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Follow the Dark Money

The down and dirty history of secret spending, PACs gone wild, and the epic four-decade fight over the only kind of political capital that matters.

"There are two things that are important in politics. The first is money and I can't remember what the second one is."—Mark Hanna, 19th-century mining tycoon and GOP fundraiser


Bill Liedtke was racing against time. His deadline was a little more than a day away. He'd prepared everything—suitcase stuffed with cash, jet fueled up, pilot standing by. Everything but the Mexican money.

The date was April 5, 1972. Warm afternoon light bathed the windows at Pennzoil Company headquarters in downtown Houston. Liedtke, a former Texas wildcatter who'd risen to be Pennzoil's president, and Roy Winchester, the firm's PR man, waited anxiously for $100,000 due to be hand-delivered by a Mexican businessman named José Díaz de León. When it arrived, Liedtke (pronounced LIT-key) would stuff it into the suitcase with the rest of the cash and checks, bringing the total to $700,000. The Nixon campaign wanted the money before Friday, when a new law kicked in requiring that federal campaigns disclose their donors. Maurice Stans, finance chair of the Committee for the Re-Election of the President, or CREEP, had told fundraisers they needed to beat that deadline. Liedtke said he'd deliver.

Díaz de León finally arrived later that afternoon, emptying a large pouch containing $89,000 in checks and $11,000 in cash onto Liedtke's desk. The donation was from Robert Allen, president of Gulf Resources and Chemical Company. Allen—fearing his shareholders would discover that he'd given six figures to Nixon—had funneled it through a Mexico City bank to Díaz de León, head of Gulf Resources' Mexican subsidiary, who carried the loot over the border.

Winchester and another Pennzoil man rushed the suitcase to the Houston airport, where a company jet was waiting on the tarmac. The two men climbed aboard, bound for Washington. They touched down in DC hours later and sped directly to CREEP's office at 1701 Pennsylvania Avenue NW, across the street from the White House. They arrived at 10 p.m.

It was the last gasp of a two-month fund-raising blitz during which CREEP raked in some $20 million before the new disclosure law took effect. A handful of wealthy donors accounted for nearly half of that haul; insurance tycoon W. Clement Stone alone gave $2.1 million, or $11.4 million in today's dollars. Hugh Sloan, CREEP's treasurer, later described an "avalanche" of cash pouring into the group's coffers—all of it secret.

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At least it was secret until some of that Mexican money ended up in the bank account of a one-time CIA operative named Bernard Barker, one of the five men whose bungled burglary at the Democratic National Committee headquarters in the Watergate complex lit the fuse on the biggest political scandal in modern American history.

Over the next two years, prosecutors, congressional investigators, and journalists untangled a conspiracy involving a clandestine sabotage campaign against Democrats, hush-hush cash drops for CREEP surrogates in phone booths, and millions in illegal corporate contributions. As the slow drip of revelations continued, public outrage boiled over. Nixon's approval rating sunk below 25 percent, worse than Lyndon Johnson's during the darkest depths of the Vietnam War. Picketers marched on the White House demanding his impeachment. College campuses erupted in protest over the Watergate abuses.

"We're back to the Nixon era," says scholar Norman Ornstein, "the era of undisclosed money…and huge interests…dominating American politics."

Almost 40 years later, that outrage is back. Mass movements like the tea party and Occupy have channeled popular anger at a political system widely seen as backward and corrupt. In the age of the super-PAC, Americans commonly say there's too much money in politics, that lobbyists have too much power, and that the system is stacked against the average citizen. "Our government," as one Occupy DC protester put it, "has allowed policy, laws, and justice to be for sale to the highest bidder."

For many political observers, it feels like a return to the pre-Watergate years. Rich bankrollers—W. Clement Stone then, Sheldon Adelson now—cut jaw-dropping checks backing their favorite candidates. Political operatives devise ways to hide tens of millions in campaign donations. And protesters have taken to the streets over what they see as a broken system. "We're back to the Nixon era," says Norman Ornstein of the conservative American Enterprise Institute, "the era of undisclosed money, of big cash amounts and huge interests that are small in number dominating American politics." This is the story of how we got here.

Watergate aside, the issue of campaign finance historically has not resonated with Americans. Those few reporters who do concentrate on it—Mother Jones has made it a focus since our post-Watergate inception—struggle to breathe life into stories based on government documents and obscure regulations. But the Supreme Court's 2010 Citizens United v. Federal Election Commission decision—freeing corporations and unions to spend unlimited outside money on elections—jolted the public, prompting hundreds of protests and inspiring a nationwide grassroots campaign to, as the group Public Citizen puts it, "reclaim our democracy."

TK TK Teddy's Trust Issues Dark-money disaster: During the 1904 campaign, New York Life Insurance secretly gave $48,000 ($1.25 million today) to the Republicans.
Key figure: President Teddy Roosevelt, who ran as a trustbuster while soliciting corporate cash on the side. "He got down on his knees for us," one tycoon recalled.
Backlash: Reformers howled. TR signed the 1907 Tillman Act, which banned companies from giving directly to candidates.
We've been here before. The basic pattern emerging from the last century of campaign finance can be summarized as: scandal, then reform. The Tillman Act's ban on corporate donations to candidates passed after Teddy Roosevelt was caught shaking down big New York City businesses. Watergate spurred the historic 1974 amendments to the Federal Election Campaign Act. And the 1996 Democratic fundraising abuses paved the way for the passage of the Bipartisan Campaign Reform Act of 2002, better known as McCain-Feingold. "Congress," says Democratic election lawyer Joseph Sandler, "is always fighting the last war." And whenever new reforms take effect, Washington's brightest minds turn to finding clever new ways to circumvent them.

Political money, campaign finance watchers say, moves much like water, always looking for an opening to flow through—and political operatives are only too eager to muddy those waters with anonymous, untraceable cash. "It's like holes in a dike: You block one hole, it's going to find its way out another way," says Democratic attorney Neil Reiff.

For decades, the campaign finance wars have pitted two ideological foes against each other: one side clamoring to dam the flow while the other seeks to open the floodgates. The self-styled good-government types believe that unregulated political money inherently corrupts. A healthy democracy, they say, needs robust regulation—clear disclosure, tough limits on campaign spending and donations, and publicly financed presidential and congressional elections. The dean of this movement is 73-year-old Fred Wertheimer, the former president of the advocacy outfit Common Cause, who now runs the reform group Democracy 21.

On the other side are conservatives and libertarians who consider laws regulating political money an assault on free markets and free speech. They want to deregulate campaign finance—knock down spending and giving limits and roll back disclosure laws. Their leaders include Senate Minority Leader Mitch McConnell (R-Ky.), conservative lawyer James Bopp Jr., and former FEC commissioner Brad Smith, who now chairs the Center for Competitive Politics, which fights campaign finance regulation.

In this ongoing battle, the upper hand shifts regularly. Wertheimer and his allies scored historic victories in the 1970s in the wake of Watergate and again in the early aughts. Yet more recently, the deregulation camp has won a series of court decisions—FEC v. Wisconsin Right to Life, v. FEC, and, of course, Citizens United—that have toppled more campaign finance regulations in less time than ever before. Even the Tillman Act's century-old corporate contribution ban is under siege by conservative interest groups.

Meanwhile, money is flooding the political system like never before. This has forced lawmakers, as many of them will forlornly admit, onto an endless fundraising hamster wheel in which they spend more and more time beating the bushes for campaign cash and less and less time actually legislating. In the 2012 election, experts project spending could top a staggering $11 billion—more than double the 2008 total.

What few people realize is how close Wertheimer and Congress came to blocking the deluge.

II. "That Bald-Headed Bastard"

The phone call that launched Fred Wertheimer's four-decade crusade against corruption and corporate money in politics came, of all times, during a nap.

It was May 1971, and Wertheimer, then 32, was unemployed. After four years working for Rep. Silvio Conte (R-Mass.), Wertheimer had quit his job on the Hill and entered into what he now calls "semiretirement." He slept late, browsed the newspapers, took long walks around Washington, and napped each afternoon. Having bills to pay, his wife, Linda, took a job at a fledgling news organization called National Public Radio. (She went on to a long career at NPR as a political correspondent and host of All Things Considered.) Wertheimer himself had applied for a handful of jobs, but he hadn't heard back.

* Includes primaries when known. Sources: Center for Responsive Politics; George Thayer, Who Shakes the Money Tree?* Includes primaries when known. Sources: Center for Responsive Politics; George Thayer, Who Shakes the Money Tree?Then, one afternoon, he awoke to a phone call. Wertheimer, groggy, reached for the receiver. It was the good-government group Common Cause, where he had applied for a lobbying position. They wound up hiring him to focus on two issues: ending US involvement in the Vietnam War and reforming the nation's weak campaign finance laws.

In a recent interview at his Dupont Circle office, the walls adorned with Mark Rothko prints, framed news clips ("Ethics Watchdog Fred Wertheimer: When He Barks, Congress Listens"), and photos inscribed by the politicians he's worked with (Barack Obama: "Keep fighting the good fight"), Wertheimer, a Brooklyn native with a crown of silver hair, recalled the warning he received from Common Cause founder John Gardner: "Reform is not for the short-winded." Even so, Wertheimer quips, "He never told me it was 41 years and counting."

Luckily for Wertheimer, he had an early taste of victory to keep him going. Watergate and the abuses of the 1972 presidential campaign had left the public agitating for reform, and both Democrats and Republicans in Congress scrambled to introduce new legislation overhauling the nation's campaign finance laws. By 1974, there were five different campaign finance bills bouncing around in the Senate, four with GOP cosponsors. The point man on one of them was none other than the Senate minority leader, Pennsylvania Republican Hugh Scott.

For much of 1974, Wertheimer shuttled around the ornate Russell Senate Office Building, his loafers clicking on the polished marble floors. He was the top lobbyist in the reform push, the broker between lawmakers working on various versions of the historic campaign finance legislation. The five bills were soon boiled down into one that included limits on campaign spending and donations, the creation of a new elections watchdog, and public financing programs for presidential and Senate races. The legislation also left open the possibility of public financing for House campaigns. It was as close to the Common Cause ideal as Wertheimer could've hoped for. The House and Senate passed their own versions of the bill with bipartisan support, then headed into conference to iron out the differences.

Wertheimer's enemies seethed. One was Rep. Wayne Hays (D-Ohio), a sour bull of a politician who chaired the House Administration Committee and loathed campaign finance reform. Like many old-school pols, Hays saw the reforms as a threat to his seat. (Hays would later resign after it was revealed he'd paid his mistress to work in his office.) He'd fought Wertheimer—the "skunk"—every step of the way, stalling or killing campaign finance legislation. One of the 1974 conferees, Hays once spotted Wertheimer lingering outside the meeting room, seemingly twisting lawmakers' arms. Wertheimer says another member of Congress relayed Hays' snarling, behind-closed-doors reaction: "What's that bald-headed bastard doing here?"

TKWatergate Dark-money disaster: President Richard Nixon's 1972 reelection campaign raked in $20 million in secret donations; some went to fund the Watergate break-in. Nixon told his chief of staff to inform donors, "Anybody who wants to be an ambassador must at least give $250,000."
Key figure: Herbert Kalmbach, Nixon's personal attorney and the deputy finance chair for the Committee for the Re-Election of the President, who destroyed evidence of the hushed donations. He was fined $10,000 and served six months in prison.
Backlash: Congress imposed new limits on campaign gifts and set up the Federal Election Commission.
Hays and the other conferees ultimately denied Wertheimer his grand slam of reforms by scrapping congressional public financing. Still, the limits on campaign spending and donations and the creation of the Federal Election Commission made for a stunning victory. In the final vote, 75 percent of House Republicans backed reform, as did 41 percent of Senate Republicans. On October 15, 1974, President Gerald Ford signed into law the amendments to the Federal Election Campaign Act (FECA), the bedrock of modern campaign finance law.

The amendments took effect on January 1, 1975. The very next day, Sen. James Buckley (R-N.Y.)—older brother of conservative icon William F. Buckley—sued the secretary of the Senate, Francis Valeo, in an all-out attack on the constitutionality of FECA. Buckley v.Valeo reached the Supreme Court in September 1975, and four months later the high court handed down a bittersweet ruling for Wertheimer. In a complex and at times impenetrable opinion—one thought to have been written by as many as five justices—the court upheld the law's contribution limits, presidential public financing program, and disclosure provisions. But it struck down the limits on spending, including so-called independent expenditures—money spent by individuals or outside groups "totally independent" of campaigns. Buckley deemed political money a form of speech and sought to balance two interests: the First Amendment's free speech protections and what the justices termed "corruption and the appearance of corruption." Money given straight to candidates could corrupt, the court argued, but independent expenditures did not and thus couldn't be limited.

Buckley not only wiped out chunks of the 1974 law—it has shaped most major campaign finance court decisions ever since. The Roberts court drew heavily on Buckley in its Citizens United decision, which opened the door to unlimited third-party spending and radically reshaped the political playing field. "Buckley," says Michael Toner, a former chairman of the FEC and onetime chief counsel to the Republican National Committee, "is a seed that has sprouted a thousand blossoms."

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