"Life is good," Dino Rossi tells The Associated Press after the Public Disclosure Commission's staff recommended dismissal of the campaign finance complaints lodged by state Democrats.

“It proves we were telling the truth all along and Gregoire’s agents were lying all along to try to smear me and call me sleazy. Christine Gregoire owes us an apology for what they said.”

Gregoire, told of his remarks Thursday night, gave a big belly laugh and said she’ll apologize just as soon as Rossi stops being such a negative campaigner himself.

Here's the rest of the story by The AP's David Ammons:

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The Democrats had hoped that the state probe would bloody Rossi, who lost to Gregoire by 133 votes in 2004. In June, the state party asked the state Public Disclosure Commission to look into whether Rossi illegally used his nonprofit group, the Forward Washington Foundation, to finance an undeclared shadow campaign and to evade the state’s strict reporting and gift-limit requirements.
Rossi has since left the foundation, which had paid him an annual salary of $75,000.

After an extensive probe by two full-time investigators, the PDC enforcement staff has recommended that the complaint be dismissed by the full commission on Dec. 6. Deputy Director Doug Ellis declined to speculate whether the commission will concur.

A 150-page report released Thursday clears Rossi and says there is no apparent violation. A proposed letter dismissing the Democrats’ complaint is part of the packet.

The investigators said Rossi became a true 2008 candidate only last month and that he didn’t misuse the foundation to raise money for an undeclared candidacy.

State law requires a declared candidate or one who is raising money and making campaign expenditures to register with the commission and to make regular detailed reports. The law also limits the size of contributions.

Rossi, attending a Republican Governors’ Association gathering in California on Thursday, was delighted by the news, and said it gives him clear sailing to take on Gregoire without any legal cloud, presuming the full PDC concurs.

“We were prepared for the worst, but this outcome doesn’t surprise me,” he said. “I’ve always said that Christine Gregoire’s people will say anything or do anything to win. Well, some things we will not tolerate. We will fight.”

Rossi said the foundation “bent over backward” to comply with all public disclosure requirements.

Democratic State Chairman Dwight Pelz, reached at the Democratic National Committee meeting in Washington, D.C., referred questions to attorney Kevin Hamilton.

“This decision is seriously wrong-headed,” Hamilton said in a statement released by the party. “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 ... 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.”

The PDC report acknowledged that Rossi filed papers for a 2008 governor’s race back in December 2004, but said he did so only on the counsel of the PDC as a way to continue receiving money to finance his court challenge of the 2004 election.

Rossi, who led in the first two tallies but narrowly lost to Gregoire on a hand recount, lost the court challenge and closed out the 2008 account.

He later created the foundation, which the Democrats viewed as a fiction to cover a shadow campaign. The PDC staff said there was no evidence that he was a candidate during that time and little evidence that the foundation’s primary purpose was to promote another Rossi gubernatorial bid.

Investigators said the foundation seems to have been what Rossi said it was, a nonprofit social welfare organization to improve the state’s business climate — “and not a political committee engaged in electoral activity.”

Rossi, stung by the Democrats’ complaint, stepped down from leadership of the foundation in September. He became a candidate again this Oct. 12 and is again filing his paperwork.

Recent polls show him in a tight race against Gregoire. The primary is next August and the main election now little more than 11 months off.