The Secret Money War

Like many Bush-loathing democrats, Glenn Smith was disgusted this summer when a supposedly independent political group he'd never heard of, the Swift Boat Veterans for Truth, began running television ads smearing John Kerry's military service. Smith became even angrier when Kerry stood by as the spots, funded by wealthy Bush supporters, started denting the Democrat's poll numbers. "It was like Alice in Wonderland," Smith says. He couldn't believe Kerry, a decorated war hero, would allow himself to be slammed like this when the president had never seen a day of combat.

Unlike other Democrats, Smith was in a position to do more than complain. A veteran political consultant in Texas, he decided to make a nasty ad of his own. If Kerry wasn't going to fight back, Smith figured, he'd do it for him. Using the Swifties as his model, Smith formed Texans for Truth, and registered the group as a so-called 527. That let him take advantage of a powerful loophole in the tax law. He could raise unlimited money, and use it for almost any political purpose, as long as he didn't explicitly endorse any candidate. That suited Smith fine. Instead of defending Kerry, he would just bash Bush. Smith cut his ad, which features a former lieutenant colonel in the Alabama Air National Guard who insisted young Bush never showed up for duty.

All Smith needed was money to buy air time. He knew where to turn. He called some friends at MoveOn.org, the hyper-organized, generously bankrolled liberal 527 group known for its own in-your-face political ads and its army of shaggy get-out-the-vote workers. Last Tuesday, MoveOn sent out an emergency e-mail to thousands of members, asking for quick cash to fund Smith's project. Within three days he had $400,000 in hand, including $100,000 from Daniel O'Keefe, a onetime "Seinfeld" writer and Kerry fund-raiser. The ads will go up next week in Ohio, Pennsylvania, Michigan and other battleground states. With more money on the way, Smith is already working on his next attack ad, featuring the newly revealed memos claiming Bush received special treatment in the National Guard. And what if the papers turn out to be fake? "It doesn't matter to me," Smith says plainly. The issue of Bush's service is still valid. "I wish we could be talking about [exporting] jobs... and health care," he says. "But you've got to play the game you're in."

This year the game has been defined, and dominated, by three numbers: 527. Run by political pros and accountable largely to themselves, the groups are loud, mean and devastatingly effective. They are also loaded, in part from lavish donations from billionaires like George Soros and T. Boone Pickens, who are blunt about their desire to influence the vote. So far this campaign, Democratic and Republican 527s like MoveOn and America Coming Together on the left, and the Swift Boat Veterans and Progress for America on the right, have raised upwards of $300 million. They could bring in tens of millions more before Election Day.

And to think this was supposed to be the year Big Money would be driven out of presidential politics--or at least wrestled under control. Don't kid yourself. The McCain-Feingold campaign-reform law may have succeeded in drying up the political parties' soft-money slush funds. But that money--and more--has simply found a new home in the murkier world of 527s. Pushed farther away from the parties and into the hands of political operatives bound only by their scruples, that money is now even less accountable than it was before. There are rules, on paper at least. But the job of overseeing the groups to make sure they don't cross the line into blatantly partisan politics is left to the Federal Election Commission, which enforces the law so lightly that the groups know just about anything goes.

The No. 1 rule is the one most often broken: 527s are supposed to be independent from the parties and the candidates. But in reality the overlaps between the groups and the campaigns are so obvious--they often swap consultants and lawyers--that it's not always easy to tell where one begins and the other leaves off. The TV ads are just the start. For the first time, the parties, Democrats especially, are "outsourcing" many of their traditional jobs to the 527s. The groups are spending millions on massive registration and get-out-the-vote campaigns. That eager college kid who knocked on your door and railed against Bush probably wasn't a Kerry volunteer, but a $10-an-hour employee of a pro-Kerry 527.

There are hundreds of them, enthusiastically walking neighborhoods in every contested state, trying to win votes one person at a time. Last Wednesday, New Hampshire was swamped by heavy rain, the last remnants of Hurricane Frances. The National Weather Service told residents to stay inside. That was good news at the Manchester offices of America Coming Together, one of the largest of the pro-Democrat 527s. A dozen paid canvassers, foot soldiers in the war to unseat Bush, were donning slickers and getting ready to make their daily rounds. "A lot of people will be home today!" beamed Amy Goodman, who will walk half the state before Election Day trying to drum up votes for Kerry. Using mapping software and a database of the state's registered voters, the canvassers, working in pairs, methodically hit one neighborhood after the next. They visit only those people the computer indicates might still be open to persuasion. No use tangling with known Bush supporters, or folks who never vote. Each team also carries a handheld Palm computer, which details the people they're visiting. Age, sex, race, religion, job, voting record. If the group had visited the house before, the computer tells them which issue is most important to the person who answers the door.

Checking the computer, Goodman and her partner, Tim Razel, noticed one more thing in the entry next to one of the houses. "B.D."--Big Dog. "Getting chased by giant dogs is just part of the job," Razel shrugged. Half an hour later, as they approached the first house, two German shepherds came out barking and howling, lunging at them through the screen door. Quick note in the computer.

For the rest of the afternoon, the pair gently prodded the neighborhood residents on the issues, trying to steer them toward Kerry but never being explicit about it. One woman told them that she cared most about the war in Iraq and health care. While Goodman discreetly entered the information into her handheld, Razel handed the woman a paper with a scathing critique of Bush's health-care record. On the flip side was a large picture of the smiling Democratic candidate over the headline JOHN KERRY HAS THE RIGHT PLAN TO LOWER OUR HEALTH CARE COSTS. (So much for not endorsing candidates.)

The woman at the door may not have realized it, but she is in for plenty of future visits from the 527 crowd. Her concerns, forever locked in the computer, were relayed that day to other pro-Kerry 527s. Her interest in the war will likely prompt a stop-by from MoveOn.org. Her health-care worries might result in a call from EMILY's List, which works on women's issues. A man who listed the environment as a top issue will get attention from the Sierra Club. The groups once squabbled over turf and money. They now work together. Once the visits start, they don't stop. Show interest to the ACT employees and they and their friends will keep coming back, unless you can convince them you're absolutely, positively voting for Bush. Or you have a big dog.

The efforts are paying off. Back at ACT's headquarters in Washington, D.C., spokesman Jim Jordan reels off the statistics. The group has already registered 102,000 voters in Missouri, 79,000 in Ohio, 126,000 in Pennsylvania and 40,000 in Florida. On Election Day, "we will have tens of thousands of people on the streets," he says. It's also trying to lock in likely Kerry supporters by persuading people who are leaning Democratic--especially single moms with hectic schedules--to vote early by absentee ballot. One challenge: finding canvassers who don't scare people. At $10 an hour, the pool of willing employees is limited. Earlier this summer the Associated Press reported that the ranks of ACT's neighborhood crews in Missouri, Ohio and Florida included a number of felons. Some had been convicted of violent crimes, including sexual assault. A few lived in halfway houses and were sent back to prison. Jordan says these days, ACT is careful to weed out violent criminals. But he has no problem with hiring people once convicted of minor crimes. The group, he says, believes people deserve a second chance.

The Swift Boat ads may have gotten most of the attention, but so far it's the Democrats who have a clear advantage in the 527 wars. Huge donations from some of the country's richest men, and from Hollywood stars, have helped. Kerry claims to be a big "Seinfeld" fan. Apparently, people who worked on the show feel the same about the candidate. Last December, Laurie David, wife of "Seinfeld" co-creator Larry David, held a series of fund-raisers in Beverly Hills and New York. Dubbed the "Hate Bush" meetings, David and a group of celebrities, including "Seinfeld" star Julia Louis-Dreyfus, "West Wing" creator Aaron Sorkin and director Rob Reiner, urged Hollywood types to open their wallets for ACT and other pro-Kerry 527s. Within two months, the Bush Haters had raised $20 million.

Plenty more was on the way. Billionaire investor Soros pledged to spend as much of his fortune as necessary to beat Bush. He even boasted he'd spend it all if it would guarantee a Kerry win. So far, he's given nearly $13 million. Even that doesn't top the list. Insurance man Peter Lewis has written checks totaling $15 million. And Hollywood producer Stephen Bing--best known as the father of actress Elizabeth Hurley's child--has given nearly $7 million.

The Republicans came late to the 527 party, and lag far behind the Democratic groups in fund-raising and organization. Instead of joining the fray, they first tried to shut down the 527s, fearing--correctly--that the Democrats would beat them at the game. Twice the Republicans have filed complaints with the FEC, charging that ACT spokesman Jordan was illegally coordinating with the Kerry campaign. Jordan's last job before joining up with the 527 was as Kerry's campaign manager. He was fired last year in a shakeup, but Republican lawyers argued that he still has insider knowledge about the campaign. For Jordan simply to forget what he knows would be "virtually impossible," says RNC chairman Ed Gillespie. "He'd have to have a lobotomy to avoid violating the law." It's not a small point, especially when you consider that other top Democrats also move between the two worlds. Democratic fixer Harold Ickes, a longtime party strategist who helped write the party's platform, is also a top official at the Media Fund, a large 527 that has aired scathing anti-Bush ads.

Still, it was a slippery argument for Republicans to make. Ben Ginsberg, the Bush campaign's attorney, resigned when it was revealed that he also advised the Swift Boat Veterans. And Bush campaign consultant Tom Synhorst is also the founder of Progress for America, the largest pro-Bush 527.

In the end it didn't matter. The FEC refused to do anything about the complaints. Now the Republicans have thrown their support behind the 527s, and are working furiously to catch up. The Swift Boat Veterans, riding on the success of their anti-Kerry ads, have raised $6.7 million. Pickens, the Texas oilman, recently gave the group $500,000. But the fastest-growing Republican 527 is Progress for America. Quietly set up last year by Synhorst, Progress has been hitting up donors for big checks. Synhorst has credibility with the Bush crowd. His phone-bank business is a major contractor with the Bush-Cheney campaign, and he is friendly with Karl Rove. "I know these guys well," Rove says in an endorsement on the Web site of Synhorst's firm. "They work as hard to win your races as you do."

Plenty of Bush backers apparently agree. So far, the group has raised $26 million, including $6 million last week alone. The latest crop of donors includes Amway founders Richard DeVos and Jay Van Andel, who each chipped in $2 million. DeVos was a Bush Pioneer in 2000, raising at least $100,000 for the campaign. Missouri financier Sam Fox, a Bush Ranger who has raised more than $200,000 for the re-election campaign, contributed $50,000 to the group. An additional $500,000 came from Harlan Crow, a Dallas real-estate magnate and longtime GOP donor who was among those who provided the initial seed money to jump-start the Swift Boat Veterans for Truth. Last Friday the group began running a slick 30-second television ad in Iowa and Wisconsin, featuring four veterans who served in Iraq and Afghanistan. In the politically "independent" spot, made with money from some of Bush's top supporters, the men praise the president's efforts in the war on terror, and attack Kerry. "President Bush sticks to his policies," one says. Another adds, "I don't think Senator Kerry has what it takes and he doesn't have the resolve."

At the same time, Republicans are also counting on a more traditional get-out-the- vote campaign to close the gap. The paid pro-Kerry 527 workers are going head-to- head with a vast army of Bush campaign volunteers, many of them retirees, who are expected to meet stringent quotas for signing up new voters. According to Bush campaign documents obtained by NEWSWEEK, the Bush campaign has also been taking their case right to their strongest supporters. The campaign is recruiting Christian evangelical pastors to preach about the virtues of Bush to their flocks. In one appeal sent out this summer, the campaign instructed volunteers to distribute pro-Bush voter guides after services, and included a list of legal do's and don'ts. It was OK for the pastor to endorse Bush, but the church itself couldn't. A senior GOP source says there is nothing wrong with the church campaign--it is only lifting a time-tested idea from the Democrats, who have done the same thing in black churches for decades.

Both sides can agree on one thing: there will be plenty of lawyers, Democrat and Republican, around on Election Day to settle whatever disputes may arise. The week before the GOP convention in New York, Ben Ginsberg made a recruitment pitch at the Harvard Club to a group of prominent Wall Street attorneys. He asked them to volunteer as poll watchers, ready to battle Democrats in potential fights over faulty electronic voting machines or, heaven forfend, a return of the dangling chad. Meanwhile, new ads are underway from both sides, and political watchdog groups are readying lawsuits to force the FEC to shut down or dramatically curtail the 527s. That could happen--maybe as soon as next year, or the year after that. By then, of course, either Bush or Kerry will have already reaped the rewards of their labors, and the political pros will once again be hitting the books, searching for the next tiny loophole in the law. One just big enough to drive a campaign through it.