updated 11/20/2007 10:22:30 AM ET 2007-11-20T15:22:30

A union-financed advocacy group that played a major role in the 2004 elections has agreed to pay a $580,000 fine after the Federal Election Commission concluded it illegally ran advertising against President Bush and in favor of Democrat John Kerry.

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In an agreement announced Monday, the FEC said the now inactive Media Fund spent $53.4 million during the contest on television, radio and newspaper ads and direct mail that made reference to Bush or Kerry. The FEC said the fund violated campaign finance laws because it accepted unlimited donations from labor unions and expressly advocated the defeat or victory of a political candidate.

The Media Fund is the latest in a string of so-called 527 organizations the FEC has fined for their activities during the 2004 presidential campaign. They include groups on both sides of the election, including the anti-Kerry Swift Boat Veterans and POWs for Truth as well as the liberal MoveOn.org Voter Fund.

Lawyers for these groups have argued that at the time of the campaign they believed they were acting within the law. But the FEC has concluded that 527 organizations that stated their desire to influence the presidential election through fundraising, public statements or advertisements violated the law. Such activity, the FEC has said, could only be conducted by political committees registered with the FEC that abide by contribution limits and public disclosure requirements.

In the agreement, the commission said it "does not challenge TMF's assertion of their good faith reliance on their understanding of the law." The FEC said the Media Fund operated "on their understanding, informed by legal advice, of the legal definition of the scope of 'express advocacy.'"

"The Media Fund is confident that all of the issue advocacy it conducted in 2004 followed both the letter and spirit of the law," the group's president, Erik Smith, said. "In the end, we determined it (was) in the best interests of The Media Fund to avoid litigation cost, settle for a fine and agree not to contest the FEC's conclusions."

The issue has centered on the emergence of the 527 groups, nonprofit organizations named after the section of the Internal Revenue Service code that governs their activities.

The Media Fund was formed in 2003 as part of a broad effort by liberal and union-related activists to confront Republican voter mobilization efforts and defeat Bush. In August, another group allied with Democrats, America Coming Together, agreed to pay a $775,000 fine.

The settlement with the Media Fund comes nearly four years after campaign finance watchdog groups filed complaints against it and others, alleging they improperly tried to influence the 2004 election with money raised outside federal limits.

The agreement was announced one day before the FEC was to vote on new regulations governing how far a corporation or a union can go in mentioning candidates for political office in ads that are ostensibly advocating for or against an issue. Some critics have said the rule could give nonprofit groups financed with unlimited corporate or union money greater leeway to influence elections.

Activists allied with both Democrats and Republicans already are forming nonprofit groups to run ads and influence the electorate in the 2008 election.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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