Mo. AG candidate used staff to channel money

JEFFERSON CITY, Mo. (AP) -- They met at an Italian restaurant in southwest Missouri. A campaign aide for Democratic attorney general candidate Chris Koster and the treasurer for a local Democratic committee. The purpose: a check exchange.

Koster's aide handed the Democratic official a check from an innocuous-sounding group called the Economic Growth Council, along with a pair of letters she had created -- one from the Economic Growth Council accompanying its money, the other from Koster's campaign soliciting money from the local political committee.

The letters were formalities. The Democratic official provided Koster's aide a pair of checks similar in size to the amount she had received.

Just like that, Koster's campaign channeled nearly $27,000 to itself -- part of the roughly $450,000 from big-time donors that got routed around campaign contribution limits to Koster in a three-month period.

E-mail communications obtained by The Associated Press show Koster's campaign staff helped direct donors wishing to give more than the state limit to the Economic Growth Council, then coordinated the transfer of that money to local political party committees and onto Koster's campaign -- a potential violation of an 8-year-old ruling against such orchestration.

The documents were provided to the AP by someone close to Koster's campaign on the condition of anonymity, because the person is not authorized to speak for the campaign.

Koster defends his fundraising tactics as legal -- and similar to those being used by other major statewide candidates.

But it's unclear whether other campaign staffs have been so deeply involved in coordinating the money shuffling. A former Koster campaign aide now is concerned the tactics may have been illegal.

Officials at the Missouri Ethics Commission are reluctant to say publicly whether fundraising scenarios such as Koster's violate campaign finance laws, in case they later are asked to make a ruling.

But "that's getting awfully close," said former Ethics Commission executive director Bob Connor, who remains on staff at the commission. "That could come before the commission if somebody thought it was improper."

The Ethics Commission historically has granted candidates considerable leeway. For example, regulators have said candidates can both raise money for other political committees and solicit contributions from those committees.

But in a 2000 opinion that remains in effect today, the Missouri Ethics Commission said candidates cannot request that contributions be made to other political committees "with the express purpose of passing those contributions through the committee to the candidate."

Koster said his actions are within the bounds of that decision.

"I strongly believe -- because we have acted in consultation with the law, the rulings and on the advise of the ethics commission -- that we are in line with campaign finance laws," Koster said in an interview at his Jefferson City campaign headquarters.

Koster is facing state Reps. Margaret Donnelly and Jeff Harris in the Aug. 5 Democratic attorney general primary. The winner may no longer have to worry about campaign contribution limits, because a bill pending before Gov. Matt Blunt would repeal them effective Aug. 28.

A state senator and former Cass County prosecutor, Koster is a prolific fundraiser who switched from the Republican to Democratic party shortly before he announced his attorney general's candidacy in fall 2007.

Like other statewide candidates, Koster reaped five- and six-figure contributions while Missouri's donation limits were temporarily lifted during the first half of 2007. After the Missouri Supreme Court reinstated the limits, Koster joined other statewide candidates in refunding all donations above the retroactively reinstated maximum of $1,275.

For Koster, that meant returning about $370,000. His refunds checks were dated Dec. 17. The next day, the Economic Growth Council was created with the Ethics Commission by Chuck Hatfield, a former top aide to Democratic Attorney General Jay Nixon. Koster had befriended Hatfield in law school and later served as the best man in Hatfield's wedding.

Hatfield said the creation of the Economic Growth Council was his own idea.

About 70 percent of Koster's Christmastime refunds were re-donated to the Economic Growth Council, including $125,000 from stem-cell research supporter James Stowers and $17,450 from Ameristar casinos. The point man for both donors was lobbyist Jorgen Schlemeier.

So why give to Hatfield's committee?

"The treasurer at the Economic Growth Council made a very clear statement that we're founded to help Chris Koster out," Schlemeier said.

Through the first three months of 2008, the council reported receiving $493,825 from various donors, nearly all of which was routed to Koster.

The council directly gave Koster the maximum $1,350. Much of the rest made its way to Koster by first passing through local political party committees, which can give almost 20 times the amount toward candidates as individuals, businesses and interest groups.

On March 19, then-Koster campaign staffer Susan McNay sent en e-mail to Hatfield with the names of 29 local political committees and the amounts of money each was to receive from the Economic Growth Council. Hatfield responded that he would write the checks.

McNay, who has since left Koster's campaign, said Koster asked her to deliver the Economic Growth Council checks to the local political party committees so that she could exchange them for contributions to Koster's campaign. In several cases, McNay acknowledged, she also used her Koster campaign computer to create a memo bearing Hatfield's name on Economic Growth Council letterhead that accompanied the checks to the political committees.

Koster said he was unaware McNay used campaign equipment to create Economic Growth Council documents, though McNay said she had informed Koster of what she was doing.

In essence, McNay was working for the Economic Growth Council -- driving thousands of miles around the state as a check courier -- while being paid by Koster's campaign.

"I trusted the candidate, even though I had questions about whether we were doing something that was not right," McNay said. "He assured me everything was fine, and now I have concerns that we broke the law."

On March 25, for example, McNay met Shelby County Clerk Tracy Smith outside a northern Missouri courthouse to hand over a $2,550 check to the 18th Senatorial District Democratic Committee of which Smith is treasurer. In exchange, McNay received a $2,350 check to Koster's campaign.

The next day, about 330 miles to the southwest, McNay met Jasper County Democratic Chairwoman Susan DeCarlo at an Italian restaurant in Joplin. It was the second time she had delivered a $13,750 check for the 129th Legislative District Democratic Committee of which DeCarlo is treasurer. McNay left the restaurant with a pair of $13,450 checks -- one a direct contribution to Koster, the other an indirect contribution made payable to Koster's advertising buyer, LUC Media of Marietta, Ga.

Koster contends other campaigns also routinely use staffers to shuttle and flip checks through political committees, though he cited no one specifically by name. Hatfield also defended it as legal, adding: "This level of coordination with campaigns is not unusual."

Koster pointed to a July 2004 Ethics Commission decision rejecting a complaint alleging Democratic Gov. Bob Holden had violated campaign finance laws. In that case, a volunteer for Holden had delivered a check from the Missouri Democratic Party to a local political committee, which then gave her a check for Holden.

Perhaps the most comparable situation to Koster's is that of Republican gubernatorial candidate Sarah Steelman. Two wholesome-sounding committees -- Power to the People and the Committee for Common Sense Values -- contributed more than $120,000 during the first three months of the year to various local political party committees, which passed the money onto Steelman.

But Steelman spokesman Spence Jackson said he is unaware of anyone on Steelman's campaign staff personally delivering and picking up the checks.

Nixon, a Democrat, and Republican Kenny Hulshof both also have received dollars that flowed from their state party committees through local political committees to their gubernatorial campaigns. But spokesmen for Nixon and Hulshof both denied campaign staff ever had been involved in shuffling those checks from one committee to the next.