INSIGHT-Key Democratic donors cool to pro-Obama Super PAC
* Many opposed the Supreme Court decision creating such groups
* Key liberal donors, Obama bundlers staying on the sidelines
* Facing massive Republican fundraising effort
WASHINGTON, April 6 (Reuters) - Two months after U.S. President Barack Obama reluctantly embraced fundraising for big-money "Super PACs," many major Democratic donors still have not given to such political groups because they are dismayed by how PACs are being used in the presidential campaign.
Billionaire investor George Soros and insurance executive Peter Lewis - who together have donated more than $50 million to Democratic political groups since 2004 - are among scores of donors close to the Obama campaign who remain on the sidelines as PACs that can receive unlimited donations seek to load up before the November election.
Their reluctance helps explain why Priorities USA Action, the Super PAC that supports Obama, has struggled to keep fundraising pace with rival Republican groups that have already spent tens of millions on the presidential race.
Many of the Democratic donors are alarmed that PACs, or political action committees, have been focused almost exclusively on spending tens of millions of dollars on ads to attack presidential candidates.
Nearly all of that spending has been by Republican-backed groups in the bitter race for that party's nomination - most of it by Restore Our Future, a PAC that supports likely Republican nominee Mitt Romney and has overwhelmed rivals Rick Santorum and Newt Gingrich with negative ads.
Obama, who opposed a 2010 Supreme Court decision lifting donation limits on PACs that operate independently from campaigns, was reluctant to embrace such groups. He changed course after seeing the cash being amassed on the Republican side and impact of the pro-Romney group's ads.
But many wealthy Democrats who would be potential donors to the pro-Obama PAC - including Lewis, chairman of the insurance giant Progressive Corp. - are turned off by the tactics of PACs in the presidential race.
"The Super PACs are nearly all about advertising, and he is loathe to contribute toward that," said Lewis adviser Jennifer Frutchy. "He is not currently planning to contribute to any Super PACs, congressional or presidential."
Lewis has contributed $5,000 to Obama's re-election campaign and $30,800 to Obama's joint fund with the Democratic National Committee, the maximum amounts allowed for an individual.
He has also given $200,000 to American Bridge, a Super PAC that is largely focused on opposition research, not advertising.
Soros spokesman Michael Vachon said the financier is "not focused" on this presidential election. Soros plans to donate to Obama and congressional campaigns but is undecided about giving to Super PACs, Vachon said.
"Like many people, he's alarmed by the (Supreme Court) decision and the growing role that money is playing in the election," Vachon said.
Last year, Soros gave $100,000 to Majority PAC, which helps Democratic Senate candidates, and $75,000 to House Majority PAC, which focuses on putting Democrats in the House of Representatives.
In the 2004 elections, Soros was the biggest donor to the Super PACs' predecessors, so-called "527" groups. The tax-exempt organizations were forbidden from "expressly advocating" for the election or defeat of specific candidates.
Such groups typically focused on registering Americans to vote and encouraging them to turn out for elections, said campaign finance specialist Anthony Corrado, a political science professor at Colby College in Maine.
"One of the problems with the Super PAC strategy is that it is largely a vehicle for financing negative advertising, and many donors don't want to invest into that type of activity," Corrado said.
"That individuals who are identified as major donors to progressive causes are reluctant to give to Super PACs is an indication of the challenges that Priorities USA faces in terms of competing with the Super PACs that will oppose them."
OBAMA BUNDLERS STAY AWAY
Obama's campaign still has a significant fundraising advantage over Romney's: The president has raised $120 million for his campaign and nearly $129 million for the fund used jointly by him and the Democratic National Committee.
But Restore Our Future and other Republican PACs could help Romney close that funding gap - and drive what most everyone involved expects to be a nasty ad war leading up to the Nov. 6 election.
The pro-Romney PAC had raised nearly $43 million by the end of February - and spent $40 million on ads, almost all of them attacking Santorum or Gingrich.
Priorities USA, the pro-Obama PAC, had raised about $10 million together with its nonprofit arm by the end of February, according to senior adviser Bill Burton.
Because of the Obama campaign's success in fundraising - it collected $750 million in the 2008 campaign - and the president's reluctance to accept Super PACs, even some of those on the Obama campaign's finance committee have not donated to Priorities USA.
Only nine of Obama's more than 400 "bundlers" - those who have rounded up at least $50,000 for the president's campaign - have given to Priorities USA, according to a Reuters analysis of Federal Election Commission filings.
At Priorities USA, Burton acknowledges that ideological concerns routinely come up in conversations with potential Democratic donors to the PAC.
"It is in the cocktail of issues that are obstacles to this Super PAC," Burton said.
Conservative activists, such as former George W. Bush presidential adviser Karl Rove, embraced Super PACs from the start, giving Republicans a head start in organizing a massive effort to unseat Obama and hold or win seats in the U.S. House of Representatives and Senate.
Beyond Restore Our Future, Romney's campaign will get the benefit of millions to be spent by groups overseen by prominent Republicans such as billionaire oil magnates David and Charles Koch, whose money helped fuel the conservative Tea Party movement in 2010, and Rove, whose American Crossroads group has said it plans to spend more than $250 million on the 2012 presidential and congressional races.
The billionaires bankrolling Republican presidential Super PACs - Las Vegas casino tycoon Sheldon Adelson, Houston homebuilder Bob Perry and investor Harold Simmons - have also indicated plans to help Romney.
On the Democratic side, the organization so far is much less unified and deep-pocketed.
Last month, the pro-Obama Priorities USA, Majority PAC and House Majority PAC created a single fundraising organization dubbed Unity 2012.
Members said the move was in part to ease donors' frustration with being prodded by multiple outside groups, giving them a single place to direct their checks. But for now the entity appears to be nothing more than a joint bank account as the PACs are still negotiating whether and how they may go beyond the shared account and help each other raise money.
On their own, as of the end of February, the Senate-focused Majority PAC had raised $2.5 million and House Majority PAC had raised $3 million.
People familiar with the state of Democratic fundraising say more and more donors are accepting the importance of resisting Republican Super PACs in the congressional races. Democrats lost a House majority in 2010 and are trying to make gains there while protecting a narrow majority in the Senate.
"Where you're going to see the biggest movement is the Senate Super PAC," said Heather Podesta, a Democratic lobbyist and influential fundraiser.
"While the giving looks flat at this point, it will rise exponentially. ... Democrats have been reluctant to adapt to the changes, but they are turning the corner." (Additional reporting by Alexander Cohen; Editing by David Lindsey)
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