Used by 10 Possible Presidential Contenders : PAC Loophole Brings Aspirants Millions

Ten potential 1988 presidential candidates, exploiting a loophole in federal campaign law, raised $26.2 million last year through political action committees that were ostensibly established to help other office-seekers but in fact worked mostly on behalf of the presidential contenders themselves.

The 10 undeclared candidates, including Vice President George Bush and former Sen. Gary Hart of Colorado, the Republican and Democratic front-runners, contributed only $2.9 million to other candidates, according to new Federal Election Commission records.

Much of the rest financed speaking tours and other activities by the potential candidates in key states in the drive for their parties’ nominations.

And the loophole allowed the candidates to avoid a limit on what they can receive and spend during the primary election season, which has already begun.

Family’s Gifts Quintupled

Sen. Bob Dole (R-Kan.), for example, was able to quintuple the amount of cash he could legally receive from California wine makers Ernest and Julio Gallo and their wives.

From each Gallo, Dole was able to receive $5,000 by creating a PAC whose purpose ostensibly was to funnel money to other candidates--but whose budget primarily paid for activities favorable to Dole’s own presidential quest. If Dole had been a declared candidate for the White House, the Gallos could have given only $1,000 apiece.

The same loophole also enabled Dole’s PAC, Campaign America, to spend $2.8 million without having it counted against the approximately $24-million spending limit he will face if, as expected, he enters the 1988 presidential primaries.

His PAC has paid for such things as voter lists in New Hampshire, which has the nation’s first primary next year, and consultants in Iowa, whose state party caucuses kick off the process of choosing delegates to the Republican and Democratic national conventions.

Other PACs

Federal records show that nine other hopefuls--Republicans Bush, Rep. Jack Kemp of New York, former Sen. Howard H. Baker Jr. of Tennessee, evangelist Pat Robertson, envoy Donald H. Rumsfeld and former Secretary of State Alexander M. Haig Jr., and Democrats Hart, Sen. Joseph R. Biden Jr. of Delaware and Rep. Richard A. Gephardt of Missouri--also operate PACs that do little of what the law intended.

The law, passed in 1974 as Congress was seeking to remedy Watergate-era abuses, set fund-raising and spending limits on federal candidates and authorized corporations, labor unions and other groups to contribute to such candidates through regulated PACs. It was not intended that presidential aspirants would skirt the limits by forming PACs of their own.

This year’s candidates are not the first to use the PAC loophole. Former aspirants ranging from President Reagan to former Vice President Walter F. Mondale have formed PACs to advance their own candidacies while minimally aiding those of others.

However, the current crop of candidates--bolstered by Federal Election Commission interpretations that overrode protests by Common Cause and other reform groups--has exploited the loophole on a much greater scale.

Tax-Exempt Foundations

Moreover, Hart, Kemp and Robertson have taken their evasive tactics a step further by setting up not only PACs, but also tax-exempt foundations established ostensibly for educational and public policy purposes. Though legally forbidden to do so, these foundations effectively promote their sponsors’ candidacies while having to make only sketchy disclosure of receipts and expenditures.

Meanwhile, Baker and Hart have established exploratory committees that have to make no public reports at all unless the former senators declare for President.

Financial reports at the Federal Election Commission provide dramatic evidence of how little the “presidential PACs” contributed to other candidates during the 1985-86 election cycle.

Of the $2.8 million spent by Dole’s PAC, only 15% went for contributions to federal, state and local candidates--and even those donations undoubtedly helped Dole’s own prospective candidacy. For other PACs the pattern was similar:

Bush: 14% of $10.5 million went to other candidates.

Kemp: 6% of $3.2 million.

Baker: 18% of $2.4 million.

Robertson: 10% of $5 million.

Rumsfeld: 13% of $0.7 million.

Haig: 3% of $0.6 million.

Hart: 16% of $0.2 million.

Biden: 27% of $0.1 million.

Gephardt: 11% of $0.7 million.

Several officials of the presidential contenders’ PACs insisted that the low percentages were misleading because, for example, the PACs spent huge sums on speaking tours, during which their bosses helped local candidates raise money and motivate volunteers.

Asked if such tours were not, in fact, primarily aimed at boosting their bosses’ rankings in presidential opinion polls, the PAC officials insisted that they were not, although they conceded that the tours probably did not hurt.

“Sure,” said Donald Devine, who oversees Dole’s PAC, “getting around the country not only helps them (other candidates), but him (Dole). But the fact is, the money is spent to help them.”

William Romjue, who heads Gephardt’s PAC, defended it and his exploratory committee while taking an apparent shot at Hart, saying: “If you’re looking for gray lines, look at tax-exempt foundations. They are able to (raise money and send literature by) mail at very low rates.”

Michigan Delegates

Bush’s PAC, which has a staff of 30, won Federal Election Commission approval of national speaking tours and other activities that included efforts to influence the selection of Michigan delegates to the 1988 Republican National Convention.

Bush’s lawyers argued that, despite press speculation, Bush was “not a candidate for any office” and his PAC’s Michigan activities did not involve direct selection of delegates.

Common Cause President Fred Wertheimer complained to the FEC that its “failure to recognize (the) reality” of Bush’s near-certain candidacy would “undermine the presidential campaign finance laws.”

In addition to the 10 potential candidates, there is one declared candidate, Republican Pierre S. (Pete) du Pont, former Delaware governor. He has a regular campaign committee that reported to the FEC that it raised $887,000 and spent $466,000 through Dec. 31.