This story was reported by Will Evans of the Center for Investigative Reporting and Peter Overby of National Public Radio.

With Sen. John McCain having clinched the Republican presidential nomination, a new Democrat-funded group has already begun an ad campaign labeling him the “McSame” as President Bush.

The campaign represents the opening salvo from a consortium of top Democrat donors, operatives and unions that at this point has raised $6.75 million for the election season. The ad campaign is an example of what is expected to be a messy advertising battle among a slew of independently operating liberal and conservative groups, with many millions of dollars spent on each side.

The Center for Investigative Reporting and National Public Radio have traced the flow of money and interwoven connections behind the anti-McCain ads, which are being run by the Campaign to Defend America, a nonprofit set up last year by co-founder Wes Boyd, among others.

The group has run ads in Erie, Pa., over the past weeks, and plans to spend more than $1 million on the anti-McCain ad, according to a press release.

The group’s money comes from the Fund for America, a new “527 organization” run by major Democrats and top union officials to help coordinate the effort to take back the White House. The fund’s money comes from billionaire investor George Soros ($2.5 million), the Service Employees International Union ($2.5 million) and hedge fund manager Donald Sussman ($1 million), among others. Its leadership includes President Clinton’s former chief of staff, John Podesta; Taco Bell heir Rob McKay; and executives from the SEIU and a national teachers union.

“A trillion dollars in Iraq over the next 10 years. McSame as Bush,” declares the ad. “Tell John McCain we need a new direction. Not the McSame old thing.”

The Campaign to Defend America declined repeated requests for interviews.

As an independent organization, the CDA can raise and spend unlimited amounts of money, as long as it doesn’t coordinate with the candidate or party committee that it is helping.

The CDA uses lawyers who also represent the Democratic National Committee. For example, DNC general counsel Joseph E. Sandler helped incorporate the Campaign to Defend America in March 2007, according to documents. Sharing lawyers is usually not a violation of the coordination rule, as long as the lawyers don’t share or influence strategy, says election lawyer Kenneth Gross. But it can raise the question of the appearance of improper coordination. Gross notes that in 2004, a legal adviser to President Bush’s campaign resigned because he had also represented the independent group Swift Boat Veterans for Truth.

The McCain ad isn’t the only production of the Campaign to Defend America. The group is closely affiliated with Americans Against Escalation in Iraq (or “Iraq 2008”), a coalition of liberal groups that ran the “Iraq Summer” campaign last year, which organized grass-roots opposition to Republican members of Congress who opposed withdrawal timetables for the war in Iraq. The Americans Against Escalation coalition is an alias for the CDA, according to records filed with Washington’s secretary of state.

The Campaign to Defend America itself is organized as a 501c4 nonprofit organization, a form of tax-exempt group growing in popularity among political operatives because it doesn’t have to disclose its donors. As yet, the group has not received tax-exempt status from the IRS, according to an IRS spokesman.

Unlike 527s such as the Fund for America, the CDA wouldn’t have to disclose who funded its automated calls to voters, which have already been the target of complaints.

But running a TV ad about a candidate close to the date of an election is subject to stricter rules, which is why the CDA filed papers revealing its funding. In the filings, the CDA also claimed a special exemption that would allow it to use stronger wording than other organizations, explicitly urging voters to vote for or against a candidate.

Only organizations that don’t accept any corporate or union money qualify for that exemption. The CDA’s funder, the Fund for America, is based at the Service Employees International Union’s Washington, D.C., headquarters, counts union officials among its directors, and took in $2.5 million in union funds.

The Fund for America, however, sent only nonunion money to the CDA and reimbursed the SEIU for staff and office expenses, steps it must take for the CDA to follow the letter of the law, according to campaign finance experts.

Whether the CDA is violating the spirit of the rule is “a political or moral question,” says Larry Noble, former general counsel to the Federal Election Commission. “Your spirit may be different than mine. People can’t be prosecuted for violating the spirit of the law. If you’re allowed to do it, you’re allowed to do it.”

Listen to NPR’s on-air story and view a chart of the money and connections behind the Campaign to Defend America.

For more articles on money and politics and other important topics, go to the Center for Investigative Reporting’s Web site.

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