June 1, 2011 -- The federal government has been investigating for two years the circumstances of how hundreds of thousands of dollars from heiress Rachel "Bunny" Mellon and lawyer Frederick Baron went to third parties to allegedly cover up the affair between former Sen. John Edwards and Rielle Hunter.
In simple terms, the case against Edwards boils down to whether the money, which went to Hunter and others, was an illegal political contribution from supporters who paid a major campaign expense.
If it was, the government will argue that it was subject to campaign finance limits.
The U.S. Department of Justice, as first reported last week by ABC News, has green-lighted the prosecution of the former presidential candidate for alleged violations of campaign laws while seeking to cover up the extra-marital affair.
Edwards, 57, is aware that he faces an indictment and is now considering his limited options, a source close to the case says. He could make a plea bargain or face a potentially costly trial.
If the case goes forward, government lawyers are likely to focus their prosecution on a couple of key legal definitions: whether the money was an expenditure meant to influence a federal election and whether Edwards or his campaign coordinated it.
"The fight is going to be over whether this is a campaign expense and whether, in a legal sense, he coordinated payment of it," Paul Ryan of the Campaign Legal Center said.
Edwards' lawyer Gregory Craig released a statement last week that might have previewed his defense. "Not one penny from the Edwards campaign" was involved in the transactions and that the government's theory is "wrong on the facts and wrong on the law," Craig said.
If Edwards decides to fight the case in court, his lawyers will most likely argue that the government is taking too broad a definition of political expenditures. They could argue that the money was personal, meant not to influence a campaign but to hide an affair from his wife.
The lawyers might stress that the money did not touch campaign coffers. They could say it came from long-time friends Mellon, 100, and Baron, who died in 2008 but had served as Edwards' national finance chairman.
"If his lawyers can prove it was not a campaign expense -- it was a personal expense -- or that he did not coordinate the payments then he is off the hook with respect to major campaign finance violations," Ryan said.
D.C. lawyer Brett Kappel, an expert on campaign finance, thinks the government case might be a stretch. "The government appears to be taking an extremely expansive view of what constitutes a campaign contribution," he said. "The problem with that theory is that taken to its logical extreme, it makes the term 'contribution' unconstitutionally vague and therefore Sen. Edwards could not be convicted."
Kappel added, "The fundamental question is what was the purpose of the funds. If it was to hide the existence of the affair from Edward's wife, so that he could save his marriage then it's a personal expenditure and the money are gifts not campaign contributions."
But Edwards' critics will say that he was a presidential candidate and he wouldn't have gotten the money but for that fact.
The government could point to a 2000 Federal Election Commission advisory opinion that says the only way such large gifts could be accepted outside of contribution limits is if there is a pattern of such gifts from the donors before he became a candidate.
Edwards Case Might Highlight Flaws in Campaign Finance Law
But there is also a separate 2002 FEC enforcement case that says a personal gift from a long-time friend could be used to make a divorce payment because of a pre-existing relationship and the fact that the loan wasn't given to advance a candidacy.
"The bottom line here is that in order for this to fall within the campaign-finance area, the money will have to have been some way coordinated with Edwards or his campaign," said Democracy 21 President Fred Wertheimer, who follows campaign finance law. "That makes the money which did not go through the campaign committee, nevertheless, an illegal campaign contribution or expenditure."
Some believe this case could ultimately serve to highlight problems with campaign finance law.
"The problem is that campaign finance law is overly complicated," Allison Hayward of the Center for Competitive Politics said. "Here we have an individual who has engaged in what most people would say is egregious behavior but the statute provides no ready answer for either the prosecutors or the defense attorney."