Republican National Committee Chairman Michael Steele has been accused by his treasurer of attempting to hide $7.1 million in debt, in a move that, if true, could expose the Republican Party to millions of dollars in fines and even criminal prosecution.

The Washington Times reports that RNC Treasurer Randy Pullen sent a memo to budget committee members Tuesday accusing Steele and his chief of staff, Michael Leavitt, of "trying to conceal" the debt by "ordering staff not to communicate with the treasurer -- a charge RNC officials deny."

The Times reports:

Mr. Pullen told the members that he had discovered $3.3 million in debt from April and $3.8 million from May, which he said had led him to file erroneous reports with the FEC. He amended the FEC filings Tuesday.

Campaign-finance analysts said that simply misreporting fundraising numbers to the FEC can lead to millions of dollars in fines and that criminal charges can be levied if the actions are suspected to be intentional.

"This is significant because the civil penalties could mean big fines that take a significant bite out of the RNC's finances close to the November congressional elections, when state parties need the RNC's financial help for their 'victory' programs," said former FEC Commissioner Hans A. von Spakovsky.

An RNC spokesman denied that Steele or his chief of staff had ever attempted to hide the debt. But Pullen wrote that Steele only backed off when Pullen complained.

The RNC report for June shows an outstanding debt of $2 million, suggesting that much of the earlier "hidden" debt has been paid off. Yet the allegations highlight that senior Republican operatives may be seriously concerned about the party's financial condition going into the mid-term elections, and some are blaming Steele for the situation. The Times reports:

Before Mr. Steele took over as chairman in January 2009, RNC fundraising typically far exceeded donations to the Democratic National Committee.

Back on May 31, 2006, for example, the RNC had $43.1 million in cash on hand compared with the DNC's $10.3 million. Part of the RNC's edge over the DNC stemmed from Republicans holding the presidency, though they were about to lose control of Congress that year.

Mr. Pullen's amended financial reports to the FEC show that the RNC engaged in deficit spending of $2.2 million in April and $3.7 million in May, spending more on raising money and on operating costs than it gathered in donations.

The allegations come at a time when much of the Republican establishment is already upset with Steele, who angered GOP supporters earlier this month by declaring that the war in Afghanistan is not winnable.

In a polemic that began with Steele calling Afghanistan a "war of Obama's choosing," the RNC chairman echoed progressive talking points in arguing that the US should abandon the ground war there because "everyone who has tried over a thousand years of history has failed."

That earned Steele condemnations from both the Democratic Party and Republicans, some of whom have called for Steele to resign over the comments.

But, as Nicole Allan points out at the Atlantic, "Steele's latest screw-up is a different degree of serious."

Allan wrote: "Depending on how the FEC responds, the consequences for the RNC could be severe. Steele may have brushed off verbal missteps, but a multimillion dollar lawsuit would be a different story altogether."