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This topic is monitored by Moritz Law Professor Steven F. Huefner

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The Rising Clamor for Additional Campaign Finance Reform in Ohio

An unfortunate number of allegations of campaign financing improprieties have emerged in Ohio during the 2004 election season. Ohio Treasurer Joseph Deters is the one statewide politician who has faced such allegations this year, including the claim that he was part of a “pay to play” scandal that has resulted in the misdemeanor convictions of three of his associates. The most prominent allegations, however, concern the activities of political consultant Brett Buerck and campaign fund raiser Kyle Sisk. Buerck and Sisk, who have often worked together, have now been fired by at least a half-dozen Ohio candidates and party organizations, including Ohio Attorney General Jim Petro, U.S. Representative Pat Tiberi, the Ohio Republican Party, and the Ohio House Republican Caucus. Buerck and Sisk also are the subjects of ongoing state and federal criminal investigations. Some of the charges against them allege heavy-handed and potentially illegal fund-raising tactics, while others allege the illegal use of political party accounts. Although none of these charges of unlawful conduct has yet been proven, widespread concern about this season’s exploitation of existing campaign financing loopholes already has affected several political careers and has moved the issue of campaign finance reform back to the top of Ohio’s legislative agenda. The discussion to follow briefly reviews some of these recent events and the legal issues they involve, and then outlines the principal reform possibilities now evolving.

Even before 2004, rumors occasionally swirled that Buerck and Sisk were raising large amounts of campaign cash for their clients through “pay to play” tactics, in which contributors assumed that only by making generous campaign contributions could they ensure support from, or access to, key elected officials. Then, in the spring of 2004, a series of reports surfaced claiming that Buerck and Sisk were encouraging their clients to use state and county political party accounts to raise and launder large amounts of money, and to rely upon secret corporate donations to fund ostensible “issue advocacy” campaigns that in fact were targeted at particular candidates. Often these aggressive tactics were employed to defeat or discourage intra-party challengers in primary contests.

When a lengthy strategy memo that Buerck and Sisk had helped draft for Ohio House Speaker Larry Householder leaked in April 2004, all the pieces were in place for a bruising intra-party conflict. The memo advised Householder how to thwart the political agenda of his fellow Republican Ken Blackwell, currently the Ohio Secretary of State. Householder, for whom Buerck had served as Chief of Staff until August 2003, is term-limited out of the Ohio House at the end of 2004, and has been regarded as a likely future candidate for statewide elected office. Meanwhile, Blackwell was seen as one of Householder’s potential future political competitors. Because the Secretary of State serves as Ohio’s chief elections officer, Blackwell’s office already had commenced an investigation of the campaign conduct of some of Householder’s political advisors, including Buerck and Sisk. Although Householder disclaimed having followed the memo’s advice, the revelation of its recommendations increased the prominence and scope of Blackwell’s investigation, as his office explored the extent to which some of the hardball tactics advocated in the memo in fact had been implemented, and whether they violated state law.

Additional revelations followed about the activities of Buerck and Sisk on behalf of other candidates. In May, State Senator David Goodman fired Buerck and Sisk in order to avoid a “continuing distraction” over the nature of their advice to him, after a memo became public urging Goodman aggressively to target some specific donors, who often were described in unflattering terms. In late June, State Senator Jeff Jacobson, who had been a sponsor of Ohio’s 1995 campaign finance reforms and who was seen as the likely successor to Ohio Senate President Doug White in 2005, admitted that he had used the Montgomery County Republican Party operating fund to hire a consultant who in turn had hired Buerck and Sisk to help Jacobson in his bid to become Senate President. On July 1, Jacobson announced that he would no longer seek to become Senate President because of the damage from his association with Buerck and Sisk. Although he did not directly name Buerck or Sisk, Jacobson stated that he had allowed himself “to become associated with persons whose practices were antithetical to the reforms I sought and the standards I believed in.” Jacobson also was damaged by allegations that he had helped an issue advocacy organization, the Ohio Taxpayers’ Association, raise money that was used to campaign against the primary opponent of a Senate candidate who had pledged to support Jacobson’s bid for Senate President.

Buerck and Sisk maintain that their activities and tactics are all permissible under existing Ohio campaign law. Not all observers agree, but in any event the aggressive efforts to skirt the purposes of the law during the 2004 election have drawn increased attention to several categories of potential loopholes in the existing framework of campaign finance regulation, a framework which dates to Ohio’s last major reform in 1995. Three types of activities have received the greatest focus: (1) the use of party “state candidate funds” to obscure donor identity and funnel otherwise impermissibly large contributions to specific candidates; (2) the use of secret party “operating funds” to advance the interests of particular candidates; and (3) the use of issue advocacy groups to circumvent Ohio’s prohibitions on corporate contributions to individual candidates.

The first of these concerns arises from the fact that Ohio law allows political parties to have a separate campaign account in each county, known as a County Party State Candidate Fund, for the purpose of supporting candidates for the state legislature or for statewide elected office. Parties are permitted to contribute over $500,000 ($549,000 in 2004, after an inflation adjustment) from these accounts per election to the campaign committee of a candidate for a state office, as well as over $100,000 and $50,000, respectively, (or $109,500 and $54,500 in 2004, after an inflation adjustment) to the campaign committees of candidates for Senate or House seats in a district that includes any portion of that county. See Ohio Rev. Code '3517.102(B)(6)(b). These amounts are substantially greater than the $2,500 limit per election that an individual or a PAC may contribute to a statewide or legislative candidate’s campaign committee. In addition, political parties may use these County Party State Candidate Funds to make unlimited “in-kind” contributions to candidates, for instance by purchasing advertising time directly for a candidate. See id. Moreover, under current law state and local political parties have been able to “loan” funds to candidates, even if the parties ultimately choose to forgive these loans.

These county state candidate funds have provided a way to launder large donations not only because of their much larger contribution limits, but also because these county accounts often float under the radar. Records concerning these accounts have generally not been kept either centrally or electronically, but only on paper in each of Ohio’s 88 counties (although in May 2004 the Secretary of State’s web site began including information from some of these county funds in its searchable database). Furthermore, under Ohio campaign finance law, contributors to these state candidate funds are not required to disclose their employer, as they are when they donate directly to a candidate’s campaign committee, thereby making it difficult to identify the underlying interests behind many of the donations to these accounts. Accordingly, in 2004 these accounts appear to have drawn increased use and attention.

The second concern relates to another type of account that political parties may maintain in each Ohio county, the party operating account. See Ohio Rev. Code ' 3517.08(C). By law, funds in these accounts may be used only for “staff and maintenance” of the party’s county headquarters, or “for a political poll, survey, index, or other type of measurement not on behalf of specific candidate.” Id. However, it is difficult to ensure that funds in these accounts are used properly because Ohio, like only three other states, permits political parties to keep these operating accounts secret. In other words, parties have no obligation under current law to disclose either contributions to or expenditures from these operating accounts. Furthermore, this secrecy means that even when these funds are not used in technical violation of the law, they may be used without much scrutiny for a range of “staff” activities likely not within the original spirit of the provisions that authorized these operating funds.

The third concern involves using “issue advocacy” groups to circumvent Ohio’s ban on corporate contributions to political candidates. Until recently, these groups have been considered essentially immune from regulation as a matter of first amendment rights, provided they did not explicitly advocate the election or defeat of a particular candidate. Thus, corporations have been able to contribute to these groups directly from their corporate treasuries, while at the same time the groups themselves have not been required to disclose the sources of their funds. Yet while issue advocacy groups are prohibited from advocating the election or defeat of a political candidate, they in fact have played increasingly audacious roles in supporting or opposing particular candidates.

In certain respects, this issue well predates the 2004 election cycle, even garnering national attention in 2000 when the advocacy group Citizens for a Strong Ohio spent several million dollars to fund “issue ads” unmistakably aimed at defeating Ohio Supreme Court Justice Alice Robie Resnick. Litigation to compel the advocacy group to disclose contributors to its 2000 campaign, as a matter of current Ohio election law, may be nearing completion, now that a state appellate court in late September 2004 ordered disclosure on the basis that the clear purpose of the advertising was to influence the Ohio Supreme Court election. But the events of the past year have heightened the concern about issue advocacy groups, as candidates themselves now appear to be taking an active role in directly establishing and raising funds for such groups, precisely in order for those groups to run “issue” advertising intended primarily to benefit these candidates. And when the U.S. Supreme Court upheld the McCain-Feingold Act in 2003, it became clear that these ostensible “issue ads” could be regulated if they amounted to “electioneering communications,” defined simply as advertising that identifies a declared candidate within a specified period of time before an election.

Thus, legislative proposals to alleviate abuses in each of the three areas described above are now garnering substantial attention and support as a result of the events that have come to light this year. Although earlier in the summer some reformers had hoped to move a bill through the Ohio legislature before the November 2004 election, it now appears likely that whatever legislative action is taken will occur between November and the end of the year. Furthermore, although the rough outlines of such a measure are emerging, it is difficult to predict how the legislative debate will conclude, as the issues are continuing to evolve. For instance, lingering questions continue to emerge about the propriety of using campaign committee funds to make severance payments to fired consultants (as Attorney General Jim Petro reportedly did after firing Sisk in January 2004), or to pay consultants’ legal fees (as Speaker Householder reportedly is doing for Buerck and Sisk). Meanwhile, in September 2004, Sisk filed suit against State Representative Timothy Grendel, alleging that Grendel had failed to make a required bonus payment in connection with Sisk’s services in Grendel’s successful primary election. Recent reports suggest that large bonus payments may have been a feature in many of Buerck’s and Sisk’s contracts with their clients. As these and perhaps other yet unknown issues surface and play themselves out, the scope of the next Ohio campaign reform measure may well change.

Nevertheless, it is likely that once the 2004 election is over, the pressure will remain great for the legislature to pass some reform measure dealing with each of the perceived major abuses of the 2004 campaign season. In August, legislative leaders in both the Ohio House and Senate joined Secretary of State Blackwell and Governor Bob Taft in calling for legislation by the end of 2004 that would eliminate County Party State Candidate Funds, require a public accounting of all political party operating funds, and require issue advocacy groups to disclose all contributions and expenditures used to fund electioneering communications. These legislative leaders include Jon Husted, expected to replace Larry Householder as the new House Speaker in 2005, and Senate President Pro Tempore Randy Gardner. Although Representative Husted himself had formerly raised money for nonprofit groups operating without disclosure, and had once encouraged one such group, Citizens for Conservative Values, to hire Buerck and Sisk, he has now distanced himself from these groups and activities. Husted may also have played a lead role in the House Republican Caucus’s decision to fire Buerck and Sisk in June 2004. Husted has said that he expects the legislature to put a campaign finance reform measure on the fast track once it reconvenes after the election. Senator Gardner, who at times had himself been a candidate to be the next Senate President, had already been working on a bill to require disclosure by issue advocacy groups targeting electioneering communications at state Supreme Court candidates, well before Buerck and Sisk’s exploits focused attention on several additional issues. In late June, Gardner was quoted as saying “Nothing but uncompromised, full disclosure [in every account] is acceptable, and it needs to happen this year.”

Still, the inertia for reform could fade after the election. Meanwhile, in the eyes of some observers these proposed reforms could go further. One potential refinement would be to require the disclosure not only of the donors to party operating funds and issue advocacy groups, but also of the donors’ employers. Another possible reform that has received some discussion, and which Blackwell has championed for years, would be to ban fund raising while the state legislature is in session. As these and other proposals rise and fall, Election Law @ Moritz will continue to follow developments in this story.