(Adds contempt probe of Port Authority official Wildstein)
By Barbara Goldberg and Margaret Chadbourn
NEW YORK/WASHINGTON, Jan 13 (Reuters) - U.S. investigators are looking into whether embattled New Jersey Governor Chris Christie misused about $2 million in Superstorm Sandy relief funds for an ad campaign that put him in the spotlight in an election year, officials said on Monday.
Already enmeshed in a scandal over snarled traffic at the George Washington Bridge, Christie, a likely 2016 Republican presidential contender, is now being audited by the Inspector General at the U.S. Department of Housing and Urban Development, an agency spokesman said.
The probe began after HUD received a request from Congressman Frank Pallone Jr., a New Jersey Democrat, the spokesman said.
The inspector is focusing on a federally financed $25 million marketing campaign intended to draw visitors back to the Jersey Shore as the area struggled to rebuild from the damage unleashed by Sandy in late 2012. The campaign included a television commercial featuring Christie and his family that cost $2 million more than a competing bid that would not have featured them.
"It is inappropriate for taxpayer-funded dollars that are critical to our state's recovery from this natural disaster to fund commercials that could potentially benefit a political campaign," Pallone said in an Aug. 8, 2013 letter requesting the investigation.
In a statement responding to the probe, Christie's office noted that HUD Secretary Shaun Donovan had lauded the ad campaign and suggested that Pallone's request for an investigation was motivated by political considerations.
"We're confident that any review will show that the ads were a key part in helping New Jersey get back on its feet after being struck by the worst storm in state history," said Christie spokesman Colin Reed.
Sandy devastated New York, New Jersey and other parts of the East Coast on Oct. 29, 2012. The storm killed at least 159 people and damaged or destroyed more than 650,000 homes, many in Pallone's district on the Jersey Shore, where the storm made landfall.
NEW STATE PROBE
The Democratic-controlled state Assembly on Monday said it had formed a new special investigative committee with subpoena power to probe the bridge incident, nicknamed "Bridgegate" by local newspapers.
E-mails released last week showed the massive September traffic jam was orchestrated by Christie's staff, apparently as political payback against the mayor of Fort Lee, New Jersey, who did not endorse Christie for re-election.
"The evidence that has come out in recent weeks makes clear that this now goes above and beyond a transportation issue and goes into the highest ranks of the executive branch," said Assemblyman John Wisniewski. "A concerted and focused investigation with increased resources is now needed."
Christie has adamantly denied any knowledge of a scheme to snarl traffic and there is nothing in the e-mails to suggest he had any direct knowledge of the scheme.
The scandal could dent Christie's carefully cultivated image as a get-things-done leader who puts the people ahead of politics - an image enhanced by his easy re-election last year in heavily Democratic New Jersey.
Without proof that Christie lied or knew that an aide was behind the lane-closure plan, Republicans said it is unlikely to be a factor by the time voters in Iowa, New Hampshire and South Carolina begin to weigh in on the presidential race in early 2016.
Other Democratic mayors who declined to endorse Christie said they believe they were punished too. Jersey City Mayor Steven Fulop said in a statement that Christie administration officials began to cancel meetings with him abruptly after he said no.
Christie last week fired a top aide who appeared to have called for the closure of lanes leading to the George Washington Bridge. He has denied knowledge of the his aide's role in triggering the four-day incident, which paralyzed Fort Lee, on the New Jersey side of the Hudson River.
News of the Sandy funds audit arrives on the eve of Christie's annual State of the State address in Trenton on Tuesday, which kicks off a second term he won in a landslide.
U.S. Attorney for New Jersey Paul Fishman, whose job Christie held before being elected governor, has opened an investigation of the decision to close the lanes.
Assembly Deputy Speaker John Wisniewski said he had referred contempt charges David Wildstein, a former Port Authority employee at the center of the bridge scandal, to county prosecutors after Wildstein declined to answer questions about the scandal during an assembly hearing last week.
The governor also faces a class-action lawsuit filed in federal court on Thursday by Rosemarie Arnold, a lawyer who charges Fort Lee residents suffered financially from being trapped in traffic. (Additional reporting by Edith Honan in New York and Susan Heavey in Washington; Editing by Dan Grebler)
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