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)