Three months after a federal jury convicted two of his former associates for participating in an illegal fund-raising scheme, the New York City Campaign Finance Board voted Monday to withhold about $3.5 million in public funds to the Democratic mayoral campaign of John C. Liu, the NY Times reports.

The decision was based on what the board said was “evidence of substantial noncompliance” with campaign finance laws. “The Board has received evidence of substantial non-compliance with the Act and Board rules – in particular, the solicitation, receipt, and reporting of straw donations,” a statement released by the Campaign Finance board read.

“The candidate is ultimately responsible for the campaign’s compliance with the law. The choice to withhold payment does not require a finding that the candidate has personally engaged in misconduct, however. Under the Act and Board rules, the actions of a campaign’s treasurer or other agents are legally indistinguishable from the campaign,” the CFB stated.

During the brief hearing, Martin Connor, a lawyer for the Liu campaign, argued that “there’s smoke and no fire,” as he asked the board to grant matching funds to the campaign. Mr. Connor also said, according to the Times, that, in the scrutiny of Mr. Liu’s contributors, many of whom are Asian-American, “I see a bit of economic prejudice.”

The decision deals a serious blow to Mr. Liu, who had already been stuck in fifth place among Democratic candidates in recent public polls.

The lack of matching funds places Mr. Liu at a disadvantage in the September 10th Democratic primary for mayor.

Mr. Liu, reportedly, only has $1.5 million left in his campaign chest to spend in the critical weeks ahead.

(Jacob Kornbluh – YWN)