O'Donnell subject of campaign funds probe

The probe of the Delaware Republican arose in response to a complaint from Citizens for Responsibility and Ethics in Washington. The watchdog group alleged in September that O'Donnell had used campaign funds for rent, meals and other personal expenses.

O'Donnell stunned the political world that month by riding a wave of tea party support to defeat veteran Rep. Michael N. Castle in the Republican primary. But her campaign was dogged by questions about her personal and campaign finances, and a trail of controversial statements arose, including her 1999 acknowledgment that she had "dabbled" in witchcraft. She lost the general election to Democrat Chris Coons.

The federal inquiry by the U.S. attorney's office in Delaware and the FBI was first reported by the Associated Press. But law enforcement sources said it is very preliminary and has not progressed to a full-fledged criminal investigation, as the AP reported. The sources spoke on condition of anonymity because the probe is ongoing.

O'Donnell called the allegations politically motivated and suggested Wednesday that the Obama administration - particularly Vice President Biden, who represented Delaware in the Senate for decades - was behind them.

"Given that the king of the Delaware political establishment just so happens to be the vice president of the most liberal presidential administration in U.S. history, it is no surprise that misuse and abuse of the FBI would not be off the table," she said in a statement.

O'Donnell added: "If anything does materialize from this rumor, we will continue to fully cooperate, as we have made every attempt to ensure we are in compliance with all rules and regulations."

O'Donnell's run was her third attempt for the Senate, and questions persisted this fall about whether, during her 2008 race against Biden, she had used campaign funds to pay for personal expenditures.

Jon Moseley, who ran her primary campaign in 2008 and briefly served as treasurer, said Wednesday that the candidate was "honest to a fault" about her campaign finances and "very cautious about doing the right thing."

But Kristin Murray, a former O'Donnell campaign manager, recorded a robocall to Delaware voters this year alleging that O'Donnell was "living on campaign donations . . . while leaving her workers unpaid and piling up thousands in debt." Murray declined to comment Wednesday.

O'Donnell, who has acknowledged having financial problems, has said she used campaign funds to pay part of the rent on her townhouse because it doubled as her campaign headquarters.

The CREW complaint to federal prosecutors cited an affidavit signed by David Keegan, a former aide to O'Donnell. He said that in 2009, O'Donnell paid two months rent out of her campaign funds, and also used the funds for meals, gas and a bowling outing.

It is unclear if the federal inquiry is examining O'Donnell's 2010 Senate run, earlier campaigns or both.

O'Donnell raised $7.3 million for her campaign this year. She spent $6.4 million and had $925,000 left in the bank in the middle of November, federal reports show.

Melanie Sloan, CREW's executive director, said Wednesday that she welcomed the inquiry. "It's quite clear that O'Donnell was misappropriating money for personal expenses," Sloan said. "My understanding is that she treated the whole thing like her piggy bank."

markonj@washpost.com sandhya@washpost.com Staff writer T.W. Farnam and staff researcher Lucy Shackelford contributed to this report.