The Associated Press: "Bank Lawyers Say McCain Loan Carefully Hewed To Election Laws"

"The bank does not now have, nor did it ever receive from (McCain's campaign) committee, a security interest in any certification of matching funds ... 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." -- Attorneys For Fidelity & Trust

Bank Lawyers Say McCain Loan Carefully Hewed To Election Laws
By Jim Kuhnhenn
The Associated Press
February 25, 2008

Lawyers for the bank that provided a crucial $4 million line of credit to John McCain's campaign late last year said Monday that the loan agreement was carefully drafted to give McCain the opportunity to withdraw from public financing during the primary elections.

In a letter obtained by The Associated Press, the outside counsel for Fidelity & Trust Bank said the loan terms specifically excluded from the collateral any potential share of public matching funds the Arizona senator was entitled to receive.

The letter, from lawyers Matthew S. Bergman and Scott E. Thomas to McCain lawyer Trevor Potter, supports McCain's stance against claims that his withdrawal from public financing is in jeopardy.

The bank's description of the loan came on the same day the Democratic Party filed a complaint against McCain, calling on campaign finance regulators 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. The Federal Election Commission also has asked McCain to explain the loan terms.

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

The Federal Election Commission approved, or certified, McCain to receive up to $5.8 million in public matching funds. McCain 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 encumbered it as collateral for a loan.

"The bank does not now have, nor did it ever receive from (McCain's campaign) committee, a security interest in any certification of matching funds," Bergman and Thomas 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 loan documents specifically state that the collateral did not include McCain's right to such the public funds. But the agreement with Fidelity & Trust Bank of Bethesda, Md., required him to reapply for matching funds if he withdrew from public financing and lost early primary contests.

"It is our understanding that, to date, none of those events have occurred," the bank lawyers wrote.

But FEC Chairman David Mason, in a letter to McCain last week, said the senator must show that he did not use the promise of future public funds to help secure the loan and asked McCain to explain three specific provisions in the loan agreement.

Mason also said McCain must receive approval from four members of the six-member commission before withdrawing from the system.

Such approval is doubtful in the short term because the commission has four vacancies and cannot convene a quorum.

The DNC's complaint faces a similar obstacle.

Upon receiving a complaint, FEC staffers must notify the target and request a response. They then make a confidential recommendation to the commissioners whether to continue with a full investigation or whether to dismiss the complaint. Without a quorum, the FEC will be unable to make that determination.

The vacancies have not been filled because of a partisan dispute in the Senate. Many Democrats oppose nominee Hans von Spakovsky, a former Justice Department official, and Senate Majority Leader Harry Reid has proposed holding separate, simple majority votes on each nominee. Republicans want all FEC nominees voted on as a package.

McCain and his lawyer, Potter, a former FEC chairman, have argued that McCain is entitled to turn down the primary matching funds in the same manner that Democratic presidential candidates Richard Gephardt, John Kerry and Howard Dean did in the 2004 primaries. Dean is now chairman of the Democratic National Committee.

McCain, campaigning in Ohio on Monday, said he hadn't considered the financial implications of staying in the public financing system.

"I haven't even contemplated it because we're doing exactly what Howard Dean did in a previous election and what the FEC ruled in the case of Congressman Gephardt," he said. "They said they were going to take matching funds and then they withdrew."

In a teleconference with reporters Sunday, DNC general counsel Joe Sandler said McCain's circumstances are different because of the terms of his loan.

Read The Associated Press: "Bank Lawyers Say McCain Loan Carefully Hewed To Election Laws"
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