First, the facts: CNN reported the investigation's existence Monday afternoon and seemed to suggest that the inquiry may include McAuliffe's connection to a Chinese billionaire businessman, Wang Wenliang, who has donated to McAuliffe's campaign.
The Washington Post's Matt Zapotosky reported Monday evening that the investigation may be much broader than McAuliffe's ties to Wang. An unnamed government official told Zapotosky that investigators have been scrutinizing McAuliffe's personal finances: "including personal bank records, tax returns and public disclosure forms that date back many years -- and are interested in foreign sources of income."
If true, both those investigations -- and they really are dealing with two different subjects, campaign finances and personal finances -- are serious, says John Dunbar, the political director at the Center for Public Integrity and a campaign finance expert.
"Broadly speaking, any donation that's connected to a foreign national is going to attract a heck of a lot of attention from state and federal investigators," he said (for reasons we'll get into below). But it's also rare for investigators to actually launch an investigation, which takes a ton of public resources, he said.
"If it's in fact true, then it's definitely serious," Dunbar said.
Then there's the question of how McAuliffe's personal finances may fold into this, which raises a whole other set of questions and implications we'll get to.
We spoke with Dunbar and combed through appropriate campaign finance laws to try to better understand what, exactly, the FBI and the Justice Department are investigating about McAuliffe (D). With the caveat that we can't answer that question yet, here's what we do know:
McAuliffe says he doesn't know much about it, either
On Tuesday, the governor told reporters that he was "shocked" by the investigation.
His attorney, Marc Elias, told Zapotosky that he didn't know about the investigation but that he'd cooperate with it. Here's his full statement: "We cannot confirm the CNN report. Neither the governor nor his former campaign has knowledge of this matter, but as reported, contributions to the campaign from Mr. Wang were completely lawful. The Governor will certainly cooperate with the government if he is contacted about it.”
Several federal campaign finance laws could be applicable to this. The first one is that foreigners absolutely cannot donate to U.S. political campaigns.
This one is pretty black and white, and the reason for the law is fairly obvious: to keep U.S. politics a strictly U.S. matter. In 2002, Congress strengthened this rule after finding out that foreigners were contributing to political parties as a workaround to curry favor with politicians.
The question of whether foreigners can contribute to U.S. campaigns came up a decade later, after the Supreme Court opened the floodgates for private money in politics in its 2010 Citizens United case. In 2012, two Canadian citizens working in the United States wanted to donate to President Obama and the conservative Club for Growth, respectively. They argued that they couldn't violate their First Amendment rights. But the court ruled against them, shutting the door once again on foreigners donating to U.S. campaigns.
But there's an exception for permanent U.S. residents.
If you're a permanent resident here in the United States -- so not technically a citizen, but not just a foreigner either -- you can contribute to political campaigns. (But generally you can't vote or run for public office.)
Wang is a permanent resident, which means he lives in the United States legally but is also a Chinese citizen. A spokesman for Wang told Zapotosky that his contribution was legal and properly disclosed. McAuliffe's attorney, Elias, echoed that to Zapotosky: "As reported, contributions to the campaign from Mr. Wang were completely lawful."
U.S. subsidiaries of foreign businesses can sometimes donate.
The goal of this law is the same as the one above -- to remove foreign influence in our elections. So a U.S. subsidiary of say, a Chinese business, can donate to political campaigns unless it has direct ties to its parent company -- specifically, if the parent company or foreigners are involved in any way with the donation.
This can be a little trickier to track down than just asking whether the donor is a permanent resident. Dunbar said wrongdoing under this law is hard to uncover without a full-scale investigation or even subpoenas.
Zapotosky reports that the Wang-related contributions to McAuliffe's 2013 campaign (in total, $120,000) are marked "West Legend." That's the name of the New Jersey affiliate of the Chinese construction and trade conglomerate firm led by Wang, known as Rilin Enterprises. The New Jersey company imports soybeans using Virginia ports.
But here's where we circle back to the first law: The owner of the entire Chinese company is a permanent U.S. resident. Again, we want to repeat that Wang's spokesman, McAuliffe's lawyer and news reports indicate that Wang's contribution didn't break any law.
The 'personal finances' question
Here's where things get even stickier: If investigators are indeed looking into McAuliffe's personal finances and potential connections to foreign income, it could suggest something much more serious than broken campaign finance laws.
"I would assume they would be looking for money from a foreign national [in his finances] meant to gain favors," Dunbar said. But he cautioned: "It's pure speculation at this point."
That's all we can say about that right now, because we just don't know enough about what investigators are looking into other than McAuliffe's bank accounts and tax records.
The politics, and how this relates to the Clintons
McAuliffe's ties to China have already been a political issue for him. During his 2013 campaign, the Republican Governors Association ran an ad questioning his connections to Wang and China in general. And McAuliffe has made his millions in part from sometimes-controversial business dealings, including an electric-car company he founded and promoted by using his political connections, a Washington Post investigation showed.
CNN's report on the investigation focused on the Clinton Foundation and Wang's ties to China's political elite, although CNN said investigators have found nothing wrong. But it's worth exploring to give even more context to how a politician can have connections to foreign nationals.
In 2013, Wang's Chinese company pledged $2 million to the nonprofit foundation. The donation caught the attention of a CBS News investigation in March 2015 -- not because of any campaign finance laws (this is a foundation after all), but because of Wang's political connections.
Wang has served as a delegate to the China's National People's Congress -- kind of like a more ceremonial Congress. And Zapotosky reports that his company helped build one of China's most secure buildings in the world, China's embassy in Washington. CBS lays out why that ties Wang to the highest levels of the Chinese government:
That contract is a direct tie to the Chinese government, said Jim Mann, who has written several books on China's relationship with the United States. With "embassy construction, one of the most important tasks is making sure that there are no bugs there," he said. "So you want to have the closest security and intelligence connections with and approval of the person or company that's going to build your embassy."
Tying this back to McAuliffe: He also served on the board of the Clinton Foundation around the time of the donation. McAuliffe is a longtime Clinton ally and a prolific fundraiser for them. In 2015, Post reporter Laura Vozzella detailed McAuliffe's connection to Wang to show how Clinton Foundation donors also pumped millions into the governor's campaign accounts.
But despite all these political connections, we repeat: CNN reports that there are no allegations that the Clinton Foundation, which collected millions of donations from foreign nationals and companies, did anything wrong.
One more thing: Virginia is the Wild West of campaign finance laws
We mention this at the very bottom of this explanation because it may not be applicable to the investigation. This appears to be a federal investigation, not a state one. But it is worth noting that Virginia state campaign finance laws have virtually no rules. You can accept any amount of money from people, corporations, unions or partnerships. You have to report it, and you can't accept anonymous donations or donations from foreign nationals.