(Update at bottom after video: Obama campaign files complaint)

The gritty black and white ad soon to be unleashed in Indiana by the pro-Clinton American Leadership Project is tough:

"Our economy is in trouble, rising prices, unemployment, foreclosures, so what's Barack Obama's plan?...The Associated Press reported that Obama's proposals to cleanup financial markets had no specifics and the Washington Post wrote that what Obama would actually do remains a mystery in too many areas. Call Barack Obama and tell him to give Hoosiers a real plan to fix our economy."

Indiana's 84 delegates are up for grabs, with the candidates running neck and neck in the state, according to polls. Both Democratic contenders and The American Leadership Project (ALP), a pro-Clinton stealth non-profit operating outside the campaign finance laws, are planning on airing competing ads in the Hoosier state, but it's the ALP ad and the organization's $700,000 buy that has the Obama campaign scurrying to reporters in an effort to blunt the attack.

In a press phone call conference, Heather Higginbottom, the Obama Campaign National Policy Director said, "The substance of the ALP attack ad is baseless. Senator Obama has set out a plan with specific policies. He [Senator Obama] has a 48-page economy policy paper to strengthen the economy and it is posted on our website."

Obama supporter, State Representative Ryan Dvorak from Indiana said, "What we got is a lot of Hoosiers excited by a candidate that would bridge the political divide and then we saw Ohio and Pennsylvania inserting a lot of negativity. The ALP is just one of Hillary Clinton's pal groups, run by one of Mark Penn's employees. What I get from my district is that my people want to see a positive outlook."

The American Leadership Project operates under the IRS tax code "527" often referred to as 'stealth non-profits' because they can raise funds and pay for advertising outside the regulations required by the Federal Election Commission.

One famous 527 was the Swift Boat Veterans for Truth that ran negative ads against John Kerry, credited for helping to sink his White House ambitions.

Bob Bauer, Obama Campaign Chief Counsel said, "We've seen ALP before...and they are completely breaking the law. They've modeled themselves after the Swiftboat Veterans for Truth. It has been organized by her [Hillary Clinton] supporters and supported by her campaign and the consequences are going to be severe. The standards of the FCC are being completely violated. Sometimes people in desperate situations do desperate things."

Bauer stopped short of saying that he would file a complaint against the ALP but promised that the people involved in organizing and running the ad runs a high risk of being prosecuted by federal authorities.

With the race up for grabs in the last delegate rich state left on the map and Obama's recent losses in Ohio and Pennsylvania, 527's with their rich coffers and scant oversight by federal watchdogs will figure larger in this primary race for the nomination than ever before.

This video is from American Leadership Project, broadcast April 29, 2008.

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Obama campaign files federal complaint

Just before Barack and Michele Obama land in Indiana for two days of stumping before next Tuesday’s primary, the Obama Campaign filed a complaint with the F.E.C. charging the pro-Clinton organization, the American Leadership Project (ALP) is “knowingly violating the federal campaign finance laws” by running attack ads against Senator Obama in Indiana and operating as a ‘527’ group instead of filing as a Political Action Committee (PAC).

Calling the American Leadership Project a “Swiftboat wannabe” and alleging they are affiliated with the Clinton campaign, Obama campaign chief counsel Bob Bauer told a group of reporters the ALP group is led by the son of one of Mrs. Clinton’s Indiana state co-chairs and has spent $700,000 to run ads specifically attacking at one candidate – Senator Obama – for the direct benefit of another – Senator Clinton and “that’s illegal and outside the scope of a ‘527’ group."

The finer distinctions of a Political Action Committee versus a ‘527’ non-profit group are significant to campaigns because a ‘527’ has no fundraising limit and they are not subject to campaign finance rules. They cannot coordinate their activities with a particular campaign or political party and are subject to the IRS ‘527’ laws – not the Federal Election Commission.

Normally, ‘527s’ don’t figure large in most primary contests but the 2008 primary campaign has broken all the usual expectations.

In his 64-page filing with the FEC, Bauer alleges the ALP was organized specifically to defeat Senator Obama by helping Senator Clinton when she was having trouble raising money and that there were numerous statements made to the press and in memos by the ALP organizers, supporters, and their lawyers which will substantiate the Obama campaign claims.

“This was a cold calculation by the organizers and financial supporters of ALP that they could violate the rules and not get caught,” said Bauer.

According to Bauer, the new FEC rules designed to reduce the impact of groups like the Swiftboat Veterans for Truth, require any groups set up expressly to support or oppose a particular candidate to follow the limits and reporting requirements of the “normal political action committees.”

The complaint was filed because “we wanted to send a message that 527 groups weren’t free to ignore the law as the campaigns head into the general election,” said Bauer.

If the Federal Election Committee doesn’t act on the complaint, Bauer said, the Department of Justice can take up the case.

“There are very, very stiff penalties for knowing and willfully violating this federal law and the group could receive fines of millions of dollars,” said Bauer.

The FEC has not been known to act quickly on these sorts of complaints and it’s questionable whether the Department of Justice will take up the case if the FEC hands it over to them.

“This organization has made the decision that it will run this risk and try to run out the clock to give it the advantage of spending without having to shut down before they run out of money,” said Bauer.

Time is on the side of ‘527s’ in such cases and that doesn’t bode well for the Obama campaign next Tuesday while hundreds of the ALP ads are shown on television stations across Indiana.