DEMOCRATS EVADED LIMIT ON SPENDING.

Byline: Jill Abramson and Leslie Wayne The New York Times

The Democratic National Committee quietly transferred at least $32 million to state Democratic parties in the past election as part of an elaborate plan to spend more money than federal election law appeared to allow on a massive advertising campaign that indirectly helped re-elect President Clinton.

The plan was conceived and coordinated by the Clinton-Gore campaign staff and Democratic Party officials as an end run around legal spending limits, according to documents and interviews with Democratic officials. Clinton campaign officials agreed to the limits in return for accepting millions of dollars in public financing.

The state parties played almost no role in deciding on the details of this arrangement and were simply used as vehicles for the Democratic National Committee to funnel more money than directly allowed on an advertising campaign promoting the president's re-election, according to the interviews and documents.

Justice Department and Senate investigators, who until now have primarily focused on how the Democrats raised money, have widened their investigation to look at whether the Democrats violated the law in the way they used money they had gathered from coffees, dinners and phone solicitations.

The money transferred by the DNC to the states was used to pay for ads on issues, which are supposed to support the party's agenda rather than specific candidates like Clinton. The investigators are re-examining the ads, which might be thinly veiled candidate ads for the Clinton-Gore effort. The DNC can legally buy ads on general issues but not ads for a specific candidate. The issue ads must be paid for with a blend of legally restricted donations and unrestricted contributions. The DNC channeled money through the state parties because they are permitted to spend more unrestricted money on the ads.

Spending instructions

The DNC transferred money with specific instructions on how to spend it, state party officials said.

Within days of receiving the transfers, the state parties dutifully sent checks to the consulting team hired by the Clinton-Gore campaign and the DNC. The $32 million went to the 12 key battleground states.

For instance, $1.4 million was sent to Colorado by the national party and was used to pay for issues ads within a matter of days. ``Basically, we'd receive instructions from the DNC, and an amount would be transferred to us,'' recalled Dan Morris, the former state party treasurer, ``and we would then transfer the money for the media buy. Folks out of the DNC sent us the money and they would give us instructions about where to send it from there.''

Money transfers from the national party to the state parties can be legal, but Justice Department and Senate investigators are looking into whether the transfers were purposefully used to evade the legal limits on campaign spending.

Even Dick Morris, the former presidential campaign adviser who orchestrated the president's media campaign, acknowledged that the television effort was directed by the DNC and not the states. ``It was a charade to say those were ads of the state parties,'' said Morris in an interview. ``I never spoke to anyone from any state.''

Among the legal issues under examination is whether this arrangement allowed ``soft money'' - contributions made to the national party in unlimited amounts by corporations, unions and individuals - to be used in ways that would otherwise violate federal election law. Such donations cannot be used to support the re-election of individual candidates.

Spending limit

Another question is whether this arrangement allowed the Clinton re-election effort to evade the $62 million spending limit it agreed to in 1996, when it accepted the same amount in public funds.

``There has always been an attempt by both parties to push back the edges of these laws,'' said Trevor Potter, a former Federal Election Commission member and election law expert. ``But, in the past, it was in the margins of political activities. Here we are talking about a wholesale blowing of the legal spending limits.''

Moreover, investigators are reviewing the conversion of candidate advertising into issue ads through a few deft changes in wording and message, allowing them to be paid for with DNC money. That permitted the Clinton-Gore campaign to conserve its financial resources. The consulting team that created the issue ads also worked for the Clinton-Gore campaign.

``This was a coordinated effort to evade the limits of how much a campaign can spend,'' said a senior Republican lawyer involved in the Senate Governmental Affairs Committee's inquiry. ``It was a strategy formed inside the White House. They knew they were in a legal gray area.''

Lanny Davis, a spokesman for the White House, said he was confident that no laws had been broken: ``This program was reviewed by the DNC and the Clinton-Gore campaign and found to be legal and appropriate.'' The DNC's general counsel, Joseph E. Sandler, called the arrangement ``absolutely legal and appropriate.'' Clinton-Gore campaign lawyer Lyn Utrecht agreed.

Harold Ickes, the former White House deputy chief of staff who is scheduled to testify Tuesday before the Senate Governmental Affairs Committee, was deeply involved in directing the DNC's fund raising and expenditures, according to interviews and legal documents, and he frequently wrote memorandums to Clinton and various party officials. Neither Ickes nor his lawyer returned calls.

By all accounts, the impetus for the money transfers came from Morris, the Clinton adviser and strategist, who launched a search for a fund-raising plan to pay for a $40 million television campaign he proposed in 1995 for the Clinton-Gore campaign.

Morris `thrilled'

According to his 431-page deposition to Senate lawyers, Morris was ``thrilled'' when he learned that DNC money could be used for the advertising campaign he envisioned, if the ads were slightly altered.

``I was delighted,'' he said in his deposition, because the issue ads ``completely fit the purposes that I had in mind.''

Had Morris not stumbled on this issue-ad solution, the Clinton-Gore campaign could not have complied with legal spending limits and also bought the expensive ads Morris envisioned.

CAPTION(S):

Chart

Chart: Some state parties that received money from the Democratic National Committee from 1995-96 spent it on advertisements for President Clinton.

The New York Times