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FEC Warns McCain on Campaign Spending

By signing up for matching money, McCain agreed to adhere to strict state-by-state spending limits and an overall limit on spending of $54 million for the primary season, which lasts until the party's nominating convention in September. The general election has a separate public financing arrangement.

But after McCain won a series of early contests 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 money and who have not used the promise of federal funding 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, he 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 his 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 money 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 limit 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 up to five years in prison.

"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."

Kessler reported from Toledo. Staff writer Michael D. Shear contributed to this report.

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