Subject: Romney, Weighing Run, Leans on State PACs
From: "Eric Schwerin" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "Alexander Snyder-Mackler" <[email-masked]>
Date: Sun, 21 Nov 2010 11:49:11 -0500

Romney, Weighing Run, Leans on State PACsBy MICHAEL
LUO<http://topics.nytimes.com/top/reference/timestopics/people/l/michael_luo/index.html?inline=nyt-per>

The fact that Mitt
Romney<http://topics.nytimes.com/top/reference/timestopics/people/r/mitt_romney/index.html?inline=nyt-per>,
the former Massachusetts governor who is weighing a run for president in
2012, has an active political action committee in Alabama might seem
puzzling.

It is, after all, not a critical early-voting state for the Republican
nomination, where these kinds of leadership PACs are often set up by
potential presidential candidates.

Upon closer inspection, though, Mr. Romney’s interest in Alabama snaps into
focus. The state has among the most permissive campaign finance rules in the
nation, allowing contributions of unlimited size from individuals and
corporations.

As a result, the Alabama affiliate of Mr. Romney’s federal PAC, Free and
Strong America, has raised more than $440,000 this year, with many of the
contributions amounting to tens of thousands of dollars each.

Yet it has donated $21,500 — less than 5 percent of what it has raised — to
state and local candidates in Alabama, for which these state PACs are
ostensibly intended. (The PAC also contributed $3,500 to Nikki
Haley<http://topics.nytimes.com/top/reference/timestopics/people/h/nikki_haley/index.html?inline=nyt-per>’s
successful campaign for governor in South Carolina.)

Instead, a vast majority of the just over $300,000 Mr. Romney’s Alabama PAC
has reported spending this year has been directed back to the Boston
headquarters of Free and Strong America, paying for, among other expenses, a
significant part of the salaries of Mr. Romney’s political staff, who will
almost certainly form the core of his presidential campaign if he decides to
run.

The financing Mr. Romney has used, leaning on not only his Alabama PAC but
also on similar vehicles in other states, allows him to tiptoe around
federal campaign finance limits. It also illustrates how potential
candidates willing to be creative with the nation’s Rube Goldberg-like
campaign finance system can manipulate it to their greatest benefit — and
Mr. Romney has been by far the most assertive in this approach among those
believed to be weighing bids for the Republican nomination.

Leadership PACs cannot, by law, be used to finance a presidential run, but
they can distribute money to other candidates, help pay for travel and even
finance the nucleus of a political operation. In the process, the PACs must
be careful not to cross over into actually footing the bill for a
presidential candidacy.

Mr. Romney is testing these limitations, as are other potential 2012
contenders, like Gov. Tim
Pawlenty<http://topics.nytimes.com/top/reference/timestopics/people/p/tim_pawlenty/index.html?inline=nyt-per>
of
Minnesota, who has set up state PACs in Iowa and New Hampshire, along with a
federal PAC. But Mr. Romney has gone further in squeezing maximum legal
advantage in other areas.

It is generally illegal for a state-based PAC, like Mr. Romney’s Alabama
affiliate, to finance activity geared toward federal elections. In other
words, money raised by the state PAC is not supposed to be used for work on
federal races, as opposed to contests at the state and local level.

In his filings with the election commission, Mr. Romney is essentially
contending that his leadership PAC’s work is divided evenly between federal
and non-federal election activities and that the financing of administrative
expenses is accordingly divided between the state and federal PACs.

As a result, for example, roughly half the salary of Eric Fehrnstrom, a
senior adviser to Mr. Romney who was his traveling press secretary in his
2008 presidential run, is paid for by the federal PAC, while the rest is
divided up by the state-based PACs Mr. Romney has set up in Alabama, Iowa,
Michigan, New Hampshire and South Carolina.

Not surprisingly, the PACs in the three states that do not cap donations to
these kinds of organizations — Alabama, Iowa and Michigan — pay the largest
parts of Mr. Fehrnstrom’s salary, as well other expenses of the federal
committee, with the Alabama PAC assuming the biggest share.

The Alabama entity has covered a little less than 20 percent of Mr.
Fehrnstrom’s salary, which has totaled about $75,000, according to the most
recent campaign finance filings available. It has provided a similar
percentage of the roughly $50,000 that the PACs have reported paying this
year to Matt Rhoades, the group’s executive director who was the 2008 Romney
campaign’s research director, and paid Beth Myers, formerly Mr. Romney’s
campaign manager, about 13 percent of the more than $75,000 in consulting
fees she has taken in this year. Mr. Romney’s federal PAC has covered about
50 percent of their salaries, with the state PACs taking on the rest.

In all, the state PACs have funneled more than $600,000 into Mr. Romney’s
federal PAC, paying for half of the organization’s legal fees this year,
which totaled $84,000; they have paid about 50 percent of the PAC’s office
supply budget, which came to $4,000; they even picked up the tab on half of
the $560 the PAC spent for paper shredding.

Yet only about a third of the $1.1 million Mr. Romney’s PACs have together
contributed to candidates has gone to those at the state or local level. By
that indicator at least, Mr. Romney’s PACs appear decidedly more focused on
federal races. Mr. Romney’s advisers, however, point out that about half the
candidates they have supported have been in state and local races.

Regardless, the election commission tends to give committees the benefit of
the doubt on these kinds of questions, campaign finance lawyers said.

“As a practical matter, they’re not going to question it,” said Lawrence
Noble, a former general counsel for the election commission and a lawyer at
Skadden, Arps, Slate, Meagher & Flom.

And Ben Ginsberg, the lawyer for Mr. Romney’s PAC, said that Mr. Romney had
been doing this for several election cycles and that the election commission
had never challenged the way the committee allocated its expenses.

“It’s what the law allows us to do,” Mr. Ginsberg said.

The use of leadership PACs by potential presidential candidates is not new,
but the elaborate architecture of state and federal PACs Mr. Romney has set
up is unusual, campaign finance lawyers said. Mr. Romney leaned on a similar
setup before his last presidential run as well.

Having the state PACs subsidize a significant part of his federal PAC’s
expenses enables Mr. Romney to maintain a larger political operation in
Boston than he could if he were restricted to the capped donations his
federal committee can accept.

The offloading of expenses on the state PACs also allows Mr. Romney’s
federal PAC to be more generous with the money it distributes to federal
candidates, who might be counted on for favors down the road.

Mr. Romney’s committees in the three states that do not restrict donations
to these kinds of organizations, essentially gives him a flexible pot of
“soft money” — or unregulated contributions — before he formally decides to
run and becomes subject to strict federal limits on political donations.

Indeed, a number of megadonors have written checks to Mr. Romney’s various
PACs that total in the realm of $100,000.

Together, the state PACs have reported raising about $1.5 million in
contributions this year, while the federal PAC has collected $4.2 million.

-- 
Eric D. Schwerin
Rosemont Seneca Partners
(202) 333-1880
[email-masked]