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Continued: June 22, 2008: Quirk in law lets corporate money flow

  • Article by: KEVIN DIAZ , Star Tribune
  • Last update: June 21, 2008 - 9:40 PM

WASHINGTON -- At a fundraising breakfast with corporate chieftains last year, Minnesota Gov. Tim Pawlenty described opportunities awaiting them at the Republican National Convention in St. Paul this summer.

First, their contributions would help the state "shine in the world spotlight." Second, the four-day party could generate $250 million in business for the Twin Cities.

And, third, it would be a chance to promote new products and "connect with influential government officials," including Cabinet members, President Bush and perhaps even the next president of the United States.

But that last opportunity, critics of convention financing insist, is really a vast loophole in campaign finance rules, a back-door way for special interests to wield clout with unrestricted injections of dollars -- and even a public tax subsidy.

According to a copy of talking points from Pawlenty's June 2007 meeting, the governor called for convention contributions of at least $1 million from each of the 20 Fortune 500 companies headquartered in Minnesota.

A year later, the host committee for the GOP convention and the organizers of the Democratic gathering in Denver have reported a combined $60 million in donations, the bulk from corporations that are barred from giving directly to presidential campaigns.

Thanks to quirks in campaign finance laws, donations to conventions -- unlike contributions to parties and candidates -- are tax deductible and unlimited, a point Pawlenty did not fail to mention at the June 2007 session at the governor's mansion.

The resulting wave of special interest money flooding both conventions this summer has been met with calls for change from major party nominees John McCain and Barack Obama, both of whom cast themselves as political reformers.

McCain, the Arizona Republican senator whose name is synonymous with the 2002 law banning unlimited "soft money" donations to political parties, says he wants to change the way conventions are funded to reduce the parties' increasing dependence on big-buck donors.

McCain's "reform agenda," said McCain spokeswoman Crystal Benton, "... would include the way the party conventions are paid for."

Obama, the Illinois Democratic senator, makes much the same pledge.

"Moving forward, one of Senator Obama's reform priorities will include changes in the way party conventions are funded," said spokesman Bill Burton.

But change won't come during this election, which is expected to reach more than $1 billion in total spending.

The Federal Election Commission upheld the special rules for donations to convention host committees in 2003, largely on the grounds that they are nonprofit civic charities driven "to promote the convention city and not by political considerations."

But critics scoff at that suggestion.

"It's all about political influence," said Steve Weissman of the Campaign Finance Institute in Washington, which released a pair of studies this month critical of the convention financing system. "It's a veneer in which you can get big companies to support a party function in a presidential election -- the first big ad in the general election campaign -- even though it would be illegal if the money was being sought by the parties."

Getting the money

While the Twin Cities and Denver convention committees each include both Democrats and Republicans, Weissman's report suggests that they have essentially become conduits for party financiers.

In Minnesota, the lead pitchmen have been Pawlenty, a close McCain adviser and potential running mate, and Sen. Norm Coleman, a Republican with ties to host committee chairman Douglas Leatherdale and chief executive Jeff Larson.

While St. Paul Mayor Chris Coleman and Minneapolis Mayor R.T. Rybak helped the Twin Cities land the convention, the two DFLers, by their own accounts, have taken a back seat in raising the money to cover the host committee's $58 million budget.

In Denver, the leading solicitors have been Colorado's top Democratic elected officials: Gov. Bill Ritter, U.S. Sen. Ken Salazar and Denver Mayor John Hickenlooper.

"Generally speaking, the Republicans and their contacts fund their convention, and the Democrats and their contacts fund theirs," said former U.S. Sen. Mark Dayton, a prominent DFL donor. "You've got to hit up the people who can afford to give huge amounts of money, and they're not charitable contributions."

Critics point out that the two conventions' biggest underwriters include some of the largest vested interests in Washington.

According to the Campaign Finance Institute, the top 107 donors have spent more than $800 million on federal campaign contributions and lobbying since 2005.

In Minnesota, the list of big donors is topped by Qwest Communications, which is ponying up $6 million in cash and services to each of the two conventions (the company's national headquarters are in Denver, and it does extensive business in Minnesota).

Xcel Energy, whose namesake arena will host the GOP convention, is providing $1 million to the Democrats and $1.1 million to the GOP event.

Other local heavy hitters are UnitedHealth Group, which has put up $1.5 million and $1 million, respectively, for the GOP and Democratic events, and St. Jude Medical, which is down for $1 million for the Republican convention.

Target Corp., Minnesota's second-largest public company by revenues, has contributed to both conventions but has not disclosed how much. Unlike political contributions, convention donations don't have to be disclosed until 60 days after the event.

Minnesota donors, who have provided more than half of the $31 million raised for the GOP convention so far, say they see their contributions in business and civic terms, not political ones.

"This is a tremendous marketing and visibility opportunity," said John Stanoch, Minnesota president for Qwest. "It's a tremendous brand and credibility booster."

Stanoch, a former judge appointed by the late DFL Gov. Rudy Perpich, says politics was not a part of his company's calculation.

'The rules we were given'

Larson, of the Twin Cities host committee, also denies that donors are buying access.

"It's ludicrous to think that CEOs of major corporations ... need to rely on a national political convention to gain access to elected officials," he said. "These companies drive the American economy and quite frankly they are and should be a part of a regular dialogue with elected officials -- and they don't need a political convention to do that."

But real or imagined, extra access to officials has been part of the pitch for convention money. The Minneapolis-St. Paul committee's initial promotion kit included the promise of golf outings and private receptions with party leaders.

In the aftermath of criticism, some of those promises have been scaled back. But local boosters from both parties say that big brand-name convention sponsors have become a fact of political life.

Starting at just $1 million for the two national conventions in 1980, corporate contributions rose to $56 million in 2000 and $143 million in 2004, as the events have become bigger and more lavish.

"This is the structure by which a host committee like ours can put on a convention," said Rybak spokesman Jeremy Hanson. "These are the rules we were given."

Kevin Diaz • 202-408-2753

  • ABOUT THIS SERIES

    Today's story is the third installment of a yearlong Star Tribune examination of the role of money in U.S. and Minnesota politics. The first installment, published March 2, looked at the influence of independent political groups. To read that story, go to www.startribune.com/a4420. The second installment, published May 26, focused on "leadership PACs" -- funds created by politicians that can be used to increase their visibility and entertain donors. That story can be accessed at www.startribune.com/a4507. Watch for additional reports in the months ahead.

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