PROVIDENCE –– The state Board of Elections has quietly offered to settle a campaign-finance dispute with the newly established Moderate Party of Rhode Island for what may be the largest fine in the board’s history.

State officials have asked the three-month-old party to forfeit a $10,000 donation and its chairman to pay another $10,000 from his own pocket, according to the terms of a deal outlined behind closed doors last week. Board officials threatened, as an alternative, to have the attorney general’s office launch civil or criminal investigations into a host of party officials for violating Rhode Island’s finance laws.

“That was a rotten deal any which way you sliced it. And frankly, a deal designed to be rejected,” said party chairman Kenneth J. Block, who shared the details and travel of the case with The Journal on Monday afternoon.

The Moderate Party, established in August after winning a court battle and gathering more than 23,000 signatures, rejected the deal in a private meeting Friday.

“I’m ready to go to war on this,” Block said.

Board of Elections Executive Director Robert Kando declined to comment when reached Monday, citing a state law that blocks board officials from discussing investigations before they are finalized.

“We have nothing to say about any meeting that may have occurred,” he said.

The board’s director of campaign finance, Richard E. Thornton, would not discuss the case in detail, but confirmed that board staff had determined that Block violated campaign finance law by donating $20,000 for “party building” over one week in September.

State law outlines a number of possible sanctions for campaign finance violations, ranging from a warning letter to a criminal investigation that could produce fines as high as $30,000.

Block blasted the deal and looming legal action as being “100-percent politically motivated.”

“Instead of sending a warning, and saying, ‘Send it back,’ what we get is nuclear war against the Moderate Party,” said Block, founder of the party that brought a lawsuit against the state to win ballot access earlier in the year. The Board of Elections was ultimately ordered to pay a share of the party’s $34,000 legal bill after losing.

Thornton defended the board’s position –– stated publicly for the first time Monday –– that a donor cannot give more than $10,000 in one calendar year for party building.

“I pride myself on being impartial,” he said. “We’re governed by the law, not by politics.”

THE FACTS of the case, as reported by The Journal earlier this month and outlined in campaign-finance reports, are not in question.

On Sept. 21, Block donated $10,000 to his organization’s state committee, the annual individual maximum allowed by state law for party building, which covers expenses related to staffing, rent and utilities, but not specific elections.

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

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

Block had been in regular communication with the Board of Elections over that week, according to a series of e-mails shared with The Journal.

On Sept. 21, for example, he sent an e-mail to Thornton asking three questions. This was the third: “Using the most extreme example, an individual donor can make a $10,000 ‘party building’ donation to every State Committee and every Town Committee of every political party in the state every year”?

Thornton responded the next day: “I can confirm that items #1-#3 are correct as presented.”

Two days later, however, Thornton sent another message, asking Block to “put your request in writing as the basis for the board issuing an advisory opinion on this question.”

Block never did so, but notified Thornton on Sept. 28 that he made two separate $10,000 donations.

“[O]n the advice of our attorneys, we have decided not to ask for an advisory opinion …” Block wrote in an e-mail. “These donations were made because I feel that Rhode Island law clearly allows $10,000 party building donations to political parties without limit … I have made this donation to establish legal standing in case a legal challenge is necessary.”

Block said he didn’t hear from the Board of Elections again until Nov. 5, when he received a letter inviting him to a closed-door hearing the following week. Hampered by the swine flu, Block missed the meeting.

His attorney was summoned to a “lawyers-only” meeting on Monday, Nov. 16, where Kando outlined the terms of the deal. Along with fines that would total $20,000 and ultimately be distributed to the Democrat and Republican parties by state law, Block would have had to admit wrongdoing.

The meeting was the first indication, Block says, that the board believed his second $10,000 donation was improper.

Two days later, both the state committee and Barrington committee voted to return the $10,000 donation in question, according to minutes of those meetings provided to The Journal. The move was relayed to Kando in a subsequent meeting on Friday.

But Kando refused to reduce the sanctions offered, according to Block.

A list of recent board decisions provided by Thornton suggest the largest fine levied against a public official or political organization was $19,762 in 2004 against Providence City Councilman Luis A. Aponte for repeatedly failing to file timely finance reports. More common, however, are smaller fines or warnings.

Attorney General Patrick C. Lynch, for example, was issued a warning in August for mislabeling thousands of dollars in campaign expenses.

“Every time we turn around, Rhode Island law is being used against us,” Block said. “It is all-out war. We are threats to the establishment.”

speoples@projo.com

Correction: An earlier version of this story misattributed the following statements, which were said by Moderate Party chairman Kenneth J. Block. “[O]n the advice of our attorneys, we have decided not to ask for an advisory opinion …” “These donations were made because I feel that Rhode Island law clearly allows $10,000 party building donations to political parties without limit … I have made this donation to establish legal standing in case a legal challenge is necessary.”