Federal Court Strikes Down 'Soft Money' Ban

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Campaign finance reform opponent Sen. Mitch McConnell scored a victory Friday when a federal court struck down key parts of legislation enacted last year banning the use of corporate and union money by political parties.

The court's decision undoes much of the "soft money" ban that went into effect the day after the November 2002 election and casts doubt on the future of the campaign finance law designed to limit the use of large donations in federal elections. McConnell, R-Ky., and a large group of plaintiffs, said the law was an unconstitutional restriction on free speech rights.

The 1,600-page ruling also finds unconstitutional new restrictions that limit the times when special interest groups can air television advertisements. The decision immediately prohibits the Federal Elections Commission from enforcing those parts of the law and gives the political parties a chance to collect cash while the ruling is appealed to the U.S. Supreme Court.

The case is sure to go to the U.S. Supreme Court, whose decision will determine how the 2004 presidential and congressional races are fought.  A provision passed in the legislation made sure that any legal disputes were legislated at the top.

The two issues -- campaign ads and soft money donations -- were sticking points for anti-campaign finance reformers. The suit was filed by McConnell as well as a variety of left and right-leaning organizations, including the American Civil Liberties Union and the Christian Coalition as well as the National Rifle Association and a number of prominent labor unions, all of which help raise soft money and put out ads during election time.

Sponsors of the Bipartisan Campaign Reform Act of 2002 include Sens. John McCain, R-Ariz. and Russell Feingold, R-Wis. as well as Reps. Christopher Shays, R-Conn. and Marty Meehan, D-Mass. who fought for years to remove what they saw as the corrupting influence of big money in politics.

President Bush signed the bill into law in March 2002 despite his apparent opposition to major facets of the bill.

"I believe that this legislation, although far from perfect, will improve the current financing system for federal campaigns," Bush said at the time, adding that parts of the bill including the political ad restrictions presented "serious constitutional concerns."

The 2-1 ruling by a special three-member, fast-track panel of Appeals Court Judge Karen Henderson, District Judge Colleen Kollar-Kotelly and District Judge Richard Leon, allows corporations and unions to donate money for general party-building activities such as get-out-the-vote drives and voter registration. The money cannot be used for direct endorsements of candidates.

Also voting 2-1, the court struck down a provision barring a range of interest groups from airing issue ads mentioning federal candidates in those candidates' districts in the month before a primary election and within two months of a general election.

Fundraising before November's election saw record amounts of cash being donated in large chunks to the national political parties in a last effort to build up the parties' strength before the money was deemed illegal.

The campaign finance reform law allowed state and local parties to continue raising soft money if state law permitted, but put limits on the use of that money for federal election activity. The Federal Election Commission voted earlier to headline soft money fund-raisers in states as long as they don't explicitly solicit the money.

While no evaluation has been done on the new law's impact on the political parties' fund-raising abilities, Republicans have traditionally had better luck soliciting individual donations, allowing them to stay in compliance with the campaign finance reforms.

In February, the National Republican Committee raised four times as much as their Democratic counterpart.  The new law allowed individual contributions ("hard money") to double from $1,000 to $2,000.

Other groups filed suit against the law, saying that the increase in hard money dollars gives wealthy voters much more say than average Americans. The National Voting Rights Institute, the U.S. Public Interest Research Group and the Fannie Lou Hamer Project, targeted the law's increase in contribution limits.

Among other major provisions, the law directed the Federal Election Commission to write tougher rules restricting interest group coordination of election activities with candidates and political parties and political party committees' coordination with each other. Those opposing the coordination limits, including the U.S. Chamber of Commerce, argued that the new rules would chill political speech and that the law was so vague it put interest groups, corporations and unions at risk of investigation simply for talking to lawmakers.

The law banned minors from contributing to national party committees or federal candidates, however. Ruling unanimously, the court struck down that ban as unconstitutional.

The Associated Press contributed to this report.