The staff of the state Public Disclosure Commission will recommend next week that the commission dismiss a complaint alleging Republican gubernatorial candidate Dino Rossi used his non-profit foundation, Forward Washington, as a front for his 2008 campaign.

A staff report says:

Based upon the information gathered during the course of the investigation, as evaluated against statutory provisions and case law, PDC staff believes insufficient evidence exists to support a determination that Dino Rossi was a candidate for governor for the 2008 election prior to accepting his first campaign contribution on October 12, 2007.

Additionally, PDC staff believes that insufficient evidence exists to support a
determination that Forward Washington Foundation acted as a political committee.

State Democratic Party officials filed the complaint in June with the PDC, which enforces the state's campaign finance rules. The staff has been investigating the complaint since then.

Rossi has said he formed Forward Washington last year to offer solutions to the state's most pressing problems. As the foundation's president, he was paid $75,000 a year and traveled around the state speaking and raising money on behalf of the nonprofit.

He stepped down from the foundation in September, and publicly announced his plans to run for governor on Oct. 25.

Democrats said that since Rossi filed papers with the PDC for a 2008 campaign in 2005 — while he was engaged in a legal battle over the November 2004 election — he was a declared candidate and should not be able to take donations for Forward Washington that weren't reported as campaign contributions.

But the PDC staff says:

Mr. Rossi stated that the reports filed with the PDC as being for the 2008 election cycle did not pertain to any campaign for office. He stated that he submitted these reports only on the advice of PDC staff in order to raise funds for expenses related to the election challenge following the 2004 gubernatorial election. PDC staff found no evidence that Mr. Rossi mischaracterized the advice the PDC gave him, or that the expenses disclosed on reports filed subsequent to the 2004 election supported a 2008 campaign effort.

In fact, a thorough PDC investigation "did not find any documents or witnesses to support a conclusion that Mr. Rossi was intending to run for governor in 2008. All his public statements as well as those private ones obtained by PDC staff remain consistent that he had not made up his mind to enter the race for governor" before leaving the foundation post.

Rossi's campaign just issued this statement:

"I'm very happy that after a long investigation the recommendation from the PDC staff is that all charges be dropped. From the very beginning of the Forward Washington Foundation, we bent over backwards to make sure we were complying with all public disclosure requirements.

"This was obviously a desperate attempt by Christine Gregoire's agents to smear me, and it didn't work."

MORE: The state Democratic Party issued this statement from its attorney, Kevin Hamilton:
Democratic Party attorney Kevin Hamilton issued the following statement:

"This decision is seriously wrong-headed. The PDC staff and Republican Dino Rossi have created a huge loophole in the law that allows unregulated campaign activity. Though dishonest about it, Rossi has obviously been campaigning all year, while keeping his financial backers secret.

"Even if the PDC won't force Republican Dino Rossi to come clean, if he believed in transparency and openness he would voluntarily disclose who's been bankrolling him all year. The voters of Washington have a right to know which special interests are funding Republican Dino Rossi's political activities, even if he's skated through a giant loophole in the law.

"We're obviously very disappointed and will be evaluating our legal options."

MORE: Rossi spoke to Ralph Thomas, who sent me this:

Rossi said he thinks Gregoire should have to answer for all the "vile things" party leaders have been saying about him.

"I want her to retract them. I want her to apologize for that because it came from her people," Rossi said.

UPDATE: After the special session today, Gregoire took a few question from the press. Ralph Thomas asked her about the staff recommendation form the PDC.

Click here to hear his question and Gregoire's answer.