- The Washington Times - Tuesday, February 26, 2008


Sen. John McCain’s presidential campaign told federal regulators yesterday that he does not need their approval to withdraw from the public finance system for the primaries.

The campaign, in a letter to Federal Election Commission Chairman David Mason, also said the Arizona Republican did not offer his potential share of public matching funds as collateral for a crucial $4 million loan he obtained late last year to continue running his then-strapped campaign.

McCain lawyer Trevor Potter said the Supreme Court concluded that public financing for campaigns is constitutional because it is voluntary. “As a result, candidates have a constitutional right to withdraw from the program,” Mr. Potter, a former FEC chairman, wrote to Mr. Mason.

Mr. McCain’s loan, from Fidelity & Trust Bank, has become a central issue in his bypassing the public financing system and the strict spending caps that come with it. Mr. Mason told Mr. McCain last week that the commission’s approval was required and that he needed to explain the terms of his loan.

“The campaign did not use its federal matching fund certifications as security for the campaign’s bank loan,” Mr. Potter wrote.

Lawyers for the bank said in their own letter yesterday that the loan agreement was carefully drafted to give Mr. McCain the opportunity to withdraw from public financing during the primary elections.

In that letter, submitted to Mr. Mason by the McCain campaign’s legal team, the bank’s lawyers said the loan terms specifically excluded from the collateral any potential share of public matching funds Mr. McCain was entitled to receive. One of those lawyers, Scott E. Thomas, is also a former FEC chairman and Democratic appointee to the panel.

The flurry of correspondence came the same day the Democratic Party filed a complaint against Mr. McCain, calling on the FEC to investigate whether the likely Republican presidential nominee can legally bypass public financing for the primary and the strict spending limits that come with it.

Staying in the public financing system could be devastating for Mr. McCain because he would have to live within spending limits that he is already on the verge of surpassing.

The FEC last year approved, or certified, Mr. McCain to receive up to $5.8 million in public matching funds; he did not collect any of the money. To withdraw once such funds have been certified, a candidate must not have received any of the money nor put it up as collateral for a loan.

“The bank does not now have, nor did it ever receive from [Mr. McCain’s campaign] committee, a security interest in any certification of matching funds,” Mr. Thomas and lawyer Matthew S. Bergman wrote. “Any finding or determination to the contrary would be wholly inconsistent with the language of the loan documents, the intent and understanding of the parties and basic principles of banking, security and uniform commercial code law.”

The agreement with Fidelity & Trust did require Mr. McCain to reapply for matching funds if he withdrew from public financing and lost early primary contests, but, the bank lawyers wrote, “it is our understanding that, to date, none of those events have occurred.”

Mr. McCain and Mr. Potter have argued publicly that the Arizona senator is entitled to turn down the primary matching funds in the same manner that Democratic presidential candidates Richard A. Gephardt, John Kerry and Howard Dean did in the 2004 primaries. Mr. Dean is now chairman of the DNC.

“We’re doing exactly what Howard Dean did in a previous election and what the FEC ruled in the case of Congressman Gephardt,” Mr. McCain said while campaigning in Ohio yesterday.

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