OLYMPIA, Wash. -- Washington congressional candidate Stan Flemming's campaign has been helped in recent months by $200,000 in loans provided by a peculiar California organization -- Spanky LLC.
Spanky LLC was formed by a Flemming supporter and business associate in February, just a few weeks before the entity began lending money to the candidate.
The atypical loan pushed the boundaries of federal law, providing a cash boost that dwarfs the money Flemming has raised during the normal course of the campaign and helped provide him an edge over fellow Republican hopeful Dick Muri in Washington's new Olympia-anchored congressional district.
Candidates are allowed to take out loans to help fund their campaigns, though that it is typically done through a bank. Flemming's campaign believes the loan it received is legal, citing Federal Election Commission rules that allow for an advance from a brokerage account, credit card account or "other line of credit."
The extension of credit must be done under "commercially reasonable terms" and made by people who make such loans in their course of business, according to FEC guidelines. The loans from Spanky LLC had an 8 percent interest rate and a due date at the end of 2012.
"To win, Mr. Flemming had to think outside the box, but legally, as to how to find sources of money for the campaign," said Carol Cain, a spokeswoman for Flemming. "He is not able to write himself a check for that amount from his personal sources, thus the loan from Spanky LLC. "
Flemming and Muri are vying to be the Republican alternative to Democratic hopeful Denny Heck, who is expected to advance in next week's primary for the 10th Congressional District.
James A. Kahl, a former deputy general counsel at the Federal Election Commission who now leads the political law practice at legal firm Womble Carlyle, said he's typically only seen candidates use the "other line of credit" aspect of federal law to draw money from brokerage firms or banks where a candidate has a home equity loan. It seemed questionable to have some type of loan coming from an organization that's only been around for a few months, he said.
"Knowing nothing about what they do, it sounds like it might be a stretch to fit in this exception," Kahl said.
While candidates must only get loans for businesses that lend in the normal course of business, it's not exactly clear what Spanky LLC does. One of the people who contributed to Flemming's campaign is listed as a "producer" at Spanky, which is based in Beverly Hills, Calif. The company has no website or contact information.
Spanky LLC was formed by Sherry Hackett, the widow of the late comedian Buddy Hackett, on February 13. California records don't reflect the type of business that was formed, but it isn't licensed by the California agencies that typically regulate loan entities -- the Department of Financial Institutions and the Department of Corporations.
Two days after Spanky's creation, Hackett gave a $1,000 contribution to Flemming's campaign.
The loans totaling $200,700 came in installments on March 6 and June 28. On that first date, Flemming also got a contribution from David Loftus, the man who listed himself as a Spanky producer.
Hackett did not return a call seeking comment. Cain, the campaign spokeswoman, said Spanky had been formed to loan money for projects of all types of businesses. Loftus and Hackett are both business associates of Flemming, Cain said.
Flemming has repaid 75 percent of the loan, with Cain saying the campaign had a commitment of contributions it felt secure about. The campaign no longer needed to continue to accrue interest on a loan it didn't need, Cain said.
Flemming is currently a Pierce County councilman.