Proving violation by firm is difficult

It kept most funds raised for clients

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.

A report in the Sunday Globe said Charles A. Morse, a Brookline Republican, retained BMW Direct Inc., based in Washington, D.C., in 2006 to run against US Representative Barney Frank. BMW Direct raised more than $700,000 in Morse's name and used 96 percent of the money to pay fees to itself, affiliated firms, and its contractors, while Morse barely campaigned and spent $30,000 on his own expenses.

BMW Direct raised more than $100,000 of those contributions in 2006 after Morse had failed to qualify for the general election ballot and suspended his campaign activities. That raised the ire of some contributors who said they would not have sent in their money if they knew Morse was no long running against Frank.

BMW Direct has said it thought he was still running an independent write-in campaign.

The pattern in the Morse case has been reflected in other campaigns and political action committees that BMW has contracted with. The list includes work for Republican Ken Chase's failed 2006 challenge of Senator Edward M. Kennedy of Massachusetts, a 2006 congressional campaign in Georgia, and on behalf of a group that sought to raise questions about Senator John F. Kerry's war record during Kerry's 2004 presidential campaign.

BMW Direct did not respond to requests for comment yesterday. The FEC, which polices federal campaign finance law, said it would not comment. The office of Attorney General Martha Coakley of Massachusetts also declined to comment.

"Clearly the donations weren't going to what the donors thought they were going to; it does warrant a look by an appropriate investigative agency," said Pamela Wilmot, executive director of Common Cause of Massachusetts. "The disparity between what was raised and what was actually spent on the campaign could spark fraud statutes."

Harshbarger said BMW Direct's operation was "quite blatant" in skirting campaign finance laws. "It clearly violates the spirit of any campaign finance laws and undermines confidence in our system of political fund-raising," he said.

He said the legal issues are far from clear, however.

Costs incurred by private fund-raising operations for candidates and the percentage the operation can take are not covered by federal regulation, specialists said. In order to find BMW Direct in violation, the FEC would have to determine whether Morse was an active candidate in the general election running against Frank. If he was not running an active campaign, his fund-raising could only cover campaign debt or financing a future race.

"There's something about this arrangement that smells fishy, but determining whether an actual violation of campaign finance laws occurred would inevitably require fact-intensive investigations into whether this individual was actually running a write-in campaign," said Paul S. Ryan, associate legal counsel to the Campaign Legal Center, a nonpartisan group that monitors campaign finance laws.

Campaign contributors from around the country interviewed by the Globe said they were unaware that Morse failed to make the general election ballot. Morse said he was unaware of BMW's continued fund-raising and how it was spending funds.

The firm said it sent him all its reports filed with the FEC. BMW Direct also said that Morse had failed to follow through with his commitment to run a viable campaign.

BMW insists that Morse received $125,000, a figure that Morse said is an "outright lie."

Morse's campaign fund-raising committee, which was controlled by BMW Direct, said it had a $112,960 debt - all of it owed to the firm, its affiliates, and contractors - in a report filed a week after the Sept. 19, 2006, primary. In addition to the $103,000 raised from Oct. 1 to Dec. 31, 2006, BMW Direct raised another $97,000 in 2007, once again using the money to pay off itself, its in-house affiliates, and printing and mail-house contractors.