Clinton Campaign Facing Deepening Debt to Advisers

By Matthew Mosk
Washington Post Staff Writer
Tuesday, April 22, 2008

The financial gap between Democratic Sens. Barack Obama and Hillary Rodham Clinton has grown increasingly pronounced during the presidential primary season, and the Clinton campaign is now shouldering sizable debts to several key consultants and advisers, campaign records show.

Clinton entered April with about $9.3 million in cash on hand, but she also carried about $10.3 million in debt. In contrast, Obama had $42.5 million available to spend at the start of April and reported $663,000 in unpaid bills.

Clinton strategists confirmed yesterday that the disparity allowed Obama to overwhelm her with television ads in Pennsylvania, which will hold its primary today.

"There's no question that Senator Obama has outspent us dramatically," said Howard Wolfson, Clinton's chief spokesman. "He is trying to knock Senator Clinton out of this race."

Clinton's volunteer fundraisers acknowledged yesterday that they are stretching to find untapped sources, and that they increasingly have relied on the Internet, which finance co-chairman Hassan Nemazee called a "highly volatile" place to get cash. Reports filed with the Federal Election Commission last night indicate how difficult the road could become if the Internet cannot produce a steady stream of donations.

While debt owed to the firm run by the campaign's recently deposed top strategist, Mark Penn, began to accumulate a year ago, with $277,147 reported last April, his tab grew to $4.6 million by the end of March. Adviser Mandy Grunwald's consulting firm began extending services to Clinton's campaign more than a year ago, and is now owed $528,480, the report shows. The campaign owes MSHC Partners, a mail and microtargeting firm, nearly $1 million. And for three months the campaign owed $240,000 to senior adviser Harold Ickes's database firm, Catalist.

Campaign finance experts said yesterday that large extended debts owed to professionals could create legal trouble for the campaign if they remain unaddressed.

"Anybody who extends credit to a campaign runs the risk of either losing money or violating the law," said Jan Baran, a Republican election lawyer who defended a mail house for not collecting debt from a campaign.

Clinton campaign spokesman Jay Carson said the campaign "pays its bills on a regular basis and will continue to do so." He noted that while firms such as Grunwald Communications; Penn, Schoen & Berland Associates; and Catalist are owed significant sums, the campaign also has made large payments to the firms.

Amy Weiss, a spokeswoman for Catalist, said the firm recently received $120,000 from the campaign and expects additional payments soon.

Nemazee said a victory in Pennsylvania would generate an influx of online donations, and that fundraising from major donors continues to exceed expectations.

Database editor Sarah Cohen and research editors Lucy Shackelford and Alice Crites contributed to this report.

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