Richard Roesler - Staff writer

OLYMPIA _ It looks as if citizens initiative guru Tim Eyman is headed to court.

The state's campaign finance watchdog Tuesday ruled that Eyman was "in apparent violation" of five state laws when he and a former campaign treasurer quietly set up a scheme to profit from his initiative campaigns.

With little comment and no debate, the Public Disclosure Commission unanimously decided to send the case to the state Attorney General's Office for further investigation and prosecution. The PDC can levy a total fine of only $2,500 -- an amount that several commissioners said is too low for Eyman's alleged wrongdoing.

"I think it cries out for greater sanctions," said chairwoman Christine Yorozu.

Attorney General Christine Gregoire's office said late Tuesday afternoon that it "intends to file a civil lawsuit in this matter" after further study of the PDC's report. A lawsuit allows for fines of $10,000 per violation -- and triple that if it was intentional.

"It really appeared that there were clear violations of the campaign laws," the PDC's newest member, Spokane City Attorney Michael Connelly, said during a break. "I don't think it was a difficult decision by any of the commission members."

The PDC also agreed with its investigators that Suzanne Karr, Eyman's former campaign treasurer -- and the whistleblower who prodded him into confessing -- also apparently violated two state laws.

Eyman didn't come to the meeting, but his attorney, Bill Glueck, said the anti-tax activist did nothing wrong.

"Everything was reported on the record," he said.

The muted tone of Tuesday's meeting -- monotone recitations of the legal allegations before the staid, silent and largely expressionless commission -- belied the sensational nature of the case, which stunned Eyman's supporters and foes alike when he confessed two months ago.

"In fact, it's probably one of the biggest cases the PDC's handled," Yorozu said.

Eyman, who rose to fame as the front man and a founder of the powerful anti-tax group Permanent Offense, admitted to reporters in February that he diverted more than $200,000 in campaign donations to his private, for-profit corporation.

It's not illegal for a campaign to pay someone. But the PDC's accusations against Eyman include:

•That he concealed money paid to him via the corporation.

•That he used campaign donations to pay bills for Insignia Corp., his fraternity and sorority watch company.

•That he failed to keep proper records to back up reimbursements that he claimed were related to the campaign. He was reimbursed more than $72,000 over three years, including more than $26,000 for postage, some of which he acknowledges may have been for his watch company.

•And that he was improperly reimbursed for a $500 campaign contribution to the Republican National Committee and $60, apparently as a joke, to a group fighting his last initiative.

Glueck, Eyman's attorney, said he intends to fight the accusations of improper reimbursement.

"We're going to contest those issues also," he said. "All the expenditures were reported to the PDC."

Eyman has been in seclusion since his emotional confession two months ago, in which he admitted repeatedly lying to the public and the media about taking the money. He said the scheme was "a charade" intended to maintain moral superiority over his paid opponents.

Eyman and Karr "manipulated the system in order to frustrate full disclosure," said Susan Harris, the PDC's assistant director.

The other three leaders of Permanent Offense -- retired Kennewick engineer Monte Benham and Spokane father-son anti-tax activists Jack and Mike Fagan -- were not found to have violated any rules by PDC investigators. Eyman controlled the group's checkbook, Harris said, and the three other leaders said they believed Eyman's repeated assurances that he was keeping the money as a campaign war chest, not personal profit.

Karr and her attorney, Robert Zielke, attended the meeting but didn't testify. Both were cornered outside the hearing by a rowdy press of TV news cameras and reporters.

"Once all the facts come out and all the circumstances come out, Ms. Karr will be exonerated," said Zielke. Karr, who'd cried silently during part of the meeting, said nothing.

"She's under a lot of stress," said Zielke as they fled down the hall, pursued by TV camera operators.

Karr said last week that she's being unfairly persecuted despite the fact that her pleas and threats were the reason Eyman finally confessed. But being a whistleblower doesn't absolve a person of wrongdoing, said PDC attorney Nancy Krier.

"I'm not aware of any whistleblower statute that protects the whistleblower's own misdeeds," she said.

Tuesday's meeting, which also included allegations of violations by the National Education Association and a hearing over the alleged misuse of public resources in a Puget Sound lawmaker's election campaign, was Connelly's first.

"You'll find that this is a lot of fun," Commissioner Gerry Marsh told him.

"I'm embroiled in controversy on a weekly basis in my other job," Connelly said later, referring to his work at Spokane City Hall. "This doesn't seem to be that different."