Clinton signs law to end anonymous political ads

WASHINGTON - President Clinton signed legislation Saturday to close a loophole that permitted unlimited secret contributions to groups trying to exert anonymous influence over the nation's political and policy agenda.

The law ''will help clean up the system by forcing organizations to come clean about their donors,'' the president said.

Speaking on the White House's South Lawn, Clinton welcomed the disclosure law as the first new restriction on political money in 20 years. Congress should move quickly to use it as a building block for comprehensive campaign-finance reform, he said.

Until now, Clinton said, private-interest organizations, such as pharmaceutical companies out to influence the debate over a prescription drug benefit for older Americans, could simply tap a reservoir of anonymous donors to ''pour millions of dollars into these efforts while keeping citizens in the dark.''

The law addressed an increasingly popular provision of the U.S. Tax Code known as Section 527, which permitted tax-exempt groups to use hidden, undisclosed donors to pay for advertising campaigns.

Giving an example, Clinton said an organization called Citizens for Better Medicare ''has flooded the airwaves with negative ads'' against an administration effort to provide a Medicare prescription benefit.

The group spent tens of millions of dollars in what he called misleading advertising, ''all to the benefit of drug companies,'' Clinton asserted.

''The American people have no earthly idea who Citizens for Better Medicare is, who is paying for the ads,'' he said. ''The bill I just signed lifts the curtain. It makes groups like this reveal the sources of all future funding.''

Officers of Citizens for Better Medicare did not immediately return a telephone call to their Washington office. The organization has described itself as ''a broad-based, bipartisan group'' that represents people and companies ''concerned with the health of Americans and our Medicare system.''

The White House said in a separate statement that a representative of the Citizens for Better Medicare has acknowledged that a majority of their funding comes from the pharmaceutical industry. The statement cited reports that the group used its Section 527 status ''to dedicate $65 million for television, radio and newspaper ads designed to lobby Congress and manipulate public opinion.''

Clinton said ''the damage may already have been done. ... The attack ads are already on the air.''

Invoking what he called the spirit of the new law, he asked Citizens for Better Medicare ''to respect the legislation, open their books and disclose the sources of the funds which have paid for these ads.''

Overall, the new law is a step forward, Clinton said.

''Let me say, this is a good day, and this is a good law, and I thank everyone for voting for it,'' Clinton said.

The White House contended that some Political Action Committees, or PACs, whose money normally is regulated, have claimed immunity from disclosure under Section 527.

The new legislation requires Section 527 groups to notify the Internal Revenue Service of their existence within 24 hours of their formation. Groups raising at least $25,000 a year would report contributions of $200 or more and spending of $500 or more. Reports would be due four times a year, plus immediately before an election. They should be available before voting this November.

Despite initial opposition from Republican leaders, the legislation was approved by huge majorities in each chamber of Congress. It passed the Senate Thursday by a vote of 92-6.

But campaign reform advocates say there are still ways to avoid disclosure. For example, groups affected by the law may reorganize themselves under the tax code.