Federal prosecutors on Monday said D.C. Mayor Vincent C. Gray knew firsthand about an illicit “shadow campaign” that funneled hundreds of thousands of dollars to his 2010 mayoral bid and that he personally sought the illegal cash from Jeffrey E. Thompson, who pleaded guilty to felony conspiracy charges.
Mr. Gray, who hasn’t been charged in connection with the wide-ranging investigation that has resulted in guilty pleas from four of his campaign workers, dismissed the scenario.
Mr. Gray’s connection was disclosed in U.S. District Court for the District of Columbia, where Thompson admitted providing more than $2 million in off-the-books funding since 2006 for seven local political races as well as Hillary Rodham Clinton’s 2008 presidential bid.
But most stunning were the revelations about the District’s mayor, who faces a Democratic primary election in three weeks and who has long insisted that he had no knowledge of the elaborate network of straw donors and unreported campaign cash.
U.S. Attorney Ronald C. Machen Jr., who last year said the shadow campaign had “compromised” the 2010 election, declared in an afternoon press conference that the “veil of political corruption has been lifted.”
“D.C. campaigns have been compromised by covert corporate money for years,” said Mr. Machen, indicating that Thompson’s cooperation has opened more avenues in the investigation. “Jeff Thompson’s guilty plea pulls back the curtain to expose widespread corruption.”
Assistant U.S. Attorney Michael K. Atkinson said Thompson insisted on Mr. Gray’s personal request for his support before he gave him any funds. He said Thompson asked the mayor to refer to him as “Uncle Earl,” Thompson’s middle name, to help maintain the secrecy.
Thompson, who has maintained a low profile since a March 2012 raid on his home and office provided the first public indication that he was being targeted by investigators, declined to speak to reporters before or after the hearing.
Asked by Judge Colleen Kollar-Kotelly about his involvement in the scheme, Thompson confirmed the details in short answers.
“Mayor Gray agreed to keep your support secret. Is that correct?” Judge Kollar-Kotelly asked.
“Yes, your honor,” Thompson said.
“Mayor Gray asked you to pay for the get-out-the-vote campaign?” she asked.
“Yes, your honor,” he replied.
“And you agreed to pay for it,” the judge asked.
“Yes, your honor,” Thompson said.
Mr. Atkinson said Thompson in 2011 asked a Gray associate to expedite a settlement between the city’s Department of Health Care Finance and a health care firm he owned, D.C. Chartered Health Plan Inc.
The case was settled for $7.5 million later that year, and Thompson dropped a lawsuit he filed against the city.
“Lies,” he called them. “My story has been the same from the very beginning. It is not changing now.”
“It’s a tough situation to be able to deal with,” he said. “I won’t change my story. I won’t change my demeanor. I’m the same person I was 3½, four years ago, and I won’t be a different person.”
Mr. Gray said his attorney, Robert Bennett, has not told him he is the target of renewed investigative efforts in light of Monday’s events or directed him to do anything specific.
But the developments are sure to roil the race for mayor, in which Mr. Gray is seeking re-election in a crowded field of Democrats in an April 1 primary.
D.C. Attorney A. Scott Bolden said he doubted prosecutors would take action against Mr. Gray before the primary election.
“Today’s news is more a political bombshell than criminal justice,” he said.
Nevertheless, Mr. Gray’s challengers pounced on the scandal.
D.C. Council member Muriel Bowser, Ward 4 Democrat, said the plea agreement detailed the worst kind of corruption, “trading illegal, under the table campaign cash for political contracts and favors for the Mayor’s family and friends.”
“I am confident that prosecutors will push hard to ensure that all wrongdoers are brought to justice,” she said.
Council member Tommy Wells, Ward 6 Democrat and also a candidate for mayor, said in a statement that “justice is prevailing” in Thompson’s admissions of his crimes.
Mr. Wells has long boasted that he was one of the few elected leaders in the city left untainted by Thompson’s largesse.
The 10-page charging document filed in the case spelled out how Thompson, who ran a high-powered D.C. accounting firm and whose health care company became the city’s biggest Medicaid contractor, gave $883,750 in illegal campaign contributions to a lengthy list of candidates for federal office — hiding the true source of the funds by transferring the money through straw donors and funding off-the-books campaigns.
Prosecutors said that, in total, Thompson made more than $3.3 million in illegal contributions to at least 28 political candidates and their campaigns from 2006 to 2011.
In addition to funding the 2010 mayor’s race, prosecutors said, Thompson secretly provided $278,000 to a candidate running for D.C. mayor in 2006 and lesser amounts to a candidate for the D.C. Council’s Ward 4 seat in 2007, to two at-large candidates running in 2008, to a Ward 6 candidate in 2010, to a Ward 1 candidate in 2010, and to an at-large candidate in 2011.
In February, prosecutors amended the plea agreement for former D.C. Council member Michael Brown to indicate that he admitted to accepting $100,000 in secret donations for his 2008 campaign for the at-large seat. Brown is facing more than three years in prison for accepting $55,000 in bribes from undercover federal agents.
Prosecutors said Thompson also paid Brown $200,000 to withdraw from the 2006 mayoral race.
Thompson faces two years in prison. If he cooperates fully with prosecutors, one count against him could be dismissed, meaning he could face a maximum six months in prison or even be sentenced to probation.