THIS POST WAS UPDATED AT 3:50pm

The Public Disclosure Commission sent a letter to the Washington State Democrats today letting them know the Commission will investigate the Democrats’ complaint alleging that Republican candidates Dino Rossi, Rob McKenna, and Douglas Sutherland (for Governor, Attorney General, and Commissioner of Public Lands respectively) received illegal contributions from GOP media firm Media Plus.

Media Plus secures ad time on credit which allows its clients–political candidates in this case–to run ads without paying first. It’s a pretty sweet set up for campaigns, which typically don’t have much cash on hand in the final days of a race. The Media Plus deal conceivably allows the Republicans to get on TV when they don’t have the money on hand to pay for it. For example, according to Rossi’s most recent campaign finance filing, he was $203,030.83 in the red, yet he had $700,000 worth in media buys running during the last week of the campaign.  (Rep. Dave Reichert, who also uses Media Plus,  appeared to be getting ad time without the cash to cover it as well.)

The Democrats contend that the advance amounts to a contribution. Rossi did over $6.5 million in business with Media Plus. McKenna did nearly $800,000 in business. And Sutherland did about $320,000.

Let me repeat the first line of this post: The Public Disclosure Commission sent a letter to the Washington State Democrats today.

When I first reported about the “GOP on Borrowed Time” controversy—the story that Rep. Dave Reichert’s media consultant, Media Plus, was securing the candidate’s TV time on credit (a potentially illegal campaign loan)—Media Plus told me the ad time didn’t constitute a loan. Media Plus president Kathy Neukirchen told me Reichert pays for the booked time on a running basis, paying for the ad placement the day after the ad runs. In essence, the explanation for the advance is: He’s good for it.

It’s not the standard way TV stations deal with campaigns because political campaigns, which survive on fundraising, aren’t the most trusty debtors. Traditionally, ad time for political campaigns must be paid for in advance.

I’ll let the FEC sort through Reichert’s deal with Media Plus— Darcy Burner’s campaign has filed a complaint about the cash advances.

But the latest campaign finance data shows Reichert is not good for it. The numbers indicate he does not have the cash to pay for the media time that Media Plus has secured for him for the final week of the campaign.

Totaling up his fundraising for October, Reichert had about $1.4 million to spend. However, his ad buys for the month total about $1.7 million. That puts him about $300,000 in the red, which is how much ad time he has booked during the last week of the campaign. That means his closing ad blitz is a gimme from the TV stations and Media Plus. (As I’ve reported, local TV stations have a long standing deal with Media Plus allowing the firm to secure ad time on credit.)

Burner spokesman Sandeep Kaushik quips, “These ads shouldn’t say, ‘This message approved by Dave Reichert.’ They should say, ‘Paid for by Media Plus.'”

I’m waiting to hear back from the Reichert campaign for their explanation of the deficit spending.

The Republicans got some media attention yesterday after they notified the press that they’d received a letter from the Public Disclosure Commission acknowledging a GOP complaint against Gov. Chris Gregoire’s campaign. 

The Republican complaint, filed last Wednesday, October 22 alleges that Gregoire got illegal donations worth $12,000 from out-of-state PACs. Candidates are only allowed to get money from out-of-state PACs if a certain amount of the PAC’s donation was raised from in-state contributors. (It turns out Gregoire had already returned all the money—including a batch before the GOP even filed its complaint.)

The news that the Republicans received a letter from the PDC acknowledging the GOP complaint just a week after they filed was heartening to GOP chair Luke Esser. His press release said:

“We have urged the PDC to expedite their investigation in the same way that Judge Kallas expedited the deposition of Dino Rossi, even though it caused him to cancel multiple campaign appearances less than a week before Election Day,'” WSRP Chairman Luke Esser said. “There shouldn’t be a double-standard that allows the Gregoire investigation to be slow-tracked by the PDC until after the election. The people of the state deserve to know the truth about these serious charges before they vote on Tuesday.” 

(Hey, shout out to you for keeping those press releases coming my way, Luke Esser. You’re a good egg and a conscientious Chairman. You might wanna nudge your colleague Mary Lane Strow. She got all bent out of shape when I came to the Rossi press conference on Wednesday afternoon and had me escorted out.) 

I wonder, though, if Esser thinks the people of the state “deserve to know the truth” about the millions of dollars in controversial loans and/or contributions that Media Plus, a local GOP media firm, gave to Dino Rossi, Rob McKenna, and Douglas Sutherland’s campaigns. Should the investigation into that money (millions as opposed to $12,000)—which is the issue of a complaint filed by the Democrats last Thursday—be slow-tracked? Should the people know the truth before they vote next Tuesday?

Democrats are nervous that the complaint is, in fact, on the slow track and people wont know the truth. It’s been a week since they filed and they have not received their letter from the PDC.

PDC spokeswoman, Lori Anderson, says the Democrats’ complaint has been assigned to a staffer. She could not say, however, if the Democrats’ complaint would be investigated prior to election day. It should be. 

Media Plus has gotten $768,991 worth  of ad time for McKenna, $318,610 for Sutherland, and $6.5 million for Rossi according to the PDC reports.

Last week, I reported that local media firm Media Plus was lining up TV ad time on credit for its stable of Republican clients—Rep. Dave Reichert, Dino Rossi, Rob McKenna, and Douglas Sutherland. 

The arrangement, in which Media Plus secured hundreds and thousands of dollars worth of TV time for its GOP clients before the candidates cut any checks (or even had the money in their accounts to pay for the ads), ticked off the Democrats who cried, “illegal loan!”

Both the Washington state Democrats and Darcy Burner’s campaign against Rep. Reichert filed complaints— the Democrats with the state’s Public Disclosure Commission; Burner with the Federal Elections Commission. The complaints accused Media Plus of lending money to its clients, which translates into a contribution.

Unfortunately for the Republicans, the dollar figure for such expensive TV buys exceeds contribution limits.

Unfortunately for the Democrats, however, it isn’t likely that either the FEC or the PDC will get to either complaint before election.

This means illegal fundraising may affect the outcome of this year’s elections.

The Media Plus deal is particularly disturbing in Reichert’s case where the $1.7 million ad buy exceeded Reichert’s budget by nearly $600,000.

On the morning he was drafting the complaint,  Burner’s attorney complained : “Media Plus probably doesn’t extend credit to any of their [other] clients in an amount greater than the amount the client earned all of the previous quarter.” (Reichert raised $524,000 in the most recent quarter.)

Dino Rossi was deposed this afternoon as a witness in a lawsuit filed by Faith Ireland and Robert Utter, two former Washington State Supreme Court justices, and Chris Gregoire supporters.

The lawsuit alleges that the Business Industry Association of Washington broke campaign finance rules by coordinating its fundraising efforts with Rossi. Independent groups like the  BIAW, that raise money for candidates, are not allowed to coordinate those efforts with the candidates they are supporting because groups like the BIAW are not limited in how much money they can raise from donors. Candidates are. The BIAW has raised $7.2 million for Rossi. 

Attorney Knoll Lowney, who questioned Rossi, says today’s deposition was successful because Rossi’s testimony showed that Rossi’s involvement in the BIAW’s fundraising was “much deeper” than they originally believed. The testimony shows that Rossi made phone calls and held a lunch meeting with members of the Master Builders Association—an affiliate of the BIAW. The MBA minutes identify these phone calls and the lunch as fund raising meetings for BIAW-friendly candidates.

The lunch meeting, while noted in the original complaint, may constitute today’s “smoking gun.” Ireland and Utter’s original complaint simply speculated about the lunch. Today, Rossi confirmed that he took MBA members out to lunch in Bellevue in June, shortly after the apparent fundraising phone calls. And while Rossi refuses to acknowledge that the lunch was a fundraising lunch, his answer contradicts MBA meeting notes about the lunch which do link it to fundraising. (The lunch is discussed beginning on page 155 of the deposition.) 

Rossi says what he did was proper because he was not an official candidate at the time of the calls and the lunch, May and June 2007. Rossi did not declare until October 2007.

Lowney’s colleague, attorney Mike Withey, belittled that defense during a press conference with reporters after the deposition, saying Rossi’s logic made a “mockery” of Washington state’s campaign finance laws. His point: If someone can line up hundreds and thousands of dollars from a group (that’s going to spend it on that someone’s behalf) by simply doing it before  officially becoming a candidate, then the law is meaningless.

Withey also said there are several additional litmus tests for when someone becomes a candidate in the eyes of the state, including—knowledge and consent that someone is raising money on  your behalf. (You’ll find the definitions of a candidate here.)  

Withey identified Rossi’s performance as “the most obstructive” he’d ever seen in over 30 years. Lowney and Withey say they are filing a complaint with the judge about Rossi’s performance. 

I’d like to report Rossi’s side of the story, but I was escorted out of his press conference.

King County Superior Court Judge Paris Kallas ruled today that Dino Rossi has to testify in the lawsuit filed by two former Washington State Supreme Court justices alleging that he illegally coordinated with the BIAW to raise money for his election campaign.

Rossi will face questioning on Wednesday from attorney Knoll Lowney.

UPDATE [GOLDY]:
In case you’re wondering, no, there aren’t any legal restrictions on releasing the transcript of the deposition, so if Rossi has anything embarrassing to hide we’ll either hear about it this week, or, you know, he’ll perjure himself.

The Washington State Democrats filed a complaint with the Public Disclosure Commission today asking them to investigate the Republican media firm Media Plus. Media Plus gets its ad time on credit from TV stations, and the Democrats believe this constitutes an illegal loan to Media Plus’ political clients. 

The complaint follows on the heels of a different complaint filed at the federal level by Democratic candidate for U.S. Congress, Darcy Burner, whose lawyers alleged on Wednesday that Media Plus gave an illegal loan to Rep. Dave Reichert’s campaign  by fronting him TV time. 

Today’s press release from the Washington State Democrats, who have identified GOP candidates Dino Rossi, Rob McKenna (Attorney General), and Douglas Sutherland (Commissioner of Public Lands) as recipients of Media Plus’ loans, says:

“By purchasing their ads on credit, the campaigns of Republicans Dino Rossi, Rob McKenna, and Doug Sutherland gain an unmistakable advantage, relieving them of the requirement to actually ‘purchase’ media time and giving them a slush fund at the most crucial part of the campaign season,” said Dwight Pelz, Chair of the Washington State Democratic Party. “If Media Plus buys hundreds of thousands of dollars of advertising time ‘on credit’ for Republican candidates during the last week of the election, what happens when those candidates don’t win and can’t pay? This practice needs to end immediately.”

Media Plus, the firm that buys TV ad time for Rep. Dave Reichert, also does media work for Republican guberanatorial candidate Dino Rossi. Public Disclosure Commission records show Rossi has spent $4.3 million with Media Plus. 

Given the controversy surrounding Media Plus’ loan to Rep. Reichert’s campaign, Gov. Chris Gregoire’s campaign is now interested in Media Plus’ work for Rossi. 

This week, it came to light that Media Plus is advancing money to Reichert’s campaign to purchase TV ad time. Depending on how you interpret Federal Election Commission rules, the billing arrangement may count as an illegal corporate contribution. Reichert’s challenger, Darcy Burner, is considering legal action. (See my post below.)

Kathy Neukirchen, President of Media Plus, told me yesterday that her firm buys all its TV ad time on extended credit. I have called her back to confirm, in fact, that Rossi gets the same deal. 

While state law allows corporations to make direct contributions, there are contribution limits ($3200 a cycle) and loans are contributions. Rossi’s ad buys exceed that limit. 

The Gregoire camp thinks Washington State law (and case history) may be less squishy about Media Plus’ practice of fronting the ad buys to its candidate clients than FEC law. State law says:   

“Contribution” includes:

     (i) A loan, gift, deposit, subscription, forgiveness of indebtedness, donation, advance, pledge, payment, transfer of funds between political committees, or anything of value, including personal and professional services for less than full consideration;

   (iii) The financing by a person of the dissemination, distribution, or republication, in whole or in part, of broadcast, written, graphic, or other form of political advertising or electioneering communication prepared by a candidate, a political committee, or its authorized agent;

UPDATE: Burner’s campaign has filed a complaint with the FEC (you can download it here), arguing that Rep. Dave Reichert does not have enough cash on hand to cover all the TV time he’s booked. The Burner campaign says the ad buy puts Reichert about $580,000 in the red and that his media buyer, Media Plus—by securing the time for him—is making an illegal campaign contribution. The Reichert campaign does not return my calls (and can you blame them, Goldy’s such a potty mouth), but Reichert spokeswoman Amanda Halligan did talk to the Seattle Times. The Seattle Times reports: 

Reichert campaign spokeswoman Amanda Halligan said Media Plus+ pays for the ads and then sends the campaign a bill. They pay it, she said, “like any other business.” 

“There’s no loan associated with it,” she said.  

ORIGINAL POST:

Yesterday’s post on Media Plus’ $530,000 loan to the Rep. Reichert’s campagin for Reichert’s ad blitz on KIRO, KOMO, and KING (the number is actually $777,000 when you add in KING, which I didn’t have at the time), included an interview with the FEC that laid out a possible loophole for Reichert. Otherwise, the loan/contribution would be in violation of election law.  

The loophole is this: Even though corporations can’t directly loan money to candidates, Media Plus’ arrangement with Reichert—getting his ad time on credit—is part of Media Plus’ established practice with stations and clients. So, when Reichert ends the quarter all paid up, the FEC may  simply see the whole arrangement as a “service” provided by Media Plus, not a contribution.

That raises a question, though: Is it Media Plus’ established practice to advance credit at such a high risk?

Darcy Burner’s lawyer, Perkins Coie attorney Ryan McBrayer, puts it this way: 

“Media Plus probably doesn’t extend credit to any of their clients in an amount greater than the amount the client earned all of the previous quarter.” 

That’s a good point. Reichert raised $524,000 in the last quarter. He’s already on the hook for nearly $800,000 in TV time for this quarter?

McBrayer adds: 

Media Plus looks to have bought airtime for the Reichert campaign that is worth hundreds of thousands of dollars more than the Reichert campaign raised all of last quarter. If so, Media Plus is really making an illegal corporate contribution because the Federal Election Campaign Act bans the extension of credit in such disproportionate and unreasonable amounts.

Yesterday, I reported that KOMO had given $180,000 worth in TV ad time to Rep. Dave Reichert on credit, an oddity in political advertising.

This morning, Kathy Neukirchen, head of Meida Plus, Rep. Reichert’s media buyer, confirmed for me that KOMO had given Reichert the time on credit, explaining the arrangement to me like this: Her firm gets its TV time for all its clients, political and commercial, on credit. Media Plus is a big local buyer and has an established relationship with the stations. She pays for the time at the end of the month (the practice is called “Net 30”). Her political clients are treated no differently, she says, than her commercial clients.

Neukirchen says Reichert pays her back daily as the ads run, and that Reichert has already paid her for yesterday’s ads and will pay her today for that portion of the rest of the week’s buy. 

Burner’s camp says they’ve confirmed that KIRO has  also agreed to run Reichert’s ads on credit. The total loaned time between KOMO and KIRO would amount to about $530,000. 

KING reportedly turned down Media Plus’s “Net 30” request for the Reichert ad buys. Neukirchen would only say she doesn’t know what the stations have said, but all her contracts are done on credit. [UPDATE: I just talked to Jim Rose, Director of Sales & Marketing at KING, and he says, in fact, KING is extending credit to Neukirchen for the Reichert buys.]

The Burner campaign tells me their lawyers are “exploring legal options” on the matter.  Neukirchen’s daily payback arrangement with Reichert, they say, amounts to a loan, and FEC rules do not allow corporations to loan money to candidates. (Nor are they allowed to donate unless it’s through a Political Action Committee. Corporate PAC limits are $10,000 per election cycle.) 

FEC spokesman Bob Biersack would not offer any judgement on this particular case, telling me only that the Burner camp was free to file a complaint with the FEC. He did tell me that firms can “loan” money (and he put it in quotes) to campaigns if it’s “part of the general course of business.”

He explained: “If a company is providing services to a campaign and in the normal course it incurs charges and then gets paid in its established billing cycle, that’s the general course of business.” 

Neukirchen’s political clients are lucky to benefit from her good standing with local TV. Political campaigns are not typically extended credit: It can create the appearance of favoritism from the media, and more practically speaking (from the stations’ point of view), fast-moving campaigns, which rely on donations, aren’t particularly stable debtors. (Also, given that not every campaign has access to high-end media firms like Media Plus, it’s not fair allow some campaigns to get ads on credit while others don’t have that opportunity.)

When I wrote a similar article during the 2006 election cycle on Mike McGavick’s special credit arrangement with KOMO (which led to a violation at the FEC because McGavick failed to report an in-kind contribution of $120,000 for loaned TV time), longtime GOP media buyer Brad Mott with Ad Ventures, told me, “Almost all political advertising is done on a ‘pay-seven-days-in-advance’ rule. Credit is a problem because if the bill doesn’t get paid, at what point does it become an illegal corporate contribution?”

Reichert’s quickie-loan arrangement with Neukirchen isn’t likely to be captured by FEC reporting. According Biersack at the FEC, any ad time that Reichert arranged after October 15 won’t be reported until 30 days after the election. At that point, according to Neukirchen’s arrangement, Reichert will have paid his obligations. Or at least, the public, which relies on FEC campaign reports to know how campaigns pay their bills, will have to trust that he eventually paid his obligation.

I am waiting to hear back from the Reichert campaign. 

If they don’t speak up, I’ll guess we’ll just have to rely on Goldy’s take on the whole thing.

Is Rep. Dave Reichert’s campaign taking a play out of Mike McGavick’s sneaky campaign playbook?

In the 2006 election, I reported that GOP Senate candidate Mike McGavick broke FEC rules by getting an in-kind contribution from KIRO TV without reporting it on his campaign finance filings. The station had lent him TV ad time.

Reported on his FEC filings or not, the move was also seen as unorthodox in its own right. TV stations don’t typically lend ad time to political candidates. It looks like favoritism from the supposedly unbiased media and really, campaign’s aren’t the most reliable debtors. 

It appears as if GOP Congressional candidate, U.S. Rep. Dave Reichert, is making the same questionable move this year. He’s not necessarily breaking FEC rules—his most recent financial reports don’t have to cover this week’s ad blitz—but he does appear to have taken the rare move of borrowing TV time. 

KOMO’s ad books show that Reichert has gotten $180,000 worth in extended credit for ad time from KOMO for this week. 

More traditionally, Reichert has already paid up-front for about $450,000 in ad time at KING and Q-13 for this week. 

Reichert’s last FEC report thru September 30, showed he had $1.1 million cash on hand. 

I will post a more in-depth report on this tomorrow.

Yesterday, Commissioner of Public Lands, Doug Sutherland, wrote a letter to State Rep. Sharon Nelson (D-34, Vashon) saying he had not yet approved a controversial lease for mining company Glacier Norhtwest. 

Nelson, an opponent of strip mining on Maury Island, sent a letter to Sutherland on Monday asking him to address what she had heard from concerned constituents: Mining company Glacier Northwest had reportedly told King County’s Dept. of Development and Environmental Services that Sutherland was going to issue a required aquatics lease to Glacier (right after the election) that would allow the company to proceed with its controversial mining expansion. 

Republican Sutherland is up for reelection in a  tight race against outspoken environmentalist, Peter Goldmark. Goldmark has made an issue out of Sutherland donors like Glacier Northwest who, Goldmark says, get political favors from Sutherland. 

In his October 16 letter to Rep. Nelson, Sutherland repeated, in much stronger terms, the denial I reported here on Monday issued by Fran McNair, Sutherland’s Aquatic Lands Steward.

Sutherland writes: “As the proprietary manager of state owned aquatic lands, DNR [the Department of Natural Resources] is the decision making authority, not a lease applicant such as Glacier. Therefore any assurances that this prospective lessee may have directly or indirectly indicated concerning their final approval of a pending application should be considered purely speculative and without any merit.”