By Joe Johns and Stacey Samuel
WASHINGTON (CNN) — Prosecutors hope to determine by Labor Day whether Virginia’s first family broke any laws regarding a gift-giving scandal that has engulfed Gov. Bob McDonnell and tarnished the once-sterling reputation of the Republican politician, a source with knowledge of the matter told CNN.
Lawyers for McDonnell and his wife met with prosecutors in the city of Alexandria on Monday as the Justice Department sought clarity over previously undisclosed gifts given to the governor and his family by the chief executive of a troubled dietary supplement company.
The desire to reach some kind of conclusion about the direction of the investigation in coming weeks revolves around the Virginia election in November to chose McDonnell’s successor. The Justice Department generally avoids bringing cases against politicians if it might impact an election.
That race is one of the nastiest gubernatorial contests in the country. It’s between Republican Attorney General Ken Cuccinelli, who has his own ties to the man behind the McDonnell scandal, and Democrat Terry McAuliffe, a heavyweight political fundraiser, businessman and close friend of Bill and Hillary Clinton.
It has been a stunning turn of events for McDonnell, a well mannered former star in Republican politics who rose from state legislator to Virginia attorney general to governor.
McDonnell’s future was so bright not long ago. He won the governorship handily in 2009 and had maintained his popularity in a southern presidential battleground state that votes blue, but just barely.
His fundraising acumen, message discipline and understated charm helped lift him to the chairmanship of the Republican Governors Association in 2011, a post other governors have used as a springboard to a presidential campaign. He was mentioned as a possible running mate for Mitt Romney.
But things came apart this year over revelations about the first family’s ties to Johnnie Williams of Star Scientific, a friend and campaign contributor.
Questions center on gifts: $15,000 for catering costs for McDonnell’s daughter’s wedding, $15,000 for clothing purchases for his wife, Maureen, and $6,500 for a Rolex watch.
Maureen McDonnell also bought stock in the company and promoted its products at a luncheon at the governor’s mansion in Richmond.
A key question remains: Did McDonnell accept things of value in exchange for official acts — which he denies — or did he willfully turn a blind eye to gifts for his wife? McDonnell maintains he didn’t know about the gifts or the stock and has denied wrongdoing.
McDonnell said he has already repaid Williams tens of thousands of dollars and said he has broken no laws.
He and his allies have cautiously defended the lack of disclosure as consistent with Virginia law, which does not require elected officials to report gifts provided to family members like McDonnell’s wife and daughter.
Elected officials in Virginia are allowed to accept gifts over $50, as long as they are publicly disclosed. McDonnell has reported other gifts from Williams, including a stay at a lake house and private plane travel. Williams has also given generously to McDonnell’s political organization.
Andrew McBride, a former U.S. attorney in Alexandria, told CNN this would be a very difficult case for prosecutors without clear evidence of a quid pro quo.
“You have the money aspect, and you have the receipt of the money, what I don’t see for a federal crime right now is the governor acting in his official capacity in order to aid Star Scientific, in exchange for the money,” said McBride.
There are calls for McDonnell to step down, but he said in July that he plans to finish his term.
Although prosecutors apparently do not like for these kinds of investigations to impact elections, Cuccinelli has not escaped the controversy.
He owned stock in Williams’ company but sold off shares earlier this year. He also collected more than $18,000 in gifts from the executive and stayed at his vacation house.
An ethics investigation of Cuccinelli’s relationship with Williams cleared the attorney general of any wrongdoing but revealed that Cuccinelli put the executive in touch with an attorney who could help him win grants from a state agency.
CNN’s Peter Hamby contributed to this report.
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