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Political Fundraising Firm Defends Practices

To say that Brian Chavez-Ochoa was a long shot to unseat Rep. Nancy Pelosi (D-CA) in 2006 is an understatement. No opponent had come close in the nearly 20 years she'd held the seat. A conservative lawyer who mainly handles First Amendment cases, he had never held elected office and didn't even live in the district. But in the summer of 2005, there was no declared Republican challenger, and he was being urged to make a run. "I was asked by a group in D.C. to put my hat in the ring, so I did," he told ProPublica.

Attorney Brian Chavez-Ochoa, center, has ministers pray for him before he files a lawsuit to prevent the removal of the Ten Commandments monument from the state judicial building in Montgomery, Ala., Aug. 23, 2003. (Credit: AP Photo/Dave Martin)That group was BMW Direct, a conservative direct-mail fundraising firm. An associate of the firm became Chavez-Ochoa's treasurer, and over the course of the next several months, his campaign committee raised tens of thousands of dollars from small donors all over the country. He said he "fully intended" to move to the 8th District from his home in the nearby 3rd District. But when Mike DeNunzio, the chairman of the San Francisco Republican Party, entered the race in February of 2006, Chavez-Ochoa decided he should step aside for "party unity," he said.

Despite the fact that his campaign never got off the ground, Chavez-Ochoa managed to raise more than $220,000 (about $70,000 more than DeNunzio, who lost to Pelosi by 69 points). But all of that was consumed by fundraising costs, and his campaign still carries more than $13,000 in debt to BMW Direct and its affiliates.

Characteristic of BMW Direct's fundraising campaigns, more than 80 percent of the contributions came from out of the state and most donors disclosed their occupation as "retired," according to CQ Money Line. Among them was a 91 year-old man, whose family has become so alarmed by his giving to various Republican campaigns -- $139,000 since 1996 - that they've asked his caretaker to screen his calls and mail.

The handling of Chavez-Ochoa's campaign is another example of BMW Direct's questionable fundraising practices that were highlighted in a Boston Globe piece earlier this week. That story focused on Charles Morse, the long shot challenger to Rep. Barney Frank (D-MA) whose committee raised more than $700,000, with all but four percent consumed by fundraising costs.

Representatives of the firm fiercely deny any wrongdoing and argue that the high cost of direct mail fundraising, particularly for little-known candidates, necessitates such expenses. Both Chavez-Ochoa and Morse dropped out before the candidates could reap the benefit of the early fundraising, they said.

"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 like working with people who are long shots," Jordan Gehrke, 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. "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."

Gehrke said, however, that it was rare for the company to approach a candidate who had not yet filed to run, and that in Chavez-Ochoa's case, a mutual friend had led to the connection. The firm also does work for high-profile candidates, including incumbents such as Rep. Virgil Goode (R-VA) and Rep. Geoff Davis (R-KY), campaigns where a far lower percentage of funds are consumed by costs.

More than $130,000 of the $220,000 raised by Chavez-Ochoa's campaign went to pay BMW Direct or affiliate companies run by principals at the firm. The rest went to contractors that regularly work with the firm. Gehrke stressed, however, that the firm was not pocketing all that money. Postage consumed 40 cents on the dollar, he said, and there were a host of costs (letter writing, data processing, etc.) associated with direct mail fundraising. Clients are kept constantly apprised of the process, he said. For his part, Chavez-Ochoa said he was satisfied with BMW Direct's handling of his campaign and would consider hiring the company if he made another run.

Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association, had another perspective. Direct mail is expensive, he said. But for costs to consume most or all of the funds raised, even at the very beginning of a campaign, "looks horrid," he said. "If I'm running for Congress and I'm not getting 50 cents on the dollar, what am I doing? If I can't get a contractor to give me that [rate of return] because I have so little name recognition, then maybe I should rethink what I'm doing."

All the campaign finance experts we contacted agreed that it did not appear as if BMW Direct was breaking any laws. "If you report the money coming in and going out and follow the reporting requirements and limitations and prohibitions, then there is nothing that is sufficiently illegal about it," said Larry Noble, formerly general counsel to the Federal Election Commission and currently an attorney with Skadden, Arps.

"There's not a whole lot of protection in federal law for contributors," said Paul Ryan of the Campaign Legal Center. "The best way to describe the way federal law treats donors is 'donors beware.' Make sure that you know who you're giving political contributions to and can trust that they will spend your political contribution in a way that is consistent with your intent."

ProPublica reached a handful of people who, according to FEC documents, donated to Chavez-Ochoa's campaign after he quit the race in February 2006. None specifically remembered his name or giving him money.

"I'm not a fan of Pelosi's, but I don't know if I would give any money to someone I didn't know anything about," said Jane Ramsland of Midland, Texas who has given more than $5,000 to Republican candidates and committees since 2000. She gave the Chavez-Ochoa campaign $350, including $100 in August -- five months after he stopped his campaign.

When told Chavez-Ochoa had dropped out in February, didn't live in the district and 100 percent of the money raised on his behalf went to fundraising costs, she said with a laugh, "that's slightly dishonest." California law does not have a district residency requirement.

Both Chavez-Ochoa and BMW Direct's Gehrke said fundraising letters that went out after Chavez-Ochoa withdrew from the race had explicitly said that he was seeking to retire campaign debt.

Goff Smith, 91, of Winnetka, Ill. didn't remember donating to Chavez-O'Choa either, but he gave $200 to the campaign in August of 2006.Smith has given $139,000 to Republicans since 1996, and BMW Direct has solicited him often. Since July of 2006, he's given $5,350 to candidate committees that had Mackenzie, the BMW Direct consultant, as their treasurer and had spent more than 80 percent of contributions on fundraising expenses. In all, he's given $13,250 to candidates and political action committees that use BMW Direct.

"It's dumb on my part," said Smith of donating to the Chavez-O'Choa campaign. "It is my fault."

Smith's caretaker Genevieve Blanquet disagreed. She said Smith's family asked her to screen his calls for fundraisers and to sort out the 20 or 30 solicitations he receives in the mail per day because he was giving away so much money.

"They realize the situation with their father and that he's being exploited," she said.

A 92-year-old woman from St. Louis, who didn't want her name used, also didn't remember donating more than $200 to Chavez-Ochoa. Although she said she "was willing to do anything" to oust Pelosi, the woman said she wouldn't have given to Chavez-Ochoa if she'd known he was already out of the race.

Another part of BMW Direct's business is selling fundraising lists compiled from donors to its clients. A listing for Chavez-Ochoa's donor list on an affiliate company's Web site touts the list of 4,379 donors who gave more than $5 to the campaign for an average of $28. "These donors are highly responsive and politically savvy," says the listing.

As we noted earlier this week, it's hard to tell just how unique BMW Direct's practices are. Other direct mail companies have run similar costs. The Boston Globepointed out that another company, Response America, has raised $976,000 for a long-shot challenger to Sen. John Kerry (D-MA), with 90 percent of that money going to fundraising expenses. The Seattle Timesreported in 2004 on the fundraising practices of the College Republican National Committee, which had raised $6.3 million that year, 90 percent of which went to direct mail vendors and postage expenses. That story focused on appeals that seemed designed to mislead senior citizens into giving. Since direct mail campaigns generally have higher rates of return in the senior citizen population, it's one of the target audiences for direct mail, said Meredith McGehee of the Campaign Legal Center.

As for why BMW Direct is being singled out, Gehrke said that it came with the territory. "We raise a lot of money for Republican candidates, and we do it very well and very effectively. We say things that are controversial, and when you do that, you're going to make some enemies." He said he welcomed the criticism from liberals. Keith Olbermann, whom Gehrke called a "liberal gasbag," singled out BMW Direct's fundraising practices on his MSNBC show Tuesday night during his "Worst Person in the World" segment. Gehrke was pleased. "The day Keith Olbermann is complimentary is the day we need to look in the mirror as a company and consider what we're doing."

Update/Correction: This article originally referred to Sen. John Kerry as a Republican.

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