A complaint by Tanonaka's former campaign manager alleges that Tanonaka hid loans to his campaign to get around the state's campaign spending law, which prohibits candidates from accepting personal loans over $10,000 from donors. Tanonaka, a former television and newspaper journalist running for Congress against U.S. Rep. Neil Abercrombie, D-Hawai'i, said yesterday that he would cooperate with the investigation and again suggested the complaint was politically motivated.

"Obviously, it was timed to have an impact on the election," Tanonaka said.

The commission yesterday found there was reason to believe there might be violations and referred the complaint to the prosecutor's office, which has expertise over criminal matters. It was the first time commissioners made a referral for a criminal investigation since 2002, when they recommended a probe against Honolulu Mayor Jeremy Harris' 2000 re-election campaign.

Jim Fulton, an aide to prosecutor Peter Carlisle, said the office would review the Tanonaka complaint.

Watada said Tanonaka has not fully documented where he obtained the money for a $45,000 loan he made to his campaign in June 2002.

Tanonaka told The Advertiser after the complaint was filed in September that he raised the money from a variety of sources, including money from refinancing his home and from credit lines. He insisted, in an interview and an e-mail and in a subsequent news conference, that two loans totaling $25,000 from a friend, Carol Tsai, were for personal expenses and not related to his campaign.

But Tanonaka's attorney, Miles Furutani, told the commission in writing that the Tsai loans were deposited into Tanonaka's City Bank account and then the money was converted by Tanonaka into loans to his campaign. He said the first loan, for $15,000 in June 2002, was part of Tanonaka's $45,000 loan. He said Tanonaka later learned of the loan limit in state law and immediately returned the money to Tsai.

The second Tsai loan, for $10,000 in September 2002, was also deposited into Tanonaka's account and then used by Tanonaka as an advance for his campaign, his attorney said. He later repaid Tsai but never disclosed the loan on campaign-finance reports.

Furutani told the commission that failure to document the September loan was inadvertent and should not prompt a criminal investigation.

Asked to explain the contradiction between his initial statements and what his attorney provided to the commission, Tanonaka said yesterday that he was still sorting out the timeline for events that happened more than two years ago.

"It may not look good," he told The Advertiser, adding that there was no deliberate intent to exceed the loan limit.

Candidates can obtain loans from banks or other financial institutions, as well as up to $50,000 from immediate family members, but loans from donors are limited to $10,000. Watada said previously that candidates are not allowed to accept loans from donors and then disguise that money as personal loans to their own campaign.

Steven Olbrich, one of the commissioners who voted against the referral, said he wanted to give Tanonaka more time to explain the loan activity. Olbrich said the commission's decision could have an influence on voters in the November election. "I would like to give him the benefit of the doubt," Olbrich said.

Two state lawmakers who were recently fined by the commission, state Sen. Cal Kawamoto, D-18th (Waipahu, Crestview, Pearl City), and state Sen. Melodie Aduja, D-23rd (Kane'ohe, Kahuku), were defeated in the September primary. Kawamoto was fined $21,000 for not reporting campaign donations and for using campaign money for personal expenses. Aduja agreed to a $9,100 penalty for not providing receipts for campaign checks to her former husband and for not disclosing a loan.

Tanonaka, who missed the commission meeting because he was returning from speaking and fund-raising engagements with expatriates in Asia, acknowledged that the investigation leaves an "unfortunate cloud" over his congressional campaign.

Ed Nishioka, Tanonaka's former campaign manager and president of Professional Results Inc., said he filed the complaint soon after he obtained Tanonaka's bank records as part of a separate civil lawsuit he filed against Tanonaka over $40,000 in disputed pay.

"My complaint is about the truth and taking responsibility," Nishioka said.