Fronting Costs Is Unusual For Direct Mail Firm

We talked to a lot of people in the direct-mail fundraising business last week, trying to get a sense of how BMW Direct’s business compares to others in the same field.

We’ve told you about how the conservative Washington political firm has a pattern of raising tons of money for longshot candidates, but spending most of that money on the direct mail campaign itself. Not much money gets back to the candidates. A lot of it goes to vendors that — whaddya know? — are run by people tied into BMW Direct.

When we asked BMW Direct to explain how millions could be eaten up in fees, the company emphasized that they front all the money in the first place.

“That’s the risk we take every time we take on a client,” said Jordan Gehrke, the firm’s director of development. “If we bill a client a flat creative fee (because that’s the only thing BMW makes money on, not printing, not postage, no percentages) and not enough money comes back to cover the costs of the package, then the client doesn’t pay us.”

That sort of no-money-down deal with candidates is unusual, according to others in the business.

“Most of the fundraising firms require the candidate or the campaign to put the money up front for the printing, postage, etc.,” said Jeff Zenk, owner of Chinook Consulting, a Seattle-based political firm that does direct mail.

“And that is a huge risk to take — especially when you are dealing with an unknown commodity,” Zenk said.

That risk not may be as big for this particular firm. BMW Direct comes to the table with a proven track record — and time-tested donor lists — that show it can raise money for long-shot candidates by going to reliable GOP donors with nationwide mailings.

One candidate, Brian Chavez-Ochoa, a little-known Republican who tried to take on House Speaker Nancy Pelosi (D-CA) in 2006, was encouraged to get into the race by BMW Direct. Chaves-Ochoa ultimately dropped out of the race months before the election.

BMW Direct had tallied up its fees and Chavez-Ochoa’s final FEC reports show he was about $13,000 in debt to BMW Direct and other mail service firms. But he told us in a recent interview that they’ve never seriously asked him to pay it back.

To be sure, the process of raising all that money is good for BMW Direct’s affiliates.

Take, for example, Scott Mackenzie, the firm’s “Client Accounting / FEC Compliance” official. He works in BMW Direct’s office building in downtown Washington and shares a receptionist with the firm. And he serves as the treasurer for a handful of campaigns that work with BMW Direct.

Mackenzie has in the past two election cycles served as the designated treasurer for candidates and PACs including:

— Deborah Travis Honeycutt of Georgia
— Duane Sand of North Dakota
— Russell Williams of Pennsylcania
— Alexandria Coronado of California,
— Bill Spadea of New Jersey,
— Brian Chavez-Ochoa of California,
— Charles Morse of Massachusetts
— Black Republican PAC
— The Madison Project

We asked Mackenzie whether he thought there was any conflict of interest in overseeing campaign accounts that cut checks to his colleagues here in Washington.

“I don’t work for BMW. I work with BMW. Because that is a company that’s involved in raising money for these campaigns,” Mackenzie said.

“I have a close working relationship with them, but I’m not part of this company,” he said in a telephone interview.

Well, it’s easy to get confused about that, since the BMW Direct Web site lists him on the “Our Staff” page.

But, in fact, Mackenzie bills himself out as Mackenzie and Company, listed on FEC documents as “consulting — compliance.”

BMW Clients have paid Mackenzie and Company more than $80,000 so far this election cycle. And a whopping $43,620 came from the campaign of Deborah Travis Honeycutt, a little-known Republican from Georgia running in a Democratic stronghold in suburban Atlanta.

Mackenzie has been handling political money for a long time. He worked for Ronald Reagan’s campaigns in the 1980s and later worked on Jack Kemp’s 1988 bid for the GOP presidential nomination. He later signed on with Pat Buchanan in 1992 and served as Buchanan’s campaign treasurer in 1996.

According to a 1996 New York Times story, Mackenzie and Buchanan’s sister, Bay Buchanan, set up a company in Virginia that the campaign used to buy advertising. The company, WTS Inc., received $1.46 million from the campaign during the 1996 election cycle.

Buchanan was known as a master of direct-mail fundraising campaigns.