Democrats criticize McCain over campaign finance

ROCKY RIVER, Ohio (Reuters) - The Democratic Party asked the U.S. government on Monday to investigate whether Republican presidential candidate John McCain has violated campaign-finance laws by exceeding spending limits he agreed to last year.

In a letter to the Federal Election Commission, the Democratic National Committee said McCain has probably surpassed the roughly $50 million limit he agreed to observe when he applied for public funding last year.

McCain, the front-runner for the Republican nomination to contest November's presidential election should not be allowed to withdraw from the public-funding system now that he no longer needs it, the DNC argued.

"He intends to simply ignore and flout the law," it said. "Senator McCain is not free to do that without the Commission's approval."

At a campaign stop in suburban Cleveland, McCain noted that Democratic committee Chairman Howard Dean had similarly withdrawn from the system when he was a presidential candidate in 2004.

"What we're doing is exactly what Howard Dean did in the previous election," the Arizona senator said.

The DNC said Dean obtained permission from the FEC before leaving the public funding system, which was set up in the 1970s after the Watergate scandal.

McCain applied for public funding last year at a time when his White House bid was regarded as a long shot and his campaign was nearly out of cash.

His fundraising has picked up as he has won state contests coast to coast and all but wrapped up the Republican nomination.

McCain notified the FEC earlier this month that he intended to opt out of the public-financing system, a move that would allow him to spend as much money as he can raise at a point when Democrats Hillary Clinton and Barack Obama are still competing for their party's nomination.

FEC Chairman David Mason, himself a Republican, told McCain in a letter last week the commission might not approve his request because four of the commission's six seats remain unfilled due to a standoff between the Senate and President George W. Bush.

Mason also said the FEC needs to review whether McCain might have violated commission guidelines by pledging its expected matching funds as collateral in a bank loan.

The trouble with the FEC followed hard on the heels of a story in The New York Times last week charging that McCain, who has led efforts to reduce the limits of money in politics, had a close relationship in 1999 with a female lobbyist who worked for, among others, a broadcaster named Bud Paxson.

At the time, McCain was chairman of the Senate Commerce Committee.

Both McCain and the lobbyist have denied any inappropriate relationship.

McCain said on Monday he could not recall whether he had met with Paxson, a major contributor to McCain's 2000 presidential campaign, but said it was not improper for him to have written a letter to the Federal Communications Commission on Paxson's behalf.

"My job as chairman of the Commerce Committee was to oversee the bureaucracies of Washington," McCain said. "It's entirely appropriate to ask a bureaucracy to function."

(To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at http:/blogs.reuters.com/trail08/)