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F.E.C fines Republican Group $750,000
NY Times
By KATE PHILLIPS
Published: March 1, 2007

WASHINGTON, Feb. 28 — A major conservative group agreed to pay a $750,000 penalty as part of a settlement with the Federal Election Commission, which found that the group violated campaign finance laws by spending more than $30 million on advertisements and mailings supporting President Bush's re-election.

The fine was the third largest in the agency's 32-year-history. The settlement reflects a crackdown in the last several months on the political activities of so-called 527 groups — named after a section of the tax law — that surfaced in the 2004 election as a powerful force, raising and spending hundreds of millions of dollars in unregulated contributions through a loophole in the law.

"I think that the thing that is clear in all of these cases is that the agency is very serious about regulating both the solicitations and the advertisements that these groups do, to try to discern whether their purpose is to influence federal elections," said Robert Lenhard, chairman of the F.E.C.

The agency found that the group, the Progress for America Voter Fund, operated as a political action committee, soliciting money and financing advertisements.

It spent $26.4 million alone on advertising in battleground states in 2004 for the purpose of retaining Mr. Bush as president.

Its actions violated campaign laws because it was not registered as a political action committee that would be subject to strict limits on donations. The agency said it circumvented a ban on corporate money and accepted contributions that well exceeded the caps on individual donations.

The group's most memorable advertisements included "Ashley's Story," featuring Mr. Bush hugging a girl whose mother died in the World Trade Center attacks and who said the president kept her safe. That cost $16.5 million and was broadcast in 11 states and on national cable, the agency said.

The group admitted no wrongdoing under the agreement, but promised to register as a political action committee if it decided to keep operating the same way. It also agreed to file disclosure reports listing donors and other information from May 2004 through January of this year. It reported raising $44.9 million in 2004, with nearly three-fourths from 13 donors, the agency said.

Critics and campaign finance reform groups contended in the 2004 election cycle that the 527 groups acted as "shadow parties." Since then, many have regrouped or closed shop.

Mr. Lenhard warned Wednesday that groups registered under other sections of the tax code — nonprofits known as 501(c)4s or 501(c)3s, for example — would also be subject to scrutiny. "These rules are conduct-based," he said. "If these organizations engage in these kinds of activities, they become PACs regardless of their tax status."

For those who continue, Mr. Lenhard said, "I think that they have to comply, and they have to understand if they don't there's a significant financial risk associated with it."

Benjamin L. Ginsburg, a prominent Republican lawyer representing the group in this case, cited the financial stakes as a reason for the agreement.

"Despite Congressional pressure to impose some set of rules or provide guidance for so-called 527 groups, the F.E.C. still refuses to do so," Mr. Ginsburg said.

"Given the ambiguous nature of this situation and the cost of litigating this dispute," he added, the group "decided it is a more prudent use of its resources and energy to conclude this proceeding."

Mr. Ginsburg also represented the Swift Boat Veterans for Truth, another 527 group, which attacked Senator John Kerry; it reached a settlement with the F.E.C. in December.

The agency is still engaged in a court battle over its decision to regulate such groups on a case-by-case basis rather than through a uniform rule.

Fred Wertheimer, head of Democracy 21, a group involved in this 527 complaint, said the agency had not acted on complaints against two other groups that were Democratic powerhouses in 2004, America Coming Together and the Media Fund.

Mr. Wertheimer praised the size of the penalty Wednesday, but said, "We don't want to see a system where people keep making illegal expenditures in campaigns and then two or three years later end up paying a fine that may be large in gross terms but is proportionally very small compared to the amount of illegal funds they spent in the election."

The Progress for America Voter Fund was created as an offshoot of Progress for America in late May 2004. It solicited money in part by promoting its efforts to counter the Democrats' distinct advantage in using mega-527 groups through affluent donors like George Soros.

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