Companies bypass campaign caps

Other states act to prohibit, limit corporate contributions

April 03, 2005|By Alec MacGillis and Michael Dresser | Alec MacGillis and Michael Dresser,SUN STAFF

While legislation to prevent corporate contributions by multiple related entities languishes in Annapolis, most other states have acted to prohibit the level of corporate giving made possible by Maryland's loophole.

Twenty states prohibit corporate contributions to candidates for county and state office. Of the remainder, all but five impose limits on how much corporations may donate in an election cycle, and most of these states do not allow corporations to bypass financial caps by giving through related entities, said Aron Pilhofer, a campaign finance expert with the Center for Public Integrity, a nonpartisan group in Washington that tracks money in politics.

"In most of the states that do allow corporate contributions, there would be very specific statements or case-law interpretations somewhere that would tend to disallow contributing through multiple corporate fronts," Pilhofer said. "It makes a complete mockery of the limits if all you have to do is incorporate [other entities]. What is the point of having limits in the first place?"

One state that specifically forbids evading caps by giving via related corporate entities is New Jersey. The state limits corporate contributions to $2,600 to gubernatorial candidates and $2,200 to other state candidates. Since instituting these limits in 1993, the state has added rules to keep corporations from getting around those rules by giving through related entities.

If one corporation owns more than 30 percent of another, if one corporation is the source of funds for another, or if there is no independent decision-making by the second entity, then contributions by the related entities are counted toward the cap, New Jersey law states.

Giving via related entities is "an obvious way of getting around the spirit of the law," said Fred Herrmann, director of New Jersey's Election Law Enforcement Division. "The main point is: If you're going to have limits and corporations are allowed to contribute, you need this kind of regulation."

Similarly, Georgia law counts contributions from entities with any "common source" toward the same $5,000 cap for corporate donations to statewide campaigns, said Kara Jones Sinkule, a spokeswoman for the Georgia secretary of state.

"The total would be the aggregation of all of those [related contributions], and the limit applies to all of those," she said.

There are some other states, though, that do not apply contributions from related entities to the same cap. New Hampshire, which limits contributions to $5,000 per candidate, has no such law but hasn't had problems with companies giving through multiple entities, said Dave Scanlon, New Hampshire deputy secretary of state.

Indiana, on the other hand, has seen corporations use related entities to get around its limit of $5,000 per statewide candidate, said its campaign finance coordinator, Pam Potesta.

"We know they're doing it. Everybody knows," she said. "It's a widespread problem."

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