City's campaign contribution limits at heart of Fattah case

At the heart of the federal indictment unsealed Wednesday against U.S. Rep. Chaka Fattah are Philadelphia's campaign finance limits, and the legal battle he lost more than eight years ago to overturn them during his unsuccessful run for mayor.

Fattah had a plan as he prepared in 2006 for the 2007 race: Raise six-figure contributions from wealthy donors and, if challenged, use the courts to overturn the limits, which became local law in January 2004.

The conventional wisdom in political and legal circles at the time was that those limits would not survive a legal challenge.

Michael Nutter, still a member of City Council in April 2006 as he considered running for mayor, also had a plan. He sued Fattah and other potential candidates in the 2007 Democratic primary, asking a judge to force them to abide by the law.

A Philadelphia judge, as expected, overturned the limits in December 2006. Commonwealth Court put the limits back in an April 2007 ruling that landed just six weeks before the mayoral primary.

As Mayor Nutter says now, that ruling "could set you into a bit of a scramble" as a candidate for mayor.

For Fattah, according to federal prosecutors, that scramble resulted in "an illegal $1 million campaign loan" in April from Albert Lord, the former chief executive officer of Sallie Mae, the student loan financing corporation.

Lord, who is not charged with a crime, had been one of the wealthy donors who supported the Fattah for Mayor Exploratory Committee, which raised $615,000 in 2006.

Lord gave $100,000. George Weiss, founder of a money management firm, and the family of Michael Karp, a real estate investor, each kicked in $100,000. Philanthropist H.F. "Gerry" Lenfest, now the owner of The Inquirer, the Philadelphia Daily News, and Philly.com, gave $200,000.

Nutter said Wednesday that those six-figure donations triggered his lawsuit.

The limits were $2,500 for individuals and $10,000 for political action committees until Tom Knox, another Democrat running for mayor, triggered a provision that allowed the limits to be doubled when he lent his campaign $5 million.

Asked how Fattah and his other primary rivals responded to the limits being upheld, Nutter quoted the boxer Mike Tyson as saying, "Everyone has a plan until they get punched in the face."

"I think for most of the candidates, part of their strategies was to get big contributions," he added.

Nutter said his campaign could not have kept up with a rival who could raise $100,000 with a single phone call.

"Our entire strategy was on small-dollar donors," he said. "No one was giving me $100,000, not $50,000, not $25,000. Nowhere near that."

Sandra Burke, the lawyer who represented Nutter, said the limits had a "beneficial impact" on local politics.

"The task of raising smaller contributions from many people as opposed to raising a few enormous contributions from a few rich people, it really goes to the heart of the democratic process," Burke said.

Nutter won the primary; Fattah finished fourth.

Fattah pressed on with an appeal of the Commonwealth Court ruling. The state Supreme Court in December 2007 agreed with the lower court, keeping in place the limits.

Fattah's fall started last August, when his longtime political aide, Greg Naylor, admitted in federal court that he helped conceal the $1 million loan.

A similar plea followed in November by Tom Lindenfeld, Fattah's political consultant. Naylor and Lindenfeld have been cooperating with federal prosecutors in the Fattah case.

Fattah's indictment says $400,000 was unspent and returned to Lord. Fattah, Naylor, Lindenfeld, and three more of the congressman's associates are also accused of "stealing charitable and federal grant funds" to repay the remaining $600,000.

Those funds passed through an educational nonprofit founded by Fattah and run by Karen Nicholas, one of his former staffers, and a for-profit firm run by Robert Brand, husband of a former Fattah staffer.

Nicholas and Brand were charged along with Fattah and Bonnie Bowser, the congressman's chief of staff, who is accused of helping to conceal the $1 million loan and its repayment. Lobbyist Herb Vederman was charged in the 29-count indictment in matters unrelated to the loan.

Nutter predicted that campaign finance regulation in the city "will continue to evolve as new and different things happen."

He pointed to legislation he signed Thursday requiring more campaign finance disclosures from so-called independent expenditure groups, which raise and spend money to influence elections without coordinating with candidates. Such groups outspent the candidates for mayor in this year's primary campaign.

"I think the city is in a much better place with the limits in place, given the unfortunate history of some of the things that have happened," he said.

215-854-5973 @ByChrisBrennan