President Bush said Friday he will return a campaign donation from an Iraqi-American who had business dealings with Iraq's government under Saddam Hussein (search).

"Due to the seriousness of the allegations and due to President Bush's strong positions, we felt it appropriate to return the funds," spokeswoman Merrill Smith said. Federal Election Commission (search) records show that Assad Kalasho, a businessman from West Bloomfield, Mich., donated $2,000 to Bush's campaign in July 2003.

A spokesman for Kalasho responded that Kalasho has done nothing wrong and is not the subject of legal investigations. The Detroit Free Press reported Friday that Kalasho negotiated a $16 million deal with the Iraqi government in 2000, when international sanctions prohibited most business dealings with Iraq.

"There is just a lot of innuendo and misinformation," spokesman Mark Smith said.

The Republican National Committee (search) said Friday it will return a $25,000 check it received from Kalasho in May, spokeswoman Heather Layman said. Sen. Debbie Stabenow, D-Mich., said she will donate the $1,000 she received last year from Kalasho to "an appropriate charity."

Smith said Kalasho understands the decisions and will continue to support the president.

"We're happy to take the check back and take care of everything on the home front," Smith said. "We're not going to allow the campaign to be dragged down into a local issue that has no merit."

The Treasury Department, which has investigated some sanctions violators, said Kalasho is not on the list of individuals who have had their assets frozen for an investigation. The agency referred further questions to the Justice Department, which didn't return a telephone call seeking comment.

According to documents obtained by the Free Press, Kalasho arranged satellite broadcasts of Iraqi government television to North and South America until shortly before the Iraq war began in March 2003.

Smith said Kalasho sold his shares in the business and never profited from it.