Citizens for Wisconsin’s Future will continue to be able to avoid disclosing their political donations and skirt campaign contribution limits in state law under a soon-to-be-introduced campaign finance reform bill, the Wisconsin Democracy Campaign said today.

The proposal is being circulated among legislators in a search for co-sponsors by Senator Michael Ellis (R-Neenah). The original Ellis bill introduced last session as Senate Bill 12 required full disclosure of campaign finances and closed the loophole that currently enables special interests to make undisclosed and unlimited contributions known as "soft money" donations. SB 12 had bipartisan support as Ellis was joined in introducing the measure by then-Senate Democratic Leader Jon Erpenbach and 21 other co-sponsors from both parties in the Senate and Assembly.

The bill Ellis plans to introduce this session no longer requires interest groups to disclose their campaign donations and abide by the campaign contribution limits in current law. The soft money loophole that remains in the new Ellis bill also allows groups to get around Wisconsin’s century-old ban on corporate campaign contributions. In recent years, it has become common practice for groups to pay for electioneering activities with corporate donations. (For more information, see a 2004 WDC study entitled From Sunlight to Darkness.)

The new Ellis bill will allow groups like All Children Matter, a right-wing group based in Michigan, to continue to conceal the sources of money used to influence Wisconsin elections. All Children Matter is thought to have spent more than $500,000 in 2004 to influence state legislative elections here. The group is headed by Michigan multimillionaire Dick DeVos, whose family founded Amway Corporation.

Another group that would not have to disclose where it gets its money under the new Ellis bill is Americans for a Brighter Tomorrow, a left-wing group that ran some of the nastiest political ads of the 2004 campaign, including one that called a Republican candidate a "right wing zombie." It is not known who is funding Americans for a Brighter Tomorrow, but it is known that an ex-staffer of indicted former Senate leader Chuck Chvala is connected to the group.

The new reform proposal also would leave Citizens for Wisconsin’s Future free to continue concealing how it pays for campaign ads such as several it sponsored in 2004 attacking Assembly Speaker John Gard. This group is thought to be a front for the Ho-Chunk tribe and its gambling interests.

Exploitation of the soft money loophole is at the center of the corruption scandal that has produced criminal charges against former legislative leaders. Fundraising done for a front group run by Chvala is the subject of extortion and money laundering charges filed against the former Senate Democratic leader.

The group, Independent Citizens for Democracy, secretly solicited corporate contributions from Alliant Energy, Madison Gas & Electric, MG&E subsidiary Central Wisconsin Development Corporation, Oneida Tribe of Indians of Wisconsin, Dairyland Greyhound Park, Mathy Construction, Air Wisconsin Airlines Corporation, Badger Liquor Company, General Beer Distributors Company, building contractor J.F. Ahern Company, Racine road builder James Cape & Sons Company, Black River Falls road builder Lunda Construction Company, Elkhorn road builder Mann Bros. Inc. and over 20 other Wisconsin corporations.

The premise of the original Ellis bill was that it would shut down the soft money-financed front groups by making them fully disclose their campaign operations and play by the same rules as candidates and regulated campaign committees, as well as by giving candidates matching grants to counter campaigns run against them by the groups.

Under the new bill, soft money groups would continue to flourish because they would remain at a distinct competitive advantage. Unlike candidates and regulated committees, soft money-fueled front groups would not have to disclose their funding sources. As a result, there would be no limit on the size of donations they could accept, while candidates and regulated committees would have to continue to abide by strict campaign contribution limits. And the special interest front groups would be able to use corporate donations to pay for their electioneering, while candidates and regulated committees could not.

"We support most everything else in the Ellis bill, but it is a major mistake to abandon the idea of full disclosure and leave the soft money loophole intact," WDC executive director Mike McCabe said. "Disclosure is the backbone of campaign finance reform."

McCabe noted that 90 percent of voters in a 2000 referendum supported "full and prompt disclosure of election-related activities." And more than 1,100 citizens who attended last Tuesday’s People’s Legislature endorsed a resolution calling for "full and prompt disclosure of campaign contributions that restores the state’s ban on corporate campaign donations."

The other significant difference between the original Ellis bill and the new legislation being advanced this session is that the original bill included a guaranteed funding source for the public financing grants called for in the legislation. The new version does not. McCabe stressed that the lack of a reliable funding source was a chief cause of the demise of Wisconsin’s old public financing system, which worked well for years after its adoption in 1977 but eventually was abandoned by candidates who no longer received the public grants promised in the law and who felt spending limits unadjusted for inflation were no longer realistic.