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An Endowed Chair

When Charles Keating's Lincoln Savings and Loan Association collapsed in 1989, Arizona Republican Senator John McCain's political career nearly went with it. McCain, the country learned, was one of five senators who had met with federal regulators at Keating's behest. Although the senators insisted there was no quid pro quo,...
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When Charles Keating's Lincoln Savings and Loan Association collapsed in 1989, Arizona Republican Senator John McCain's political career nearly went with it.

McCain, the country learned, was one of five senators who had met with federal regulators at Keating's behest. Although the senators insisted there was no quid pro quo, all had taken sizable campaign contributions from the banker. Keating and his associates had donated more than $112,000 to McCain's '82 and '84 U.S. House bids and his '86 Senate campaign.

The term "Keating Five" became international shorthand for government corruption.

A decade later, John McCain is the only member of the Keating Five who retains his Senate seat; the other four retired long ago, in varying degrees of disgrace. After a mild rebuke from the Senate Ethics Committee, McCain left the Keating mess behind and set about picking up the pieces of his career. He focused on foreign affairs -- a natural for the former Navy officer who spent five years as a prisoner of war in Vietnam.

McCain seized upon another issue as well: campaign-finance reform.

It worked.

Today, McCain is running for president. His role in the Keating Five scandal has been reduced to a paragraph in most John McCain profiles, which rhapsodize about the candidate's one-man crusade against the corrupting powers of special interests, how he spreads the gospel of clean campaigns through the backroads of New Hampshire on his campaign bus, the "Straight Talk Express," even taking a stroll with Granny D, the arthritic octogenarian who's crossing the country on foot in support of the cause.

But John McCain still raises money the old-fashioned way -- that is to say, the way he raised it from Charlie Keating.

Federal Election Commission data show that McCain has raised about $13.9 million in his past two campaigns -- his 1998 Senate reelection bid and his current presidential run. New Times conducted a computer-assisted analysis of gifts to both campaigns, but only $9.8 million of the total of $11.6 million that McCain has collected from individuals and political-action committees was analyzed for this story. The difference between the $9.8 million examined and the $11.6 million collected from individuals and PACs is due to the fact that not all campaign filings are available electronically. The difference between the $11.6 million figure and the $13.9 million figure exists because "other sources" cited by the FEC, including loans to the campaign, were not included in the New Times analysis. McCain transferred about $1.9 million from his Senate campaign fund to his presidential campaign account. This is why senate and presidential numbers were combined for this analysis.

The numbers cited are conservative.

The research shows that many of McCain's most generous donors happen to have business before the Senate Committee on Commerce, Transportation and Science, which the senator has chaired since January 1997.

Among the findings:

• Hundreds of thousands of dollars of McCain's campaign contributions can be tied to industries with interests before the Commerce Committee, with the telecommunications industry alone donating nearly $1 million.

US West's PAC and employees (along with subsidiary QWest) have donated at least $103,700 to McCain's presidential campaign and his 1998 Senate reelection campaign. Bell South has given at least $56,000, Viacom and its subsidiaries, at least $55,250.

People who testified before the Commerce Committee between January of 1997 and November 1999 donated at least $797,917 to McCain -- nearly 10 percent of all the contributions examined for this story. They made the contributions personally, or through their employers' political action committees.

Of those who testified, 473 represented industry. Only 37 represented consumer groups. Witnesses for industry accounted for all of the contributions.

• Donors who've given more than $1.2 million to McCain's past two campaigns do not list an occupation or employer: Federal law requires a candidate to make a best-faith effort to learn and disclose the information. Even when disclosure rules are met, it is often impossible to identify what a donor's interests might be. At least $506,174 in contributions to McCain came from donors identified as "self," "retired" or "housewife," who often are aligned with special interests. Scores of contributors identify their employers with arcane acronyms. Contributions of $200 or less need not be disclosed at all.

• McCain got at least $73,363 from liquor interests, with $51,563 coming from employees and PACs associated with Anheuser-Busch. McCain's father-in-law, Jim Hensley, owns Hensley & Company, one of the nation's largest Anheuser-Busch distributorships. McCain's interest in Hensley & Company is valued at more than $1 million. Budweiser, an Anheuser-Busch beer, is one of the largest sponsors of professional boxing; McCain is currently sponsoring legislation to reform the boxing industry.

Another generous industry: gaming ($103,177). The Mashantucket Pequot tribe, which owns the Foxwoods Casino in Connecticut, has, through employee and PAC contributions, given McCain $28,400. McCain is also a member of the Senate Indian Affairs Committee, which regulates Indian gaming.

If these findings raise concerns about influence peddling, none of those concerns would be addressed by McCain's campaign-reform platform, which is narrow in scope. He wants to ban "soft money," the hundreds of thousands of dollars that large corporations and other special interests pour into political party coffers each campaign cycle. Once the parties have the soft money in hand, they spend it on "independent," third-party ads that buttress party favorites in hotly contested races.

A soft money ban would be a good start toward reforming the campaign-finance system, but it would by no means stop the influence of special interests. Charles Keating did not become famous donating soft money to political parties; instead, he and his employees wrote stacks of individual checks for $250 or $500 or $1,000.

So do employees for the airlines, railroads and phone companies under the purview of Commerce Committee Chairman McCain.

"Hard money" donations made directly to candidates are limited to $2,000 per individual, per election cycle ($1,000 for the primary, $1,000 for the general) and $10,000 ($5,000 primary, $5,000 general) per PAC per election cycle. Corporations are prohibited from donating unlimited amounts of cash directly to a campaign, but they can, for example, host a fund raiser for the candidate and collect dozens of checks from employees, as some McCain donors have. This is known as "bundling." Companies are not supposed to reimburse employees who contribute to the firm's favorite politicians, but there's no way to monitor whether this occurs.

The money adds up. And it's all legal. Bundling -- a term made familiar by the Keating Five scandal -- is strictly defined by the Federal Elections Commission as checks written on the same day, literally bundled together and handed over by a company employee to a campaign employee. Bundling is acceptable, FEC officials say, as long as a candidate files a letter reporting it as such.

Most campaign-finance reformers have a looser definition: Bundling should be considered money from employees/PACs of a special interest, collected during a single election cycle.

Larry Makinson of the Center for Responsive Politics says that while soft money and hard money are different, "they both have some things in common . . . the ultimate goal is influence with the politicians."

He continues, "Now, there's such a thing as a benign [bundle] and there's such a thing as a not so benign [bundle]. A bundle of, let's say, Italian voters in Manhattan or Brooklyn or something like that is one thing, and a bundle from one company that has business before your Senate committee is quite another."

Some observe that McCain is a prisoner of his war chest -- absolutely forced to clamor for money in order to be a viable candidate for the White House, where he might have a shot at making reforms stick. Others are weary of hearing him grouse about the evils of special interests as he takes their money.

Senate Majority Leader Trent Lott has criticized McCain for complaining that others take soft money as he rakes in the hard money. And the publication Campaigns and Elections even dubbed McCain the "Political Hypocrite of 1998" because he raised almost $4.5 million while his no-name Senate opponent raised only $375,463.

In recent weeks, the national press has started to report that executives for companies like America Online, EchoStar, Union Pacific and US West -- all of whom regularly have business before his committee -- have been hosting fund raisers for McCain, blanketing him with cash.

The McCain campaign sees no duplicity. McCain has no choice but to take contributions from individuals with business before his committee, says campaign spokesman Howard Opinsky.

"About 80 percent of all business in this country is somehow or another impacted by decisions made by the Commerce Committee, so to . . . make a decision to not accept contributions from anybody who has anything to do with the Commerce Committee would mean that you would systematically make anyone who works for any corporation ineligible to give to your campaign," he says.

The distinction, Opinsky insists, is soft money vs. hard money. His boss has only complained about the former. "He's never criticized the current FEC rules and he doesn't criticize people that raise money," Opinsky says. "He's never said anything about George W. Bush or anyone else that's able to raise sums of money according to the FEC rules. That's not what's at issue. What he's trying to do is eliminate the $100,000 check. That's a huge sum of money that undoubtably has an impact on the way things work. A $1,000 contribution in the face of a $100,000 contribution is insignificant."

But what about more than $100,000 from US West employees and PACs?

Opinsky says the campaign pays no attention to a contributor's employer.

"The contributions are made from individuals. . . . There are no corporate contributions, they are only from individuals and they are according to the law," he says.

"What you're trying to do," Opinsky continues, "is compare soft money donations to donations made by individuals who all belong to a similar corporation. And I don't really see that there's a comparison. I mean, if a company wants to make a soft money donation, they should go ahead and make a soft money donation."

But then they couldn't donate to John McCain.

Without a confession from a politician, it would be all but impossible to prove that any particular campaign contribution influenced a public policy decision. But there are instances where McCain has taken actions that affected donors. Sometimes, the donor lost. Sometimes not.

McCain did not respond to an interview request made through Opinsky, but he was recently quoted in Business Week: "I'm influenced by the big donor who has access to my office," he says. "I know I'm influenced by people having access to me when average citizens do not."


Last month, the public interest group Common Cause released a report linking Congress' decision to gut the so-called Airline Passenger Bill of Rights with soft-money campaign contributions from major airlines.

"The reason for this timidity in Washington?" the report asked. "Because when it comes to influencing Congress with campaign cash, the airlines are always on time. At the same time the airline industry has vigorously fought recent congressional efforts to establish airline passenger rights, its political giving has taken off."

Common Cause's study revealed that during the first six months of 1999, airlines contributed almost $1 million in soft money to political parties.

No mention is made in the report of the man largely responsible for gutting the Airline Passenger Bill of Rights, Senate Commerce Committee Chairman John McCain, whose panel oversees the Federal Aviation Administration.

That is because McCain does not accept soft money. But McCain does take hard money, and the airlines are on time with that, too. New Times' analysis reveals that McCain has received at least $83,900 from major airline employees and their PACs. Add in all aviation-related industry and the number jumps to at least $182,000.

Did money buy influence in this case?

Paul Hudson, of the Aviation Consumer Action Project in Washington, D.C., says his group and other consumer advocates -- who are not among McCain's donors -- were not invited to the negotiations that led to the compromise between Congress and the airlines. Instead, Hudson watched, incredulous, as McCain announced the decision in June at a joint press conference with airline industry officials.

Hudson calls the deal a "giveaway," and says that the legislation -- which he says would have addressed perhaps 10 percent of the complaints airline customers commonly lodge -- was gutted and replaced with a study committee.

Mark Buse, staff director of the Senate Commerce Committee, sees the matter differently.

"Senator McCain has from the very beginning stated that he thinks it's better for industry to voluntarily do these sorts of plans . . . as opposed to government-imposed mandates. But if they don't do it, then he is prepared to pass out a bill," Buse says.

Of course, if and when that happens, McCain will probably not be raising money for a presidential bid.

McCain has been unabashed in his attempts to win a much-sought-after prize for America West Airlines, which is headquartered in Arizona. For years, McCain has fought to increase the number of slots at Reagan National Airport in Washington, D.C. -- a move that would all but guarantee America West the opportunity to fly nonstop from Phoenix, instead of stopping in the Midwest. District interests strongly opposed the move, and the argument became so heated that McCain had to vow he would never personally take one of the nonstop flights.

Darryl Jenkins, director of the Aviation Institute at George Washington University, says he doesn't care if there are more slots at National Airport. His real concern is that McCain's push on behalf of America West held up legislation that Jenkins believes is infinitely more important.

"What is really kind of irritating . . . is the fact that for two years now, the current Congress has not reauthorized FAA. They've let regional, parochial issues like this hold up important issues like improving air-traffic control, which is of concern to an awful lot of people. It's to the point now where our air-traffic system is so outdated, so overpumped that in a couple years it could become a safety issue. So I wish these people would get off these things and get onto some real, serious aviation issues, and I don't see that happening."

McCain "has to take responsibility," Jenkins says. "He's head of the Senate committee that oversees these things."

America West Airlines has donated at least $11,500 to McCain. John Timmons, a former McCain staffer and current lobbyist for America West, has donated $2,000. His firm, Higgins, McGovern and Smith, has donated another $3,000.

McCain successfully bargained to get 24 slots for National Airport, but the deal is on hold because the FAA authorization bill was not passed before November 19, when Congress adjourned.


Of the many industries impacted by the Senate Commerce Committee, the most prominent is telecommunications. It is also the most lucrative for McCain, who has raked in at least $1 million from people and PACs in the industry.

The issues vary and the players change sides from issue to issue, so it is tough to pin a particular campaign contribution on a particular vote.

But two things are clear:

Just about all the major players in the telecom industry donate big bucks to McCain, and his actions -- big and small -- on the Senate Commerce Committee have the ability to make or break their businesses.

Microsoft is one of McCain's biggest donors, having given at least $32,250.

It's the Senate Judiciary Committee, not Commerce, that has jurisdiction over antitrust issues like the one Microsoft is embroiled in, yet McCain made noise last year about convening related hearings before his committee. At about the same time, Microsoft hosted a fund raiser for him in Seattle.

And many Commerce Committee actions do affect Microsoft. The company has interests in phone and satellite companies, and McCain has jurisdiction over Internet legislation affecting privacy. He has supported legislation that requires schools and libraries to use filters to limit kids' access to pornography. Internet taxation is fodder for Commerce, too, and McCain sponsored the Internet Tax Freedom Act, now law, which prohibits states and local jurisdictions from taxing Internet activities. That legislation was celebrated by Microsoft and other Internet-related companies.

McCain gladdened Internet providers in May when he introduced a bill to keep the Internet free of government regulation. The measure was designed to encourage companies to expand high-speed Internet networks all over the country. The regional phone companies, all of whom rank among McCain's top donors, including US West ($103,700) and Bell South ($56,000), strongly support the measure. But long-distance companies such as AT&T ($52,250) and cable television companies such as Time Warner ($12,000) are opposed.

Interests on both sides of the debate over the Satellite Home Viewers Act have contributed to McCain. Last week, McCain refused to endorse the final version of the bill, which was approved by Congress as part of the omnibus budget agreement and now goes to the president. The measure was designed to level the playing field for satellite and cable television providers. McCain says -- and consumer groups agree -- that the bill is not fair because it does not grant satellite companies authority to broadcast local programming, something cable providers can do.

Cable interests such as the National Cable Television Association have given him at least $9,394. But so have satellite companies -- the most notable is EchoStar, whose chairman, Charlie Ergen, hosted a spring fund raiser for McCain that reportedly garnered more than $40,000.

Cable companies may be unhappy with McCain's stance on the Satellite Home Viewers Act, but if they're in the market to own TV stations, they'll love a bill the senator introduced in September. The measure would allow TV station groups to buy more. Owners would be allowed to reach 50 percent of U.S. households, rather than the current 35 percent. Owners would also be allowed to own a television station and newspaper in the same market.

Consumer groups oppose the measure, saying it would further limit the number of voices in the market; non-network affiliates don't like it, either.

But mega-companies like Viacom ($55,250) and Fox Broadcasting ($19,050) stand to benefit.

McCain isn't always decisive on telecommunications issues. Sometimes, he simply sits back and waits. That's the case with the continuing debate over how to fix the Telecommunications Act of 1996. The act was supposed to lower phone rates by encouraging competition among long-distance carriers and the Baby Bells; instead, it has led to mergers among companies and resulted in higher cable and phone rates.

McCain, one of a handful to vote against the bill in 1996, has expressed concern over the ramifications of the new law -- but he hasn't suggested any legislative remedies. Instead, over the past several months he's held a series of hearings on the matter, summoning the CEOs of these communications Goliaths before him to testify.

Commerce Committee staff director Buse says McCain has been consistent on the issue.

"He's had a pretty constant mantra: 'I'll continue to hold hearings and look at how to improve the act so that American consumers get more choice.' He is very concerned over consolidation in the cable industry. He remains very concerned that the average consumer at home doesn't have lower prices on their telephone bills, on their cable bills. . . . He will continue to investigate how we can open that up."

Buse is quick to point out that McCain invites all sides to testify. Gene Kimmelman of the Consumers Union (which publishes Consumer Reports) is a frequent witness.

At a hearing this month, Kimmelman told the committee, "Consumers are getting the short end of the stick -- higher fees, higher prices. Unless you're in the high end of the market, you're a high-volume customer, then you get choices. And so, I leave it for you, Mr. Chairman, should Congress allow consumers to be ripped off in a core market that has monopoly attributes, because that monopoly says I want to go somewhere else and compete? I don't think that's fair."

Kimmelman called on McCain to revamp the law to make it more fair. Buse says there is no time frame for doing so.


Railroads are not as high-profile as aviation or telecommunications, but they are frequently on the Senate Commerce Committee agenda -- and industry representatives have been generous to John McCain, contributing at least $97,110.

This figure does not count the flights McCain has taken on the private jets of rail corporations CSX Transportation and Union Pacific. McCain reimbursed the companies for the flights, but paid the cost of a first-class ticket on a commercial airliner -- far less than the real cost of such a ride. (Bell South has also given McCain rides on its jets.)

CSX and Union Pacific are two of the private freight companies that benefited from the Amtrak Reform and Accountability Act of 1997, which included provisions that limit the liability of companies that own the tracks used by the government railroad. The bill also capped, at $200,000, the total damages that can be paid to passengers in a single train wreck.

A 1991 train wreck in Florida cost CSX $50 million in punitive damages. The company's tracks had not been properly maintained and the company had recently cut its maintenance personnel in half.

Frank Clemente, director of Public Citizen, a Washington, D.C., consumer group, says the bill that was ultimately passed was much less onerous than the one that made it out of McCain's committee. That bill would have, in effect, forced Amtrak (i.e., the taxpayer) to pick up the tab for damages awarded in any crash, no matter how egregious the actions of the private company. The bill also would have further limited damages an individual could claim.

McCain abstained on the committee vote that sent the bill to the Senate floor. As committee chairman, he could have held the bill and let it die. He voted for the final version that became law.


Most experts agree that the Y2K scare is just that -- a scare. But high-tech special interests took no chances. They asked the Senate Commerce Committee and John McCain to protect them from liability in the event of product failure. The Y2K Dispute Resolution Bill addresses almost any catastrophe related to a Y2K computer crash.

Tom Bantle of CongressWatch, a Ralph Nader creation, calls the bill anti-consumer and says it benefits hardware and software manufacturers.

"It's particularly unusual," Bantle says of the bill, "because the Y2K defect was created by the computer companies -- in order to save themselves computer space and therefore money -- knowing that in the year 2000 it would be a problem. And while they've created it themselves, they came to Congress to say, 'Well, we created it, but you should now protect us from our own decision to put this defect into our products by making it harder for people who are hurt by it to get compensation.'"

Even though Y2K will likely be a "non-event," Bantle worries that industry will use the legislative victory as a steppingstone toward additional liability exemptions. Already, he says, the computer industry is citing the bill "as an example of the types of things that we should do more often, so in that sense it's a very bad precedent."

Commerce Committee staff director Buse dismisses Bantle's concerns as more grousing from Nader, whose groups he says parrot trial lawyers who don't want to limit lawsuits.

Of the bill, Buse says, "It does not benefit any single industry of any kind. What it does benefit is society as a whole. I don't think that we'd want a bunch of frivolous lawsuits out there."

Companies and trade associations that supported the bill include: Intel ($5,100); IBM ($6,350); and Microsoft ($32,250).

Editor's note: In preparing this story, New Times reviewed John McCain's campaign-finance reports for his 1998 Senate campaign and his 2000 presidential campaign through the latest Federal Election Commission filing deadline (October 15, 1999). This included all PAC receipts and 14,318 individual contributions. Because of an electronic omission by the Federal Election Commission, at least $2,512,052 of McCain's total receipts of $11,616,136 were not examined, so actual contributions from a special interest's employees could be higher than reported here. Information for individual contributions and PACs was provided by Public Disclosure Inc.'s FECInfo. In cases where multiple family members are identified, the income-earner's employer is listed for all family members.

Maidi Terry assisted with computer analysis.

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