Firms Tied to Campaign Manager
Received 10% of McCain's Budget

WASHINGTON -- John McCain's financially shaky presidential campaign has paid a significant share of its budget to companies associated with his new campaign manager, according to a financial statement released over the weekend.

The records cast new light on spending squabbles that have rocked the campaign over the past few months, as the candidate has burned through most of the money he has raised so far this year. Despite that heavy spending, Mr. McCain lags in the polls behind his main rivals. That high spending has triggered infighting inside the campaign over who bears responsibility for his poor financial and political showing and contributed to last week's shake-up of Mr. McCain's operations.

About 10% of the $11.2 million Mr. McCain raised from individual donors in the second quarter was spent or budgeted for two companies connected to Washington lobbyist Rick Davis, according to the report filed late Sunday with the Federal Election Commission. The bulk of those funds were budgeted for a Web consulting firm and its subcontractors.

Mr. McCain last week handed Mr. Davis the reins to his bid for the Republican nomination after angrily confronting other top aides about overspending. The confrontation led to the departures of the Arizona senator's campaign manager, Terry Nelson, and the senator's top strategist, John Weaver.

Political campaigns usually pay top strategists either with salaries or in fees paid to their consulting companies.

In contrast to the McCain campaign's spending on Davis-related entities, the company of Democratic Sen. Hillary Rodham Clinton's top strategist, Mark Penn, was paid $277,000 in the second quarter -- about 1% of the Clinton campaign's donations in that period.

Sen. Barack Obama, Democrat of Illinois, also paid out about 1% of his second-quarter receipts to his top strategists, David Axelrod and David Plouffe, in the form of salaries and consulting fees totaling $325,000.

A spokesman for Mrs. Clinton's campaign said no other direct or indirect payments went to Mr. Penn or companies associated with him in that period. A spokeswoman for Mr. Obama said she didn't believe Messrs. Axelrod and Plouffe had interests in any other firms receiving payments from the campaign.

Mr. Davis, a former Reagan administration official who played a key role in Mr. McCain's 2000 bid for president, didn't respond to a request for comment yesterday.

Among other things, the McCain campaign paid $340,000 to a Web consulting firm partially owned by Mr. Davis in the second quarter and owed it another $721,000, the report shows.

"Rick Davis informed the campaign from Day 1 that he was an investor in 3eDC," the campaign general counsel, Trevor Potter, said in an interview. "The campaign ensured that he had no role in hiring 3eDC or writing the terms of the contract."

People familiar with the campaign said the contract with 3eDC was always controversial with Messrs. Nelson and Weaver.

The $721,000 debt to 3eDC resulted after they effectively put a hold on further payments, the people said. Mr. Potter said he didn't know what percentage of 3eDC Mr. Davis owned.

In addition, subcontractors to 3eDC doing computer and Internet-related work earned another $249,000 from the campaign, the records show. Mr. Potter said any payments to 3eDC subcontractors "had nothing to do with" Mr. Davis.

The lobbying and consulting firm in which Mr. Davis is a partner, Davis Manafort Inc., took in $50,000 from the campaign in the second quarter, and Mr. Davis directly was paid $5,000.

In the same period, Mr. Weaver was paid $62,000 in salary and Mr. Nelson, $40,000 in salary. A consulting firm in which Mr. Nelson is a partner, Mercury Public Affairs, was paid an additional $61,000 in that latest three-month period.

Write to Mary Jacoby at mary.jacoby@wsj.com