FEC puts McCain in trouble

It's getting lost in the post Obama-Clinton debate debate, but the Washington Post is reporting that John McCain has been told by the FEC Commissioner that he can't withdraw from the public financing system he applied for when his campaign was broke.

This is very bad news for McCain--even if he somehow finds a loophole, he's just lost one of his great strengths, that he's been a leader on trying to clean up Washington from within. FEC Warns McCain on Campaign Spending:

Matthew Mosk and Glenn Kessler: The nation's top federal election official told Sen. John McCain yesterday that he cannot immediately withdraw from the presidential public financing system as he had requested, a decision that threatens to dramatically restrict his spending until the general election campaign begins in the fall.

The prospect of being financially hamstrung by the very fundraising system he helped create is the latest in a series of bitter challenges for the presumed GOP nominee, who still faces a fractured conservative coalition as he assumes the mantle of party leadership. ... [8 paragraphs reporting on the McCain/lobbyist story]

But McCain's attempts to build up his campaign coffers in advance of a general election contest appeared to be threatened by the stern warning yesterday from Federal Election Commission Chairman David M. Mason, a Republican. Mason notified McCain that the commission had not granted his Feb. 6 request to withdraw from the presidential public financing system.

The implications of that could be dramatic. Last year, when McCain's campaign was starved for cash, he applied to join the financing system to gain access to millions of dollars in federal matching funds. He was also permitted to use his FEC certification to bypass the time-consuming process of gathering signatures to get his name on the ballot in several states, including Ohio.
By signing up for matching funds, McCain agreed to adhere to strict state-by-state spending limits and an overall cap on spending of $54 million for the primary season, which lasts until the party convention in September. There is a separate public financing arrangement for the general election.

But after McCain won a series of early primaries and the campaign found its financial footing, his lawyer wrote to the FEC requesting to back out of the program -- which is permitted for candidates who have not yet received any federal funds and who have not used the promise of federal funds as collateral for borrowing money.

Mason's letter raises two issues as the basis for his position. One is that the six-member commission lacks a quorum, with four vacancies because of a Senate deadlock over President Bush's nominees for the seats. Mason said the FEC would need to vote on McCain's request to leave the system, which is not possible without a quorum. Until that can happen, the candidate will have to remain within the system, Mason said.

The second issue is more complicated. It involves a $1 million loan McCain obtained from a Bethesda bank in January. The bank was worried about McCain's ability to repay the loan if he exited the federal financing program and started to lose in the primary race. McCain promised the bank that, if that happened, he would reapply for matching funds and offer those as collateral for the loan. While McCain's aides have argued that the campaign was careful to make sure that they technically complied with the rules, Mason indicated that the question needs further FEC review.

If the FEC refuses McCain's request to leave the system, his campaign could be bound by a potentially debilitating spending cap until he formally accepts his party's nomination. His campaign has already spent $49 million, federal reports show. Knowingly violating the spending limit is a criminal offense that could put McCain at risk of stiff fines and a jail term of up to five years.

"If in fact he is stuck with these spending limits, it would be a serious limitation on what he can do," said Rick Hasen, an election law expert at Loyola Law School in Los Angeles.

Finance experts compared the situation to the massive imbalance faced by Republican presidential nominee Robert J. Dole in 1996, when he was forced to contend with spending limits while his opponent, President Bill Clinton, was not.

Trevor Potter, a former FEC chairman who is McCain's top lawyer, immediately disputed the assertions in Mason's letter, saying McCain has a constitutional right to exit the federal program. He also dismissed the letter as unenforceable because the FEC lacks a quorum to resolve the dispute.

"We believe that Senator McCain had a clear legal right to withdraw from the primary matching fund system, and he has done so," Potter told the Associated Press. "No FEC action was or is required for withdrawal."

Campaign finance experts were split on how serious the FEC position could become. But several agreed that the matter would not be resolved by McCain simply ignoring the letter and plowing ahead.

"It's nice for Trevor Potter to say 'Buzz off,' but the campaign is going to have to respond," said Bradley Smith, a former FEC chairman.

"This is serious," agreed Republican election lawyer Jan Baran. Ignoring the matter on the grounds that the FEC lacks a quorum, Baran said, "is like saying you're going to break into houses because the sheriff is out of town."

Wow--so he's facing jail time if he tries to pull out unilaterally.

Wonder how well the Straight Talk Express can be run from San Quentin?