Judge Rebukes Elections Panel for Its Finance Reform Rules

WASHINGTON —  A federal judge has ruled that the Federal Election Commission repeatedly misinterpreted the 2002 campaign finance reform legislation when it issued rules implementing the law, creating “an immense loophole” that could “foster corruption.”

Her decision striking down more than a dozen FEC rules, many focusing on “soft money” donations, probably will have no effect on this year’s election, campaign finance experts said Monday.

Still, the ruling Saturday by U.S. District Judge Colleen Kollar-Kotelly represented yet another blow to the beleaguered agency, which has come under fire from key members of Congress and others who say it is ineffective and should be abolished.

“The bottom line is, the FEC’s interpretation of our law had no basis in the reality of the statute,” said Rep. Christopher Shays (R-Conn.), who filed the lawsuit in October 2002 with his co-sponsor of the reform bill, Rep. Martin T. Meehan (D-Mass.).

Shays and Meehan had argued that the FEC rules weakened the campaign finance legislation as approved by Congress, creating loopholes that enabled “the subversion, erosion and circumvention of campaign finance laws.”

The judge, who oversaw the Microsoft antitrust settlement, told the FEC to rewrite 15 regulations. Among them were rules concerning:

* coordination between third-party groups and federal candidates;

* appearances by members of Congress at state party fundraising events;

* how state parties may spend unregulated contributions on voter registration drives and other party-building activities;

* the Internet and exempting it from regulation as a form of public communication;

* permission for charitable organizations to spend corporate or union money on television advertising featuring federal candidates within 60 days of an election.

The 2002 campaign finance law banned unlimited corporate, union and individual contributions to political parties. Such types of donations are typically known as soft money.

It fell to the FEC to devise rules for how the law should be enforced. Sens. John McCain (R-Ariz.) and Russell D. Feingold (D-Wis.), co-sponsors of the legislation, filed a brief with the court supporting the Shays-Meehan lawsuit.

The FEC asked the judge to dismiss the Shays-Meehan lawsuit, arguing that the lawmakers had no standing to sue. But the judge disagreed in a 157-page decision, saying that some of the agency’s rules created the potential for “gross abuse.”

Several FEC commissioners said Monday that they expected the agency to appeal the judge’s order, but they believed their rules would remain in place for now.

“I will support an appeal, and I expect the agency will appeal. As I read it, in the meantime, our current [regulations] are still in effect,” said Commissioner David Mason, a Republican.

Vice Chair Ellen Weintraub, a Democrat, agreed.

“We can’t have a situation six weeks out from the election where suddenly we have no rules,” she said. “There is no way we can have new rules in effect before election day.”

Outside experts said the judge’s decision not to issue an injunction signaled that she did not intend to throw out the old rules until new ones took their place.

“The rules stay in place until new ones are written,” said Bob Bauer, a Democratic election lawyer with Perkins Coie.

Republican election lawyer Jan Witold Baran said he was advising his clients to follow the existing rules until they were changed.

FEC commissioners said they were troubled by some of the judge’s findings, particularly those regulating the Internet.

FEC Chairman Bradley A. Smith, a Republican, said he thought her order could affect bloggers if the commission were forced to regulate their activity.

“What do you call unpaid political advertisements on the Internet?” he said. “I call it blogging. There’s a lot at stake here.”

Commissioner Michael Toner, a Republican, said he too was concerned about the order to issue new rules governing the Internet. He said he saw “no evidence whatsoever that Congress intended to regulate the Internet when it passed the McCain-Feingold law.”

Still, the judge’s lengthy order came on the heels of recent criticism of the FEC, particularly for its failure to rein in the so-called 527 independent groups that have been spending tens of millions of dollars in soft money on presidential advertising.

Members of Congress, activists and the Bush administration have filed lawsuits about the 527s in federal court. Judge Kollar-Kotelly’s decision would have no effect on those groups.

And two congressional committees are exploring ways in which the agency can be reformed.

Fred Wertheimer, president of the campaign watchdog group Democracy 21 and the spokesman for the legal team that won the court victory before Kollar-Kotelly, contended Monday that the decision went into effect immediately, leaving only the McCain-Feingold law in place. However, the opinion is not shared by most other experts.

“The way it has to end is getting a new enforcement agency to replace this totally failed agency,” Wertheimer said.