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62 Days to Decide: Tea Party Favorite's Financial Problems Threaten Senate Bid in Delaware

Christine O'Donnell is seeking to upset Rep. Mike Castle in the GOP Senate primary in Delaware. (AP)

Fresh off its latest political victory in Alaska, the Tea Party Express is now jumping into the Delaware Republican Senate primary to back longshot candidate Christine O'Donnell, a fiscal conservative whose deep financial problems are grabbing headlines and could prevent the increasingly powerful grassroots movement from scoring a second major upset in two weeks.

The Tea Party Express told FoxNews.com it was aware of O'Donnell's campaign debts, her past troubles with the IRS over unpaid taxes and the sale of her foreclosed home to a campaign staffer to settle mortgage claims before it endorsed her in her primary race against longtime Rep. Mike Castle, a moderate Republican.

Levi Russell, a spokesman for the group, said there's "very little substance to the story."

"It seems it's been blown out of proportion, no doubt by the Castle campaign, which is trying to take the focus off of his liberal voting record," Russell said. "I think it's just ugly campaign tactics."

The Tea Party Express said it plans to spend at least $250,000 for O'Donnell before the Sept. 14 primary. The group spent around $600,000 to help Joe Miller upset Sen. Lisa Murkowski in the Alaska Republican primary last week.

The winner will take on New Castle County Executive Chris Coons, the Democratic nominee, in November for Vice President Biden's longtime Senate seat. It is the third time O'Donnell has run for Senate; she lost the election to Biden two years ago.

According to a Rasmussen poll last month, Coons trails Castle but leads O'Donnell by 10 percentage points.

Castle told Fox News that "it's discouraging in a way" to have the Tea Party throw its support behind O'Donnell. "The only way to deal with this is to match it, not just dollar-wise, but answer allegations to prove why I would be a better candidate and make sure that message is out there.

"I'm fully aware they are coming in," he said. "I intended to fully engage any campaign they run."

Castle said the public needs to know about O'Donnell's financial problems.

"She may be a fiscal conservative, but she's had problems in her own life," he said. "She has no government experience whatsoever. She just states what she believes in. She doesn't have experience in getting things done."

"She could not possibly get elected in the state of Delaware," he said.

O'Donnell fired back that Castle's statement "clearly shows how out of touch he is with average Americans."

"Americans are faced with financial hardships, because of politicians like Castle that have been living in a bubble and voting liberally with [House Speaker Nancy] Pelosi and [Senate Majority Leader Harry] Reid," O'Donnell said in a written statement to FoxNews.com.

Her website contains documents that respond to some of her opponents' charges. 

The site posts a letter from the IRS dated in February stating that she deserves "some relief" from a 2005 tax audit of more than $18,000 in wages and vehicle expenses. The letter requests more information for nearly $10,000 spent on travel, meals and entertainment and legal and professional fees.

The site also posts a letter from CitiMortage showing that her home was sold through a private mortgage company and not a public foreclosure. 

She has nearly $24,000 in campaign debt, and she told the Delaware News Journa she pays half of her rent with campaign donations because her townhome is also her Senate campaign headquarters.

"There are some people in Delaware who say she talks conservative and lives liberal. I say she talks conservative and lives dysfunctionally," said Tom Ross, chairman of the Republican Party of Delaware.

Ross said what troubles him most is O'Donnell's unpaid campaign debt from 2008 and the way she lives off her campaign funds.

"I think it's disingenuous, to say the least, you're asking for campaign contributions to win back the Senate seat for Republicans and it goes to pay your rent," he said.

Ross said lightning won't strike in Delaware for the Tea Party Express because O'Donnell's resume pales in comparison to other successful Tea Party favorites, like Miller, Sharron Angle, who was a state legislator in Nevada, and Rand Paul, who is an ophthalmologist in Kentucky.

"Quite frankly, she has no shot in the primary," he said. "If she won the primary, it would be an absolute disaster not only for the Republican Party in Delaware but for the Republican Party nationally. You would be giving Joe Biden's Senate seat to Democrats on a silver platter."

O'Donnell said Ross' "behavior is blatantly unbecoming of a state party chairman due to the constitutional Republican platform our campaign has presented."

As for Russell, the spokesman for the Tea Party Express, he said Ross sounds like he's afraid of losing his job.

"I think it would be a disaster for him if she won because he wouldn't be around much longer as head of the Republican Party in Delaware," he said.