The Democratic Party in the three states funneled a total of $25,000 beginning in December 2005 to Rhode Island Secretary of State Matt Brown, who was seeking the Democratic Senate nomination.

Over the next few weeks, three of Brown's top donors contributed a total of $28,000 back to the out-of-state parties that had made the donations to Brown's campaign. In each case, the donor had already given Brown the maximum allowed under federal law, $4,200.

Those transactions led to a complaint by the Hawai'i Republican Party alleging that Brown's campaign broke campaign finance laws by routing money through state parties to avoid contribution limits.

"Though it may be reasonable to infer that the individual donors solicited by Brown gave to the state parties under the assumption that some portion of their contribution might then be donated to the Brown Committee, such an inference alone is insufficient," according to the Federal Election Commission's decision, which was dated April 4 but not publicly announced.

The commission wrote that there was no evidence of an explicit arrangement between the state parties and the Brown campaign for a money swap that would skirt election laws.

"We made our case, and we still believe that what the Democratic Party of Hawai'i did was wrong," said Hawai'i Republican Party chairman Sam Aiona. "We do hope that the voters of Hawai'i look at it differently, especially during the next elections."

The matter had little apparent impact on the 2006 election in Hawai'i in which Democrats retained 80 percent control of both legislative houses and swept U.S. House and Senate elections. Although incumbent Gov. Linda Lingle won decisively, Democrats did no worse than expected in any race.

In Rhode Island, Brown later dropped out of the race because he lacked enough money to continue his campaign. Sheldon Whitehouse went on to win the Democratic primary, and then he defeated incumbent Republican Lincoln Chafee in the general election.

The controversy contributed to the resignation of Maine Democratic Party chairman Patrick Colwell, who stepped down on the same day his state party adopted new rules preventing future out-of-state donations.

The Hawai'i Democratic Party also banned out-of-state donations as a result, said chairman Mike McCartney.

"We're going to focus on Hawai'i, and not on the Mainland," McCartney said. "I'm happy that it's over, and we just have to move ahead."

Federal election laws prohibit organizations from passing on contributions in someone else's name, and they also disallow money exchanges that are made in order to avoid campaign donation limits on individuals. Brown acknowledged that he personally asked supporters to give money to the three state Democratic parties that contributed to his Senate campaign, but denied ever making a deal to illegally funnel donations to his campaign.

Although he denied wrongdoing, he did return the money, and so did the state parties.

"Clever people can find all kinds of ways to get around laws," said Jean Aoki, legislative chairwoman for the Hawai'i League of Women Voters, when asked for comment on the decision. "You can't close every loophole. If you understand the intent of the law, you would think that law-abiding citizens would know what to do."

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