McCain Facing Big Clash Over Campaign Cash

WASHINGTON — Senator McCain, who as a legislator backed giving more power to the Federal Election Commission, now faces a clash with it as a presidential candidate.

The chairman of the Democratic National Committee, Howard Dean, said yesterday that he would file a complaint today urging the FEC to investigate Mr. McCain for violating the spending limits and other conditions of an agreement he struck when he became eligible for public matching funds for the Republican primary.

Dr. Dean, a former Vermont governor who ran for president four years ago, suggested Mr. McCain was acting as a hypocrite by trying to circumvent a campaign finance program he has championed.

"This is a classic example of someone who talks one way and then does the other when it benefits him," Dr. Dean told reporters yesterday in a conference call.

Mr. McCain was the co-sponsor with Senator Feingold, a Democrat of Wisconsin, of the McCain-Feingold bill in 2002 that strengthened campaign finance restrictions.

Mr. McCain, the likely Republican nominee, has tried to withdraw from the public financing system, but the FEC chairman has initially refused to grant his request.

The case could have far-reaching implications for the fall campaign. A decision that forces Mr. McCain to remain in the public financing system for the primary or that finds him in violation of federal law could severely limit the amount of money he could spend in the six months leading up to the Republican nominating convention in late summer. The restriction would have the effect of giving the Democratic nominee a spending head start equal to tens of millions of dollars.

The situation is complicated by the current state of the FEC. Squabbling over presidential nominees between the Bush administration and the Democratic-controlled Congress has four of the six seats on the commission vacant. The panel therefore lacks the four commissioners required for a quorum and cannot rule definitively either on Mr. McCain's attempt to withdraw from the system or on the forthcoming DNC complaint against him.

Mr. McCain applied for federal matching funds for the primary last summer when his campaign teetered on the brink of financial collapse. A candidate can withdraw from the system before spending any of the federal funds, and the McCain campaign, flush with cash following a series of primary wins, signaled its intent to do so in a letter to the FEC dated February 6. But in a response late last week, the commission chairman, David Mason, questioned whether Mr. McCain had used the promise of federal matching funds as collateral for a bank loan he took out last year that provided a $4 million line of credit. Such a move could prohibit him from withdrawing from the system because he would have already benefited.

Mr. Mason asked Mr. McCain for more information on the loan and further stated that the commission could not rule on his request without a quorum.

Candidates that participate in the public financing system cannot spend more than $54 million during the primary season that ends with the party conventions. Mr. McCain had already spent more than $49 million by the end of January, meaning he may already have exceeded the federal limit. Candidates that opt out of the program are not subject to spending limits.

Neither Senator Clinton nor Obama are participating in the system for the primary.

The McCain campaign has downplayed the import of Mr. Mason's letter, saying the candidate did not use the guarantee of public funds as collateral for his bank loan and that he therefore has a "constitutional right" to withdraw from the system. "It is clear to the campaign, as it is to a number of FEC experts, that no FEC action is necessary in response to Senator McCain's notice of withdrawal given the constitutional nature of the right," the campaign said in a statement yesterday. "In our view, the senator's letter is all that is legally required to exit from the system."

The campaign also issued a harsh rebuke to Dr. Dean's criticism, pointing out that he also withdrew from the public financing program during his own presidential campaign. "Howard Dean's hypocrisy is breathtaking given that in 2003 he withdrew from the matching funds system in exactly the same way that John McCain is doing today," a McCain spokesman, Brian Rogers, said.

Dr. Dean, however, said there were notable differences. He did not have a disputed loan, he said, nor did he use participation in the public system to secure his spot on the ballot in a number of states, which he said likely saved Mr. McCain "$2 million or 3 million."

One of the senators who has helped prevent the confirmation of President Bush's nominees to the FEC is Mr. McCain's possible general election opponent, Barack Obama. Mr. Obama and three other senators last year placed a hold on one of the nominees, Hans von Spakovsky, citing his civil rights record. Senate Democrats have pushed for an up-or-down vote on Mr. von Spakovsky, while Republicans have insisted that all four nominees be voted on as a package.

For now, the empty seats on the commission could allow Mr. McCain to spend some money to promote his candidacy before being reined in.

"He may have the upper hand for the time being," a Republican election lawyer, Jan Baran, said of Mr. McCain, "but he will be subject to FEC action at some point."

If Mr. McCain is hobbled by the spending limits, he would likely turn to the Republican National Committee to help him compete with the Democratic nominee over the summer, much as Robert Dole did in 1996. But the RNC does not raise so-called "soft money" because of the 2002 McCain-Feingold bill, Mr. Baran noted, so it may not have as much money to spend on Mr. McCain's behalf.