New York official's campaign treasurer arrested

NEW YORK (AP) — New York City's comptroller, who had been widely viewed as a potential successor to Mayor Michael Bloomberg, said Tuesday he will reassess whether to run for office in 2013 following the arrest of his campaign treasurer on fraud charges.

John Liu has said he was "stunned" by the charges against 25-year-old Jia Hou, who was arrested on charges she was part of a scheme that used stand-in donors — many tied to the city's Chinese-American business community — to funnel large, illegal contributions to his campaign. Hou's was the second arrest in a federal investigation of the fundraising.

During an appearance later Tuesday, Liu said he believed his campaign had acted properly at all times.

Defense attorney Martin Adelman said Hou called an "idealistic young woman." If convicted of all charges, she faces up to 60 years in prison. After a brief court appearance, Hou was released on $100,000 bail. She declined to speak to reporters.

The government said the investigation had turned up evidence of at least 40 fraudulent donations, including some in which donors were reimbursed afterward.

Liu said he first met Hou when she worked as a volunteer on his 2009 campaign. "I have come to know her very well and depend on her," he said.

Asked if the news affected his confidence in Liu's ability to perform his job, Bloomberg said he hadn't yet heard the details of the case and couldn't comment.

Once considered one of the top Democratic contenders for the 2013 mayoral race to lead the nation's largest city, Liu has been dogged by falling approval ratings and months of headlines since an October report in The New York Times questioned whether his campaign was accurately reporting the identity of his donors and revealed that he had not been reporting the names of supporters raising money on his behalf.

Liu has defended his practices and said he is cooperating with investigators. Last month, he belatedly disclosed the names of the supporters who raised money for him.

"New York's campaign finance laws are not optional," U.S. Attorney Preet Bharara said Tuesday in a statement. "Today, we allege that Jia Hou, a campaign treasurer, was a central figure in a coordinated scheme to break the city's campaign finance laws."

Hou also was charged with obstructing the government's investigation of fraud in connection with the campaign's fundraising efforts.

Prosecutors said Hou participated in a scheme to circumvent the $4,950 limit on individual donations so that the campaign could more frequently collect up to a maximum of $1,050 in matching funds that the city provides for each contributor.