Obama forced to return $200,000 tied to fugitive Mexican tycoon

Move comes as President urges more campaign funding to match Republicans

Embarrassed it might have taken blood-tainted money, Barack Obama's re-election campaign said it was returning donations of $200,000 (£125,000) from two American supporters after learning that they have a brother known as the "Casino Czar" in Mexico linked to corruption and political violence there.

The swift action by the campaign came after an inquiry about the donations from The New York Times. The newspaper had also learned that the brother, Juan Jose Rojas Cardona, whose casino interests are based in Monterrey, Mexico, jumped bail in Iowa in 1994, where he studied in university, and disappeared. A State Department cable first made public by WikiLeaks also said that the fugitive, more commonly called Pepe Cardona, may have been involved in the assassination in Mexico of a business rival.

The two brothers, who seemingly have been seeking to have their brother cleared of probation violations in the US courts, were identified as Alberto and Carlos Cardona. Both had emerged fairly recently as big donors to Mr Obama and the Democratic Party as well as bundlers seeking to persuade others to contribute.

Separately, the campaign revealed that Mr Obama is to encourage donations to the super-PAC that is backing him, Priorities USA Action. The President has criticised the 2010 Supreme Court ruling that allows unlimited donations to outside groups operating independently of campaigns. But with many groups lining up to help the eventual Republican nominee, it became clear Mr Obama would have to join them not beat them. The super-PACs cannot coordinate directly with campaigns but have played a major role in the Republican primary contests by funding millions in negative ads.

"We are not going to fight this fight with one hand tied behind our back," said Jim Messina, the President's campaign manager. "With so much at stake, we can't allow for two sets of rules."

Mr Messina sent out an email to Obama supporters on Monday night: "Due to unlimited and unprecedented super-PAC spending, we may have no spending advantage (as we did in 2008) and could in fact get outspent. I thought this might help you put the other side's efforts into some context as you talk to friends and supporters about why we need their help and we need it now."

The Obama campaign said it had not been aware of the Cardona brothers' family background when it accepted their support. It isn't clear if they were giving the money in the hope that the President might be able to assist in cleaning the legal slate of their brother in the US.

"On the basis of the questions that have been raised, we will return the contributions from these individuals and from any other donors they brought to the campaign," Ben LaBolt, a spokesman for the Obama campaign, told The New York Times.