Federal prosecutors and John Edwards' lawyers argued in secret for months over how campaign finance law deals with gifts and third-party payments.

This area of the law would be at the core of a prosecution of the former North Carolina senator and two-time presidential candidate, according to new information obtained by The News & Observer. The two-year probe could turn into criminal charges this week unless there is a plea deal.

The main questions in a criminal case would be whether payments to Edwards' mistress and a campaign staffer were intended to keep his 2008 campaign alive, and whether he knew about them - substantive legal issues aside from the Edwards soap opera, which includes the affair while seeking the presidency as his wife battled cancer, conceiving a child with the mistress, and publicly denying paternity as an aide, Andrew Young, claimed it.

Two wealthy Edwards supporters had provided more than $1 million to pay the living expenses of the mistress, Rielle Hunter, and Young and his family. The money helped keep Hunter quiet and, for a time, kept the affair from bursting into national headlines.

The payments for Hunter never touched campaign or Edwards' accounts. The money went to Young and Hunter directly from the donors or to intermediaries. It was not reported on campaign disclosure forms.

But the prosecutors contend the money flowed so that the campaign could continue, and would point out that one of the donors, the late Fred Baron of Texas, was an influential and important person in Edwards' national campaigns. The other donor was heiress and multimillionaire Rachel "Bunny" Mellon of Virginia.

The Edwards legal team argues that the money was intended to keep the affair a secret from Edwards' wife, Elizabeth, and constituted legal gifts not connected to the campaign. Edwards is not the first to get help from a friend to pay a mistress, they say.

Campaign finance laws are written to limit how much any one person can influence an election, and to require disclosure of such spending. At the time that Edwards was running for president in 2007 and 2008, a person could not contribute more than $2,300 to a federal campaign per election.

Behind the scenes, prosecutors and Edwards' legal team have been in a debate about the law in what has amounted to a preview of possible courtroom arguments. Some meetings included a range of federal elections law experts, according to people involved in the discussions.

To read the complete article, visit www.newsobserver.com.