When the RNC elected Michael Steele as its chair, Republicans hoped that Steele could represent a new start for the GOP after two successive national defeats.  Instead, the party has another dance with potential scandal.  Federal investigators have begun looking into claims that Steele diverted campaign funds from his 2006 Senatorial run in Maryland to family members, but the Post has found at least some support for Steele as well:

Michael S. Steele, the newly elected chairman of the Republican National Committee, arranged for his 2006 Senate campaign to pay a defunct company run by his sister for services that were never performed, his finance chairman from that campaign has told federal prosecutors.

Federal agents in recent days contacted Steele’s sister, a spokesman for Steele said yesterday.

The claim about the payment, one of several allegations by Alan B. Fabian, is outlined in a confidential court document. Fabian offered the information last March as he was seeking leniency for himself during plea negotiations on unrelated fraud charges. It is unclear how extensively his claims have been pursued. Prosecutors gave him no credit for cooperation when he was sentenced in October.

Steele spokesman Curt Anderson said he did not know what information the federal agents were seeking, but he dismissed Fabian’s allegations as patently false. “It’s from, what, a convicted felon? And it has no substantiation in fact,” he said. …

The recent allegations outlined four specific transactions. In addition to the payment to Steele’s sister, Fabian said that the candidate used money from his state campaign improperly; that Steele paid $75,000 from the state campaign to a law firm for work that was never performed; and that he or an aide transferred more than $500,000 in campaign cash from one bank to another without authorization.

The bank transfer was made against the explicit wishes of other Maryland Republicans, who had hoped to use it to support the campaigns of state legislators, said aides to Steele and former governor Robert L. Ehrlich Jr.

Well, this is just perfect.  And it’s not the first time this issue appeared, as Matt Lewis notes today.  Our friend Rob Bluey mentioned money problems with Steele a month ago, although not these specific problems:

Steele boasts that his chairmanship of GOPAC qualifies him to run the RNC. He cites GOPAC’s work to elect Republicans as good preparation. So how did GOPAC fare under Steele’s leadership? During the 2008 cycle, GOPAC gave 11 candidates seeking U.S. House seats nearly $20,000. Six won and five lost. (See my update, “The Tale of Two GOPACs.”)

Among GOPAC’s expenditures in 2008 was $5,000 to Steele for Maryland, even though Steele wasn’t on the ballot. The money probably went to pay off Steele’s 2006 campaign debt. It also happened to be the third largest expenditure for GOPAC, raising questions about the organization’s priorities under his leadership.

Money has been a problem for Steele in the past. Jennifer Skalka of National Journal’s Hotline reported that when Steele’s consulting business struggled financially, two banks threatened to place liens on his house. Although Steele cleared his debts, these financial issues are factors that must be considered for anyone seeking the RNC chairmanship.

Interestingly, the Washington Post only found out about the details of this story when they requested the prosecution sentencing memorandum from the Fabian case.  The US Attorney accidentally sent them the defense memorandum instead, which had been under seal.  The Post does a good job of presenting Steele’s side of the story as well.  His sister, Monica Turner (at one time Mike Tyson’s wife), told them that this was part of a “get Steele” campaign and shut the door on the reporter, but they also reported that the Steele campaign has invoices for much of the money in question showing Turner’s work for the campaign.

Matt says that Steele has come back from bigger setbacks, and this may turn out to be nothing.  Unfortunately, it will provide at least a distraction while Steele reorganizes the RNC.  We can only hope that the charges prove entirely false and that Steele gets the same level of attention for his vindication as he gets for the accusation.