Romney makes the most of funding rules

By Donovan Slack
Globe Staff / April 15, 2011

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WASHINGTON — Mitt Romney kicked off his presidential exploratory committee this week in an enviable position.

Since his defeat in the 2008 GOP presidential primary, a few political friends have given generously to Romney’s political operation, providing him a financial and organizational edge as the 2012 campaign gets underway.

But donors’ generosity is not the only reason Romney’s bottom line is strong.

The former Massachusetts governor has become a master of a controversial but legal fund-raising technique that relies on a network of loosely regulated state political action committees to collect those funds.

Consider the gifts to Romney from Donna G. Marriott — the wife of Marriott chairman J.W. Marriott Jr. — and J.W.’s brother, Richard E. They wrote checks totaling $215,000 to Romney’s state political committees, according to public records reviewed by the Globe.

Contributions of that size are not permitted to be given to fed eral political committees under rules intended to limit the influence of individual supporters on candidates. But Romney, more fully exploiting the system he employed in the 2008 election cycle, got around those restrictions by taking in contributions through political committees set up under the rules of individual states.

Most of the money was then transferred to Romney’s federal political action committee, Free and Strong America, and used to pay the salaries of top aides, political consultants, and traveling expenses.

The same system is used by other candidates, but on a much smaller scale. Romney raised more than $1.5 million from just 38 individuals in 2009 and 2010, more than double the combined donations of the rest of the prospective GOP field. Under federal limits, it would take 300 contributors to accumulate that much money.

Critics say Romney and the other contenders are using state loopholes to circumvent the spirit of federal limits. Romney’s team said the system is proper and open for public inspection.

“Free and Strong America PAC follows both the letter and spirit of the law,’’ said Andrea Saul, who was spokeswoman for the committees and is now working for Romney’s exploratory committee. “Our PAC operations have always been totally transparent — our donors and expenses are all disclosed regularly and in great detail.’’

Federal law limits an individual’s donation to $5,000 a year for the sort of federal political committee Romney was operating — called a “leadership PAC’’ in beltway jargon. By setting up the series of state leadership PACs — several of which operate with no limits — Romney was able to solicit the larger contributions.

Such committees are typically set up as a way for national figures to support candidates and causes within a particular state.

The website for Romney’s committees declared such a purpose, saying the “Free and Strong America PAC supports officeholders and candidates who are dedicated to advancing social, fiscal, and foreign policies that will strengthen America at this critical time in the nation’s history.’’ But only a fraction of what the state committees raised — 13 percent — was contributed to state candidates or causes.

Four of Romney’s five state political committees — in Alabama, New Hampshire, Iowa, South Carolina, and Michigan — shared an address in Lexington, Mass. Contributions to them flowed through accounts at the same Bank of America branch in Washington, a block from the White House. Most then went to another account at the same bank — the one for Romney’s federal committee — to pay overhead.

Parts of the overhead costs incurred by Romney’s national political operation were reported as individual state committee expenses through complex accounting on campaign finance reports. Even individual Starbucks purchases by members of his political staff have been divided up to the penny and apportioned across the array of Romney committees.

Saul, the spokeswoman for Romney’s exploratory committee declined to make him available for an interview but, in response to written questions, she defended the practice and said the committees’ contributions to other candidates were significant.

“In addition to direct contributions, the PAC gave Mitt Romney the resources to campaign for candidates, speak about the ideas and policies important to him, and help Republican candidates and conservative groups across the country,’’ she said.

Advocates for tighter restrictions on the flow of money in politics say Romney is getting around rules intended to restrict the amount candidates raise while they are testing the waters for a presidential run.

“This whole situation in my view becomes a charade and disingenuous,’’ said Paul S. Ryan, associate legal counsel at the nonpartisan D.C.-based watchdog Campaign Legal Center. “Is a little honesty too much to ask?’’

David Donnelly, national campaigns director at Public Campaign Action Fund, concurred, saying Romney is “clearly violating the intent and the spirit of the law.’’

“It’s a big racket,’’ Donnelly said. “There’s not even a fig leaf.’’

Lawyers who advise candidates on the intricacies of Federal Election Commission rules say Romney and his team were within their rights to raise and spend money outside the federal limits, to maintain a political network before the testing-the-waters period. Romney’s exploratory committee — launched this week kicks off that phase, which will be subject to the stricter limits.

If the law were changed to tighten restrictions on politicians who are simply talking about running or visiting early primary states, it would become unwieldy, said Cleta Mitchell, one such lawyer. She declined to say whether she is currently advising any potential presidential candidates. She said critics are overzealous.

“They want to regulate every action and every word that comes out of somebody’s mouth,’’ Mitchell said.

Romney’s backers have been extremely generous in his bid to keep a high profile the past two years.

The Marriott family emerged as Romney’s top contributors. Until January, he also served on the Marriott board; the company paid him roughly $187,000 in salary and stock in 2009 alone, public records show.

The second-biggest contributors were the founder of a South Dakota beef manufacturer and his wife, Eldon and Regina Roth. Romney’s other big check writers included New York Jets owner Robert Wood “Woody’’ Johnson IV, and his mother, philanthropist Betty Wold Johnson. He also received large contributions from oil and gas industry magnate Hushang Ansary, and Edward Conard, a former executive with Bain Capital, an investment company cofounded by Romney.

Betty Johnson declined to comment; the Roths and Ansary did not return messages left seeking comment; and Robert Johnson, Donna Marriott, and Conard could not be reached. Saul declined to elaborate on his relationships with the large contributors.

Richard Marriott said he contributed so much because he believes the country could use Romney’s business acumen. Marriott also noted Romney’s family’s close relationship with the Marriott family, which stretches back more than 60 years.

“We’ve just been supportive of him,’’ Marriott said. “If he wants us to help out on certain things, then we’re willing to help.’’

Another contributor, the chief executive of a Michigan parts manufacturing company, said in an interview that he and his wife wrote checks totaling $60,000 to Romney’s state committees because they support his vision for the country.

“I see everybody else who I think is running, and some of the other candidates are also, let’s say, likable,’’ said John C. Kennedy III, chief executive of Autocam Corp., which makes parts for the automotive and medical industries. “But I’m a businessman, I’m an entrepreneur. I started my own businesses when I was quite young, and I appreciate sitting across the table from someone who at least understands how business works, how business operates.’’

Donovan Slack can be reached at Follow her on Twitter @DonovanSlack.