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Thursday, Nov. 3, 2011 03:30 pm

Climbing through a giant loophole

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An apparent legislative drafting error has created a massive loophole in the state’s new campaign contribution limit law, and ComEd and its parent company, Exelon, have been aggressively exploiting it since early this year.

State campaign finance reform laws that capped campaign contributions went into effect this past Jan. 1. One provision of the new law set a $50,000 cap on what political action committees could receive from other political action committees during a calendar year.

Yet, despite that cap, Exelon’s federal PAC has transferred more than $189,000 this year to a state PAC controlled by its subsidiary, ComEd.  Those transfers appear to be almost four times higher than the law allows.

ComEd has, in turn, taken that Exelon PAC money, pooled it with its own cash and given large numbers of contributions to state legislators as it worked to pass a so-called “Smart Grid” bill, then override Gov. Pat Quinn’s veto of that legislation. The company succeeded at both those tasks last week. Gov. Quinn claimed campaign contributions were behind the company’s legislative success.

So, how did Exelon and ComEd get around the contribution cap law?

Well, ComEd officials insist that what they did was completely within state law. But the Illinois Campaign for Political Reform says otherwise.

“ICPR believes that these transactions are in violation of the Election Code,” said David Morrison, the group’s deputy director. “Only political parties are allowed to make these kinds of transfers, by our reading of the statute.”

ComEd officials claim they cleared these contributions with the Illinois State Board of Elections. The board’s executive director, Rupert Borgsmiller, said he wasn’t aware of any specific contacts with ComEd, but said the statute in question “hasn’t been fully tested.” He also said the statute has been discussed quite a bit.

“By the plain reading of it, I would say that ComEd has a very good point,” Director Borgsmiller said.

Indeed, the company does have a decent point.

What I’m about to tell you may look technical and complicated, but it’s really not. Stay with me here.

The new campaign caps were outlined in Section 9-8.5 of Illinois law. Paragraph “c” of that section deals with limits on what can be given to state political party committees. Also in that same paragraph is this language: “Nothing in this Section shall limit the amounts that may be transferred between a state political committee and federal political committee.” That language is then followed by more limitations on political parties.

A spokesman for House Speaker Michael Madigan said the intent of the law was to allow state political parties, and only state political parties, to transfer unlimited money from their federal PACs. The law, he said, was absolutely not designed to give companies like ComEd a way to skirt the PAC caps.

But the sentence that ComEd relies on clearly says: “Nothing in this Section.” The “Section” deals with campaign caps of every kind, not just political party caps. If it had said “Nothing in this Paragraph,” then ComEd and Exelon wouldn’t be able to use that sentence to their advantage.

This was a very dangerous mistake by the people who wrote the law. Left unchanged, this loophole could be used to get around all state caps.

Why? Well, under the ComEd/Exelon reading of the law, federal PACs do not have to abide by any of the state’s new caps. They can give as much as they want to any candidate, political party, legislative leader, whomever. And, of course, state PACs could form federal PACs to get around all of Illinois’ campaign cap laws.

Neither Exelon nor ComEd have done any of that, beyond transferring that money to the ComEd PAC, at least so far, according to an ICPR analysis.

But this is, without a doubt, a truly gigantic loophole that could easily be exploited unless the General Assembly closes it soon.

Director Borgsmiller said his office has been contacted numerous times about the cap rules. A Board of Elections task force recently recommended that the loophole be closed during the spring session. It ought to come even sooner.

Madigan’s spokesman said last week no decision had been made about whether to proceed with legislation. He suggested that the board ought to just enforce the law the way it was intended. But the board is so far interpreting the laws the way they are written.  

Rich Miller publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.

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