TPM News

Thanks to help from TPM Reader BK, we uncovered some congressional testimony from last year about BWM Direct, the Washington direct marketing firm that raises money for GOP candidates, among others, but doesn't give them much of it.

The House oversight committee held a hearing on December 13, 2007, about veterans' charities. The legislators heard a complaint from Bonnie Carroll, the executive director for the Tragedy Assistance Program for Survivors, or TAPS, a group that provides support to families of fallen combat troops.

Carroll had this exchange with Rep. Elijah Cummings (D-MD) at the hearing on Dec. 13, 2007. She doesn't identify the firm during the hearing, but in a phone interview with TPMmuckraker this week she confirmed she was referring to BMW Direct:

Mr. CUMMINGS. Well, Let me ask you this. How much money did you make under the telemarketer? How much money did you make?

Ms. CARROLL. If I could just defer to our CFO here.

Mr. CUMMINGS. Sure.

Ms. CARROLL. It is upset,ting to say that our income was approximately $50,000 to their total of $500,000. Mr. CUMMINGS. Wait a minute. Let me get this right. I know I didn't hear that right. Let me get this right. They got $500,000, and you got $50,000?

Ms. CARROLL. Yes, sir, that is correct.

Mr. CUMMINGS. Jiminy Christmas.

Ms. CARROLL. And we terminated that very quickly, and it was a regrettable experience.


Carrol provided us with this data on how their deal with BMW played out between 2005 and 2007:

In 2005, the firm raised $371,375 and spent $366,375, giving TAPS a net of $5,000.

In 2006, the firm raised $187,394 and spend $176,310, giving TAPS a net of $11,084.

In 2007, the firm raised $3,187 and took no expenses out, giving TAPS a net of $3,187.

In total, BMW Direct raised $561,956 on behalf of TAPS, spent $542,685, giving TAPS a net of $19,271.

Let's do the math. That's...3.5 percent. So all those people who thought they were giving money to support widowed wives of slain combat troops, less than a nickel on the dollar actually did.

While TAPS was disappointed with how much money they ultimately received, Carroll said BMW Direct didn't misrepresent itself from the outset. "BMW was forthright," she said, and was not "raising false expectations on either instantaneous or total economic returns."

We also talked to the National Black Republican Association, which used to have BMW Direct raising money for its Black Republican PAC. Frances Rice, the group's chair, said they stopped working with BMW Direct last year. The two parties had a "disagreement over strategy." Rice declined to elaborate.

As we reported earlier, Chairman Waxman of the House Oversight Committee claimed today that the Bush Administration knew about the Hunt Oil deal way before it happened-- something the administration has denied regularly.

According to Waxman, there were nearly a dozen contacts between various levels of the administration and Hunt Oil as the deal was taking place. Hunt regularly informed the President's Foreign Intelligence Advisory Board of his intentions to seek a deal with the Kurdistan government. Management at Hunt also regularly met and communicated with the U.S. Regional Reconstruction Team (RRT), as well as State Department personnel.

So let's go through a little time line of the events and communication leading up to Sept. 8, 2007-- the day the Hunt Oil deal was finalized with the Kurdistan government.

June 12 and 15: Hunt Oil officials meet with officials from the RRT for the Kurdistan region, "to investigate investment prospects" in the Kurdish region. Hunt Oil General Manager Ken McDonald, asks RRT members if the deal between Hunt Oil and Kurdistan is in violation of U.S. policy:

I specifically asked if the USG had a policy toward companies entering into contracts with the KRG and [redacted] replied that there was no policy, neither for nor against.


July 12, 2007: Ray Hunt, president and CEO of Hunt Oil sends a letter to the President's Foreign Intelligence Advisory Board, letting them know he is pursuing an oil deal in Kurdistan:

We were approached a month or so ago by representatives of a private group in Kurdistan as to the possibílity of our becoming interested in that region. We had one team of geoscientists travel to Kurdistan several weeks ago and were encouraged by what we saw. We have a larger team going back to Kurdistan this week but who they will actually meet with while they are there and what the relationships of those people might be with the Government of Kurdistan are both unclear at this time.


August 2007: Hunt Oil representatives exchange a series of emails with State Department personnel discussing their return to Kurdistan.

August 30, 2007: Ray Hunt sends another letter to the Advisory Board to let them know he will be in Kurdistan the week of September 3:

While my schedule is still fluid, there is a high likelihood that I will meet with President Masoud Barzani, the Prime Minister, the Oil Minister and various other individuals associated with the government of Kurdistan.


September 5, 2007: McDonald informs the RRT in Erbil that "Hunt is expecting to sign an exploration contract" with the Kurdistan Regional Government. That same day, the RRT leader sends an e-mail summary of the meeting to the Embassy in Baghdad and the State Department headquarters in Washington. A second synopsis of the meeting is sent to the Embassy in Baghdad in a situation report the following day.

September 8, 2007: The Hunt Oil contract is finalized with the Kurdistan Regional Government.

September 13, 2007: A State Department official contacts Hunt Oil to describe another "good opportunity for Hunt" in Iraq, prompting a Hunt Oil official to write Ray Hunt: "This is really good for us. . .I find it a huge compliment that he is 'tipping' us off about this . . .This is a lucky break."

House oversight committee Chairman Henry Waxman says the Bush Administration knew about the September 2007 deal that Texas-based Hunt Oil struck with Kurdish officials in Iraq.

That contradicts what President Bush said at the time.

That deal was controversial because it came at a time of precarious negotiations in Baghdad about a possible revenue-sharing agreement between the warring factions in Iraq. The Kurds decision to forge a deal independent of the Baghdad government angered the Sunni and Shia Arabs in Iraq.

In a letter to Secretary of State Condoleezza Rice, Waxman asked for further information about the U.S. involvement in Iraqi oil deals, the Hunt Oil deal as well as more recent deals. He quoted the president speaking shortly after the deal was announced almost a year ago.

Administration officials criticized the Hunt Oil contract because it jeopardized the efforts of the Iraqi parliament to come to an agreement on the national oil legislation. When President Bush was asked about the Hunt Oil contract, he stated:

"I knew nothing about the deal. I need to know exactly how it happened. To the extent that it does undermine the ability for the government to come up with an oil revenue sharing plan that unifies the country, obviously if it undermines it I'm concerned"
Waxman said his committee has conducted an investigation of the Hunt Oil deal.
The documents that the Committee has received tell a different story about the role of Administration officials. Ray Hunt, the head of Hunt Oil, personally informed advisors to President Bush of meetings he and other Hunt Oil officials planned with representatives of the Kurdish government. Other Hunt Oil officials kept State Department officials informed about the company' s intentions.

After taking a hard look at the candidates who work with BMW Direct, the conservative Washington political firm that appears to keep a lot of the money it raises on behalf of other people, we've found an interesting pattern.

The firm appears to have two different types of clients.

For some candidates -- the little known longshots who are challenging incumbents -- the firm raises considerable amounts of money with nationwide mailings and spends almost all of that money on its own direct mail campaign. The monies raised by BMW go into the campaign's accounts then are quickly expended with various fees back to BMW or its affiliates, usually by the end of the same FEC reporting period.

For other candidates -- ones who are already in office and have a substantial campaign operation -- the firm appears to charge less in fees and does not allow expenses to eat up all the money pulled in. These candidates actually have some cash on hand at the end of the reporting period.

For example, take a look at Rep. Geoff Davis, the Republican from Kentucky. According to his most recent quarterly FEC report, he spent a lot of money on direct mail expenses -- $88,674.56 -- during the first quarter. But that was less than 60 percent of his total expenses. Davis also appears to have other normal campaign activity, where he is paying people in his home district for "administrative support," rent, catering campaign events, and paying mobile phone bills. (And $1,521 worth of tickets to the Kentucky Derby.)

And most importantly, while most of his campaign contributions were from outside his district -- presumably the haul from a nationwide direct mail campaign -- he actually had money left over at the end of the quarter - a net gain of $73,750.62. It's also very clear that Davis. a two-term incumbent from a district with a lot of Democrats, has an established campaign in place. That additional money added to his overall war chest for a total of $724,286.

Another client who appears to do routine business with BMW Direct is Rep. Virgil Goode (R-VA). He's actually facing a tough race this year. Goode spent $69,852 on direct-mail related expenses in April and May. But he took in a total of $136,909, including a lot donations from inside his own state. And Goode still has more than $600,000 on hand.

The upstarts don't fare as well with BMW Direct. We've already told you about Deborah Travis Honeycutt down in Georgia. There are a few others like her.

For example, Duane Sand, a little known Republican from North Dakota. His filings show he raised more than $300,000 during the first quarter and also spent more than $300,000. In the end he had less than $40,000 on hand. Almost all of his money came from out of state. And his expenditures show that more than 90 percent of his expenses were related to the direct-mail campaign, or $360,681.77 out of the total expenses of $389,501.01 spent for the quarter.

It's the same with Russell Williams, a retired Army lieutenant colonel and Republican running for office in Pennsylvania. He's challenging Rep. John Murtha (D-PA). During the first quarter, he only held on to about 13 percent of his money, raising $222,071.09 and spending $193,606.89, almost all of that money going to direct-mail expenses. Russell's campaign treasurer is Scott Mackenzie of BMW Direct.

Typically, direct-mail fundraisers take at least 30 percent of the fees raised. So even for the office holders, BMW Direct looks pricey. But at least they actually get some return on the deal. Some of those longshots aren't so lucky.

It was bound to happen when you had a big mess of lawyers disqualified from hiring for illegal reasons. One of the de-selected masses filed a lawsuit claiming $100,000 in damages on Monday.

As the The Blog of Legal Times wrote yesterday:

The class action by Sean Gerlich -- filed yesterday in U.S. District Court for the District of Columbia -- is the first suit resulting from an internal Justice report issued last week that says two former Justice officials illegally screened applicants to the honors and summer intern programs.

The two officials were Esther Slater McDonald, then counsel to the associate attorney general and now an associate at Seyfarth Shaw, and Michael Elston, then chief of staff to Deputy Attorney General Paul McNulty and now a partner at McGuireWoods.

Gerlich's suit says the department politicized the selection process, mishandled the applications and failed to maintain the records, all in violation of the Privacy Act, the Civil Service Reform Act and the Federal Records Act. In addition, the suit claims violations of the First and 14th Amendments.

Gerlich says he was rejected because of his liberal affiliations, which officials dug up through Internet searches.

Samuel Israel III, the convicted hedge fund manager who faked his own suicide just days before he was to be sent to prison, turned himself into police in Southwick, Massachusetts today.

From the AP:

Federal officials say fugitive hedge-fund swindler Samuel Israel has surrendered to authorities.

Rebekah Carmichael, a spokeswoman for U.S. Attorney Michael Garcia, said Wednesday that Israel is in federal custody. She would not immediately provide other details.

Israel disappeared last month on the day he was supposed to report to federal prison. Authorities found his car on a bridge over the Hudson River with the words "suicide is painless" scrawled in the dust on the hood.

He was sentenced to 20 years in prison for bilking investors out of $450 million in hedge funds.

As predicted, there's been lots of fall out from the first report by the Department of Justice Office of Inspector General on the hiring practices used by the DOJ.

As the New York Times reports today:

The Office of Special Counsel, an agency that investigates political interference in the federal workplace, let the Justice Department know this week that it would be examining the issues raised in the report "to discuss what our next step should be," said James P. Mitchell, a spokesman for the office.

The special counsel has offered to work with the department "to determine whether disciplinary action is warranted," Mr. Mitchell said. The inspector general's report noted that two department officials who it said were largely responsible for the abuses in 2006, Michael Elston and Esther Slater McDonald, could not face disciplinary action because both had left the department.

But Mr. Mitchell said: "That doesn't rule out others -- those who considered political affiliation in making decisions as well as those who let them do that. This is a prohibited practice, and this is an area that we enforce."


The OSC is no stranger to trouble. It's had its own issues lately, namely that the head of the department, Scott Bloch, is under investigation by the FBI.

For all the allegations of fraud, waste and abuse in Iraq and Afghanistan, few U.S. individuals or companies have been hauled into court, placed under oath and forced to answer a lot of questions.

A story in today's Washington Post offers some insight as to why not.

There's a massive backlog of whistle-blower cases over at the Department of Justice. These are unique cases where regular citizen-whistleblowers are the plaintiffs (and share in the recovery when the cases are successful, which is supposed to encourage them come forward). The reason we don't hear much about them is because they are automatically placed under seal. Filed under the Civil War-era False Claims Act, not even the people filing them can talk about them.

In theory, this allows the government to conduct an investigation without tipping off the target of that investigation. The government has the option of joining the plaintiff in the case. But that veil of secrecy can also allow the government to drag its feet on an investigation, which the Post points out.

Critics argue that the delays are at least partly the result of foot-dragging by Justice and the federal agencies whose position it represents, especially in the touchy area of suppliers that may have overbilled the government for equipment, food and other items used by troops in Iraq and Afghanistan.

Justice lawyers have rejected about 19 cases involving contractor fraud in Iraq and Afghanistan, registering five settlements that resulted in $16 million, officials said. Government officials said this week that they are considering whether to dive into 32 more whistle-blower cases involving Iraq or the Middle East.

"It's just flatly absurd for us to be five years into this war" with so few public cases, said Alan Grayson, a whistle-blower lawyer in Florida who has criticized the Justice effort and who is running for Congress as a Democrat.


There was an oddly written report from the BBC a few weeks ago that appeared to be reffering to these cases, known as "Qui Tam" cases.

One case that did become public a few years ago was the case of Custer Battles, when we heard about soldiers unloading trunks full of $100 bills from C-130 cargo planes with no sign of any accounting system.

Typically these whistleblower cases take two to four years to become public. But there are a lot of challenges to investigating a legal claim in a war zone.
Whistle-blower lawyers say other factors can contribute to long delays, including the difficulty in investigating claims in war-torn areas and complications that arise when military officials contend that technology or other products at issue in the lawsuits are classified. In addition, Justice lawyers who handle civil cases often cannot proceed until authorities decide whether a case merits criminal prosecution, the lawyers said.
In an interview with TPMmuckraker few weeks ago, Robert Bauman, a former Department of Defense criminal investigator who now works as a consultant to people who file whistleblower cases, said there's a lot of cases still unresolved.

"They're still in the mill," Bauman said. "They will come out. I don't know how long it will be, but eventually, they'll come out."

Blackwater has sparked new controversy with their plan to expand its military-training business in San Diego. Sen. James Webb (D-VA) is holding out on approving four civilian defense officials until he receives more information about a Blackwater training facility in California. One of the nominees being held is set to be the undersecretary of the Army. (Wall Street Journal)

The ACLU filed a Freedom of Information Act request on Tuesday for records pertaining to the government's cell phone tracking practices. The ACLU is concerned that the government is exercising unconstitutional powers with this practice and seeks to learn further details for a possible suit. (New York Times)

In the wake of legal and financial problems, the new UBS chairman has announced the departure of four directors and a layer of board management. There are still many concerns that these moves will not be enough to help the ailing bank. (Wall Street Journal)

Read More →

As we reported yesterday, the Justice Department sought a court order against UBS, to force the Swiss banking giant to give up the identify of its U.S. shareholders. A long court battle was predicted, and now it has begun.

From the International Herald Tribune:

An order signed by Judge Joan A. Lenard of U.S. District Court in Miami gives investigators the authority to request the information from UBS. A spokesman for the Internal Revenue Service said the agency, which was working with U.S. prosecutors, was expected to serve UBS with a summons for names within several days. The bank can either turn the names over -- an unprecedented move for a Swiss bank under secrecy laws -- or appeal the judge's ruling.

TPMLivewire