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The politics of fuzzy math

Pierce O'Donnell, once a hero, is going to jail

Pierce O’Donnell is perhaps best known in Hollywood as the man who took on Paramount, representing Art Buchwald in a legal showdown that exposed the bookkeeping magic the studios have used to hide a movie’s haul. Ever since, the phrase “Hollywood accounting” has conjured up suggestions of fuzzy math.

So there’s no shortage of irony in O’Donnell’s current predicament. Last week, he pled guilty to two misdemeanor counts of illegal campaign contributions: In 2003, he got 10 employees of his law firm and others to each contribute $2,000 to the John Edwards campaign and then reimbursed them, violating election law. (Exacerbating O’Donnell’s situation was his 2006 guilty plea to a previous case of “conduit” contributions, misdemeanor state charges of using a false name to give to the 2001 mayoral campaign of James Hahn.) He faces six months in prison and a fine.

But O’Donnell’s case is interesting not just as an act of hubris or yet another piece of wreckage related to Edwards’ political career but for the amount involved: about $20,000. In today’s flood of campaign cash, that’s small potatoes.

Donors are motivated by a desire for influence or by an ego-boosting drive to play in the world of politics. Despite our cynical assumptions, some do have a genuine inspiration to do what it takes to elect their candidate of choice.

What’s ever more apparent, however, is that it costs a lot more to make an impact.

Campaigns rely on bundlers, and campaigns like President Obama’s re-election effort are asking their top echelon to raise sums in the six figures, not five.

There’s also the recent proliferation of superPACs, independent expenditure committees raising unlimited sums from individuals and corporations and free to run ads expressly for or against a candidate. Similar independent groups existed back in 2003, but the Supreme Court’s decision in the Citizens United case removed restrictions not just on corporate spending but on the extent to which they can expressly advocate for or against a candidate.

Just this past week, a Bain Capital associate of Mitt Romney’s fessed up to being the source of a $1 million contribution to a pro-Romney PAC. DreamWorks Animation’s Jeffrey Katzenberg, an Obama bundler, gave $2 million to Priorities USA Action, a pro-Obama PAC that has already run anti-Romney spots. Politicos also are setting up nonprofits by which they collect unlimited sums from donors, and their names do not have to be disclosed. These groups are still not supposed to coordinate with the actual campaign. Otherwise, all is perfectly legal.

There’s always been some suspicion that the “conduit” contributions of the sort in the O’Donnell case are rather common; it’s just that most people don’t get caught.

O’Donnell’s lawyers originally argued that the election statute on which he was being indicted didn’t expressly prohibit the reimbursements he made, and a district court agreed. But that decision was reversed by the Court of Appeals last year.

And just as lawyers for Citizens United based their case on free speech issues, O’Donnell’s legal team raised First Amendment concerns as they tried to get the Supreme Court to take the case, to no avail.

Yet finance reform groups see reimbursements — “straw donors” is another term for it — as flouting the limits on donations that do exist. As much as money flows to outside groups, it still doesn’t match writing a check or rounding up contributions that go directly to the actual campaign, even with the current limits.

“I think there is a stark difference,” said Sheila Krumholz, executive director of the Center for Responsive Politics. “It is a far more powerful statement to give directly to a candidate than to an outside group that may or may not have credibility with voters.”

Trevor Potter, a Washington attorney with Caplin & Drysdale and former chairman of the Federal Election Commission, said the very act of “laundering” the money through straw donors shows that the real donors know it is wrong. Otherwise, they would try to give money directly to the campaign.

O’Donnell’s friends are surprised that he may serve time given that he was such a brilliant trial attorney who could “pull a rabbit out of the hat” in court, in the words of Dennis McDougal, who co-authored the book about the Paramount case, “Fatal Subtraction,” with him.

Other friends note that O’Donnell wasn’t exactly a shrinking violet as all of this was going on: He was a lead trial counsel suing the federal government on behalf of Hurricane Katrina victims, leading to a court ruling in 2009 that found the Army Corps of Engineers guilty of “monumental negligence.” O’Donnell was smitten with Edwards early on in his career, and both were champions of the New Orleans cause.

Says McDougal: “All the stars were against him, with charges at the federal level, and with a candidate who disgraced himself.”

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