Washington DC Mayor Vincent Gray has a real scandal on his hands, but it may do a lot more damage than first thought. As part of the corruption investigation into Gray’s 2010 campaign, Jeffrey Thompson pled guilty to conspiracy charges and worked with prosecutors on their probe into Gray. However, Thompson had a lot more to discuss than just municipal campaigns — fingering a key adviser to Hillary Clinton and alleging a conspiracy to conduct an illegal shadow campaign in 2008:

A longtime adviser to Hillary Rodham Clinton personally sought and secured the funding for what prosecutors say was an illegal shadow operation to boost Clinton’s 2008 presidential bid, according to court papers released as part of a wide-ranging campaign finance investigation.

Washington businessman Jeffrey E. Thompson, who pleaded guilty Monday to federal conspiracy charges in a case that has focused largely on D.C. Mayor Vincent C. Gray’s (D) 2010 campaign, told federal prosecutors that Clinton aide Minyon Moore asked him to fund pro-Clinton efforts in four states and Puerto Rico costing $608,750 during the hard-fought 2008 Democratic presidential primary campaign, the documents show.

Thompson financed the operation through his accounting firm, at times funneling funds through a company owned by a longtime associate. A spokeswoman said Moore did not know that Thompson was funding the project off the books, adding that Moore had asked Thompson to raise money directly for the campaign.

Prosecutors said they had no evidence showing Clinton was aware of the efforts.

But Thompson, in his discussions with authorities, depicted Moore as playing a far more intimate role in the off-the-books campaign than was previously indicated — securing the money and helping guide the strategy by feeding internal campaign documents and receiving messages about the media coverage.

The Post’s Matea Gold and Rosalind Helderman offer a very detailed look at the effort, which began late in the 2008 primary cycle. By February 2008, Hillary had already been set back on her heels in fundraising and support by the upstart Barack Obama campaign, which stunned everyone with its effectiveness. According to the court papers, that’s when Moore began working to find a way around the campaign-finance restrictions, especially to fund GOTV efforts.

The effort included people from League of United Latin American Citizens (LULAC), even though the organization supposedly refrains from endorsements. It’s a 501(c)4, according to its website, although it takes a little digging to find the reference. That makes it the same as those conservative groups attacked by the IRS — a category which is designed for groups that are primarily oriented to “social welfare,” and which cannot endorse or work for candidates. The “street teams” provided by LULAC and funded through off-the-books cash distributed campaign materials for Hillary, the papers allege, among other activities. If true, LULAC will, or at least should, have major issues with their tax status that year.

Team Hillary denies everything, of course:

The Dewey Square Group public affairs firm where Moore works said in a statement Tuesday that Moore “fully cooperated with the government’s investigation and the facts make clear that she was entirely unaware of any inappropriate activities and at all times conducted herself, as she always has, not only in full compliance with the law but in accordance with the highest ethical and professional standards.”

“Nothing that happened yesterday changes these facts,” the statement said.

The firm also fired back at The Washington Post, which first reported the new details, for the newspaper’s perceived implication that Moore was asking for funding she knew was illegal.

”The article posted online today by The Washington Post regarding Minyon Moore is inaccurate,” the firm said. “Nowhere in the Statement of Offense from March 10, 2014 does it say Ms. Moore sought funds for an ‘illegal’ campaign.

“The Statement of Offense says Ms. Moore asked Jeffrey Thompson to fund street teams. In fact she asked Thompson to contribute and raise money directly for the campaign so the campaign could afford to execute a field program in constituent communities. Her actions were legal.”

Possibly her actions were legal, thanks to the vagaries of campaign-finance laws. LULAC might not get so lucky. Even so, this smells bad, especially given the fact that Moore appears to have done this when Team Hillary got very, very desperate — and still lost a fight that was supposed to be a coronation.

If Democrats aren’t spooked by Hillary’s dropping poll numbers, they should be spooked by the incompetence.

Update: Out of fairness to the nature of plea bargains, I added a question mark to the headline.