By TOM BREEN and NEDRA PICKLERWINSTON-SALEM, N.C. -- In May 2007, as John Edwards endured ridicule for his $400 haircut, a wealthy supporter fired off a note to a campaign aide, vowing to privately pay for his hair care and other expenses important to his candidacy.
"It is a way to help our friend without government restrictions," Bunny Mellon wrote in a letter cited by federal prosecutors.
Investigators believe there should have been restrictions on the $925,000 in under-the-table money that Mellon and another benefactor ended up providing to support Edwards. It's key to the government's contention that the 2004 Democratic vice presidential nominee broke the law in hiding his pregnant mistress during the final months of his 2008 campaign for the White House.
Prosecutors contend that plan was an illegal conspiracy to evade campaign finance laws. A federal grand jury agreed, returning a six-count indictment of Edwards on Friday, accusing him of conspiracy, taking illegal campaign contributions and making false statements.
"As this indictment shows, we will not permit candidates for high office to abuse their special ability to access the coffers of their political supporters to circumvent our election laws," said Assistant Attorney General Lanny Breuer, head of the Justice Department's criminal division.
Edwards, 57, pleaded not guilty and was released without bail on the condition he surrender his passport and not leave the continental U.S.
"There's no question that I've done wrong. And I take full responsibility for having done wrong. And I will regret for the rest of my life the pain and the harm that I've caused to others," Edwards said outside the courthouse. "But I did not break the law, and I never, ever thought I was breaking the law."
A former trial lawyer who won multimillion-dollar verdicts with the same formidable powers of persuasion that propelled his political career, Edwards now faces the prospect of a lurid trial and the possibility of both prison time and the loss of his license to practice law.
The charges came after a two-year FBI investigation into the former North Carolina senator. Investigators narrowed the scope of their work to focus on money from two wealthy backers that went to keep Edwards' then-pregnant mistress, Rielle Hunter, in hiding at the height of his 2008 White House campaign.
In an aggressive and apparently novel application of the law, prosecutors said the money constituted campaign contributions because it was intended to protect Edwards' political career from ruin. They said the spending was illegal because Edwards should have reported it on his campaign finance filings and because it exceeded the $2,300-per-person limit on contributions.
"A centerpiece of Edwards' candidacy was his public image as a devoted family man," the indictment said. "Edwards knew that public revelation of the affair and the pregnancy would destroy his candidacy by, among other things, undermining Edwards' presentation of himself as a family man and by forcing his campaign to divert personnel and resources away from other campaign activities to respond to criticism and media scrutiny regarding the affair and pregnancy."
Defense attorney Gregory Craig called the case unprecedented and said there was no way anyone, including Edwards, should have known that the payments should have been treated as campaign contributions.
"He has broken no law, and we will defend this case vigorously," Craig said.
Citizens for Responsibility and Ethics, a Washington watchdog group often critical of the Justice Department for failing to pursue wrongdoing by government officials, was a surprising critic, with executive director Melanie Sloan, a former prosecutor, saying the case was remarkably weak. While Sloan called Edwards' conduct despicable, she said "no court has ever interpreted the definition of campaign contribution this broadly."
If convicted, Edwards faces a maximum penalty of five years in prison and a $250,000 fine on each of the six counts. First-time white-collar offenders in federal cases are usually not sent to prison, but the Justice Department typically presses for at least a short stint behind bars for public officials.
Prosecutors moved ahead with the indictment after negotiations to get Edwards to plead guilty to reduced charges proved fruitless, according to people with knowledge of the discussions. Prosecutors had insisted on a plea to a felony, which would endanger Edwards' law license and his hopes of working as an attorney for the poor.
With Edwards' political career already in ruins, a trial could destroy any hope he may have had of rehabilitating his image, spilling out the sordid details of how he cheated on his cancer-stricken wife Elizabeth Edwards and then publicly disavowed Hunter's baby daughter as his own.
The centerpiece of the investigation has been the hundreds of thousands of dollars provided by two wealthy Edwards supporters - Fred Baron, his former campaign finance chairman, and Mellon, the 100-year-old widow of banking heir Paul Mellon.
Prosecutors said $725,000 from Mellon and $200,000 from Baron was used to pay for Hunter's living and medical expenses and for chartered airfare, luxury hotels and rental of a house in Santa Barbara, Calif., to keep her hidden from the public.
Former campaign staffer Andrew Young, who initially claimed to be the father of Hunter's child to protect his boss, has said that Edwards was aware of the financial support and agreed to solicit money directly from Mellon.
Mellon sent her money through her decorator, sometimes hidden in boxes of chocolates. On the memo lines of her checks, she listed items of furniture such as "chairs," "antique Charleston table" and "book case" to hide the true purpose, according to the indictment.
With one of Edwards' former campaign rivals, Barack Obama, now sitting in the White House, the case contains a measure of political intrigue. While the case was overseen by top Justice Department officials in Washington, it was put together by U.S.
Attorney George Holding, a Republican-appointed holdover who stayed on the job to finish the probe at the request of North Carolina's senators.
Edwards' rapid rise to the pinnacle of American politics was outmatched only by the speed of his downfall. In his first run for public office, he landed in the Senate, defeating Republican incumbent Lauch Faircloth in 1998. Massachusetts Sen. John Kerry, the Democratic presidential nominee in 2004, selected Edwards as his running mate that year.
Hunter was hired to shoot behind-the-scenes video footage of Edwards as he geared up for a second run for the White House. She was paid about $200,000.
Edwards, who abandoned his bid in early 2008, initially denied having an affair with Hunter but eventually admitted to it in the summer of 2008. He also denied being the father of her child before finally confessing last year. His wife died of cancer in December.
Since 2008, Edwards has largely remained out of the spotlight, emerging for a trip to Haiti after the earthquake, for various sporting events with his children and for his wife's funeral.
(Copyright ©2011 by The Associated Press. All Rights Reserved.)
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WASHINGTON -- The United States Department of Justice has green-lighted the prosecution of former presidential candidate John Edwards for alleged violations of campaign laws while he tried to cover up an extra-marital affair, ABC News has learned. 
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