WASHINGTON — In May, the Supreme Court struck down limits in place for two decades that barred federal candidates from raising money indefinitely to pay off personal loans.
Three months later Sen. Ted Cruz, who’d challenged the 2002 ban, was $545,000 richer. To set up the test case, he’d left $10,000 unpaid at the end of his reelection effort in 2018, hoping the courts would let him recover the far bigger sum he’d spent winning the seat six years earlier.
“It’s a fantastic payoff,” said Craig Holman, campaign finance lobbyist at Public Citizen, which opposed the Texas Republican in court.
At least 18 current lawmakers and former candidates have availed themselves of the flexibility Cruz engineered to recover loans from campaigns of yore, according to a review of FEC filings since the Supreme Court’s ruling in May by The Dallas Morning News.
Together, they’ve recouped $5 million they’d written off and thought they’d never see again.
John Ratcliffe, who gave up a Dallas-area House seat in May 2020 to serve as Donald Trump’s director of national intelligence for eight months, recovered $225,300 from 2014, when he ousted the late Rep. Ralph Hall in the GOP runoff.
David Perdue is the big winner so far since Cruz paved the way. He’s recovered $3 million from 2014, when he snagged an open Senate seat in Georgia that he lost in a high-profile runoff in early 2021.
Several Democrats have also gotten in on the action so far.
“Sen. Cruz has had numerous current and former senators and House members thank him. Democrats won’t want to admit it publicly, but they’re grateful, too,” said Cruz spokesman Steve Guest.
Rep. Vicente Gonzalez, D-McAllen, wrote off $1.35 million in personal loans from his 2016 campaign. He told the Federal Election Commission in July that he wants it back. He has since informed the FEC that he has unforgiven that loan, though he hasn’t yet tapped his campaign funds to recover any of it.
A bruising reelection fight depleted his campaign account. But there’s no hurry. Under the Supreme Court’s ruling, candidates can now recoup debts indefinitely.
To Holman and other watchdogs, that’s a problem.
“If Ted Cruz had lost, he wouldn’t have gotten that $500,000 from anybody, because he’s no longer in a position to reward the donors,” he said. “Donors aren’t going to give you money just to be nice.”
Public Citizen, Campaign Legal Center and other watchdog groups warned the justices not to let donors ingratiate themselves by cutting checks that effectively end up in a politician’s personal account. The high court rejected that view 6-3.
Paul Smith, senior vice president at the Campaign Legal Center, which also defended the restrictions Cruz got overturned, drew a distinction between a senator taking donations that end up in his personal account and an ex-candidate tapping unspent campaign funds to repay an old loan.
“You can’t give somebody a $3,000 gift when they’re in office,” he said, but “the Supreme Court says he has a First Amendment right to do what he’s doing” that outweighs any risk of corruption.
Many more ex-candidates will likely dust off old loans now that Cruz opened the door.
In theory, celebrity doctor Mehmet Oz could eventually recoup the $23 million he put into the high-profile Senate race he just lost in Pennsylvania.
The problem for candidates like him, though, is that donations dry up fast in defeat.
“As a practical matter, if you’re not a current officeholder, or you’re not going to be running for a new office, it will be difficult to raise money to pay yourself back,” said Brett Kappel, a lawyer who specializes in campaign finance.
The limits at issue come from the Bipartisan Campaign Reform Act of 2002, commonly known as McCain-Feingold.
One provision bars campaigns from using post-election donations to repay more than $250,000 for candidate loans — the idea being that if winners can ask donors indefinitely for help paying off their debts, it would be far too easy for wealthy backers to endear themselves.
The Federal Election Commission clarified that with a regulation allowing 20 days after Election Day for candidates to recover as much as they could. Then the $250,000 limit kicked in.
In 2012, Cruz stunned the Texas GOP establishment by forcing Lt. Gov. David Dewhurst into a runoff (Dewhurst led 45-34 in a 9-person field), then trouncing him on the way to winning the Senate seat.
Dewhurst put nearly $20 million of his own money into the race. To keep up, Cruz loaned his campaign $1.43 million. When the deadline passed, Cruz had left $545,000 on the table.
“Sen. Cruz invested his entire liquid net worth into the campaign,” said Guest, his spokesman. “Thankfully — due to the tremendous hard work of thousands of grassroots activists — it produced a 14-point victory in the [runoff] and a 16-point victory in the general election.”
The senator has listed that loan as an asset marked “accounts receivable” on annual financial disclosure reports ever since.
“Sen. Cruz has always believed that this law was an unconstitutional restriction designed to protect incumbents,” said Guest. “The 6-3 decision was a victory for our democratic process by making it substantially easier for challengers to take on career politicians.”
Cruz’s $10k gambit
In 2018, Cruz decided to tee up the legal fight that yielded success in May.
The day before he defeated Democrat Beto O’Rourke, he loaned his campaign $260,000. The campaign didn’t need it; he’d raised $46 million.
Over the next month, the Cruz campaign repaid Cruz the person all but $10,000. Cruz had standing to challenge the law.
At the Supreme Court, his lawyer told the justices that if he can’t be bought for $250,000, another $10,000 would make no difference.
In the majority opinion, Chief Justice John Roberts noted that most states impose no limit on the use of post-election donations to repay candidate loans, and “the Government is unable to identify a single case of quid pro quo corruption in this context.”
Cruz drew $555,000 from the campaign account on Aug. 5 to close out the old loans.
He’s never asked donors to help pay off his stranded debt, Guest said.
Cruz is also a prolific fundraiser — $2 million reported to the FEC just since the May court ruling, from 20,000 donors — so there’s no way to say exactly who helped.
The current federal cap is $2,900 per person per federal election, primary and general. It would take at least 115 donors to cover Cruz’s debt, which supports the argument that Cruz and other politicians have made that such donations are too diluted to allow for corruption.
“All of the generous donations over the years — collectively, over 2 million contributions — are aggregated, so it’s impossible to identify any particular donations that went to loan repayment. Millions of grassroots donors, banding together, are a powerful force to defeat career politicians,” Guest said.
Holman pointed out that the funds at issue paid for ads, salaries and robocalls a decade ago. So, he said, at this point “that money is not going to pay for Ted Cruz’s campaign. It’s money that’s going directly into Ted Cruz’s pocket.”
The News has identified 15 Republicans and three Democrats who’ve recovered loans under the new rules. Among them:
- Rep. Vern Buchanan, R-Fla., a leading contender to chair the tax-writing Ways and Means Committee. Elected in 2006 with a net worth of $100 million, he took on debt in the 2020 race. In July, he repaid himself $375,000.
- Sen. Cynthia Lummis, R-Wyo., collected $140,500 from her campaign war chest on Sept. 30, wiping out a debt from 2020, when she won the seat.
- Four-term Rep. Jody Hice, R-Ga., gave up his seat to challenge Georgia Secretary of State Brad Raffensperger, who gained national renown for resisting Trump’s pressure to “find” enough votes to reverse his defeat. He lost the primary despite Trump’s backing. Then he recouped $65,100 from a failed congressional bid in 2010.
- Rep. William Timmons, R-S.C., won reelection unopposed this month. He recouped $202,434, nearly all of it from 2018, when he won the seat.
- Rep. Chris Jacobs, Republican from a suburb of Buffalo, N.Y., won his seat in 2020 with backing from the NRA and Trump. After a gunman massacred 10 Black residents in Buffalo in May, Jacobs embraced a federal assault weapons ban. Support dried up. He dropped out of the June primary. On Sept. 13, he cleared out his campaign account, recovering $205,688, about a third of the debt from 2020.
Gonzalez, who defeated GOP Rep. Mayra Flores this month in a marquee South Texas race, loaned his campaign nearly $1.9 million in 2016. He recouped some and forgave the rest: $1.35 million.
He wants it back.
“But for the law and regulations at the time, Rep. Gonzalez would have sought full repayment … and wishes to reinstate those loans now for repayment,” his lawyer wrote to the FEC in July as the agency weighed a request for an advisory opinion from Harley Rouda.
A one-term Democrat from California, Rouda unseated 15-term GOP Rep. Dana Rohrabacher in 2018. He lent $1.6 million to the cause and got back all but $902,872 before hitting the McCain-Feingold cap.
On Aug. 31, the FEC gave its blessing to Rouda and others who want to revoke forgiveness of old debts and take repayments from leftover campaign funds — or from future donations.
Gonzalez revoked forgiveness of his old loans that same day, Aug. 31, as he later informed the FEC.
As of mid-October, his campaign balance was $475,000 and he hadn’t tapped it yet for that purpose. But he has at least two more years in Congress to woo donors.
Rouda took $116,245 from his campaign account on Sept. 19. That left $48,609, with dim prospects for replenishment.
“You now have members of Congress who are going to be out soliciting money, and the people that they’re soliciting it from will know that it’s going to go directly to them,” said Kappel. “That was the moral hazard that Congress was concerned about when they passed the law. ... But, you know, the Supreme Court held otherwise.”