Senator and gubernatorial candidate Jon S. Corzine (search) loaned the president of New Jersey's largest state workers union $470,000 when the two were romantically involved three years ago, then forgave the debt last year.

Corzine defended the transaction, first described in reports Thursday in The Star-Ledger of Newark and The New York Times.

Corzine, New Jersey's senior U.S. senator, turned the 10-year mortgage into a gift to Carla Katz (search) just a week after kicking off his campaign for governor last December and several months after the two stopped dating.

Katz, 46, is president of the Communications Workers of America, Local 1034. The union local represents 9,000 state workers as well as other workers.

Corzine's involvement with Katz, which was well-known in political circles, is significant because the two could find themselves on opposite sides of the bargaining table if he wins the November election. A Democrat elected to the Senate in 2000, he opted to run for governor this year.

The Republican candidate for governor, businessman Doug Forrester (search), said Corzine's gift to Katz "suggests an all-too-familiar pattern in New Jersey of public officials entangling themselves in relationships that are not private matters but in direct conflict with the public interest."

Speaking after a news conference Thursday on an unrelated matter, Corzine said the loan would not hamper his administration's ability to negotiate fairly or effectively with the union.

"I don't think there's a conflict," said Corzine, 58. "The relationship has ended."

Democratic strategist Rick Thigpen agreed. "If he can foresee paying the gift tax on that money, he can certainly foresee the need to have nothing but an arm's length relationship with her union as governor," he said.

The mortgage was found among public documents and land records filed with Hunterdon County. Katz was living in the more than 200-year-old home at the time of the loan, and used the money to buy out her ex-husband.

The CWA endorsed Corzine's Senate candidacy five years ago and recently announced its support for him in the governor's race, one of only two in the nation this year.

The union is one of a handful of labor groups expected to press the state for billions of dollars in wage increases and pension and health fund bailouts. The current CWA contracts expire June 30, 2007.

A former CEO of Goldman Sachs, Corzine's personal wealth is estimated at up to $261 million. He split from his wife of 33 years in 2002, and their divorce became final in late 2003.

In separate interviews with the two newspapers, Katz and Corzine both said they were confident the matter would not compromise their constituents in negotiations.

Corzine, who met Katz in 1999 when he was campaigning for his 2000 U.S. Senate run, declined to discuss terms of the loan or details of his relationship with her. The Democrat said he forgave the loan after his romance with Katz ended in July 2004 because she did not have the means to repay it.

He declined to say whether he had given Katz or any of her family members any other financial help, calling that personal.

"I'm a public official, but I also have a private life," Corzine said.

Katz did not disagree with Corzine's account of the mortgage, but declined to discuss the matter with the newspapers. She did not immediately return calls Thursday from The Associated Press.

"My private life and personal finances are just that -- personal," she told The Star-Ledger, adding she remains "great friends" with Corzine.