BALTIMORE - Federal authorities have opened a criminal investigation of Delaware Republican Christine O'Donnell to determine if the former Senate candidate broke the law by using campaign money to pay personal expenses, according to a person with knowledge of the investigation.

The person spoke on condition of anonymity to protect the identity of a client who has been questioned as part of the probe. The case, which has been assigned to two federal prosecutors and two FBI agents in Delaware, has not been brought before a grand jury.

In a statement Wednesday, Matt Moran, O'Donnell's former campaign manager, said: "We have heard absolutely nothing other than the same unsubstantiated allegations and rumors that have been circulating in the press for months." Moran said there was "no impermissible" usage of funds.

The U.S. Attorney's Office has confirmed it is reviewing a complaint about her campaign spending filed by a watchdog group, but officials in the office and the FBI declined to say whether a criminal investigation was under way.

O'Donnell, who set a state record by raising more than $7.3 million in a tea party-fueled campaign this year, has been dogged by questions about her finances.

At least two former campaign workers have alleged that she routinely used political contributions to pay her personal expenses in recent years as she ran for the Senate three times, starting in 2006. The Washington-based watchdog group Citizens for Responsibility and Ethics filed a complaint with the Federal Election Commission making similar allegations and asked Delaware's federal prosecutor to investigate.

O'Donnell's campaign has denied wrongdoing but acknowledged she had paid part of her rent at times with campaign money, arguing that her house doubled as a campaign headquarters.

Federal law bars candidates from spending campaign money for personal benefit. FEC rules say this ban applies to the use of campaign money for a candidate's mortgage or rent "even if part of the residence is being used by the campaign," though O'Donnell's campaign maintained it was told otherwise by someone at the agency.

O'Donnell upset veteran Rep. Michael Castle in the GOP Senate primary but lost to Democrat Chris Coons in the Nov. 2 election.

This article includes information from Bloomberg News.