PROVIDENCE –– The Board of Elections is reviewing whether the chairman of the state Moderate Party violated campaign finance law by personally donating $20,000 over one week to his fledgling political organization.

The recent contributions by Kenneth J. Block, which are double the annual limit for “party building” donations, appear to be legal, according to Richard Thornton, the board’s director of campaign finance.

“This area of Rhode Island general law has pretty much not been utilized in this fashion. For now, the transaction is as it stands, but we are looking at it,” Thornton said. “We understand that the possibility exists that this may happen again. It’s something we want to resolve quickly.”

Indeed, the outcome is critical for the newly established party’s effort to influence the 2010 elections and could have far-reaching effects on the influence of money in Rhode Island politics for years to come.

Democratic Party Chairman William Lynch is among those paying close attention.

“I don’t know how it can be seen as anything other than fraud,” he said. “I’d be happy if the Board of Election decides it’s legal … If they can do it, rest assured, we will as well.”

The basic facts of the case, as detailed in campaign finance reports, are not in dispute.

On Sept. 21, Moderate Party founder and current chairman Block personally donated $10,000 to his organization’s state committee. The donation matched the annual individual maximum allowed by state law for party building, which covers expenses related to staffing, rent and utilities, but not individual elections.

On Sept. 26, Block, a Barrington software engineer, wrote another $10,000 check. This time the recipient was the Barrington Moderate Party Town Committee, which had been formed just two days before.

And on Sept. 28, according to state filings, the Barrington committee sent $10,000 –– all but $100 in its bank account –– to the state committee.

Block says the Barrington group, the head of which he appointed days earlier, acted independently. But he acknowledges having had a conversation about diverting the donation.

“I had discussed, and we are discussing with all our town committees, that one of the primary missions is to raise money and get it to the state party to support infrastructure,” Block said, noting that he estimates roughly $180,000 in staffing and overhead costs through December 2010. “It’s understood by all the members of those town committees what our short-term goal is.”

Ultimately, he says, donor intent is not addressed in the law. Even if he had given $10,000 to the town committee with the explicit understanding it would be diverted to the state committee, it wouldn’t be illegal.

“This is black-and-white in Rhode Island law,” Block said. “This law has sat unmodified on the books for decades. I don’t know why anybody hasn’t done this before.”

Lynch said he was shocked by Block’s interpretation.

“That’s like saying to me I can take $1 million and write checks to 39 city and town committees and tell them to deposit the money and send checks to the state party. There’s no way you can do that,” he said. “I’ve got big Democratic donors all over the country who would be very happy to learn they could avoid the legal caps simply by washing the money through another entity.”

Block, meanwhile, said he was cleared by Thornton, of the Board of Elections, before making his donations. “We vetted our approach with the Board of Elections, and they said, ‘Yes you can do this,’ ” Block said.

Thornton recounted the exchange differently.

“At some point in the conversation when he was looking for clarity, I asked him to put his request in writing so we could form an advisory opinion,” he said. “And that did not happen.”

Block explained that after receiving early indications from Thornton that he was on solid footing, he wanted to avoid a formal advisory opinion.

“If it comes back and the answer is no for political reasons, then you’re forced to go to court,” Block said. “We’ve had attorneys go through this … If it was a murky decision, we probably wouldn’t have done anything. But the language is crystal clear.”

Block said he would continue donating to local committees as would other deep-pocketed donors. While the locals will do as they please, Block predicted they would divert much of their funding to the state committee, which has hired three full-time staffers in recent months and leased a Warwick headquarters.

Asked why he would risk making donations that might be questioned, he said, “It’s 100 percent ethical. If it were not legal, it wouldn’t be ethical.”

That didn’t satisfy Lynch.

“These are the guys, the Moderate Party, who want to sit back and throw stones and criticize everybody else,” he said. “They’re going to be the new moral authority in Rhode Island politics. And right out of the bat, they’re coming up with a strategy at least to avoid law in Rhode Island. You can’t make this stuff up.”

speoples@projo.com