527s: The McCain-Feingold Loophole

This is a partial transcript of "Special Report With Brit Hume," Aug. 24, 2004, that has been edited for clarity.

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BRIT HUME, HOST: The president says all the ads put forward by so-called 527 political groups (search) should be taken off the air. So what is a 527 group? And why do we suddenly seem to be surrounded by them? And what restrictions a reply to them?

Well better to ask than the chairman of the regulatory body that enforces campaign regulations? Bradley Smith, chairman of the Federal Election Commission (search).

Mr. Chairman, welcome.

BRADLEY SMITH, FEDERAL ELECTION COMMISSION CHAIRMAN: Thank you, Brit.

HUME: What is a 527 group?

SMITH: 527s have been around for a long time. It is a section of the tax code under which you can organize to engage in certain types of political activity. Some 527s are federal committees. It means they have to register with the federal government; they're limited in all the money they can take after extensive reporting.

HUME: And the reason they are a federal committee and not some other kind of committee is what?

SMITH: What makes them a federal committee is when they explicitly advocate the election or defeat of candidates for federal office.

HUME: Which means they have to actually say vote for X or do note vote for Y?

SMITH: Or something very close to that. Something similar to that.

HUME: Something obviously intended to cause somebody to...

SMITH: Merely saying George Bush or John Kerry (search) wants to do various horrible things to America does not necessarily trigger that. You've got to include that line that we’re...

HUME: Now, what regulations apply to these groups in terms of what they may do and what they may not do on television?

SMITH: Well, again, if it is a federal committee, it's got all kinds of regulations. Has to spend hard money and so on.

HUME: Hard money is money that is raised from contributions whose donors are identified and have limits on them?

SMITH: Right. Have very strict limits. What people seem to be raising concerns about are nonfederal 527s -- groups that don't trigger this by saying vote for these people, vote against these people.

HUME: So the Swift Boat group would qualify in that category...

SMITH: They would seem to fall in there.

HUME: ...and MoveOn.org, which may attack the president but not necessarily call for his defeat, would fit into that category too?

SMITH: MoveOn.org has both a federal account, in which they can specifically call for the president's defeat, and a nonfederal account, which they can use unregulated money or state regulated money and talk about issues.

HUME: We are coming up now on the date on which would be 60 days to the regulation. Certain regulations are triggered by the arrival at that point. What do they have to say, those regulations, about advertising by such groups?

SMITH: Right. Some people said that these 527s that aren't federal committees are not regulated. It's the Wild West. It's not true. They have a host of regulations. They still have to disclose their donors, but with the Internal Revenue Service rather than with us. Also, within 60 days of the presidential election, they cannot run any broadcast ads that are paid for with any corporate or any union money.

Or if the organization itself is incorporated, even if all the money it is spending is from individual contributions, it can't run a broadcast ad that even mentions a federal candidate.

HUME: So the 527 group that is Swift Boat Vets for the Truth, which is obviously a group opposing Kerry, would not be able to run any further ads after the 60-day mark, if they were corporate sponsored or incorporated themselves? But if it is a bunch of individual contributions what about that?

SMITH: They can continue to run those ads. Groups can also run the ad if they have hard money. For example, if MoveOn has a federal PAC with hard money, they continue to run ads...

HUME: Hard money being money that's raised from individual contributions, subject to limits. In other words, an individual can only give so much to such a group, right?

SMITH: Exactly.

HUME: All right. So there isn't any likelihood then that regulations are going to silence these groups any time in the near future?

SMITH: Some of the groups will clearly be forced to reduce or stop some of the activity they would do. But you're right; other groups would be able to continue on using hard money or because they are not incorporated or they're not using corporate or union money.

HUME: Now, the claim has been made that President Bush is behind these groups, the 527 group, the Swift Boat group is a front for the Bush campaign. I believe there is a complaint with the Federal Election Commission to that effect. Am I mistaken about that?

SMITH: Well, they have announced that they have filed a complaint. I actually haven't seen one cross my desk, but we'll assume that they filed a complaint as they asked.

HUME: And that complaint would have to trigger action by the FEC and the suing party would have to establish that the president and/or his campaign are what?

SMITH: Right. Well, filing a complaint is a very low threshold. Anybody can file a complaint. And then you don't have to do anything. The FEC does the investigation of it. So it's very easy to file complaints.

HUME: So you don't have to come in and make briefs and in bring witnesses or anything like that?

SMITH: Right. And so people often file complaints just to harass the other side, to scare their donors and that sort of thing. My understanding is that people are saying there's been coordination between the Bush campaign and the Swift Boat vets. I have no idea whether that is true or not.

HUME: But the FEC staff now is obligated to investigate that?

SMITH: But we would investigate that.

HUME: All right. We'll find out the outcome of that in the fullness of time, one presumes.

SMITH: Right.

HUME: Now, if the president has been called upon to stop these ads, would there be anything improper about him picking up the phone and calling the head of Swift Boat Veterans and saying, “I wish you would take those ads off the air?”

SMITH: Well, arguably that would be coordination. Coordination is important because if you coordinate your activity, it counts as a contribution to the campaign, which is limited.

I tend to think that would not, in and of itself, constitute coordination. Because coordination requires that you coordinate to do something, not that you coordinate not to do something.

HUME: Coordinate to stop something. So he might legally be able to do it.

SMITH: Right. But it should be understood that he can't force them to stop, just as John Kerry can't force Americans Coming Together and MoveOn and leadership fund to stop. And they've spent $65, $70 million.
HUME: And they won't stop.

Bradley Smith, great to have you.

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