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Stung by the news that two aides once lobbied for the Burmese junta, John McCain last week rolled out a sweeping new conflict-of-interest policy for his campaign, requiring all staffers to fill out questionnaires identifying past or current clients that "could be embarrassing for the senator." Aides say that McCain was furious over the Burma connection (which he learned from a NEWSWEEK story) and was "adamant" about banning campaign workers from serving as foreign agents or getting paid for lobbying work.

But the fallout may not be over. One top campaign official affected by the new policy is national finance co-chair Tom Loeffler, a former Texas congressman whose lobbying firm has collected nearly $15 million from Saudi Arabia since 2002 and millions more from other foreign and corporate interests, including a French aerospace firm seeking Pentagon contracts. Loeffler last month told a reporter "at no time have I discussed my clients with John McCain." But lobbying disclosure records reviewed by NEWSWEEK show that on May 17, 2006, Loeffler listed meeting McCain along with the Saudi ambassador to "discuss US-Kingdom of Saudi Arabia relations."

Another potential problem: Loeffler's firm started paying $15,000 a month last summer to one of its lobbyists, Susan Nelson, after she left to become McCain's full-time finance director, said a source familiar with the arrangement (who asked not to be identified talking about sensitive matters). Campaign officials were told the payments were "severance" for Nelson and that they ended by November. But in "February or March," Loeffler rehired Nelson as a consultant to "help him with his clients" while she continued on the McCain payroll, according to a campaign official who asked not to be identified talking about personnel matters. Federal election law prohibits any outside entity from subsidizing the income of campaign workers. McCain's officials say they have been assured that Nelson did actual work for Loeffler's lobbying clients—and that the payments were proper. But after NEWSWEEK posed questions about the matter, they confirmed Loeffler's resignation and the termination of Nelson's consulting contract. (Loeffler and Nelson did not respond to requests for comment.) Also last week, energy adviser Eric Burgeson was ousted.

If other staffers are not in compliance with the new rules, "they will become so or they will leave the campaign," said McCain spokeswoman Jill Hazelbaker. She also accused the Obama campaign of an "absurd double standard" because it has not disclosed the names of all advisers who may have lobbying ties. Responded Obama spokesman Bill Burton: "Washington lobbyists don't give money to our campaign, and they're not going to run our White House."