From McAuliffe's own book:

---------------------------------------- ---------------------

They thought I was bluffing. But it was my responsibility as chairman to take action for the good of the party, and taking away half their delegates was well within my authority.  Now all the presidential candidates were upset.  They were getting calls from Iowa and New Hampshire asking them to pledge to come to their states no matter what Michigan did, putting the candidates in an impossible position.  The whole primary calendar was in danger of spinning out of control.  The candidates kept calling me and asking what was happening with the schedule, and I made it clear that I was not going to let Michigan throw the entire process out of whack.  Finally I'd had enough and scheduled a meeting in Carl's Senate office for April 2 to settle this once and for all.

As I was escorted into Carl's office with my staff, Debbie Dingell and Carl's chief of staff, David Lyles, were already sitting there waiting with Carl.  Sparks flew when I sad down with Phil McNamara and Josh Wachs and immediately complained about all the leaks to the press, which led to finger-jabbing and shouting back and forth between various people in the meeting.  Soon, Carl and I were going at it.
    "I'm going outside the primary window," he told me definitively.
    "If I allow you to do that, the whole system collapses," I said. "We will have chaos.  I let you make the case to the DNC, and we voted unanimously and you lost."
    He kept insisting that they were going to move Michigan up on their own, even though if they did that, they would lose half their delegates.  By that point Carl and I were leaning toward each other over a table in the middle of the room, shouting and dropping the occasional expletive.
    "You won't deny us seats at the convention," he said.
    "Carl, take it to the bank," I said. "They will not get a credential.  The closest they'll get to Boston will be watching it on television.  I will not let you break this entire nominating process for one state.  The rules are the rules.  If you want to call my bluff, Carl, you go ahead and do it."
    We glared at each other some more, but there was nothing much left to say. I was holding all the cards and Levin knew it.
    "Well, that was a good meeting," I told my shell-shocked staff on the way out of Carl's office.

[Source: McAuliffe, Terry. "What A Party!", pp. 324, 325.]
---------------------------------------- ------------------------

McAuliffe is an astounding hypocrite. I guess he only believes in following the rules when he is the one setting them, enforcing them, and benefiting from them.

I particularly like this incredibly callous comment by McAuliffe:

"Carl, take it to the bank," I said. "They will not get a credential.  The closest they'll get to Boston will be watching it on television.  I will not let you break this entire nominating process for one state.  The rules are the rules.  If you want to call my bluff, Carl, you go ahead and do it."

Full Disclosure: None of this is my original research.  I was astounded to see this on Kos today, and had not found cross posting of this here on MyDD so far. You can see Kos's original post here: http://www.dailykos.com/storyonly/2008/4 /25/165935/668/909/503541

I apologize if someone has already posted it to MyDD, and I give 100% full credit to Kos (who also credits Mark Nickolas for finding this material in Terry McAuliffe's own book.) I will say that I was able to cross reference this and read it myself in McAuliffe's book.