Mitt Romney's Big Campaign Money Shell Game

When Republican presidential front-runner Mitt Romney's political action committee released its 2010 fundraising numbers on Monday, the totals impressed party officials. But buried beneath the $6.3 million 12-month total are maneuvers that while intended to stay within the letter of existing federal election law threaten to stray outside the spirit.

Romney's filings provide rich details on the five state political action committees that allow the former Massachusetts' governor to maintain the core of a presidential campaign—more than 15 former staffers, campaign consultants, and policy advisers, including 2008 campaign manager Beth Myers—without the constraints that come with an official announcement.

The former Massachusetts governor's use of state PACs emblemizes the strange kabuki dance that has become a presidential election tradition under current election laws. Specifically, the distinction of what a candidate can do before he officially "declares"—and what that even means in a political world of perpetual campaigning. And Romney, far more than the dozen or so others eyeing the nomination, seems to be more aggressive and creative in terms of capitalizing on his non-candidate candidate status.

Here's the way the law currently works: state PACs are supposed to be used for state and local candidates and issues, while federal PACs are more broad. Sarah Palin, for example, only has a federal PAC. The distinction is important, because state PACs are a convenient way to circumvent campaign donation restrictions. While a donor can only give $5,000 maximum to a federal PAC, he can give far more by contributing money to a national figure's different state PACs. (Especially since some state PACs have no donation limits.)

This has helped Romney raise extra money. The Daily Beast found at least 20 individuals who, just in the last five months of 2010, gave at least $5,000 to more than one of Romney's state PACs, which carry the same name as his federal PAC, Free and Strong America.

Moreover, once Romney declares, all this PAC funding will go away. All individual donations at that point, limited to $2,500 in the primaries and $2,500 in the general election, must go through his campaign. Which is one of the big reasons why not a single candidate (besides long shot pizza mogul Herman Cain) has thrown his or her hat into the ring—or even formed an exploratory committee, the traditional bridge between PACs and full-fledged campaign.

While Romney's efforts seem contrary to the spirit of election law, experts say they seem quite legal—depending on the former Olympics chief's intent.

Most of his Alabama PAC disbursements are entirely unrelated to the Alabama, notably the salaries of many of Team Romney's senior staff.

• Mark McKinnon: The GOP’s Bachmann Strategy• Which States Squandered Their Stimulus Money?"If you are spending money out of a non-federal PAC then you shouldn't be testing the (presidential) waters," explains Lawrence Noble, the former general counsel for the Federal Election Commission. "You have to look at everything else he's doing and ask, 'Has he crossed over that threshold?'" It's possible, Noble adds, that if a complaint is made after Romney becomes a candidate, the FEC could investigate.

While four of the PAC states host early primaries and caucuses—Iowa, South Carolina, New Hampshire, and Michigan—the fifth, Alabama, raises the most questions. Alabama election law has no individual donation restrictions. So Eldon and Regina Roth from South Dakota gave $35,000 each to Romney's Alabama PAC (in addition to hefty amounts in Iowa and New Hampshire). New York Jets owner Woody Johnson and his mother each gave $15,000. And so on.

While the Alabama PAC donated to 15 Alabama races—the kind of expenditures a state PAC is supposed to make—most disbursements are entirely unrelated to Alabama, notably a portion of the salaries of many of Team Romney's senior staff (the federal PAC covers half), despite the absence of any inherent campaign ties to the state, or early voting schedule. There are also payments to the Boston-based document shredding company "Shred-It Boston" and a payment to a well-known GOP joke writer, Doug Gamble. Likewise, investigation of the South Carolina PAC expenses show it was used to pay taxes to the City of Lexington, Massachusetts, a New Hampshire caterer and dues to the Massachusetts Board of Bar Overseers Association.

Romney is far from the only potential 2012 candidate using state PACs—both former Minnesota Governor Tim Pawlenty and Mississippi Governor Haley Barbour have state PACs as well as federal political action committees. "Romney didn't invent it," says Larry Levy, election law expert at Bracewell Giuliani who also worked on Rudy Giuliani's 2008 primary bid, "He has just done it more effectively or to a greater extent than other PACs."

Romney's committee says they are playing by the rules. "We will continue to do the things we have always done: push conservative ideas and policies, assist Republican candidates, and get out the PAC's message about smaller, more responsible government," wrote Romney's longtime aide, senior adviser Eric Fehrnstrom, in an email to The Daily Beast. "If Mitt declares as a candidate for president, this will obviously change."

He added all of the Romney state PACs are "active and there are no plans to change their status right now."

"It begs the question," says Levy, " 'Are you running for president?' If you are doing the exact same thing you did the last time you ran for president, but you say, 'No I'm not a candidate—I'm not subject to the rules of a candidate'—isn't that somewhat disingenuous? However, that's what everyone does from every party. For example, it was reported that the president didn't announce the location of the Democratic convention because he hasn't announced."

So how much longer can Romney credibly claim to not be a presidential candidate?

On Good Morning America Tuesday, promoting a new paperback edition of his book on American exceptionalism, No Apology, Romney—tieless and tan— all but admitted that he was in for 2012, "I'm sure I'm going to avoid some of the mistakes I made last time, but I'll make new ones this time." Asked directly if he was running, "I'm inclined to make sure there's somebody in the race that really understands how the economy works and can get jobs back."

Shushannah Walshe covers politics for The Daily Beast. She is the co-author of Sarah From Alaska: The Sudden Rise and Brutal Education of a New Conservative Superstar. She was a reporter and producer at the Fox News Channel from August 2001 until the end of the 2008 presidential campaign.

John Avlon's new book Wingnuts: How the Lunatic Fringe is Hijacking America is available now by Beast Books both on the Web and in paperback. He is also the author of Independent Nation: How Centrists Can Change American Politics and a CNN contributor. Previously, he served as chief speechwriter for New York City Mayor Rudy Giuliani and was a columnist and associate editor for The New York Sun.