Obama lawyer warns of 'reckoning' for Clinton 527 donors and staff

Obama lawyer Bob Bauer reiterated the charges made in a memo yesterday (after the jump) that the new pro-Clinton 527, the American Leadership Project, is breaking the law and warned that donors and aides to the group could face criminal liability — an apparent effort to stop the group before it starts, and to scare off other, similar efforts.

Bauer argued on a conference call with reporters that the group's "major purpose" is supporting Clinton and that it's "a very clear runaway case of lawbreaking" because it hasn't filed papers with the Federal Election Commission or reported the money it spent producing its ad and posting it to YouTube.

"There’s going to be a reckoning here," he warned. "It’s going to be rough — it’s going to be rough on the officers, it’s going to be rough on the employees, it’s going to be rough on the donors."

"Whether it's at the FEC or in a broader criminal inquiry, those donors will be asked questions," Bauer said.

Asked how this differs from the pro-Edwards 527 in Iowa, which Obama also denounced, but which he didn't call illegal in these terms, Bauer said he wasn't sure "how to answer that."

His charges seem to hinge, however, on some details that aren't entirely clear: whether the group has already spent more than $1,000 and whether the FEC (which is currently not sitting because of a congressional standoff) will rule that this group is engaging in "express advocacy" for Clinton.

Roger Salazar, a spokesman for the American Leadership Project, laid out his position in a statement yesterday:

The type of 527 we have organized does not intend to engage in express advocacy or the functional equivalent of express advocacy, and so will not qualify as a political committee under the Federal Election Commission rules. It will, however, fund “electioneering communications” — ads that feature a candidate and run within the 30 days before the election — and so will have reporting requirements with the FEC as well as the IRS. (Unlike the Swift Boat ads, we will be fully disclosing our donors to the FEC.)

Salazar's full response, and Obama's original memo, are after the jump.

RESPONSE FROM ROGER SALAZAR:

The American Leadership Project was established to amplify the primary election’s focus on issues of importance to the middle class — the economy, jobs, education, and the mortgage crisis, among others.

Because of recent U.S. Supreme Court decision, there have been changes in the law since 2004 and the FEC has acknowledged those changes by issuing a new regulation, effective December 26, 2007, spelling out in detail the types of electioneering communications that do not result in the entity running afoul of the FEC source and amount limitations. We are following that regulation. Moreover, our advertisements focus on public policy issues and the candidate's position on those issues, not on anything else.

The type of 527 we have organized does not intend to engage in express advocacy or the functional equivalent of express advocacy, and so will not qualify as a political committee under the Federal Election Commission rules. It will, however, fund “electioneering communications” — ads that feature a candidate and run within the 30 days before the election — and so will have reporting requirements with the FEC as well as the IRS. (Unlike the Swift Boat ads, we will be fully disclosing our donors to the FEC.)

The ALP must file quarterly and pre-election reports with the IRS in which it discloses the identity of its donors. In addition, every time the ALP spends $10,000 or more on an electioneering communication, it must file within 24 hours a report with the FEC that lists its donors of $1,000 or more. Those reports will be publicly accessible on the FEC website.

OBAMA MEMO:

FW: MEMO: A New 527 & the Law of the Swift Boats

TO: Interested Parties

FR: Obama Campaign

RE: The American Leadership Project and the Law of Swift Boats

DA: February 20, 2008

The America Leadership Project is organized on the same model as Swift Boats Veterans for Truth and other "527s" operating outside the financing limits of federal campaign finance law. It has been established without regard to the changes in the law, made after 2004 and under court supervision, to stop this type of activity.

Under those changes, the Project should be registered with the Federal Election Commission as a regulated "political committee," and it should be complying with all the rules such committees should follow-such as limits on contributions they receive. The Project is flouting those requirements, so that it-like Swift Boats and others before it-can use six-figure checks from wealthy contributors to influence the outcome of the primaries ahead in Ohio, Texas and Pennsylvania.

The law, however, provides clearly that the American Leadership Project is indeed a political committee subject to the federal financing limits. The FEC has stated specifically that any 527 becomes a political committee if it (a) spends or receives more than a $1,000 in a calendar year on federal election-related purposes and (b) has an overall organizational major purpose of influence of elections.

(a) Press reports make clear, moreover, that the Project will spend in the millions of dollars, crossing well over the $1,000 annual threshold for political committee spending. The monies received and spent will be treated as political "contributions" or "expenditures" for campaign purposes. In addressing this issue of purpose, the Federal Election Commission has specifically considered what contributors will be told about the use of their monies. Where the money was solicited with an "indication" that it will benefit Hillary Clinton, nothing more is needed to trigger federal regulatory jurisdiction, under rules adopted by the FEC in 2004. In the light of the large sums the Project will be asking, for commercials built entirely around Hillary Clinton and broadcast to primary state electorates, there is no question here about purpose.

(b) Organizational "major purpose" is then determined by a whole range of factors, any one of which will be decisive. How does the organization explain its purpose? What other evidence is there of its purpose? Has it conducted other activities, beyond the communication it disseminates about particular candidates in particular elections? What is the timing of those activities — immediately before an election?

Here we have a committee that springs up on the eve of an election, promotes a specific candidate, and has no history or apparent purpose of lobbying specific issues outside the benefit to the candidate of these communications. Its "major purpose" is no mystery.

Liability for violating the federal campaign finance laws is both civil and criminal. Any investigation, like the investigations conducted after 2004, will involve the Project's officers, staff and donors. Because the FEC specifically addressed and publicly explained the applicable standards in the recent past, the violation of those standards in this instance presents a clear indication of knowing violations of the law. Once again, the issues raised here affect all who knowingly participate in a scheme to violate the rules: the officers, the staff and the donors.