Straight Talk and Cold Cash
John McCain says he's a reformer, but his fundraising tactics tell a different story
"Our Democracy is not for sale."
Sen. John McCain, Arizona Republican
Sen. John McCain has worked hard to cultivate an image as the straight-talking man. For years, he pressed for clean campaigns unsullied by the big-money influence of special-interest groups. He prevailed five years ago by helping to steer a historic campaign finance reform bill through Congress. The McCain-Feingold bill removed what McCain saw as a cancerous growth on the body politic-the huge unlimited "soft money" contributions that corporations, lobbyists, and labor unions gave to national political parties.
But now, as the former POW makes another run for the White House, he faces a question that strikes at the heart of his campaign: When it comes to money, just how straight-talking is he, really?
McCain has positioned himself as a die-hard opponent of special-interest influence. But a U.S. News analysis of his 25-year legislative career shows he has been an avid seeker of special-interest money to support his campaigns and initiatives. The pattern goes all the way back to his first House race in 1982. Moreover, as the boss or No. 2 member of the Senate Commerce Committee, he has drawn heavy support from PACs and individuals associated with industries overseen by that committee-especially telecommunications, media, and technology firms. Between 1997 and June 2006, he collected nearly $2.6 million from such interests, according to the Center for Public Integrity, an independent watchdog group in Washington. In some cases, the review showed, McCain's positions mirrored those of his biggest supporters. Big corporate donors also have given hundreds of thousands of dollars to the Reform Institute, a tax-exempt organization-once closely affiliated with McCain-that was established to promote campaign finance reform.
Connections. McCain is also relying on well-connected corporate executives and lobbyists to raise funds-people like Thomas Loeffler, a former congressman and lobbyist whose law firm was paid more than $5 million last year to represent Saudi Arabia. Loeffler, who is directing the McCain fundraising effort, is one of 15 national finance cochairs who each have pledged to raise $1 million for McCain.
McCain has repeatedly said that he wants to break up "the iron triangle of big money, special-interest lobbyists, and the legislation they buy," but his aides say he has no choice but to rely on influential money men if he wants to be president. McCain declined to be interviewed by U.S. News but provided written responses to questions. "Campaign contributions," the senator wrote, "have never affected my support or opposition to any legislation." He said that he took "positions, rightly or wrongly because I believe they are in the public interest." McCain added that his lobbyist supporters "have never asked for nor have I ever offered to take a position on legislation in exchange for their support."
As it is, McCain has a ways to go to catch up to his chief rivals for the Republican nomination. Federal campaign reports show he raised $12.5 million in the first quarter of the year, trailing former Massachusetts Gov. Mitt Romney ($21 million) and ex-New York Mayor Rudy Giuliani ($15 million). McCain, disappointed with the effort, recently shook up his fundraising team.
Critics of the Washington influence game say that McCain's acceptance of so much special-interest money doesn't comport with his reformer image. "McCain has used every avenue possible to raise money," says Kent Cooper, a political money expert and former official at the Federal Election Commission. "He's certainly been someone out in front screaming about special interests' influence in Congress, and yet it seems when people run for president, no one is a special interest."
Beginnings. McCain, now 70, first jumped into elective politics when a House seat in the Phoenix area opened up in 1982. He proved to be a tireless campaigner and savvy fundraiser, grabbing support from PACs and well-heeled backers, including an Arizona developer named Charles Keating. Federal records show that McCain received $110,000 in campaign donations from Keating, his associates, and friends in his two House campaigns and in his first Senate race in 1986. The Keating friendship eventually led to the biggest stain on McCain's career-the so-called Keating Five scandal. McCain and four other senators became entangled after they attempted to get federal regulators to lay off Keating's faltering savings and loan in 1987. The institution later failed, and Keating emerged as a symbol of lawlessness that plagued the industry. A Senate inquiry concluded in 1991 that McCain "exercised poor judgment in intervening with the regulators" but had not violated Senate rules or federal laws.
McCain, like most lawmakers, has always sought funds from special-interest PACs. All told, McCain has taken in about $5.7 million from such groups. In the current presidential campaign, he has received a little more than $300,000 from PACs, including maximum gifts of $5,000 each from old reliables such as AT&T, Verizon Communications, and Qwest Communications; in the 2000 presidential campaign, he raised $405,600 from such groups; in two House races and four Senate campaigns, McCain raised $4.3 million from PACs, or about one fourth of the total of $16 million that has flowed into his coffers, according to a U.S. News analysis of campaign reports. His leadership PAC, Straight Talk America, has received some $686,000 from such groups since its creation in early 2000.
But relying on PAC money as a measure of special-interest donations can be misleading. Special-interest money often comes directly out of the pockets of lobbyists or from others looking for legislative support. A case in point: On a December night in 2005, McCain collected $150,000 for Straight Talk America, thanks to a dinner hosted by lobbyist Scott Reed, who represents financial services companies, Internet-related clients, and Indian tribes, among others. Reed confirmed that almost all of the money came from individual contributors, including some corporate clients. Others at the dinner, he says, were lobbyists and friends who wanted to support McCain's efforts to elect Republicans to Congress in 2006.
McCain has been courting the Establishment for years. In his 2000 presidential run, for instance, McCain drew heavy support from some of Washington's most powerful lobbyists, including Kenneth Duberstein, the former chief of staff in the Reagan White House; William Ball III, the former secretary of the Navy and now managing director of the lobbying firm of McCain's current national finance chairman, Thomas Loeffler; and Timothy McKone, an influential telecommunications lobbyist. Some prominent lobbyists are playing big fundraising roles in the current campaign and represent clients who have sought help from the Commerce Committee.
Support. As former chairman and now No. 2 Republican on the panel, McCain has counted heavily on support from telecommunications, technology, and media interests. Those ties were clearly demonstrated, in a recent study of campaign contributions to federal lawmakers and others, by the Center for Public Integrity. McCain's take: $2,581,967 from such interests in a nearly 10-year period ending in June 2006.
In reviewing his committee actions, U.S. News found that McCain took positions, sometimes aggressively, that favored his supporters. In other instances, his positions ran counter to their wishes. Such independence, his aides say, shows that McCain's vote is not for sale. "I have worked for Senator McCain for 18 years," says Mark Salter, one of his closest aides, "and not once in 18 years have I seen him vote for something because of a contribution."
That may be, but McCain has developed ties to several companies in the satellite, cable, software, and broadcast industries that have proved to be mutually beneficial. Perhaps one of his most loyal supporters is Charles Ergen, a onetime professional gambler and chief executive of EchoStar Communications, a Colorado-based satellite television provider. The two men are close, and McCain has favored Ergen in his fights with broadcasters and the cable industry, according to Senate aides. McCain "thinks satellite is a damn good alternative" to what he views as an "unregulated cable monopoly," says Mark Buse, a lobbyist and McCain's former top aide on the Commerce Committee.
Ergen, a generous donor to other politicians, hasn't shortchanged McCain. Over the years, EchoStar and people affiliated with the company have given nearly $46,000 to McCain, according to the Center for Public Integrity study. Additionally, in 2001, another Ergen company, Echosphere, provided a $100,000 contribution to the Reform Institute (the nonprofit group then linked to McCain), according to an institute spokesperson.
Another important backer is Charles Dolan, the chairman of Bethpage, N.Y.-based Cablevision Systems Corp. McCain and Dolan both favor a la carte pricing, a flexible pricing plan that would allow customers to pick the cable channels they want, rather than buy fixed-priced packages. Two years ago, the Associated Press disclosed that CSH Holdings, a Cablevision Systems subsidiary, had contributed $200,000 to the Reform Institute. Two McCain political aides, who also were involved in the Reform Institute, solicited the donations, which were given in $100,000 installments in 2003 and 2004.
Testimony. McCain, long a proponent of a la carte pricing, urged federal regulators in May 2004 to support the idea, quoting Dolan's testimony before the Commerce Committee in May 2003. McCain denied there was any conflict of interest. Federal campaign records examined by U.S. News show that Cablevision Systems'PAC gave $10,000 to McCain's Senate re-election committee in February 2003-just a month before the senator urged other cable companies, in writing, to follow Cablevision's lead on a la carte pricing. Shortly after the AP story, McCain stepped down as chairman of the Reform Institute's advisory board in March 2005.
Software and Internet businesses also have been generous to McCain-and they've benefited from his support. In April 1999, as he was preparing to run for the presidency the first time, McCain introduced the Protect Act, a measure designed to allow software and other high-tech outfits to export strong encryption, or data-scrambling technology, products to nonhostile nations. McCain's decision stunned some Senate aides, who had watched him oppose encryption-export relief in the past because of national security concerns.
But his new position moved him closer to that of most high-tech companies-businesses that have long given him campaign support. In 1999 and 2000, Microsoft and its employees donated $40,000 to McCain, according to the Center for Public Integrity study. In the past decade, Internet and software companies have donated $394,000 to McCain, the center said. McCain's aides say the software industry actually wanted no controls on exports and that McCain felt he had to compromise-with the Protect Act-and back off his no-export position. They say that his compromise addressed crucial national security concerns that the technology could end up in the hands of terrorists. Faced with McCain's turnaround and a growing movement in Congress for export relief, the Clinton administration finally eased restrictions in January 2000.
McCain has been running for president for nearly a decade, using his PAC, Straight Talk America, his Senate campaign, Friends of John McCain, and the Reform Institute to help him along the way. Like other candidates, McCain has been quite adept at legally exploiting campaign laws to aid his presidential ambitions. With his eye on the White House, McCain raised far more than he needed to win his last two Senate campaigns in 1998 and 2004. McCain took in $7.8 million from individuals and PACs in those campaigns, yet spent only $4.6 million to overwhelm weak opponents. Most of the rest of the cash-$3 million, or 38 percent-was transferred into his presidential races, federal campaign records show. In McCain's current presidential campaign, this so-called rollover means that some givers in effect will exceed the current contribution limits for individuals, now $2,300 per election. McCain asserts that many donations came in before it was clear who his opponents would be or what the campaign costs would be, and he staunchly maintains that he did not raise the cash under false pretenses.
As for the Reform Institute, a lobbyist who knows McCain well says bluntly: "The Reform Institute is McCain's Achilles heel." Engaging in political activity would have violated the institute's tax-exempt status, but McCain, campaign aides, and institute officials all deny that the organization has played any role in promoting his presidential candidacy. The institute, established in 2001, kept McCain front and center as it promoted campaign finance reform in its many press releases and fundraising letters. Moreover, the institute was run for several years by Richard Davis, manager of McCain's 2000 presidential effort and CEO of his current campaign. The institute operated for a time out of Davis's lobbying offices in Alexandria, Va. Its chief fundraiser was Carla Eudy-the same Carla Eudy who has served as the chief fundraiser for McCain's Straight Talk America, Friends of John McCain, and his presidential committees. The institute's lawyer, Trevor Potter, also represents McCain's political organizations. Moreover, many of the big donors to the institute were large contributors to McCain's political races, campaign and institute records show.
Eudy declined to be interviewed but said in a statement that McCain had "signed fundraising letters" for the Reform Institute that were mailed to people on the fundraising lists of the Friends of John McCain and Straight Talk America. It is, she said, "perfectly legal" for a political committee to raise funds for a tax-exempt group. Eudy added that the Reform Institute's own mailing list "was never ... used for any political purpose."
As McCain's chief fundraiser, Eudy has made a bundle. Since 2001, the Reform Institute and McCain's political committees have paid her about $1 million. She says she is paid the "industry standard," or "10 percent of moneys raised." Last month, as part of McCain's campaign restructuring, Eudy was replaced as finance director, but she continues as an adviser, a McCain aide says.
The new finance director, Mary Kate Johnson, a former Bush fundraiser, will be counting on some heavy hitters to deliver. Among the 15 national finance cochairs who have each pledged to raise $1 million: Wayne Berman, a Bush fundraiser and lobbyist whose impressive client list includes oil and telecommunications concerns; A. Jerrold Perenchio, a billionaire investor and big soft-money giver; Lewis Eisenberg, a former Goldman Sachs partner; and John Thain, CEO of the New York Stock Exchange.
McCain's spokesman, Brian Jones, says that the fundraisers aren't looking for favors. "You are talking about people who believe in his ideas, who are responding to him as a leader," Jones says. Fair enough. But in the process, McCain's image as a maverick and reformer may be suffering. "John couldn't ride the maverick horse and win the nomination," says Orson Swindle, a fellow POW and close friend. "If he is going to swim in the water, he has to raise money to swim. That's the way it is."
With Jennifer L. Jack and Monica M. Ekman
This story appears in the May 28, 2007 print edition of U.S. News & World Report.