Casaleggio, who counts Crazy Horse Too owner Rick Rizzolo and former Las Vegas City Councilman Michael McDonald among his close friends, was questioned by federal prosecutors about $30,000 he loaned to McDonald more than four years ago.

A federal grand jury recently convened to hear the federal government's tax fraud case against McDonald. Casaleggio, a Roman Catholic priest for nearly three decades, said he was stunned the government questioned the legality of the loan.

Casaleggio explained that he simply offered the money to his parishioner because he considered him a friend in need.

"The only thing wrong about this whole thing is the way the FBI is looking at it," Casaleggio said last week. "I'm a priest."

At the time of the loan, McDonald was on the City Council, but the priest said he thought nothing of it since he had no business pending before the city.

Casaleggio said federal authorities suggested the loan originated from Rizzolo, who is now in federal prison after pleading guilty to conspiring to evade taxes.

Casaleggio said prosecutors believe the money was a payment from Rizzolo to McDonald that was filtered through the priest's bank account.

"They're trying to associate my friendship with Rizzolo and my friendship with McDonald as some sort of middleman," said Casaleggio, a chaplain at the maximum security men's prison in Indian Springs.

McDonald declined to comment last week.

Casaleggio acknowledged that his relationships with McDonald and Rizzolo have raised eyebrows over the years, which he understands.

"Me being a priest, it's weird -- a topless bar owner, a politician and a priest," he said.

But Casaleggio emphasized he has never engaged in any illegal activity.

Casaleggio, 59, said he formed a friendship years ago with Rizzolo, 49, when Rizzolo's children attended Our Lady of Las Vegas School.

"I became friends with him as a person, not as a topless club owner," Casaleggio said.

In January, Rizzolo was sentenced to one year and one day in federal prison after he pleaded guilty to conspiracy to evade taxes.

Casaleggio said his friendship with McDonald, 41, also started through the church; Casaleggio was McDonald's priest.

After McDonald told him that he needed $30,000 to pay his taxes, Casaleggio, whose parents had recently died and left him a home in San Francisco, agreed to loan him the money, he said.

Casaleggio said he was questioned before the grand jury about whether McDonald was paying interest on the loan or whether Casaleggio could produce a promissory note.

"Maybe I'm stupid but I didn't see anything in this," Casaleggio said. "I looked at them and said, 'If I have to lend money on a promissory note, I'm not going to lend money.' I'm not a banker. Our promissory note was a look in the eye and a handshake."

Casaleggio said McDonald has not paid him back but has promised he will as soon as one of his large development projects is a success.

"I'm at peace with it because I know he will," the priest said.

Authorities have known about the loan since 2003, when McDonald turned over financial records to the federal government, Casaleggio said. At that time, McDonald was believed to be a subject of a political corruption investigation that snared four Clark County commissioners.

Federal authorities confirmed in 2003 that it had used the Patriot Act to retrieve financial information, including certain financial records pertaining to McDonald, in its political corruption investigation. It was the first reported case of the government using the act, designed to root out terrorists after Sept. 11, 2001, to access politicians' personal records.

As a result of the probe, former Commissioners Erin Kenny, Dario Herrera and Mary Kincaid-Chauncey were convicted of taking bribes from strip club owner Michael Galardi, a rival of Rizzolo's. Their former colleague on the County Commission, Lance Malone, pleaded guilty to serving as the middleman. McDonald was not indicted in the case.

However the investigation contributed to his losing his City Council seat in 2003 to political novice Janet Moncrief.

The federal government as part of its tax fraud case also is investigating an arrangement under which McDonald, while he was on the council, received $5,000 a month for two years from the law firm of Patti and Sgro.

Defense lawyer Tony Sgro represented Rizzolo in his federal tax fraud case.

Sgro did not return phone calls Tuesday and Wednesday.

A source close to the case said McDonald, a former Las Vegas police officer, did consulting work for Sgro through his company, Alpha Omega Strategies.

Certain details of McDonald's financial dealings have come out in court.

Galardi testified in 2006 that he paid McDonald, a high school buddy, $5,000 a month starting about seven months after McDonald was sworn into office in 1994. When pressed on whether McDonald had a job title, Galardi responded: "He gave himself a title ... as consultant."

Earlier this year, real estate consultant Donald Davidson was convicted of attempting to bribe McDonald in 2002. During a telephone conversation with Malone, Davidson discussed a lunch meeting he had with McDonald in April of that year.

"I approached him the same way I approached you," Davidson told Malone, according to transcripts of the government-intercepted call. "I have five dimes to spread around."

During a later phone conversation recorded by the government, McDonald told Malone: "The way he came across; not the way I operate."

Although McDonald's name has been mentioned prominently in two corruption trials, the association does not appear to have harmed his business.

In June, he was back in the Las Vegas City Council chambers.

The council agreed to sell city land to his company for $6.5 million, millions of dollars less than it is worth.

McDonald said his company plans to build 600 apartments for low-income senior citizens on the 13 acres at Decatur Boulevard and Vegas Drive.