Fund-Raising Brokers Reshape U.S. Campaigns
By: Wall Street Journal
Consultants Round Up Names of Likely Givers
By CHRISTOPHER COOPER
The spiraling cost of campaigning has sent American politicians at all levels on a near-perpetual quest for money. Increasingly, they are outsourcing this task to free-lance fund-raising consultants, who specialize in vacuuming up the maximum legal contribution from hundreds of donors all across the country.
This outsourcing has emerged as a major force in national politics. Campaign fund raising by independent consultants was practically unheard-of 25 years ago. Today, hundreds ply the profession on a national level.
In the first nine months of this year, House and presidential candidates, political parties and political-action committees paid $31.1 million to about 800 fund-raising consultants and their companies, according to the Center for Responsive Politics, a nonpartisan group that did an analysis of campaign-finance records for The Wall Street Journal. That compares with $12.3 million spent on 260 companies for such services in the first nine months of 2003, during the previous presidential campaign, and $2.1 million on about 130 individuals and companies four years before that.
But while the fund-raising industry has flourished, no parallel system has evolved to make sure the cash is clean. Consultants devote little time or resources to vetting the donors for possible checkered pasts or shady tactics, many in the industry say, adding that the sheer number of donors would make that impractical.
Sen. Mary Landrieu of Louisiana found out the hard way this year. For her tough 2008 re-election campaign, the Democratic senator curbed in-state fund raising because some of her constituents were still recovering from Hurricane Katrina. As she had done in the past, she hired Tina Stoll, a fund-raising consultant based in Washington, D.C., to help tap faraway donor pools in New York and the West Coast.
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The senator’s money take soared. But so did the portion that came from little-known names on cold-call sheets that Ms. Stoll’s company, Campaign Finance Consultants, provided to Mrs. Landrieu. One name Mrs. Landrieu called: Norman Hsu, a man Ms. Stoll didn’t know but had identified as a top donor to Democrats — and who turned out to be a convicted felon. Yesterday, Mr. Hsu faced new charges, accused of cheating investors and breaking campaign-finance laws. (See related article.)
Ms. Stoll says she generally performs a quick background check on new donors, but her Google search on Mr. Hsu found no red flags. Sen. Landrieu netted at least $14,200 from Mr. Hsu and a few donors affiliated with him. The senator gave the haul to charity after press reports this summer revealed Mr. Hsu’s criminal past and raised the possibility that he had improperly used surrogate contributors.
“I thought I was going to be sick,” says Ms. Stoll, a former congressional staffer who has more than 20 years of experience in fund raising.
Over three years, Mr. Hsu and donors associated with him gave about $2 million to 86 candidates, many of whom raised funds nationally and used fund-raising consultants. That someone with his background could stride onto the political stage and quickly become one of a party’s major players points up a vulnerability in America’s electoral finances.
“If someone comes to a campaign and is anxious and eager to help you raise money, the first question you often don’t want to ask is, ‘Can I do a criminal background check on you?’” says Mary Boyle of Common Cause, a nonpartisan group and longtime advocate of campaign-finance reform.
The outsourcing trend has facilitated a big change to the money game in recent years, a growing nationalization of fund raising. In 2002, Sen. Landrieu’s first re-election campaign, 54% of her contributions were from Louisiana. So far in this election cycle, 52% have come from out of state.
For this cycle through September, the campaign has paid $150,000, including expenses, to Ms. Stoll’s fund-raising consulting company, campaign-finance records show. Sen. Landrieu has raised $3.4 million, more than double what the two-term senator raised in the corresponding nine months of her prior re-election effort.
Hazards in Raising Money
The hazards in raising money nationally and using consultants are clear: Politicians are further removed from their patrons, and donors often become just faces in a receiving line or names on a list. While that has long been true for presidential candidates, increasing numbers of lower-level politicians — members of the House, governors, even mayors — have begun hitting the national circuit as well.
Perversely, campaign-reform laws have in some ways increased the risk of tainted donors. Federal law now generally limits individual donations to $2,300 per candidate per election. But the less a single donor can give, the more donors must be found, as the cost of campaigns spirals. Campaigns aren’t equipped to scrutinize the backgrounds of what has become thousands of donors per cycle.
What vetting does go on is geared toward identifying donors who want influence in return for their cash. Mr. Hsu never asked for a single favor, say many politicians and fund-raisers.
“There’s a PGA-tour quality to political campaigns these days: They have to get somebody who knows how to raise money in Seattle one day and San Francisco the next day and Denver the day after that,” says Bill Carrick, a longtime Democratic operative in Los Angeles who has helped run both state and national campaigns. One of his recent clients — Phil Angelides, the Democratic candidate for California governor in 2006 — received more than $32,000 in donations from Mr. Hsu and associates. Mr. Carrick says the Hsu group was unknown to the candidate.
Unlike some politics-driven businesses, such as lobbying and campaign management, fund-raising consulting resists consolidation. It’s an industry dominated by sole proprietors, many working from their homes. The business doesn’t draw much attention beyond back-shop political operative circles. Few of these fund-raisers have ever spoken to a reporter or placed an ad. Many don’t even have Web sites.
What they have are electronic Rolodexes, gathered through years of staging charity events, working for the main political parties or circulating as Capitol Hill staffers. These lists can be manipulated to turn up potential donors who share certain demographic characteristics — gun owners, say, who have contributed to candidates in the past. A focused list such as this enables a politician to enter a strange town, gather a monied group in a room and raise thousands of dollars over glasses of cheap Chardonnay and steam-table food.
‘It’s All About the Contacts’
“In this business, it’s all about the contacts you have,” says Jean Freelove, who specializes in raising money for Republicans in Southern California. Ms. Freelove figures her database of San Diegans and Palm Springs residents can strain an invitation list using more than 100 different demographic characteristics. This year, her Freelove Consulting, a five-person shop, has applied its services to former New York Mayor Rudy Giuliani’s presidential campaign.
Consultants might earn $5,000 for a one-off event, maybe $10,000 a month for a long-term regional gig, or $15,000 a month plus expenses for a more-permanent national position. They’re paid more modestly than, say, political media consultants and other top campaign operatives. But satisfied politicians sometimes offer generous bonuses. For example, campaign-finance records show that Rep. Jim McCrery, a Louisiana Republican, paid fund-raising consultant Elizabeth Delaney an $88,000 bonus this year, on top of $33,000 she drew in fees through September.
For many practitioners, political fund raising was once an election-year endeavor, with off years devoted to raising money for civic events. But politicians’ intensified cash quest has prompted some consultants, such as Ms. Freelove, to drop the charity work. Between gigs for national politicians such as Mr. Giuliani and local ones such as San Diego Mayor Jerry Sanders, “I can make a full-time living in an even year or an odd year,” she says.
Fund-raising consultants have so proliferated that few national or state candidates venture out to the hustings without one. The growth is particularly dramatic at the presidential level. Combined, the top six presidential hopefuls spent more than $9 million on the industry during the first nine months of this year, versus $1.8 million by that point in 2003.
When Arizona Republican Sen. John McCain first sought the presidency eight years ago, he spent $470,000 on fund-raising consultants during the entire campaign. This time, he spent $2.3 million just through Sept. 30, when the first voting was still three months away.
Pressure to go national in fund raising is especially strong for politicians who face rich self-financed candidates, who can jack up the cost of a campaign by using their own money and aren’t as worried about corralling donors.
In 2000, Maria Cantwell, an Internet entrepreneur, won a Senate seat from Washington after declaring she would spend “whatever it takes” to win and plowing $10 million of her own money into the race. In 2006, the tables were turned. The Democratic senator found herself running for re-election against Republican Michael McGavick, chief executive of insurance company Safeco Corp., who put $2.5 million into his own campaign.
Sen. Cantwell was in a pinch. Her fortune had been severely diminished by the dot-com crash. And a pledge to reject donations from political-action committees made fund raising even harder. So she turned to fund-raising consultants. Records show that in 2005 and 2006, Ms. Cantwell spent more than nearly any other senator on such consultants: more than $800,000, to consultants in eight states and the District of Columbia, federal records show.
One result: While 74% of Ms. Cantwell’s donations had come from her home state of Washington in her 2000 race, that dropped to 45% in the 2006 cycle.
By going national, Ms. Cantwell became one of the most accomplished money raisers in Congress, staging fund-raising events from New York to Los Angeles and in dozens of cities in between. The second-largest group of donors to the Washington senator’s campaign, according to the Center for Responsive Politics, was a group of employees of a Dallas law firm. (The largest consisted of employees of Redmond, Wash.-based Microsoft Corp.) Ms. Cantwell won her race handily.
Federal records show that in the 2006 race, Mr. Hsu and donors associated with him gave Ms. Cantwell’s campaign about $16,000. At least a portion of this money was brought in through a New York fund-raising consultant, Jill Straus, who knew Mr. Hsu for several years but apparently didn’t know of his background. A former fund raiser for the Democratic Party, Ms. Straus hung out her own shingle about seven years ago and is now one of the most prolific for-pay money raisers in politics, according to the Center for Responsive Politics. She also raised Hsu-related money for failed Senate candidate Harold Ford Jr. of Tennessee.
A Variety of Sources
Mr. Hsu’s largess made its way to Democrats through a variety of sources, not just fund-raising consultants. Michigan Gov. Jennifer Granholm, who traveled a national fund-raising circuit for a year, received $28,000 in Hsu-affiliated cash after staging a fund-raiser in New York in late 2005, an aide says. Iowa Democratic Sen. Tom Harkin got $50,000 in Hsu-directed cash after approaching Mr. Hsu on the advice of a former Senate colleague, Bob Kerrey, says a Harkin aide. Mr. Harkin has returned the money.
Many candidates, such as Illinois senator and presidential candidate Barack Obama, who received at least $66,000 via Mr. Hsu, say they don’t know why Mr. Hsu gave to them.
Some consultants use Internet searches and commercial databases such as Lexis-Nexis to search for taint in the donors they hit up for money. In the case of Mr. Hsu, “no Google search on him gave any inclination of his background,” Ms. Stoll says.
Other consultants do even less, saying it’s the responsibility of campaigns to ensure the worthiness of their donors. And once a major campaign has taken money from a contributor, many consultants consider the donor to have been vetted, sparking confidence that the contributor is clean.
This apparently happened with Mr. Hsu, whose first recorded political donation was to the 2004 presidential run of Democrat John Kerry. Mr. Hsu gave $35,000 to the Democratic National Committee and dozens of individual donations to its brethren, the Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee.
Anne Dunsmore, who works out of Los Angeles raising money for Republicans, says a typical presidential campaign, staging $100,000 to $200,000 events and taking in $4 million a month, could devote 800 staff hours a week into donor vetting and still not detect a background like Mr. Hsu’s.
Unless directed by a candidate to do so, Ms. Dunsmore does no vetting. “How do you do this, ask donors whether they visit hookers or use cocaine, and hope that they tell the truth?” she asks. “How do you check someone’s citizenship? It’s virtually impossible to be perfect.”
With new questions raised about donors, some in the fund-raising industry see the possibility of a new, parallel sector arising. “We may see a vetting industry grow up next,” Ms. Stoll says.
Write to Christopher Cooper at firstname.lastname@example.org
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