Congress took a big step toward reducing the corrupting influence of money in our political system. 'Unfortunately ... this historic reform will be undermined if this river of money is simply diverted to shadowy and highly partisan 527 groups.

Joan Claybrook, president of Public Citizen

Pro-Choice Vote in turn disseminated millions of those dollars to other liberal groups, but the money trail is hard to follow, because of the Internal Revenue Service's labyrinthine disclosure system.

Funded almost exclusively by Fonda, Pro-Choice Vote is one of a relatively new breed of political organizations that many political analysts expect to thrive after the new campaign finance reform law takes effect this fall.

Known as 527 organizations, for the section of the tax code that regulates them, these groups can raise unlimited amounts of money and spend it on activities ranging from thinly veiled campaign ads to get-out-the-vote activities and political mailings.

The primary purpose of these tax-exempt groups is political activity. An IRS document indicates how broad their activities can be: ''influencing or attempting to influence the selection, nomination, election or appointment of an individual to a federal, state, or local public office or office in a political organization.''

With political parties unable to accept unlimited donations under the new law, many analysts warn that the cash will be diverted to 527 organizations. While a 2-year-old law requires that such groups disclose their financial activities to the Internal Revenue Service, campaign finance specialists say the system is woefully inadequate. And, they argue, if a bill pending in the House is passed, the benefactors and activities of these groups will become harder to track.

''Congress took a big step toward reducing the corrupting influence of money in our political system,'' Joan Claybrook, president of Public Citizen, said at a Capital Hill press conference. ''Unfortunately ... this historic reform will be undermined if this river of money is simply diverted to shadowy and highly partisan 527 groups.''

Overall, the 25 largest of these groups raised $67 million during the 18-month period ending last Dec. 31, according to a report released yesterday by Public Citizen.

The groups range from Pro-Choice Vote, which raised more than any other 527 organization during the period of time covered in the report, to better-known organizations like the League of Conservation Voters, Planned Parenthood, the Sierra Club, and the AFL-CIO. Eight of the top 10 527s were left-leaning, and more than two of every three dollars raised by the top 10 groups went to Democratic or liberal causes.

When the campaign finance reform legislation was passed, critics warned that the millions of dollars in unregulated soft money currently flowing into national party committees would end up flowing to such outside groups. As a result, disclosure by 527 organizations has gained new importance.

''Our 527 disclosure law has become a critical complement to that reform,'' said Senator Joseph I. Lieberman, the Connecticut Democrat who sponsored the 527 disclosure law and who founded and remains active in the New Democrat Network, a 527 group that ranked ninth in contributions in the study.

''We have to be sure that every dollar these groups receive and spend is reported to the IRS,'' said Senator Russ Feingold, the Wisconsin Democrat who was a lead sponsor of the campaign finance legislation, said yesterday at a press conference at which the Public Citizen report was released.

The report found that the top 25 groups failed to get adequate information - employer and occupation information - for two-thirds of their donors. This included the Republican Leadership Coalition, which failed to get the requisite information from any of the 2,019 individuals who contributed $200 or more to the group.

The report also noted the inadequacy of the IRS reporting system, which is not searchable by donor and not cross-referenced from organization to organization. ''You can't be sure of finding all of Enron's 527 contributions unless you open the electronic folders of more than 14,800 different groups,'' Claybrook said.

Campaign finance advocates argue that what disclosure there is could be undercut by a provision in a tax bill pending in the House.

The section is aimed at keeping state-based groups who file reports with a state from having to file duplicative reports with the federal government. The provision exempts groups that only have state-level activities and report information that is ''substantially similar'' to information required under federal law.

© Copyright 2002 Globe Newspaper Company

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