WASHINGTON — A federal investigation into a long-ago land deal by Senator Bernie Sanders’s wife is threatening to take some of the luster off the senator’s populist appeal, attaching the phrase “bank fraud” to the biography of a politician practically sainted on the left for his stands against “millionaires and billionaires.”
Mr. Sanders, a Vermont independent, is still riding high on popularity from his presidential campaign, delivering rousing speeches to cheering progressives in Ohio, Pennsylvania and West Virginia.
But he has been shadowed by talk of a deepening investigation into his wife’s role in a 2010 land deal for a Vermont college that ultimately contributed to her ouster as its president. His wife, Jane Sanders, has hired a lawyer to represent her as federal authorities look into a $10 million sale of about 33 acres of lakefront property by the Roman Catholic Diocese of Burlington to Burlington College. Ms. Sanders was hoping to relocate and expand the institution.
The couple and many of their supporters maintain that the investigation is politically motivated and that it was set in motion by the Vermont state chairman for Donald J. Trump’s presidential campaign, Brady Toensing, who filed a complaint with the local United States attorney’s office in January 2016 on behalf of the diocese’s parishioners.
But the facts in the case do not fit well with Mr. Sanders’s populist image. The charges revolve around a $2.6 million bank loan, obtained with a promise that college donors would quickly pay it back. They didn’t, Ms. Sanders was ousted, and the college went belly up. The senator had already taken some grief last year for purchasing a $575,000 vacation home on Lake Champlain, to complement his house in Burlington and his rowhouse on Capitol Hill.
Sanders fans and Democratic strategists agree that the investigation, no matter its outcome, could be used by operatives in both parties to undermine the senator. Rival Democrats could use the case to try to wrest the progressive mantle from Mr. Sanders, who ran for the Democratic presidential nomination yet refuses to join the Democratic Party.
“Just the fact that this is hanging over them could be used,” said Nina Turner, president of Our Revolution, a liberal organization formed by several people close to Mr. Sanders. “I would hope that voters would dig deeper, but sometimes people don’t. And they hear the word ‘F.B.I.’ and it sends a shiver up and down people’s spines.”
Mr. Sanders remains one of the most popular political figures in the country. Even Democrats who might want to push him aside understand that tarnishing the integrity of one of their biggest draws could make it harder for liberals to win elections in 2018 and 2020.
However, as Hillary Clinton’s experiences with her private email server and the 2012 attack in Benghazi show, prolonged investigations take a toll. And within the Sanders ranks, there is some talk of conspiracy.
RoseAnn Demoro, executive director of National Nurses United and a leading Sanders supporter, said she believed some in both parties were hoping the investigation would hurt Mr. Sanders because he is challenging the entire political establishment. “Bernie is the only person out there with a populist base who could actually win the presidency right now, and they are trying to take him out,” Ms. Demoro said.
Not everyone is so enamored with Mr. Sanders’s continuing power. Stu Loeser, who owns a media strategy firm and was a longtime spokesman for Mayor Michael R. Bloomberg of New York, said Mr. Sanders had missed his “once in a lifetime chance” to be president.
“His people are worried that his best days may be behind him,” Mr. Loeser said, “and they may be right. But that’s not going to be because of a paperwork snafu regarding his wife.”
A federal law enforcement official, who declined to be identified because the matter was still under investigation, confirmed that the authorities have been looking into the land deal.
To finance the land purchase, the college borrowed from a bank and obtained additional financing from the diocese, according to David V. Dunn, a Burlington College trustee at the time. The college needed to demonstrate that it had the financial resources to pay the bank loan, which it did with Ms. Sanders’s assurances that it would receive $2.6 million in donations and increase its enrollment, Mr. Dunn said.
“Neither of those were true,” he said in an interview Monday.
Some of the pledges turned out to be overstated, and enrollment did not increase. Ms. Sanders was forced to resign in 2011. Financially strained, the college closed last year.
In his letter of complaint to the federal prosecutor, Mr. Toensing, who was then vice chairman of the Vermont Republican Party, said he was requesting “an investigation into what appears to be federal loan fraud involving the sale of the Roman Catholic Diocese of Burlington headquarters.”
“This apparent fraud resulted in as much as $2 million in losses to the Diocese and an unknown amount of loss to People’s United Bank, a federally financed financial institution,” the letter said.
Many Sanders supporters and a spokesman for Ms. Sanders called the investigation a distraction.
“He’s widely popular among all demographic groups, and a lot of the polling shows if he were to run for the nomination in 2020 that he would be the front-runner,” said Jeff Weaver, who was Mr. Sanders’s presidential campaign manager. “The Republicans, they are thinking long term here, and they are trying to do what they did with Benghazi and a bunch of other smear campaigns.”
But Ms. Sanders is taking the investigation seriously and is worried that the Trump administration might not treat her fairly, Mr. Weaver said.
Democrats like former Representative Steve Israel of New York, Senator Sherrod Brown of Ohio and Senator Richard Blumenthal of Connecticut warned party members against trying to capitalize on the investigation.
Robert M. Shrum, a longtime Democratic strategist who now teaches at the University of Southern California, said: “I hope it won’t become some kind of an occasion to have a fight to excommunicate or exile or supplant Sanders. The last thing you want to do is form a circular firing squad.”
That does not mean that the dozens of Democrats running on progressive platforms should not be prepared to gently push Mr. Sanders aside, Mr. Loeser said.
“If you aren’t able to give a good gold-watch speech — ‘He’s done great things and we are all grateful for him’ — and imply he’s ready for retirement, you’re not going to be able to do anything,” he said. “He’s an old man from a predominantly white state with decades of politics on guns and other issues that are problematic for Democratic candidates.”