By Dan Eggen and Scott Wilson
Washington Post Staff Writers
Monday, October 11, 2010; 1:08 AM

The White House intensified its attacks Sunday on the powerful U.S. Chamber of Commerce for its alleged ties to foreign donors, part of an escalating Democratic effort to link Republican allies with corporate and overseas interests ahead of the November midterm elections.

The chamber adamantly denies that foreign funds are used in its U.S. election efforts, accusing Democrats of orchestrating a speculative smear campaign during a desperate political year.

President Obama, speaking at a rally in Philadelphia, said "the American people deserve to know who is trying to sway their elections" and raised the possibility that foreigners could be funding his opponents.

"You don't know," Obama said at the rally for Senate candidate Joe Sestak and other Democrats. "It could be the oil industry. It could even be foreign-owned corporations. You don't know because they don't have to disclose."

The remarks are part of a volley of recent attacks by Obama and other Democrats on alleged foreign influence within the Republican caucus, whether through support for outsourcing jobs by major U.S. corporations or through overseas money making its way into the coffers of GOP-leaning interest groups.

The comments also come as Democrats attempt to cope with an onslaught of independent political advertising aimed at bolstering Republicans, much of it fueled by donations that do not have to be revealed to the public. The spending has added to a political environment in which Democrats are in danger of losing control of both the House and Senate.

David Axelrod, a top Obama adviser, said on CBS's "Face the Nation" that secret political donations to the chamber and other groups pose "a threat to our democracy."

Axelrod also took the unusual step of calling on the chamber to release internal documents backing up its contention that foreign money is not being used to pay for U.S. political activities. Democrats have seized on a report by a liberal blog alleging that dues from chamber-affiliated business councils could be used in that way.

"If the chamber opens up its books and says, 'Here's where our political money's coming from,' then we'll know," Axelrod said. "But until they do that, all we have is their assertion."

The chamber has vehemently denied the allegations, characterizing them as part of a desperate strategy to stave off a GOP takeover of Congress. The business lobby has vowed to spend up to $75 million on the midterm elections, primarily in favor of Republicans.

Chamber senior vice president Tom Collamore called the Democratic attacks "a blatant attempt to avoid a serious discussion of Americans' top priority - creating jobs and growing the economy."

The Democratic National Committee began airing ads over the weekend attacking the chamber as "shills for big business" and claiming: "It appears they've even taken foreign money to spend on our elections." The ad also attacks Karl Rove, former Bush administration political adviser, and Ed Gillespie, former Republican National Committee chief, for their ties to American Crossroads, an independent group also spending big on election ads this year.

"Tell the Bush crowd and the Chamber of Commerce: Stop stealing our democracy," the ad says.

Gillespie and Rove, both of whom say they are not formally connected to American Crossroads, bristled at the attacks during television appearances Sunday. Rove said on "Fox News Sunday" that there was "not one shred of evidence to back up that baseless lie" that foreign money was funding conservative campaigns.

"Don't accuse those who are playing by the rules of somehow doing something that is unethical or illegal," Gillespie said on "Face the Nation."

This year's record tide of spending has been fueled in part by a controversial Supreme Court ruling in Citizens United v. Federal Election Commission, which found that corporations could spend as much as they want on elections. Obama and Senate Democrats failed in their attempts to enact legislation that would have increased disclosure requirements for such spending and tightened restrictions on political activities by foreign-linked firms.

Democratic candidates have increasingly attacked Republicans such as Senate candidate Carly Fiorina of California for allegedly backing policies that encourage U.S. employers to move jobs to cheaper overseas labor markets.

The party has also seized on a report last week by ThinkProgress, an arm of the liberal Center for American Progress, documenting the chamber's ties to "AmChams" and other overseas business groups that pay dues to the U.S.-based group. The report said the chamber funds U.S. political activities out of the same account that collects foreign dues, and raised the possibility that the money could be unlawfully commingled.

Chamber officials say the group collects about $100,000 in dues from overseas affiliates and that the money is cordoned off for use on "international programs." The business lobby has declined to release further details, citing confidentiality rules governing nonprofits.

Josh Earnest, a White House spokesman, said Obama and other administration officials are not accusing the chamber of illegality nor calling for an investigation into its campaign spending. He also acknowledged that the White House has no specific evidence that the chamber is using foreign money in U.S. elections.

"The president is making a disclosure argument," Earnest said. "He's just saying for the good of democracy the chamber should disclose where it is getting its money and how it is financing these ads, and that all organizations should."

Asked if the White House believes midterm voters care about this issue, Earnest said "it goes to a larger point."

"You have Republicans in Congress standing up for corporate interests to block the president's agenda," he said. "And I think voters do care that some of the same corporate interests are funding these ads attacking Democrats."

Legal experts from both parties say the prohibition against foreign funding in U.S. elections is clear, and noted that Democrats have turned up no hard evidence that the chamber is violating that ban.

But advocates of stronger campaign-finance regulations also said there is little apparent policing of the restrictions either by the FEC or the Internal Revenue Service.

"It's very clear that current laws are not up to ensuring that this doesn't happen," said Meredith McGehee, policy director at the nonpartisan Campaign Legal Center. "It's one of the reasons that you'll continue to see these types of accusations, which are really one of the most volatile accusations you can make during an election."

eggend@washpost.com wilsons@washpost.com Staff writer Nia-Malika Henderson contributed to this report from Philadelphia and Carol D. Leonnig from Washington.