Despite a defeat in the Third District Democratic Congressional primary, former state Rep. Ed Fallon said he is proud of the campaign he ran.

But that wasn’t the hardest part.

“The next day, I had brunch with my staff as a big sendoff,” Fallon said. “It was really hard. It felt like I was sending my kids off to an orphanage.”

Throughout the campaign, Fallon and his staff had grown close, even making sure they took a break every evening to sit down and have dinner together.

“It became like a big family,” said Lynn Heuss, Fallon’s campaign manager for his run for the Third District Congressional seat. “We really miss seeing those people every day.”

But now he turns to the future, working to pay off his campaign debt that totaled around $37,500 shortly after the primary was over. Since then Fallon has managed to raise a little more than $23,000.

He’s also kept busy, along with Heuss, moving the campaign offices into storage and updating the 9,000-strong e-mail list he put together during his campaign.

“When the caucuses ended, a couple of the presidential campaigns were just going to toss all their equipment into the landfill and move on,” Fallon said. “We got a lot of our stuff that way. But this campaign isn’t the end. We see it as a step to build momentum for a progressive movement.”

On primary night, when Fallon said he wasn’t going away, he meant it. He has no intentions to run again for office any time soon, but he also has no intentions of “sitting back and letting politics as usual go on.”

“I don’t know exactly what I’m going to do, but I want to continue to work for Iowa,” Fallon said. “I know I’m going to continue to be politically engaged; it’s just a matter of figuring out where to focus our energies.”

Fallon and Heuss said they will return to work in the organization they founded after Fallon’s gubernatorial run in 2006, An Independence Movement for Iowa (I’m for Iowa), with a focus on state issues like campaign finance reform and local control, as well as broader issues like combating global climate change.

“We’re being approached by a lot of Democrats looking to see if we can help them on certain issues,” Fallon said. “There are plenty of opportunities to get involved.”

Fallon’s primary challenge of incumbent Boswell was bruising affair, a campaign Fallon calls “the ugliest I’ve ever been a part of.” Boswell questioned Fallon’s loyalty to the Democratic Party, and the media called into question the Fallon campaign’s ties to I’m for Iowa and in the process called into question Fallon’s campaign finance ethics.

“I know what it’s like to get swift-boated,” Fallon said, referring to the negative campaign tactics used against Sen. John Kerry in his 2004 presidential run. “They took something that was a strength of mine and turned it into a weakness.”

Heuss said one of the biggest mistakes the campaign made was in budgeting. The prolonged presidential campaign sapped a lot of the political energy from many in the progressive community who would have supported Fallon, which hurt the campaign’s ability to raise money.

“We built a big staff very quickly, but then we weren’t able to raise the money we thought we could,” Heuss said. “In retrospect we should have built the staff more slowly and utilized more paid media.”

Because Fallon was outspent 5-to-1, Boswell was able to frame the debate, not to mention frame Fallon as someone who could not be trusted, Heuss said.

“It was a learning experience,” Fallon said. “But I’m proud of our campaign. We got 39 percent of the vote against an incumbent after being outspent 5-to-1 and having the entire apparatus of the Democratic Party work against us. We made some mistakes, but I think we ran a good, positive campaign that we can be proud of. It felt good not to sink to their level and go negative.”

Fallon is also proud of the staff he built, many of whom had never been involved in politics before.

“That’s very rewarding,” he said. “To me that’s a win.”

So what does the future hold for Ed Fallon?

“I will continue to focus on public service,” he said. “I figure I’ve got at least another 30 years of service left in me, and I’m not weary at all.”

But the FEC denies confirming any facts in relation to a specific campaign.Fallon’s press release did not attribute the determination to any specific individual at the Federal Elections Commission (FEC), nor did it provide a direct transcription of the Information Services department’s answer to the campaign’s inquiry.

According to FEC spokesperson George Smaragdis, it would have been against commission policy for an employee to answer such a question as it related to any specific campaign.

“No Commission employee made any determination relative to the specific circumstances of any campaign,” Smaragdis told Iowa Independent in an emailed statement.  “Only the Commission can make such a determination.”

The commission, which currently lacks enough appointed members to issue rulings, has not yet considered any legal questions related to the contested Democratic primary between Fallon and current US Rep. Leonard Boswell.

Although Fallon claims that Boswell has accused him of violating FEC regulations, neither Boswell himself nor the numerous news reports of the story have gone as far as to claim Fallon acted illegally, and Iowa Independent’s story noted that FEC regulations do not appear to explicitly prohibit connections between a for-profit general partnership like I’M For Iowa and a federal congressional campaign.

Rather, Boswell and others have so far only alleged that Fallon’s financing practices raise ethical questions — namely, whether a federal candidate should be allowed to raise unlimited, undisclosed donations for a personal business that then uses its resources for the purposes of his or her political campaign.  Fallon’s critics have stopped short of alleging anything illegal.

In light of Fallon’s history of adhering to stricter campaign finance standards than required by law and his long-standing emphasis on campaign finance reform, operating in an apparent ethical gray area may be seen as particularly damaging to his campaign.

Although I’M For Iowa participates in political advocacy and relies on contributions to stay afloat, its financial status does not fit the typical mold for this type of organization. Rather than registering it as a nonprofit organization with the Internal Revenue Service under sections 501(c)(3), 501(c)(4) or 527, Fallon runs the organization as a for-profit general partnership, making its tax status no different from most home businesses. He and his current campaign manager, Lynn Heuss, co-own the business.

But there is a difference between I’M For Iowa and most typical businesses: Rather than sell products and services to customers, it accepts donations for its political advocacy work. While the donations are not tax-deductible, the business can accept unlimited amounts of money. And because of its tax status, it is not required to disclose information about its sources of funding.

Although Fallon continued to receive paychecks from his gubernatorial campaign account through the end of 2006 and earned a nominal amount of money for consulting on former Sen. John Edwards’ presidential campaign during the Iowa caucuses, he said that he also earned some money from I’M For Iowa during 2007. “I think both Lynn and I took a small draw on the business, but again, it was just getting going,” he said. Currently the business is Fallon’s only apparent source of income.

But I’M For Iowa is not just a source of income for Fallon. It is also an outlet to promote his congressional campaign through e-mails to its long list of subscribers. Fallon denies that the business has been used for campaign purposes, claiming that “there has been no connection between I’M For Iowa and the campaign. I have been very meticulous about that.”

But aside from the organization’s political advocacy work on local and statewide political issues, Iowa Independent has uncovered two I’M For Iowa e-mails promoting Fallon’s congressional bid.

On Feb. 29 an e-mail Fallon wrote to his I’M For Iowa group invited readers to visit his campaign Web site and participate in campaign activities to coincide with his 50th birthday. And on Jan. 12 he sent an I’M For Iowa e-mail announcing his candidacy for Congress and providing a lengthy critique of his primary opponent’s voting record.

The result is a complicated question involving the nuances of campaign finance law. Can an unincorporated business accept unlimited contributions without the requirement to disclose its contributors and then use contributed funds to promote a congressional campaign?

Although Fallon may not have violated the letter of current campaign finance laws, even the appearance of impropriety could damage his campaign, which is founded on proposals for campaign finance reform and clean elections.

Confronted about the situation, Fallon claimed that I’M For Iowa is no different from any other business for campaign finance purposes. “Well, that’s no different than Jeff Lamberti making a living off of the proceeds of Casey’s,” he said, referring to Boswell’s 2006 Republican opponent, whose family founded the well-known chain of gas stations.

But Casey’s corporate e-mail accounts were not used to promote Lamberti’s congressional campaign. Because Casey’s is an incorporated entity, in-kind contributions like promotional campaign e-mails on behalf of the company would have been illegal. Casey’s also does not solicit donations to generate revenue.

Although Fallon wrote an email to I’M For Iowa’s e-mail list on March 7 asking each member for “a donation of $100, $50, $25 or more if possible,” he now admits that using the term “donation” may have been a mistake.

“If the e-mail described it as donations, it’s probably the wrong technical language,” Fallon said. He likened contributors to I’M For Iowa to “investors” rather than donors, although contributions are not made in exchange for a financial stake in the company.

The fact that a candidate can form a business entity, accept unlimited, undisclosed contributions to the business, and then use the business for campaign purposes, might raise questions among many advocates of increased transparency in politics. But Fallon, himself an outspoken advocate for cleaner elections, does not see the issue.

“It’s not getting around any rules,” he said.

The candidate resisted Iowa Independent’s request for I’M For Iowa’s tax return and other documentation of its contributors or “investors.” “I’m not sure whether that’s public knowledge or not,” he said, implying that he would not release the information unless required to by campaign laws.

A representative of the Federal Elections Commission would not comment on any matters that regulators may have to rule on, but FEC regulations do not seem to explicitly prohibit coordination between a campaign and an unincorporated business entity owned by a candidate.

But Fallon, who imposed stricter fund-raising limitations on himself than were required by state law during his campaign for governor, has generally held himself to higher campaign finance standards than what the letter of the law requires. A major part of his 2008 campaign message is that he refuses money from any political action committee (PAC), which many of his supporters see as corruptive influences in politics. But even PACs are required to disclose certain information about their donors, while I’M For Iowa is not.

How supporters of stricter campaign finance laws will react to these revelations about Fallon’s I’M For Iowa entity remains to be seen.

What this means to public campaign finance proponents lobbying for VOICE is unclear. “I’M for Iowa’s” Lynne Heuss is perplexed as to why a campaign finance reform committee needs to be appointed: “The bill drafted by Pam Jochum, D-Dubuque, is one of the strongest in the country. The VOICE bill is airtight.”Senate Republican Leader Mary Lundby, R-Marion, was more vocal and called for some signs of movement from Democrat leadership. “The cost of campaigns has been on the forefront for a long time and now we’re just simply ignoring it,” Lundby said. “…We stand up on the (Senate) floor and we bitch about it and we say how bad it is and then we’re not committed to doing anything about it.”

Lundby said Democrats who control the Legislature’s debate agenda — and the number of “interim study committees” that will meet this summer and fall — had assured her that campaign reform would be one of the topics addressed.

Public campaign finance may have been sidestepped during the interim session, but a number of progressive activists are in the process of building a grassroots’ movement to ensure that VOICE isn’t ignored next January, when the next legislative session starts in Iowa.

1. Work with Iowans across the state to develop the tools they need to address problems confronting them and their communities, particularly issues involving land, justice and poverty;

2. Advocate for progressive legislative changes, particularly Voter-Owned Iowa Clean Elections (VOICE), local control over factory farms and universal health care;

3. Continue to build the organizational base necessary to recruit and elect progressive candidates across the state, and mentor them on an ongoing basis once elected;

4. Support local businesses and Iowa farmers and encourage personal examples of the many ways in which individuals can lead lives that are more sustainable and truly independent; and

5. Build the infrastructure needed to create a grassroots, democratic force that can become An Independence Movement for Iowa, and work in coalition with groups committed to these goals and ideals.

I’m for Iowa’s Goals:

1. CANDIDATES. Recruit and assist progressive candidates.

2. CLEAN ELECTIONS. Provide grassroot support for legislative initiatives to enact Voter-Owned Iowa Clean Election (VOICE) legislation.

3. CLIMATE CHANGE. Provide leadership to encourage changes in personal habits and public policies relevant to growing concerns about global warming.

4. COMMUNICATION. Broaden the base of our movement through public speaking, media events, weekly updates and columns.