The 25-year-old campaign treasurer for New York City Comptroller John Liu has been indicted for making a false statement to federal officials, according to a court filing, further weakening Liu's bid to become mayor in 2013.
In February, Liu's campaign treasurer, Jia Hou, was arrested and charged with fraud for violating contribution limits. Prosecutors said she had used 'straw donors' to funnel large, illegal contributions to Liu's mayoral campaign.
Straw donors make a campaign contribution in their own names but with funds provided by someone else, or are reimbursed for the donation later. Prosecutors say the scheme illegally boosted the amount of campaign matching funds for which Liu qualified.
The comptroller is the city's fiscal watchdog and helps oversee its $110 billion pension fund.
Democrat Liu, who was born in Taiwan, is the city's most prominent Asian-American politician.
Liu's campaign spokesman, George Arzt, said of Hou, also known as Jenny: "The allegations remain just that - unproven allegations. Jenny is entitled to a fair hearing, and John hopes she will be treated fairly," Arzt added.
Hou's lawyer, Gerald Lefcourt, said: "Jenny Hou is a lovely, hard-working young woman who has not committed any crimes, did not engage in a conspiracy with anyone and did not knowingly fail to produce any documents."
Lefcourt added: "The government charges are just wrong, plain and simple, something which will be entirely evident at trial."
Hou already was facing as much as 60 years in prison, as each of the previous charges, attempted wire fraud, conspiracy to commit wire fraud and obstruction of justice carries a maximum sentence of 20 years. The new charge, making false statements, has a maximum sentence of five years.
Liu's mayoral campaign began to unravel last year when one of his fund raisers, Xing Wu Pan, was charged with wire fraud and conspiracy for evading campaign donation rules. The new superseding indictment adds Hou to the indictment against Pan.
The comptroller's Democrat mayoral rivals include City Council Speaker Christine Quinn, Public Advocate Bill de Blasio and Manhattan Borough President Scott Stringer.
Police Commissioner Raymond Kelly has been asked repeatedly in recent weeks if he would seek the Republican mayoral nomination but has said he is concentrating on his current post.
(Reporting by Joan Gralla; Editing by Dan Grebler and James Dalgleish)