Citizens for Responsibility and Ethics in Washington filed an FEC complaint today against Sarah Palin and the Republican National Committee for violating federal election law in spending $150,000 outfitting the Alaska governor.

The group claims the excessive spending is a violation of campaign finance law which specifically prohibits candidates from using campaign funds for personal use.

"It is ridiculous that RNC would spend $150,000 to outfit a vice presidential nominee and her family at any time, but it is more outrageous given the dire financial straights of so many Americans and the state of our economy," CREW director Melanie Sloan said in a statement. "If the RNC had an extra $150,000 to throw around, there were better alternatives than pricey designer clothes."

Earlier this week, the RNC responded to possible violations of the Federal Election Campaign Act by stating that all of Palin's clothes would be donated to charity after the election.

Odds are looking good Sen. John McCain will get a favorable ruling next week regarding his request to withdraw from the public campaign financing program.

Democrats complained when McCain sought to opt out of the program -- and its spending limits -- even after he took out a loan that hinged on his participation. A final decision comes next week.

Roll Call reports:

In the recently rebooted agency's first major test, the FEC distributed a draft opinion Thursday siding with McCain, whose fate the commission's three Democrats and three Republicans must still decide at the public meeting next week.

The agency's legal department concluded that McCain did not break the law by taking the loan -- and then exceeding contribution limits -- despite warnings to the contrary from since-ousted FEC chairman David Mason, who had a tense back-and-forth with the campaign in early 2008.

"We believe that the matching payment act does permit candidates to withdraw after they have been declared eligible," the FEC's lawyers concluded in their new draft guidance. "Although no eligible candidate may exceed the expenditure limits, the statues simply do not say whether the commission has discretion to reverse its eligibility determination and decertify a candidate."

Dr. Ada Fisher lost the 2006 bid for a North Carolina Congressional seat by a wide margin -- 34 points.

But that didn't discourage her fundraisers, BMW Direct, a Washington-based political firm.

Just a few days after Fisher lost to Rep. Mel Watt (D-NC), an official from the fundraising firm emailed the candidate about mounting a post-election money drive -- and maybe signing on for another race.

Ada,

Attached is a debt reduction letter. We still owe outside debt to vendors and this will go to pay it off.

I would also like to set up a time to speak with you about running again. With more time to mail, I think we could do even better.

Timothy

That's an email from Timothy Webster, a founder of BMW Direct, and it was provided to TPMmuckraker by Fisher. She wasn't very happy with the firm, which raised more than $400,000 on her behalf but, after taking out the costs of its own direct mail effort, only provided her campaign with about $30,000.

She also provided us with a draft copy of a "debt reduction letter" drawn up by BMW Direct.

Fisher told us she's not sure whether she ever signed off on the letter and agreed to let BMW send it out.

Read more to see the letter's full text.

Late Update: Jordan Gehrke, BMW Direct's director of development, said in a written response to a query from TPMmuckraker: "To the best of my knowledge we did no debt reduction letters for Dr. Fisher."

Read more »

Dr. Ada Fisher doesn't have much good to say about BMW Direct, the Washington political firm that raised money on behalf of her 2006 bid for a North Carolina House seat.

"They sort of -- what shall I say? -- screwed me," Fisher said in a recent interview.

BMW Direct raised more than $400,000 for Fisher during the last election cycle, but only about $30,000 made it back to her to use in her campaign against U.S. Rep. Mel Watt (D-NC). Sound familiar?

Fisher complained that she never understood where the money raised on her behalf was going. She did not know that many key vendors used by BMW Direct were owned or operated by BMW staffers.

"They make it seem like each of these people is a private entity. But as you listen more and more and you get smarter, you realize they all work together," Fisher said.

BMW Direct and its staff operate a handful of companies out of a downtown Washington office building -- data processors, donor-list rentals, mail services, etc.

Fisher said BMW Direct urged her to "hire" its FEC compliance officer, Scott Mackenzie in Washington, to serve as her campaign treasurer, as he has done on other long-shot campaigns. But she refused, she said, and had a friend serve as treasurer.

So BMW Direct raised the money on her behalf, processed it and then doled out information and cash at its own pace.

Just a day or two before FEC filing deadlines, the firm would send Fisher large files of fundraising data for her to copy and submit under her name.

"We'd fill out the FEC forms based on the information they gave us. They would just tell us: This is how much money you raised," Fisher said.

Fisher's biggest complaint was that the fraction of money she did actually receive came too late. The firm never told her how much money to expect and was unable to plan for the fall campaign.

In late September 2006, she received her first check from BMW Direct for $5,000 and several similar checks followed in October.

"By that time, it was too late," she said.

But according to BMW Direct, Fisher's case was a unique.

Jordan Gehrke, BMW Direct's director of development, agreed that the fundraising efforts for Fisher were not as successful as those of other clients.

That's because she contacted the firm later than most candidates, after the election cycle was underway, Gehrke explained. That shortened the window of time for fundraising, which is critical for direct-mail efforts.

"In Fisher's case, we started eleven months before the election. She was an attractive candidate, and we believed her appeal would enable her to outperform the usual time window," Gehrke said in a written response to questions from TPMmuckraker.

"We firmly believed in her candidacy, and we think we would have been very successful if we had had another six months. For all kinds of reasons, fortune had its say, and things did not work out as we hoped."

The fees -- which in Fisher's case took up more than 90 percent of the total money raised -- are clearly explained to all clients from the outset, Gehrke said.

"We have a very clear contract. We take a lot of time going through this stuff with our clients yo make sure they understand the process....Nothing gets paid without the clients' approval," he said in an interview.

Even if a candidate loses a race, Gehrke said, the direct mail effort is still a valuable way to build a candidates name recognition and shape perceptions about the Republican Party.

"Is it worth it? Yes. If she doesn't win this year, maybe she ends up turning it into a state senate seat a few years later and then runs for congress again," Gehrke said. "Going into a district where Republicans have not traditionally competed and having a black doctor on the ballot is a way of saying this is not your father's Republican Party. This is what building a party is about. This is what expanding your coalition is about. The point is, it has value."

It was a spectacular 2nd quarter for Deborah Travis Honeycutt and her campaign's direct-mail firm, BMW Direct.

We told you last week about how the conservative Washington firm was raising big bucks for the Georgia Republican but eating up almost all of that money in fees. Interestingly, Honeycutt doesn't complain about the firm's tab.

Now Reader BK points out new FEC disclosures filed Saturday showing the firm raised almost $1 million on Honeycutt's behalf during the second three months of 2008, but spent at least $736,000 of that on fees related to a massive nationwide direct-mail campaign.

That brings Honeycutt's total raised so far this election cycle to almost $2.6 million, according to the FEC report (even though she has no challenger for next week's primary election). That puts her among the biggest fundraisers nationwide in this election cycle.

Yet despite the astounding sum of cash, her campaign in suburban Atlanta remains oddly low profile.

While she raised almost $1 million during the second quarter, she spent less than $50,000 in her home state -- including a $4,962 filing fee, $6,000 on "mobile truck advertising," $3,400 in canvassing fees, $2,250 on a local public relations consultant, office rent of $167 per month and a handful of travel expenses. She also gave $5,850 to her campaign manager and husband, Andrew Honeycutt, for expenses listed as "consulting -- campaign strategy."

Honeycutt now has about $290,000 cash on hand and about $175,000 in unpaid debts for direct-mail services.

She's facing Rep. David Scott, a three-term incumbent from an overwhelmingly Democratic district.

In 2006, she lost to Scott by 38 points. Maybe she'll do better this year.

Raising millions in campaign cash on behalf of someone else and spending almost the same amount on the fundraising process itself is just part of the business, according to staffers at the firm BMW Direct.

The company recently explained to ProPublica that even if a candidate doesn't actually keep much of the money, it's building a "donor file."

"One of things you do when you go out prospecting is build a donor file and that costs money," Scott Mackenzie, a consultant for BMW Direct and Chavez-Ochoa's campaign treasurer, said. "Once you build a house file and start mailing to the list, that's when you start making the money."
...
"We don't feel it's right that all these candidates should run unopposed," said Mackenzie, and direct mail is the "only way if a candidate doesn't have name recognition or personal finances to run their campaigns."

Where would the little guys be without the help of firms like BMW Direct?

"We like working with people who are long shots," Jordan Gerhke, the firm's director of development, said. If not for the firm's efforts to help little-known candidates, only "a bunch of millionaires" would be able to afford a run, he said.

BMW even recruits some of those longshot candidates. For example, ProPublica found Brian Chavez-Ochoa who briefly ran against Rep. Nancy Pelosi (D-CA) in 2006. How did this obscure candidate get into the race?

"I was asked by a group in D.C. to put my hat in the ring, so I did," he told ProPublica. That group was BMW Direct, which proceeded to raise -- and spend -- more than $220,000 on his behalf.

It may not be new, but that doesn't mean donors like it.

Thanks to help from TPM Reader BK, we uncovered some congressional testimony from last year about BWM Direct, the Washington direct marketing firm that raises money for GOP candidates, among others, but doesn't give them much of it.

The House oversight committee held a hearing on December 13, 2007, about veterans' charities. The legislators heard a complaint from Bonnie Carroll, the executive director for the Tragedy Assistance Program for Survivors, or TAPS, a group that provides support to families of fallen combat troops.

Carroll had this exchange with Rep. Elijah Cummings (D-MD) at the hearing on Dec. 13, 2007. She doesn't identify the firm during the hearing, but in a phone interview with TPMmuckraker this week she confirmed she was referring to BMW Direct:

Mr. CUMMINGS. Well, Let me ask you this. How much money did you make under the telemarketer? How much money did you make?

Ms. CARROLL. If I could just defer to our CFO here.

Mr. CUMMINGS. Sure.

Ms. CARROLL. It is upset,ting to say that our income was approximately $50,000 to their total of $500,000.

Mr. CUMMINGS. Wait a minute. Let me get this right. I know I didn't hear that right. Let me get this right. They got $500,000, and you got $50,000?

Ms. CARROLL. Yes, sir, that is correct.

Mr. CUMMINGS. Jiminy Christmas.

Ms. CARROLL. And we terminated that very quickly, and it was a regrettable experience.

Carrol provided us with this data on how their deal with BMW played out between 2005 and 2007:

In 2005, the firm raised $371,375 and spent $366,375, giving TAPS a net of $5,000.

In 2006, the firm raised $187,394 and spend $176,310, giving TAPS a net of $11,084.

In 2007, the firm raised $3,187 and took no expenses out, giving TAPS a net of $3,187.

In total, BMW Direct raised $561,956 on behalf of TAPS, spent $542,685, giving TAPS a net of $19,271.

Let's do the math. That's...3.5 percent. So all those people who thought they were giving money to support widowed wives of slain combat troops, less than a nickel on the dollar actually did.

While TAPS was disappointed with how much money they ultimately received, Carroll said BMW Direct didn't misrepresent itself from the outset. "BMW was forthright," she said, and was not "raising false expectations on either instantaneous or total economic returns."

We also talked to the National Black Republican Association, which used to have BMW Direct raising money for its Black Republican PAC. Frances Rice, the group's chair, said they stopped working with BMW Direct last year. The two parties had a "disagreement over strategy." Rice declined to elaborate.

After taking a hard look at the candidates who work with BMW Direct, the conservative Washington political firm that appears to keep a lot of the money it raises on behalf of other people, we've found an interesting pattern.

The firm appears to have two different types of clients.

For some candidates -- the little known longshots who are challenging incumbents -- the firm raises considerable amounts of money with nationwide mailings and spends almost all of that money on its own direct mail campaign. The monies raised by BMW go into the campaign's accounts then are quickly expended with various fees back to BMW or its affiliates, usually by the end of the same FEC reporting period.

For other candidates -- ones who are already in office and have a substantial campaign operation -- the firm appears to charge less in fees and does not allow expenses to eat up all the money pulled in. These candidates actually have some cash on hand at the end of the reporting period.

For example, take a look at Rep. Geoff Davis, the Republican from Kentucky. According to his most recent quarterly FEC report, he spent a lot of money on direct mail expenses -- $88,674.56 -- during the first quarter. But that was less than 60 percent of his total expenses. Davis also appears to have other normal campaign activity, where he is paying people in his home district for "administrative support," rent, catering campaign events, and paying mobile phone bills. (And $1,521 worth of tickets to the Kentucky Derby.)

And most importantly, while most of his campaign contributions were from outside his district -- presumably the haul from a nationwide direct mail campaign -- he actually had money left over at the end of the quarter - a net gain of $73,750.62. It's also very clear that Davis. a two-term incumbent from a district with a lot of Democrats, has an established campaign in place. That additional money added to his overall war chest for a total of $724,286.

Another client who appears to do routine business with BMW Direct is Rep. Virgil Goode (R-VA). He's actually facing a tough race this year. Goode spent $69,852 on direct-mail related expenses in April and May. But he took in a total of $136,909, including a lot donations from inside his own state. And Goode still has more than $600,000 on hand.

The upstarts don't fare as well with BMW Direct. We've already told you about Deborah Travis Honeycutt down in Georgia. There are a few others like her.

For example, Duane Sand, a little known Republican from North Dakota. His filings show he raised more than $300,000 during the first quarter and also spent more than $300,000. In the end he had less than $40,000 on hand. Almost all of his money came from out of state. And his expenditures show that more than 90 percent of his expenses were related to the direct-mail campaign, or $360,681.77 out of the total expenses of $389,501.01 spent for the quarter.

It's the same with Russell Williams, a retired Army lieutenant colonel and Republican running for office in Pennsylvania. He's challenging Rep. John Murtha (D-PA). During the first quarter, he only held on to about 13 percent of his money, raising $222,071.09 and spending $193,606.89, almost all of that money going to direct-mail expenses. Russell's campaign treasurer is Scott Mackenzie of BMW Direct.

Typically, direct-mail fundraisers take at least 30 percent of the fees raised. So even for the office holders, BMW Direct looks pricey. But at least they actually get some return on the deal. Some of those longshots aren't so lucky.

We've got a couple more examples of how a conservative Washington political group is raising money on behalf of other people then keeping a extraordinary chunk of that money in fees.

BMW Direct, a direct-mail fundraising firm, has been raising money for groups called Freedom's Defense Fund and The Madison Project.

It's not clear what Freedom's Defense Fund supposedly does. It shares an address at the same office as BMW Direct. It does not appear to have a Web site.

The Madison Project, according to its Web site, "raises money for conservative candidates through our network of grassroots conservatives."

Today ProPublica points out a Roll Call story from April showing that the Washington firm raised more than $1 million for Freedom's Defense Fund during the past three election cycles and spent more than 95 percent on the fundraising effort.

BMW Direct didn't return our phone call yesterday, but they did talk to Roll Call a couple months ago.

[BMW Direct Chief Operating Officer Michael] Centanni defended the in-house arrangement and the PAC's seemingly high operating expenses, arguing that "Freedom's Defense Fund doesn't pay any rent. ... We don't have payroll, and we try to keep our costs low."

And despite the fact that only 5 cents for every dollar the PAC raises actually goes to Republican candidates or causes, Centanni said it provides a vehicle for less-heeled donors "to be part of the process." He also said to check back with the group in November, when he expects expenses to dwindle and predicted that three cycles of donor mining will finally pay off.

"We will be spending a lot more money ... on contributions to candidates," he said.

As for the Madison Project, we checked the group's records over at the Center for Responsive Politics. It looks like the Madison Project so far this election cycle has spent nearly $300,000 on direct mail efforts with BMW Direct and its affiliates.

It has given no money in contributions to federal candidates so far this cycle.

Are the people over at BMW Direct getting defensive?

The conservative Washington fundraising firm took down several pages from their Web site this afternoon, in particular those listing the names of people involved with the company and their list of clients.

However, we've had our eye on this firm for a while now, and we've got photos of those pages. So in case you're looking for any info about the shop, here you go (click to enlarge):

Below the fold pictures after the jump.

Late Update: BMW Direct restored their Web site pages about one day after this post.

Read more »

The Boston Globe reports again today about BMW Direct, the conservative political fundraising firm in Washington.

Despite calls for an investigation, specialists in campaign finance rules said it would be difficult to prove that a direct-mail firm violated federal rules by keeping most of the hundreds of thousands of dollars it raised on behalf of little-known GOP candidates running nearly invisible campaigns against high-profile Democrats.

The practice may fall somewhere between the jurisdiction of Federal Election Commission rules and local consumer protection statutes, which are enforced by states, specialists said.

"These people have found the loopholes," said Scott Harshbarger, the former Massachusetts attorney general who served for three years as national president of Common Cause, an advocacy group that monitors election fund-raising.

During the first quarter of 2008, BMW Direct, a conservative political firm in Washington, helped raise more than $500,000 for an obscure Republican longshot running for Congress in Georgia.

But in a replay of the firm's modus operandi in a Massachusetts race, as chronicled by the Boston Globe, most of the money raised by BMW Direct in the Georgia race has come from out-of-state contributors and been spent on supposed campaign-related services provide by the firm and its affiliates.

A half a million dollars in a single quarter is a substantial haul for even well-financed, high-profile candidates, let alone someone like Deborah Travis Honeycutt, who ran for the seat in 2006 and lost by 38 points.

BMW Direct, which has a track record of raising a lot of campaign money and then directing most of it to affiliates or vendors, uses glossy direct-mail campaigns targeting conservatives across the country, urging them to chip in to help defeat liberal lawmakers and push hot-button right-wing issues.

Honeycutt lists BMW Direct's Washington office as her campaign address, and the firm's FEC compliance officer, Scott Mackenzie, is listed as her treasurer, according to her most recent FEC filing.

Honeycutt's campaign has brought in more than $1.7 million so far this election cycle. It has also spent more than $1.5 million.

For the most recent quarter, the campaign raised $620,016.72 in mostly small donations from across the country, according to her most recent FEC filing. And she spent $537,622.68 during the first quarter, most of which was to cover the costs of the direct mail campaign.

Only a small fraction of the money went to pay for a campaign on the ground. The total money spent in Georgia was $16,695. That covered expenses listed as political field work, public relations and media.

However, more than $314,000 went to BMW Direct and its affiliates who all work in the same downtown Washington office building. That's not including the other large payments to other Washington-area firms for direct mail-related expenses.

For example, Honeycutt's FEC report shows a payment to BMW Direct affiliate Century Data Systems Corp. for $7,430.85 for "data processing" on Feb. 4, 2008. The campaign cut a $23,569 check to the affiliate Legacy List Marketing for "list rentals" on Feb. 21, 2008. And a $19,544 check on March 7 for "direct mail fundraising" went to a company called Patriot Partners, which shares an office address with Legacy List Marketing.

This is the second time Honeycutt's run for the seat, and last time she also worked with BMW Direct. In the 2006 cycle, she raised $1.1 million from donors across the country. But most of the money went to BMW Direct and its affiliates and vendors. That campaign didn't get much attention and she lost to the incumbent, Rep. David Scott (D-GA) by a wide margin, 31 percent to Scott's 69 percent.

Now she's at it again. Honeycutt is outraising and outspending Scott by about four times. But the district is rated "Safe Democrat" by Congressional Quarterly.

We called the BMW Direct office this afternoon and a receptionist said there was no one available to take our call. We also put in a call down to Honeycutt's campaign in Georgia, but have not heard back from them.

The Boston Globe found an exceptionally good story this weekend nestled inside an anonymous office tower in downtown Washington.

They drilled down into the details of a company called BMW Direct, which bills itself as a "full service creative agency" for national political candidates and conservative groups.

Here's what the Globe found: the firm mounts massive nationwide direct mail fund-raising efforts, urging self-styled conservatives to contribute to help defeat "ultra-liberal" lawmakers by pushing hot-button right-wing issues such as getting the U.S. out of the United Nations, cracking down on immigration, outlawing abortion, and protecting gun laws.

And here's the catch, according to the Globe: The firm takes most of that money to pay for its own fund-raising expenses.

The Globe looked at the example of Charles A. Morse, a little-known Republican from suburban Boston who tried to run against longtime Rep. Barney Frank (D-MA) in 2006. The Washington firm took control of Morse's campaign. A BMW Direct staff member became the campaign treasurer and signed the Federal Election Commission filings for the candidate.

In short, Morse had no idea how much money was being raised -- and spent -- in his name. The firm raised more than $700,000 for Morse, mostly from donors across the country who were told defeating the Massachusetts liberal was critically important.

Ultimately, Federal Elections Commission records show, $30,000 was devoted directly to Morse's campaign expenses in the Fourth Congressional District. And Morse said he was shocked when told by the Globe how much BMW Direct had raised and spent in the name of his candidacy.

"That is craziness," he said. "I am really amazed. It is really way above and beyond what I was made aware of."

Morse didn't get enough votes in the primary to qualify for the general election, but BMW Direct kept on raising money in his name anyway.

On the firm's Web site, BMW Direct's list of clients includes the Black Republican PAC, Black Republican Freedom Fund, Republican National Hispanic Assembly, Bob Barr Leadership Fund. the RNC Senate Fund and Citizens Committee to Defeat Hillary Clinton (Project).

BMW Direct also raises money for Veterans for Victory, a Texas-based group that touts its efforts to publicize Sen. John Kerry's "disgraceful military record."

During the 2006 congressional election campaign cycle, Veterans for Victory's committee raised almost $1 million and actually donated about 3 percent of that to candidates, according to the Globe.

With people like BMW Direct on the job, it is really a surprise that the GOP is having fund- raising problems this year?