By Ralph Thomas, Katherine Pfleger and Vince Kueter
Seattle Times staff reporters

OLYMPIA — The state Democratic Party failed to properly disclose millions of dollars in so-called campaign soft money it received during the months leading up to the 2000 general election.

During the campaign season, a variety of national Democratic Party organizations funneled more than $6.6 million in soft money — large, unregulated contributions, often from labor unions and corporations — to the state party, according to records at the Federal Election Commission.

But the state party failed to report most of those contributions in a timely manner to the Public Disclosure Commission (PDC), the state's campaign-finance regulator.

Wide gaps in the party's disclosure records came to light last week in a nationwide study by a trio of campaign-finance watchdogs: the Center for Public Integrity, the Center for Responsive Politics and the National Institute on Money in State Politics.

The organizations did not find disclosure problems at other Washington state party committees.

A more in-depth analysis by The Seattle Times — comparing federal, state and party records — found that the state Democratic Party failed to fully disclose to the PDC more than $1 million in national soft-money contributions. And of the more than $5 million in contributions disclosed, most was not reported to the state until the following year or later, or was filed on the wrong form.

The state PDC is reviewing the Democrats' faulty reporting and will decide soon whether to file a formal complaint against the party.

"I'm still trying to get a complete handle on this," PDC Executive Director Vicki Rippie said this week.

State Democratic Party Chairman Paul Berendt, who last week let The Times review party records, initially disputed the national groups' findings.

But this week Berendt said he could not account for a large portion of the contributions that went unreported, and he said he was not aware of all the late filings. He acknowledged that in 2000 the party had what he described as a campaign-finance "compliance meltdown," which he blamed on staffing and computer problems.

Berendt met with PDC staffers yesterday to discuss the party's reporting transgressions. "I acknowledge that these are serious reporting flaws," said Berendt. "I'm going to bend over backwards to work with the disclosure agency to make it right."

He added, "It makes me sick that this wasn't disclosed, because there's nothing to be gained by non-disclosure."

State Republican Party Chairman Chris Vance said he recognizes how difficult it is to keep track of so much money. But he didn't cut the Democrats any slack.

In fact, he believes Attorney General Christine Gregoire, a Democrat, should investigate "the entire structure" of the state Democratic Party for possible campaign-finance illegalities.

"These are the guys who talk about campaign-finance reform, who talk about how the Republicans get all this money from big business and how we're beholden to special interests," Vance said. "They're hypocrites."

Money poured in

Heading into the 2000 national election, Democrats and Republicans considered Washington a key state. They knew voters here might cast deciding votes in the tightest presidential race in decades, and that several races here might tip the balance of power in Congress.

With so much at stake, soft money rained down on the state parties in record amounts.

During the 2000 election, the state Democratic Party raised and spent more than $10.2 million, and the state Republican Party raised and spent more than $12.6 million. For both parties, those totals were roughly double what they spent in 1996, the previous presidential-election year.

The more than $6.6 million in soft money received by the state Democratic Party came from the three major national-party committees: the Democratic National Committee, the Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee. The organizations raise money and help craft messages for candidates.

Berendt said the money was spent mostly on "issue-advocacy" ads aimed at the presidential race and several congressional races.

State law requires campaigns to file a variety of different forms to disclose those contributions and expenditures.

During the 2000 election, it appears the state Democratic Party kept up on its "C-4" reports, which show contribution and expenditure totals. But the party failed to file many of the corresponding "C-3" reports, which list the source and date of each contribution.

The Times analysis of the party's 2000 soft money found:

• No C-3 reports on file at PDC for nearly $1.6 million in contributions. (The party did disclose about $570,000 of this, but not on the proper report forms.)

• The party filed about $2.7 million worth of contribution reports in August 2001, more than nine months after the election.

• The party filed another $1.7 million worth of contribution reports in January 2002, more than a year after the election.

Behind the 'meltdown'

Berendt said the party entered the 2000 election year with a new comptroller and a new computer program for tracking campaign finances.

He said the new comptroller struggled with the job — at one point transferring hundreds of thousands of dollars in soft money into a wrong account — and quit abruptly in June 2000. And he said the new accounting program was riddled with flaws and had to be ditched in August 2000.

In the midst of all this, Berendt said, he told the PDC he was "fearful we're going to have a compliance meltdown."

Rippie, the PDC's executive director, "vaguely recalls" the conversation. "But that's not carte blanche for the whole campaign to not report on a timely basis," she said.

MaryJo Sylwester, database editor at the Center for Public Integrity, who helped prepare last week's report, said such disclosure issues are common.

"It is a perfect example of the problems we found in every state," Sylwester said. "The information is just so hard to get, and even when you do get information, you don't get all of it."

Larry Noble, former Federal Election Commission general counsel who is now executive director of the Center for Responsive Politics, said the sloppiness suggests the Democratic Party does not put a high enough priority on reporting contributions.

"You get suspicious when there are a lot of different excuses," he added. And "one thing to keep in mind on disclosure: late disclosure is almost as bad as no disclosure at all. ... Any time a report is filed late, you have to ask if is it is just a mistake, or if they have some reason that they did not want to report the contribution on time."

Reporting requirements are in place to allow the public time to see where campaign money is coming from during an election.

Campaign watchdogs fear state-party reporting problems could get worse when the federal McCain-Feingold campaign-finance law is supposed to take effect after the November election. Among other provisions, the law limits issue ads and bans soft-money donations to the national parties.

Noble expects much of the soft money will now make its way directly to state and local party organizations, where disclosure laws and contribution limits vary widely.

Experts generally say Washington has more stringent policies than other states, including an in-house auditor at the PDC and a requirement that parties keep separate accounts for soft money.

But even those checks have flaws. And with more disclosures expected to go to already overburdened state regulators, the reporting system could see even more strain.

The PDC's Rippie said Washington is ahead of other states. In the past, campaign organizations reported contributions by mailing or faxing hard-copy reports to the PDC. Under a new state law, big-money campaign organizations — including both major parties — are now required to report all contributions and expenditures electronically.

The new electronic reports are supposed to give people immediate access to campaign-finance information.

Rippie said the state's campaign-finance disclosure system is usually "self-policing" and that major reporting gaffes by one party are usually spotted by the other.

Vance, who was not the GOP chairman in 2000, isn't sure why no one noticed the reporting discrepancies. But, he added, "I'll make sure that my political staff is watching the Democrats very closely next time."