New Troubles for RNC Chair Michael Steele?

Embattled chairman continues to face questions about spending, racial remark.

WASHINGTON, April 6, 2010— -- Scandal at the Republican National Committee has claimed its first high-profile victim with the resignation of its chief of staff after the group, specifically chairman Michael Steele, came under fire for excessive spending on travel and entertainment.

Ken McKay resigned as RNC chief of staff Monday in the wake of the spending controversy. Top GOP donor Sam Fox also stepped down from his position on an RNC fundraising committee.

Steele swiftly appointed McKay's deputy, Mike Leavitt, to take his spot, which ignited both praise and criticism.

Former RNC chairman Ed Gillespie praised Leavitt's management style.

"Mike is a very smart political operative and effective manager of people and resources," Gillespie told ABC News. "He knows the chairman well and how best to maximize his strengths. He also has very good relations with the other committees and Republican strategists. Chairman Steele's decision to put Mike Leavitt in charge of the building will be reassuring to a lot of Republicans."

But one Republican close to the RNC said the elevation of Leavitt, who managed Steele's unsuccessful Senate campaign, could spell more trouble for the RNC. Leavitt has been overseeing RNC's communications for the past two months, during which time four communications staffers resigned because of Leavitt's "bluster" and leadership style, said the Republican who spoke on condition of anonymity.

Steele is under fire for what some consider to be too lavish of a spending spree in these economic times -- $17,000 for private jet travel, $13,000 for limousines and car services and $9,000 for a trip to the Beverly Hills hotel. The RNC's approval of nearly $2,000 at a sex-themed nightclub in Los Angeles in the name of entertaining donors raised even more eyebrows.

But campaign filings show Steele's RNC problems go beyond spending at a sex club. The RNC has spent more money than it has raised so far in the election cycle, just when the GOP is supposed to be raising money for campaigns for the fall's mid-term elections. According to campaign finance reports released in late March, the RNC raised $7.69 million but spent $7.71 million.

Steele argued on "Good Morning America" Monday that the spending issue is being blown up to be larger than it really is and that when he heard about the spending at the nightclub, "I was very angry, and we dealt with it. We got to the bottom of it."

He argued that the RNC has raised more money than the Democratic National Committee in seven out of 12 months.

Steele sent a letter to 168 members of the RNC Monday evening, promising tighter controls.

"Leadership requires that I can safely assure you, our donors, and the American people that our mission is what drives every dollar we spend, every phone call we make, every e-mail we send and every event we organize," Steele wrote in the letter. "Recent events have called that assurance into question and the buck stops with me. That is why I have made this change in my management team and why I am confident about going forward to November with renewed focus and energy."

Meanwhile, the RNC chairman's comments on race Monday have generated new controversy and garnered criticism even from within the GOP ranks.

The embattled committee chairman said he has been under fire partly because of his race when asked on "GMA" if he has a slimmer margin of error because he's African-American.

"The honest answer is, 'yes,'" Steele said. "Barack Obama has a slimmer margin. A lot of folks do. It's a different role for me to play and others to play and that's just the reality of it. But you take that as part of the nature of it."

The White House dismissed Steele's comments.

"I think that is a fairly silly comment to make," White House Press Secretary Robert Gibbs told reporters today. "I think Michael Steele's problem isn't the race card, it's the credit card."

Even some black Republicans say Steele shouldn't have played the race card and that he missed an opportunity to make a bigger point about his role and vision.

"Politics has no affirmative action. ... To interject race here is nonsense," said Ken Blackwell, who lost to Steele in the race for the RNC chairmanship.

GOP Heavyweights Form New PAC

"The job of the chairman is to build the party from the grassroots up and do it very meticulously and do it in a way that people can see a growth in the capacity to win elections. Pure and simple, that's what the chairman will be judged on as we go forward," Blackwell added. "There is a pattern of missteps, miscues, and misstatements and as a consequence, we now can't fall back on the issue of race."

Several GOP powerhouses, including former RNC chairman Mike Duncan, former RNC communications director Jim Dyke and former RNC co-chair Jo Ann Davidson -- have formed a new group to raise $50 million for Republican candidates.

Gillespie and Karl Rove, adviser to President George W. Bush, are serving as informal advisers.

The new conservative PAC, called "American Crossroads," will target wealthy donors and corporations. It has already raised $30 million in commitments from contributors, according to the National Journal, and its goal is to raise $52 million.

The new group gives donors who are upset with Steele another outlet to donate, but the group's organizers insist their goal is to counter similar efforts by Democrats and complement the RNC, not bypass it.

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