Firm gets big cut of campaign donations
GOP candidates see little of funds raised; Some clients, donors unaware of numbers
Charles A. Morse, a conservative Republican gadfly from Brookline, ran a brief write-in campaign to unseat US Representative Barney Frank in 2006. It fizzled completely when he received just 145 votes in a primary and dropped out two months before the general election.
"I never saw him," Frank said when asked about Morse's presence in the campaign.
Yet the political fund-raising firm that ran Morse's campaign finances reported that it raised more than $700,000 for his race, much of it from GOP contributors across the country eager to help defeat a Massachusetts liberal - and some of it donated well after Morse abandoned the race.
A review of campaign reports shows that, rather than spending that money in the Fourth Congressional District, 96 percent of the funds raised in Morse's name were used to pay a politically connected direct-mail firm in Washington, BMW Direct Inc., and a coterie of BMW Direct's affiliates and contractors. The firms specialize in national fund-raising appeals on behalf of conservative Republican candidates and right-wing causes.
The pattern in the Morse campaign of raising big sums from donors yet spending little on that campaign is similar to other fund-raising operations managed by BMW Direct, a private company whose financial statements and executive salaries are not disclosed. The list includes work for Republican Ken Chase's failed 2006 challenge of Senator Edward M. Kennedy of Massachusetts, a 2006 congressional candidate in Georgia, and on behalf of Veterans for Victory, a group that sought to raise questions in similar fashion to Swift Boat Veterans for Truth about John F. Kerry's war record when the Massachusetts senator was running for president.
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."
BMW Direct's chief executive, Kimberly Mellissimo, and other firm members declined requests for interviews. The firm issued a statement saying it stands by its handling of the accounts. Scott B. Mackenzie, a lawyer who served as Morse's treasurer, signed his FEC reports, and who is listed as a staffer for BMW Direct, said in a brief phone conversation that the firm uses most of the money in early stages to compile a donor list for candidates, priming the pump for the rest of the candidate's campaign.
Mackenzie said Morse dropped the ball by not maintaining an aggressive campaign after the initial round of fund-raising and the building of the donor list.
As part of his contract with the firm, Morse turned over control of his campaign accounts to BMW Direct. Morse acknowledged he never checked the contributions and expenditure numbers on the FEC reports sent to him by BMW Direct.
But a Massachusetts political consultant who worked with Morse on the campaign, Ben Kilgore, asked: "What other business accepts money for a third party from the public and then keeps 96 percent of it?"
In the Morse case, as with others, BMW Direct tapped into an ideologically right-wing base of donors around the country who are eager to contribute to any effort to defeat high-profile liberals like Frank and Kennedy. To stoke conservative passions and generate hundreds of thousands of dollars for its unknown candidate, Morse, BMW Direct sent out mailings that flogged Frank as an "ultra-liberal."
As the funds poured in and BMW paid itself and related entities with the proceeds, Morse never appeared at a campaign event or candidate forums. Nor did he promote his candidacy with any advertising, mailings, or phone banks. He had no headquarters or staff. Having never taken out nomination papers, he needed 2,000 votes in the Sept. 19 Republican primary election to qualify for the general election ballot, but fell far short with 145.
"Basically, after the primary I suspended activities," Morse said.
Yet BMW Direct continued its fund-raising appeals to Republican donors, even after Morse failed to qualify for the general election ballot and no longer considered himself a candidate.
During that time, BMW's operation raised $103,000 from Oct. 1 to the end of 2006 for Morse's committee. It then raised another $97,000 in 2007, once again using the money to pay itself, its in-house affiliates, and printing and mail-house contractors. Mackenzie said the firm's executives believed Morse was running a write-in campaign as an independent candidate after failing to qualify for the ballot.
Donors, contacted directly by the Globe, were upset to learn that Morse, a strong advocate of conservative principles, was not the GOP nominee at the time they contributed. Goff Smith, a retiree living in Winnetka, Ill., who gives generously to conservative causes around the country, said he knew nothing of Morse's noncandidacy in the fall of 2006. He donated $500 on Oct. 5 and another $1,000 on Oct. 17, a month after the primary in which Morse fell short.
"Why the hell would I do that?" said Smith when asked if he would have contributed if he knew Morse's name was not on the ballot or that he all but abandoned his candidacy. "That was a waste of time and money. I think I got sucked in on that one."
"I wouldn't have given," said Ann Baker, a retired architect in California, when asked if she had been informed that Morse was not on the general election ballot when she donated.
Advocates who monitor federal campaign finance issues say companies raising so much money through direct-mail appeals, only to use most of the money for those expenses themselves, is unusual.
"I've never seen anything like this," said Meredith McGehee, a longtime federal campaign finance reform activist and current policy director for the Campaign Legal Center, a nonprofit group in Washington that tracks the flow of money in politics.
She and others say the average amount that a direct-mail fund-raiser takes is about 30 percent to cover its own expenses and profits.
"There's certainly an appearance that the direct-mail campaign looks more like a pass through for the vendor than for the campaign," McGehee said.
BMW Direct is not the only direct-mail firm raising money for little-known Massachusetts Republicans. This year, Jeff Beatty, the Republican running against Kerry, has boasted that he raised $976,000 in a nationwide mail campaign in a few short months late last year and earlier this year. But again, 90 percent of his funds were eaten by the fund-raising expenses. That fund-raising effort was run by another Washington direct-mail firm, Response America. Beatty's aides said he expects the mailing operation will allow him to create a donor base that he can use as the race progresses.
BMW Direct was founded in 2002 by Mellissimo, its president and CEO, who describes herself on the firm's website as a "direct mail professional" who has had "a long passion for the conservative movement and principles espoused by President Ronald Reagan." Others listed as staff include operatives and former Washington government staffers who rose through the conservative ranks.
Among the clients listed on its website are political committees seeking to get the United States out of the United Nations, to crack down on immigration, to outlaw abortion, and to protect gun ownership. Another client listed is GOPAC, former US House speaker Newt Gingrich's political action committee.
BMW Direct executives declined to discuss other committees also managed by the firm that showed patterns of spending similar to the Morse campaign.
BMW Direct raises money for Veterans for Victory, a Texas-based political action committee that says it made the public aware of Kerry's "disgraceful military record." It has a similar mission but is separate from Swift Boat Veterans for Truth. During the 2006 congressional election campaign cycle, Veterans for Victory's committee spent $975,420, mostly on payments to BMW Direct and related entities, but gave about $28,000 in donations to candidates, or about 3 percent.
BMW Direct's fund-raising operation also raised just more than $1 million over the past four years for Freedom's Defense Fund, a political action committee it created to fund conservative campaigns and causes. The committee gave less than 5 percent to candidates, according to its publicly filed finance reports.
Another political action committee, Save New York PAC, raised and spent $1.1 million in 2006, but gave $20,250 to candidates, or about 2 percent, according to FEC reports. Most of the expenses, more than 90 percent, went to BMW's fund-raising efforts.
A BMW Direct congressional client, Republican candidate Deborah Honneycutt, appeared on the ballot in Georgia against an incumbent Democrat. Her campaign finance reports say she raised more than $1.1 million in 2006 from donors across the country. But most of the money went to BMW Direct and its affiliates and vendors.
Even Republican observers in Georgia were quoted in the local media as saying she ran an under-the-radar campaign, with "no presence" locally. She lost by a wide margin, 31 percent, to incumbent David Scott's 69 percent.
In Massachusetts, Chase received 16 percent of the $884,802 that his committee reported in expenditures that year. The rest went to BMW Direct's fund-raising operations.
"It was bare-bones," Chase said of his campaign.
But Chase blames himself for not paying attention to the details of the arrangement he made with BMW Direct for the fund-raising.
Spurred by Globe questions, Morse now complains about BMW Direct's handling of his campaign finances. While FEC campaign filings indicate the amount that was spent on Morse's campaign expenses in Massachusetts was $30,000, BMW Direct says it turned over $125,000 to Morse for campaigning - 14 percent of the expenses that year.
Morse says that is an "outright lie."
"After they take 96 percent of the take, they are blaming me, saying I didn't keep my side of the bargain," he said. "That is hysterical. That is really rich."
