NEW YORK (Reuters) - A top campaign aide for Comptroller John Liu, New York City's financial overseer, on Tuesday was charged with fraud for violating contribution limits, dealing another setback to the Democrat's quest to win his party's 2013 mayoral nomination.
Liu, the first Asian-American to be elected New York City comptroller, serves as a fiscal watchdog, monitoring the city's finances with audits. He also helps run the city's $110 billion pension fund.
His campaign treasurer, Jia Hou, was arrested on Tuesday, the second person charged in a scheme federal investigators say they uncovered.
Hou, also known as Jenny Hou, "is accused of participating in a scheme that used 'straw donors' to funnel large, illegal contributions that were well above the individual limit authorized by the New York City Campaign Finance Board," U.S. Attorney Preet Bharara said in a statement.
The comptroller, in a statement, said he was "stunned" by the accusations made against Hou. "These accusations against her are uncharacteristic and unexpected." He added: "Jenny is a smart, hardworking person who I hope will be treated fairly."
The campaign treasurer's close ties to the comptroller further complicate his efforts to distance himself from the federal investigation.
"It's difficult to be believed when someone that close to you is arrested," said Hank Sheinkopf, a political consultant. "It reduces the possibility that he can be elected the mayor of New York City," he added.
The campaign treasurer also was charged with obstructing the government's investigation of the suspected fraud, the Manhattan U.S. Attorney said in a joint statement with Janice Fedarcyk, the assistant director-in-charge of the New York Office of the Federal Bureau of Investigation.
A spokesman for Liu had no immediate comment. Nor did a lawyer for Xing Wu Pan, known as Oliver Pan, who was indicted on February 15 on federal conspiracy and wire fraud charges for evading campaign finance rules. Liu has previously confirmed that Pan was one of his supporters.
Liu, who was born in Taiwan, has tapped New York City's Chinese-American community for campaign donors. The list of his Democratic rivals includes his predecessor, William Thompson, City Council Speaker Christine Quinn, Public Advocate Bill de Blasio and Manhattan Borough President Scott Stringer.
Using straw donors helped Hou and Pan qualify the comptroller's campaign for more matching funds from the city, the federal investigators said.
Hou took part in "at least 40 fraudulent donations designed to funnel city matching funds to (the) campaign," the federal prosecutors said.
(Reporting by Joan Gralla; Editing by James Dalgleish and Andrew Hay)