[Senate Report 105-167]
[From the U.S. Government Publishing Office]
105th Congress Rept. 105-167
SENATE
2d Session Vol. 4
_______________________________________________________________________
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION
WITH 1996 FEDERAL ELECTION CAMPAIGNS
__________
FINAL REPORT
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL AND MINORITY VIEWS
Volume 4 of 6
March 10, 1998.--Ordered to be printed
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996
FEDERAL ELECTION CAMPAIGNS--VOLUME 4
105th Congress Rept. 105-167
SENATE
2d Session Vol. 4
_______________________________________________________________________
INVESTIGATION OF ILLEGAL OR
IMPROPER ACTIVITIES IN CONNECTION
WITH 1996 FEDERAL ELECTION
CAMPAIGNS
__________
FINAL REPORT
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL AND MINORITY VIEWS
Volume 4 of 6
March 10, 1998.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
SUSAN COLLINS, Maine JOHN GLENN, Ohio
SAM BROWNBACK, Kansas CARL LEVIN, Michigan
PETE V. DOMENICI, New Mexico JOSEPH I. LIEBERMAN, Connecticut
THAD COCHRAN, Mississippi DANIEL K. AKAKA, Hawaii
DON NICKLES, Oklahoma RICHARD J. DURBIN, Illinois
ARLEN SPECTER, Pennsylvania ROBERT G. TORRICELLI, New Jersey
BOB SMITH, New Hampshire MAX CLELAND, Georgia
ROBERT F. BENNETT, Utah
Hannah S. Sistare, Staff Director and Chief Counsel
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
------
MAJORITY STAFF
Michael J. Madigan, Chief Counsel
J. Mark Tipps, Deputy Chief Counsel
Donald T. Bucklin, Senior Counsel
Harold Damelin, Senior Counsel
Harry S. Mattice, Jr., Senior Counsel
John H. Cobb, Staff Director/Counsel
K. Lee Blalack, Counsel
Michael Bopp, Counsel
James A. Brown, Counsel
Brian Connelly, Counsel
Christopher Ford, Counsel
Allison Hayward, Counsel
Matthew Herrington, Counsel
Margaret Hickey, Counsel
Dave Kully, Counsel
Jeffrey Kupfer, Counsel
John Loesch, Counsel
William ``Bill'' Outhier, Counsel
Glynna Parde, Counsel
Phil Perry, Counsel
Gus Puryear, Counsel
Mary Kathryn (``Katie'') Quinn, Counsel
Paul Robinson, Counsel
John S. Shaw, Counsel
David Hickey, Investigator
Stephen J. Scott, Investigator
Matthew Tallmer, Investigator
Darla Cassell, Office Manager
Mary D. Robertson, Office Manager
Kenneth Feng, GAO Detailee
Mark Kallal, Legal Assistant
John W. M. Claud, Legal Assistant
Mike Marshall, Legal Assistant
Michael Tavernier, Legal Assistant
Michael Vahle, Legal Assistant
Amy Alderson, Staff Assistant
Kim Bejeck, Executive Assistant
Deborah Collier, Executive Assistant
Daniel Donovan, Staff Assistant
Leanne Durm, Staff Assistant
Michele Espinoza, Executive Assistant
Cheryl Ethridge-Morton, Executive Assistant
Heather Freeman, Staff Assistant
John Gilboy, Staff Assistant
Janat Montag, Executive Assistant
Kathryn O'Connor, Executive Assistant
Wayne Parris, Staff Assistant
Jason Parrott, Staff Assistant
Sahand Sarshar, Staff Assistant
Jerome Sikorski, Archivist
Loesje Troglia, Executive Assistant
Sandra Wiseman, Executive Assistant
GOVERNMENT AFFAIRS COMMITTEE STAFF
Frederick S. Ansell, Chief Counsel
Richard A. Hertling, Senior Counsel
Curtis M. Silvers, Professional Staff Member
Paul S. Clark, Communications Director
Michal S. Prosser, Chief Clerk
Matthew Peterson, Assistant Clerk
Christopher W. Lamond, Systems Administrator
Steve Diamond, Senator Susan Collins
Jim Rowland, Senator Sam Brownback
Brian Benczkowski, Senator Pete V. Domenici
Michael Loesch, Senator Thad Cochran
Barbara Olson, Senator Don Nickles
William J. Morley, Senator Arlen Specter
Rick Valentine, Senator Bob Smith
Bill Triplett, Senator Robert F. Bennett
MINORITY STAFF
Alan Baron, Minority Chief Counsel
Pamela Marple, Deputy Chief Counsel
David McKean, Deputy Chief Counsel
Jeffrey Robbins, Deputy Chief Counsel
Alan Edelman, Counsel
Jonathan Frenkel, Counsel
Jim Lamb, Counsel
Deborah Lehrich, Counsel
Cassandra Lentchner, Counsel
Dianne Pickersgill, Counsel
Lisa Rosenberg, Counsel
Kevin Simpson, Counsel
Howard Sklamberg, Counsel
Beth Stein, Counsel
David Cahn, Assistant Counsel
Sarah Des Pres, Assistant Counsel
Peter Rosenberg, Assistant Counsel
Larry Gurwin, Investigator
Jim Jordan, Press Secretary
Holly Koerber, Clerk
Bill McDaniel, Investigator
Jay Youngclaus, Investigator
Caroline Badinelli, Staff Assistant
Ann Metler, Research Assistant
Jessica Robinson, Staff Assistant
Rachael Sullivan, Staff Assistant
Nichole Veatch, Staff Assistant
Linda Gustitus, Governmental Affairs Committee, Senator Levin
Elise Bean, Governmental Affairs Committee, Senator Levin
Laurie Rubenstein, Governmental Affairs Committee, Senator Lieberman
Nanci Langly, Governmental Affairs Committee, Senator Akaka
Marianne Upton, Governmental Affairs Committee, Senator Durbin
Matthew Tanielian, Governmental Affairs Committee, Senator Torricelli
Bill Johnstone, Governmental Affairs Committee, Senator Cleland
FBI DETAIL
Anne Asbury, Investigator
Jerome Campane, Investigator-FBI Detail Leader
Becky Chan, Investigator
Jeffrey Harris, Investigator
Steven Hendershot, Investigator
James Kunkel, Investigator
Kelli Sligh, Investigator
Vo ``Ben'' Tran, Investigator
C O N T E N T S
----------
Page
Chapter:
1. Preface................................................... 1
2. Procedural Background and Overview........................ 5
3. Summary of Findings....................................... 31
4. The Thirst for Money...................................... 51
5. The White House Controlled the DNC and Improperly
Coordinated the Activities of the DNC and Clinton/Gore '96. 105
6. The DNC Dismantled Its System for Vetting Contributions... 167
7. DNC Fundraising in the White House: Coffees, Overnights,
and Other Events........................................... 191
8. Fundraising Calls from the White House.................... 499
9. White House Vetting of Individuals with Access to the
President.................................................. 751
10. Johnny Chung and the White House ``Subway''.............. 781
11. The Contribution of Yogesh Gandhi........................ 917
12. Ted Sioeng, His Family, and His Business Interests....... 961
13. John Huang's Years at Lippo.............................. 1117
14. John Huang at Commerce................................... 1153
15. John Huang Moves from Commerce to the DNC................ 1653
16. John Huang's Illegal Fundraising at the DNC.............. 1689
17. The Hsi Lai Temple Fundraiser and Maria Hsia............. 1749
18. The China Connection: Summary of Committee's Findings
Relating to the Efforts of the People's Republic of China
to Influence U.S. Policies and Elections................... 2499
19. Charlie Trie's and Ng Lap Seng's Laundered Contributions
to the DNC................................................. 2517
20. Charlie Trie's Contributions to the Presidential Legal
Expense Trust.............................................. 2711
21. The Saga of Roger Tamraz................................. 2905
22. DNC Efforts to Raise Money in the Indian Gaming Community 3071
23. The Hudson, Wisconsin Casino Proposal.................... 3165
24. The Cheyenne and Arapaho Tribes: Their Quest for the Fort
Reno Lands................................................. 3547
25. The Offer of R. Warren Meddoff........................... 3623
26. White House, DNC and Clinton-Gore Campaign Fundraising
Efforts Involving the International Brotherhood of
Teamsters.................................................. 3655
27. Compliance by Nonprofit Groups with Committee Subpoenas.. 3833
28. Role of Nonprofit Groups in the 1996 Elections........... 3993
29. Allegations Relating to the National Policy Forum........ 4195
30. White House Document Production.......................... 4277
31. DNC Document Production.................................. 4425
32. Campaign Finance Reform Issues Brought to the Forefront
by the Special Investigation............................... 4459
33. Recommendations.......................................... 4503
Additional Views
34. Additional Views of Chairman Fred Thompson............... 4511
35. Additional Views of Senator Susan Collins................ 4535
36. Additional Views of Senator Arlen Specter................ 4539
37. Additional Views of Senator Robert Bennett............... 4545
Minority Views
38. Additional Views of Senators Glenn, Levin, Lieberman,
Akaka, Durbin, Torricelli and Cleland...................... 4557
39. Additional Views of Senator Glenn........................ 9507
40. Additional Views of Senator Levin........................ 9511
41. Additional Views of Senator Lieberman.................... 9525
42. Additional Views of Senator Akaka........................ 9559
43. Additional Views of Senator Durbin....................... 9565
44. Additional Views of Senator Torricelli................... 9571
MINORITY VIEWS OF SENATORS GLENN, LEVIN, LIEBERMAN, AKAKA, DURBIN,
TORRICELLI AND CLELAND
Table of Contents
Page
Foreword......................................................... 4559
Executive Summary................................................ 4561
Part 1 Foreign Influence........................................ 4577
Chapter 1: Overview and Legal Analysis........................... 4577
Findings..................................................... 4577
Overview of Following Chapters............................... 4577
Legal Analysis............................................... 4579
Chapter 2: The China Plan........................................ 4619
Findings..................................................... 4620
Introduction................................................. 4621
The Committee's Investigation................................ 4623
Background................................................... 4623
The China Plan............................................... 4625
Events Leading up to the China Plan...................... 4625
Information about the China Plan......................... 4626
Implementation of the China Plan......................... 4627
Legal Activities......................................... 4627
Illegal Activities....................................... 4628
Individuals Under Investigation and the China Plan....... 4628
Ted Sioeng............................................... 4629
John Huang and Maria Hsia................................ 4630
The Riadys............................................... 4630
Intermediaries: Relation to the Committee's Public
Investigation.......................................... 4631
Political Contributions to Federal Elections............. 4632
Political Contributions: Relation to the Committee's
Public Investigation................................... 4633
Information not Pursued by the Committee..................... 4633
Conclusion................................................... 4634
Chapter 3: The National Policy Forum............................. 4657
Findings..................................................... 4657
Introduction................................................. 4657
Haley Barbour................................................ 4659
Ambrous Young................................................ 4659
Origin Of the National Policy Forum.......................... 4660
The Barbour-Baroody Split................................... 4661
Funding the NPF.............................................. 4661
Baroody Resigns.............................................. 4662
The NPF Under John Bolton.................................... 4663
Barbour Solicits Ambrous Young............................... 4665
The Loan Transaction......................................... 4666
Funding the Contract With America............................ 4668
The Trip to Hong Kong........................................ 4669
The Trip to China............................................ 4670
The Default.................................................. 4670
Other Foreign Contributions.................................. 4671
Conclusion................................................... 4672
Chapter 4: John Huang............................................ 4788
Findings..................................................... 4788
Huang's Early Career......................................... 4789
Background on the Lippo Group................................ 4790
Huang's Activities on Behalf of the Lippo Group.............. 4791
Political Contributions.................................. 4792
Huang's Tenure at the Department of Commerce................. 4794
Huang's Appointment...................................... 4794
Huang's Role at Commerce................................. 4796
Huang's Security Clearance and Access to Classified
Information............................................ 4798
Granting of Top Secret Clearance......................... 4799
Huang's Access to Classified Information................. 4800
Huang's Use of the Stephens Office....................... 4802
Huang's Post-Commerce Clearance.......................... 4803
No Evidence of Espionage................................. 4806
Evidence of Solicitations of Contributions............... 4808
Hiring Huang to Work at the DNC.............................. 4811
Huang's Understanding of Applicable Law.................. 4813
Huang's Fundraisers...................................... 4814
February 1996 Hay Adams APALC Events, Washington, D.C.... 4814
May 13, 1996 Sheraton Carlton Event, Washington, D.C..... 4816
July 22, 1996 Century Plaza Hotel Event, Los Angeles..... 4816
July 30, 1996 Jefferson Hotel Event, Washington, D.C..... 4817
Other Huang Activities................................... 4818
Hsi Lai Temple Event..................................... 4818
The Vice President and the Temple Event.................. 4819
John Huang and the Temple Event.......................... 4831
John H. K. Lee and the Cheong Am America Contribution.... 4832
June 18, 1996, DNC Coffee at the White House............. 4836
Rawlein Soberano......................................... 4838
The DNC's Supervision of Huang........................... 4839
Conclusion................................................... 4840
Chapter 5: Charlie Trie.......................................... 5270
Findings..................................................... 5270
Background................................................... 5271
Trie's DNC Contributions and Fundraising..................... 5272
Trie's DNC Contributions................................. 5272
Trie's DNC Fundraising................................... 5274
Chu and Wang Contributions................................... 5275
DNC Awareness of Trie's Activities........................... 5276
Trie's Fundraising for the Presidential Legal Expense Trust.. 5277
Trie's March 21, 1996 Meeting with Cardozo............... 5278
Investigation into the Contributions..................... 5279
The Trust's Decision to Reject the Contributions......... 5281
The Trust's Change in Accounting Procedures.............. 5282
Foreign Funds............................................ 5283
Analysis................................................. 5284
Trie's Access to White House and DNC Events.................. 5285
Trie's Commission Appointment................................ 5287
Trie and Wang Jun at the White House......................... 5289
Wang Jun's Invitation to the White House Coffee.......... 5290
Role of Ernest Green..................................... 5291
Analysis................................................. 5292
Trie and China............................................... 5293
Chapter 6: Michael Kojima........................................ 5413
Findings..................................................... 5413
Contribution History......................................... 5415
Kojima's Access to the White House and Other Perks........... 5415
The Bush White House and Fundraising......................... 5418
GOP Claimed No Duty to Investigate........................... 5423
Foreign Funds................................................ 5425
Failure to Conduct a Federal Investigation................... 5427
Conclusion................................................... 5428
Chapter 7: Ted Sioeng............................................ 5573
Findings..................................................... 5573
Ted Sioeng's Background...................................... 5573
Sioeng's Connections to China................................ 5574
The ``China Plan'' and Ted Sioeng............................ 5576
The Sioeng Family's Contributions to Matt Fong in April 1995. 5576
The Source of Sioeng's April 1995 Contributions to Fong...... 5578
Fong Arranges for Sioeng to Meet Speaker Gingrich............ 5578
The Sioeng Family's Contributions to the National Policy
Forum...................................................... 5579
The Sioeng Family's Contribution to Matt Fong in December
1995....................................................... 5580
Jessica Elnitiarta's Contributions to the DNC................ 5581
The Hay Adams Fundraiser................................. 5581
Hsi Lai Buddhist Temple Event............................ 5582
Sheraton Carlton Hotel Event............................. 5582
Century City Event and Subsequent $50,000 Contribution... 5583
Conclusion................................................... 5584
Chapter 8: Jay Kim............................................... 5683
Findings..................................................... 5683
The Korea Traders' Club...................................... 5683
Kim's Contribution From His Own Business in 1992............. 5684
The Kim's Acceptance of Corporate Funds...................... 5684
Acceptance of Funds From Foreign Nationals................... 5685
Alleged Violations During the Federal Investigation.......... 5686
The Conviction of Kim's Former Campaign Treasurer............ 5686
Possible Election Law Violations During the 1996 Cycle....... 5687
Kim's Commitment to Compliance With U.S. Election Laws....... 5688
The Kims' Book Deal.......................................... 5689
Conclusion................................................... 5690
Part 2 Independent Groups....................................... 5926
Chapter 9: Overview and Legal Analysis........................... 5926
Findings..................................................... 5926
Overview of Following Chapters............................... 5926
1996 Election-Related Activities......................... 5927
Legal Analysis............................................... 5928
Categories of Independent Groups......................... 5929
Disclosure............................................... 5930
Coordination............................................. 5930
Circumvention............................................ 5933
Third Party Contributions................................ 5934
Violations of Tax Law.................................... 5934
Chapter 10: The Republican Party and Independent Groups.......... 5967
Findings..................................................... 5967
Introduction................................................. 5967
RNC Ties to Independent Groups............................... 5969
Coalition Plans.......................................... 5969
Coordination during the 1996 Election Cycle.............. 5973
RNC Funding of Independent Groups........................ 5974
RNC Funding Schemes in the 1996 Election Cycle........... 5975
RNC Contributions and Fundraising Help in 1996........... 5976
Circumventing Campaign Finance Laws...................... 5978
The RNC's Front Organizations................................ 5979
The National Policy Forum................................ 5980
Coalition for Our Children's Future...................... 5981
Fronts For Conservative Donors............................... 5981
CCF's Attack Ads......................................... 5981
Triad's Attack Ads....................................... 5982
Triad's Donors........................................... 5982
Conclusion................................................... 5983
Chapter 11: Americans for Tax Reform............................. 6034
Findings..................................................... 6034
Background................................................... 6034
Grover Norquist.............................................. 6035
The $4.6 Million October Surprise............................ 6037
ATR Televised Attack Ads..................................... 6041
ATR Candidate Advocacy....................................... 6043
ATR: Coordinated Efforts in 1996 to Elect Republicans To
Office..................................................... 6048
RNC-Directed Contributions to ATR............................ 6050
ATR and RNC's Refusal to Cooperate........................... 6051
Possible Civil, Criminal, and Tax Law Violations............. 6052
Circumvention............................................ 6052
Coordination............................................. 6053
Disclosure............................................... 6053
Tax Laws................................................. 6054
Conclusion................................................... 6055
Chapter 12: Triad and Related Organizations...................... 6289
Findings..................................................... 6289
Introduction................................................. 6290
Background................................................... 6290
The Committee's Investigation of Triad....................... 6291
The Political Operation of Triad Management.................. 6293
Triad is Not a Business.................................. 6293
Robert Cone's Financial Support of Triad................. 6293
Corporate Contributions by Triad......................... 6294
Triad and Political Action Committees.................... 6297
The Advertising Campaign..................................... 6301
Creation of Citizens for Reform and Citizens for the
Republic............................................... 6301
Improper Coordination of Triad's Advertising with
Political Candidates................................... 6303
No Comparison Between Triad and the AFL-CIO.............. 6306
Financing the Advertising Campaign....................... 6307
The Trusts Behind Triad.................................. 6308
Economic Education Trust................................. 6309
Triad's Impact on the 1996 Elections..................... 6312
Advertising by Other Triad Contributors.................. 6312
Conclusion................................................... 6313
Chapter 13: Coalition for Our Children's Future.................. 6771
Findings..................................................... 6771
Background................................................... 6771
RNC Ties to CCF.............................................. 6772
CCF's 1995 Advertising Campaign.......................... 6774
CCF and its Exempt Organization Status................... 6775
CCF 1996 Advertising for Republican Candidates............... 6777
The Secret Trust and CCF's 1996 Election Advertising......... 6780
Did CCF's Secret Contributor Fund Triad Attack Ads?...... 6781
Conclusion................................................... 6782
Chapter 14: Christian Coalition.................................. 6934
Finding...................................................... 6934
Background................................................... 6934
Pat Robertson and Ralph Reed................................. 6935
Voter Guides Before the 1996 Election Cycle.................. 6937
Distortion of Candidates' Positions on Issues................ 6937
Voter Guides in the 1996 Election Cycle...................... 6938
Coalition Officials Endorsed Candidates...................... 6941
Coalition Ties to the Republican Party....................... 6944
Coalition Activity in State Elections........................ 6947
FEC Action................................................... 6949
Conclusion................................................... 6951
Chapter 15: Other Independent Groups............................. 7051
Seniors Organizations........................................ 7051
Term Limits Groups as Fronts for GOP Donors.................. 7053
Nonprofit Groups Linked to Presidential Candidates........... 7055
Conclusion................................................... 7055
Chapter 16: The Democratic Party and Independent Groups.......... 7062
Findings..................................................... 7062
Chapter 17: Warren Meddoff....................................... 7064
Findings..................................................... 7064
Warren Meddoff............................................... 7064
Meddoff and the October 1996 Fundraiser...................... 7065
Ickes Conversations With Meddoff............................. 7066
No Evidence of Illegal Coordination.......................... 7067
Ickes's Alleged Direction to Meddoff to Shred the Fax........ 7068
Meddoff's Credibility........................................ 7068
The DNC'S Refusal of the Contribution Offer.................. 7071
Fundraising on Federal Property.............................. 7072
Conclusion................................................... 7073
Chapter 18: Teamsters............................................ 7102
Findings..................................................... 7102
Teamster Contributions....................................... 7102
Martin Davis's Initial Contacts With DNC Officials....... 7103
Judith Vasquez's Contribution to Vote Now '96............ 7104
Teamsters' Contributions................................. 7105
Sullivan's Role.............................................. 7106
Proposed Contribution to Unity '96........................... 7107
DCCC Executive Director Rejected the Proposal............ 7107
DCCC Chairman Rejected the Proposal...................... 7108
DSCC Deputy Executive Director Rejected the Proposal..... 7108
DSCC Chairman Rejected the Proposal...................... 7109
The Proposal and Unity '96............................... 7109
Conclusion................................................... 7109
Chapter 19: Other Independent Groups............................. 7235
Findings..................................................... 7235
Overview..................................................... 7235
The DNC and Independent Groups............................... 7236
Activities of Independent Groups............................. 7237
The AFL-CIO.............................................. 7237
Vote Now '96............................................. 7238
Citizen Action........................................... 7239
National Council of Senior Citizens...................... 7239
Conclusion................................................... 7239
Part 3 Contribution Laundering/Third Party Transfers............ 7241
Chapter 20: Overview and Legal Analysis.......................... 7241
Finding...................................................... 7241
Overview of Following Chapters............................... 7241
Legal Analysis............................................... 7242
Chapter 21: Contributions to the Democratic Party................ 7244
Findings..................................................... 7244
Keshi Zhan, Yue Chu, and Xiping Wang......................... 7246
Pauline Kanchanalak.......................................... 7248
Yogesh Gandhi................................................ 7249
Hsi Lai Temple Monastics..................................... 7253
Arief and Soraya Wiaridinata................................. 7256
The Lum Family............................................... 7257
Conclusion................................................... 7258
Chapter 22: Contributions to the Republican Party................ 7372
Findings..................................................... 7372
Michael Kojima............................................... 7372
Aqua Leisure Industries, Inc................................. 7375
Empire Sanitary Landfill, Inc................................ 7377
Deluca Liquor and Wine, Ltd.................................. 7378
Conclusion................................................... 7379
Part 4 Soft Money and Issue Advocacy............................ 7515
Chapter 23: Systemic Problems of the Campaign Finance System..... 7515
Findings..................................................... 7515
Introduction................................................. 7515
Soft Money................................................... 7516
Background on Soft Money................................. 7516
Soft Money Finds a Way into Federal Elections............ 7517
Soft Money Creates the Appearance of Corruption and
Undermines Public Financing............................ 7519
Disclosure of Soft Money................................. 7520
Issue Advocacy............................................... 7521
Background on Issue Ads.................................. 7522
Proposals for Reform......................................... 7524
Kassebaum-Baker/Mondale.................................. 7525
League of Women Voters................................... 7525
Common Cause............................................. 7526
Campaign Reform Project.................................. 7526
Public Campaign.......................................... 7526
Disclosure Only.......................................... 7526
Conclusion................................................... 7526
Part 5 Fundraising and Political Activities of the National
Parties and Administrations.................................... 7540
Chapter 24: Overview and Legal Analysis.......................... 7540
Finding...................................................... 7540
Overview of Following Chapters............................... 7540
Legal Analysis............................................... 7541
Taking Official Action in Exchange for a Contribution.... 7541
Use of Federal Property.................................. 7542
Use of Federal Employees................................. 7544
Spending Limits, Coordination and Issue Advocacy......... 7546
Chapter 25: DNC and RNC Fundraising Practices and Problems....... 7595
Findings..................................................... 7595
Introduction................................................. 7596
Structure of the National Parties............................ 7598
The Democratic National Committee........................ 7598
The Republican National Committee........................ 7599
Fundraising Drives........................................... 7600
Soliciting Contributions..................................... 7600
Training Fundraisers..................................... 7601
The DNC's Training Procedures and Problems............... 7601
The RNC's Training Procedures and Problems............... 7602
Contribution Compliance.................................. 7602
The DNC's Contribution Compliance and Problems........... 7602
The RNC's Contribution Compliance and Problems........... 7603
Telephone Solicitations from Federal Property............ 7605
Organizing Fundraisers and Other Events...................... 7605
DNC Events and Contributor Services...................... 7605
RNC Events and Contributor Services...................... 7606
Spending Party Funds......................................... 7607
DNC'S Splitting Contributions Between Hard and Soft Money
Accounts................................................... 7608
Conclusion................................................... 7609
Chapter 26: Telephone Solicitations From Federal Property........ 7773
Findings..................................................... 7773
Presidential Telephone Calls................................. 7773
Richard Jenrette......................................... 7774
Vice Presidential Telephone Calls............................ 7776
Purpose of the Phone Calls............................... 7777
Raising Soft Money....................................... 7780
DNC Splitting Contributions Between Hard and Soft Money
Accounts............................................... 7781
Applicability of the Pendleton Act....................... 7783
The Contributors......................................... 7783
Payment for the Phone Calls.............................. 7783
Payment for the Thank-You Notes.......................... 7784
No Other Costs to the Government......................... 7784
Republican Phone Calls....................................... 7785
Conclusion................................................... 7786
Chapter 27: White House Coffees and Overnights................... 7956
Findings..................................................... 7956
DNC Coffees at the White House............................... 7956
The Coffees and Fundraising.............................. 7957
The Coffees as DNC Events................................ 7959
The Law and Precedent.................................... 7960
White House Overnights....................................... 7960
Conclusion................................................... 7961
Chapter 28: Republican Use of Federal Property and Contributor
Access......................................................... 7968
Findings..................................................... 7968
Major Contributor Access to Elected Officials................ 7968
Republican Eagles........................................ 7968
Team 100................................................. 7970
Other Republican Events and Meetings for Contributions... 7972
Use of Federal Property For Fundraising...................... 7975
Political Appointments Awarded to Republican Contributors.... 7977
Conclusion................................................... 7978
Chapter 29: Democratic Contributor Access to the White House..... 8057
Findings..................................................... 8057
Introduction................................................. 8057
The Secret Service........................................... 8058
The White House Office of Political Affairs.................. 8059
The National Security Council................................ 8060
Previous NSC Procedures.................................. 8061
Current NSC Procedures................................... 8062
Other Issues............................................. 8063
Conclusion................................................... 8065
Chapter 30: Roger Tamraz......................................... 8095
Findings..................................................... 8095
Overview..................................................... 8095
1970-1990: Tamraz's Business Ventures, Dealings With the CIA
and Political Contributions................................ 8096
Business Ventures........................................ 8096
Reported Contacts with the CIA........................... 8097
RNC's Recommendation for a Reagan Administration Position 8097
Tamraz Leaves Lebanon after Embezzlement Charges......... 8098
1994-1995: The Commerce Department........................... 8098
1995: The Caspian Sea Pipeline............................... 8099
U.S. Policy on the Caspian Sea Pipeline.................. 8099
May-June 1995: Meetings with Executive Branch Officials.. 8100
Bob of the CIA........................................... 8101
July-October 1995: Contributions to the Democratic Party..... 8103
Contribution History..................................... 8103
The DNC's Acceptance of Tamraz's Contributions........... 8103
September 1995: Request For an Official Meeting With the Vice
President.................................................. 8104
Tamraz's Attendance at DNC Events............................ 8105
Summary of Events........................................ 8105
Fowler's Role............................................ 8105
No Effect on Policy...................................... 8107
April 1996: Department of Energy Official Talks to Heslin.... 8107
Tamraz's Attendance at March 27 and April 1, 1996 DNC
Events................................................. 8107
Follow-Up on the Pipeline Project........................ 8108
The Request within the Department of Energy.............. 8109
Carter's Call to Heslin.................................. 8110
Heslin's Testimony....................................... 8110
Carter's Testimony....................................... 8110
The Department of Energy Responds to the Request for
Information Conclusions................................ 8111
Conclusion: Access Still for Sale in 1997.................... 8113
Chapter 31: Other Contributor Access Issues...................... 8250
Findings..................................................... 8250
Johnny Chung................................................. 8250
Political Contributions.................................. 8251
Access to Administration Officials....................... 8251
Link Between Contributions and Visits.................... 8252
Williams's Handling of Chung's $50,000 DNC Contribution.. 8253
The Pendleton Act........................................ 8255
The Hatch Act............................................ 8256
Other Individuals............................................ 8256
Jorge Cabrera............................................ 8256
Grigori Loutchansky...................................... 8257
Wang Jun................................................. 8258
Yung Soo Yoo............................................. 8259
Michael Kojima........................................... 8260
Conclusion................................................... 8260
Chapter 32: Coordination Among the Democratic National Committee
and the Clinton/Gore Campaign and the White House.............. 8281
Findings..................................................... 8282
Introduction and Summary..................................... 8282
The Origin of the DNC's Issue Ads Campaign................... 8282
The DNC and Rules Governing Issue Ads........................ 8283
The DNC Adhered to the Legal Rules Governing Issue Ads....... 8285
The Clinton Campaign and the DNC Campaign.................... 8286
The Legality of Coordination Among the Clinton Campaign,
White House and DNC........................................ 8286
The President's Role in the Making of DNC Issue Ads...... 8286
Ickes's Role in Coordinating with the DNC................ 8287
Conclusion................................................... 8290
Chapter 33: Coordination Between the Republican National
Committee and the Dole for President Campaign.................. 8294
Findings..................................................... 8294
Introduction................................................. 8294
The Origin of the Pro-Dole Issue Ads......................... 8295
Dole for President and the Dole/RNC Campaign................. 8296
The Substance of Dole/RNC Issue Ads.......................... 8297
The Dole/RNC ``Issue Ads'' and Presidential Battleground
States..................................................... 8299
Dole/RNC Issue Ads and Soft Money............................ 8300
Coordination of Fundraising and Political Efforts............ 8301
Dole for President and the RNC Impeded the Committee's
Investigation.............................................. 8302
Conclusion................................................... 8303
Part 6 Allegations of Quid Pro Quos............................. 8368
Chapter 34: Overview and Legal Analysis.......................... 8368
Legal Analysis............................................... 8368
Overview of Following Chapters............................... 8369
Chapter 35: Hudson Casino........................................ 8371
Findings..................................................... 8371
Overview..................................................... 8372
Secretary Babbitt's Remarks to Lobbyist Eckstein............. 8372
Eckstein's Affidavit..................................... 8372
Secretary Babbitt's Letter to Senator McCain............. 8373
Eckstein's Deposition.................................... 8373
Secretary Babbitt's Letter to Chairman Thompson.......... 8374
Secretary Babbitt's Hearing Testimony.................... 8374
Eckstein's Allegations....................................... 8376
Eckstein's Interpretation.................................... 8378
Secretary Babbitt and Lobbyists for the Opposing Tribes...... 8378
Role of the White House...................................... 8379
Lobbyist Contacts with Harold Ickes...................... 8379
White House Requested Status Report from Interior........ 8380
White House Requested Second Status Report from Interior. 8381
White House and Interior Confer on Response to
Congressional Inquiry.................................. 8382
Other Interior and White House Contacts.................. 8382
Eckstein's Access to Interior Officials...................... 8383
Eckstein's Telephone Contacts with Secretary Babbitt..... 8383
The Tribal Applicants' May 1995 Meeting with Interior
Officials.............................................. 8384
Eckstein's July 14 Meeting with Secretary Babbitt........ 8384
The Merits of Interior's Decision on the Hudson Application.. 8385
The Hudson Casino and the Surrounding Community.......... 8385
The Surrounding Communities Opposed the Hudson Casino
Proposal............................................... 8386
Interior Staff Recommended Denial........................ 8387
The Administrative Record................................ 8388
Allegations of Timing and Political Pressure............. 8389
Interior's Final Decision-Maker Acted on the Merits...... 8390
Conclusion................................................... 8390
Chapter 36: Tobacco and the 1996 Election Cycle.................. 8511
Findings..................................................... 8511
The Tobacco Industry's Political Contributions During the
1996 Election Cycle........................................ 8511
Republican Assistance to Tobacco Companies................... 8512
Haley Barbour Assisted Tobacco............................... 8513
Tobacco Settlement and the $50 Billion Tobacco Tax Credit.... 8514
Haley Barbour and Kenneth Kies............................... 8515
Conclusion................................................... 8517
Chapter 37: Cheyenne-Arapaho Tribes of Oklahoma.................. 8539
Findings..................................................... 8539
Overview..................................................... 8539
The Battle Over the Closure of the Fort Reno ARS............. 8540
The Tribes Increase Their Political Activities............... 8543
The Tribes' Contribution to the DNC.......................... 8545
The White House Luncheon..................................... 8547
The President's Birthday Fundraiser.......................... 8552
The Tribes Continue Their Lobbying Efforts................... 8553
The Tribes' Dealings with Mike Copperthite, Nathan Landow,
and Peter Knight........................................... 8554
The Tribes' Dealings with Cody Shearer and Terry Lenzner..... 8560
The Tribes' Contribution is Returned......................... 8561
Conclusion................................................... 8562
Part 7 Investigation Process.................................... 8680
Chapter 38: Laying the Groundwork................................ 8680
Findings..................................................... 8680
Introduction................................................. 8680
Initial Floor Statements By Chairman Thompson and Senator
Glenn...................................................... 8681
Organizational Meeting....................................... 8683
A. Budget................................................ 8683
B. Scope................................................. 8685
C. Process............................................... 8686
D. Termination Date...................................... 8686
First Public Debate On Issuance of Subpoenas................. 8687
Alternative Resolution, S. Res. 61........................... 8687
Rules Committee Appearances.................................. 8687
Final Floor Debate........................................... 8689
The Majority Impeded a Fair Investigation.................... 8689
A. Subpoenas............................................. 8690
B. Consideration of Grants of Immunity................... 8690
C. Interviews............................................ 8691
D. Hearings.............................................. 8692
Conclusion................................................... 8693
Chapter 39: Democratic Compliance Issues......................... 8710
Finding...................................................... 8711
DNC Cooperation and Compliance............................... 8711
Attorney-Client Privilege Issue.......................... 8712
Late Production of Certain Files......................... 8713
Conclusion................................................... 8713
Chapter 40: Republican Compliance Issues......................... 8775
Findings..................................................... 8775
Introduction................................................. 8775
The First Subpoenas.......................................... 8776
RNC Compliance Issues........................................ 8777
Triad Compliance Issues...................................... 8779
The NPF Order................................................ 8780
NPF Compliance Issues........................................ 8780
ATR Compliance Issues........................................ 8782
Conclusion................................................... 8785
Chapter 41: The Breakdown of Compliance.......................... 8938
Finding...................................................... 8938
Introduction................................................. 8938
Organizations Suggested for Subpoena by the Minority......... 8941
Tax-Exempt Groups Linked to Presidential Campaigns........... 8941
Republican Exchange Satellite Network and Lamar Alexander 8941
Better America Foundation and Bob Dole................... 8942
The American Cause and Pat Buchanan...................... 8943
Other Tax-Exempt Groups...................................... 8943
Citizens Against Government Waste........................ 8943
The Heritage Foundation.................................. 8944
The Coalition: Americans Working for Real Change......... 8944
American Defense Institute/American Defense Foundation... 8945
Citizens for a Sound Economy............................. 8945
Women for Tax Reform..................................... 8946
National Right to Life Committee......................... 8946
The Christian Coalition.................................. 8946
Private Corporations Linked to Contribution Laundering....... 8947
DeLuca Liquor & Wine and Empire Landfill, Danella Inc./
USA Waste Services of Eastern Pennsylvania............. 8947
Organizations Suggested for Subpoena by the Majority......... 8947
National Council of Senior Citizens...................... 8948
Citizen Action........................................... 8949
National Education Association........................... 8949
Vote Now '96............................................. 8950
Campaign to Defeat Proposition 209....................... 8950
The Sierra Club.......................................... 8950
Democratic Leadership Council............................ 8951
EMILY'S List............................................. 8951
National Committee for an Effective Congress............. 8951
American Trial Lawyers Association....................... 8951
Americans United for Separation of Church and State...... 8951
Conclusion................................................... 8952
Chapter 42: White House Tapes.................................... 9331
Findings..................................................... 9331
Overview..................................................... 9331
Video and Audio Taping in the White House.................... 9332
The White House Communications Agency........................ 9333
Videotape Procedures for Coffees............................. 9334
The Initial Failure to Identify Responsive Videotapes........ 9335
White House Definition of Document........................... 9337
White House Search Procedures................................ 9339
White House Responses to Committee Inquiries About Videotapes 9340
Notifying the Department of Justice of the Existence of
Responsive Videotapes...................................... 9344
Deputy White House Counsel and the Videotapes................ 9345
Allegations Concerning Alteration of the Videotapes.......... 9345
Other Production Issues...................................... 9346
The Presidential ``Diary''............................... 9346
WAVE Records Relating to Mr. Wu.......................... 9347
Lisa Berg documents...................................... 9348
Conclusion................................................... 9349
Part 8 Minority Recommendations................................. 9394
Part 9 Response to Majority Report.............................. 9399
Senator Glenn's Additional Views................................. 9507
Senator Levin's Additional Views................................. 9511
Senator Lieberman's Additional Views............................. 9525
Senator Akaka's Additional Views................................. 9559
Senator Durbin's Additional Views................................ 9565
Senator Torricelli's Additional Views............................ 9571
Foreword to the Minority Report
The faith of the American people in our political system is
being jeopardized by the increasing perception, expressed in
public opinion polls, that campaign contributions buy access to
officeholders that in turn affects policy decisions. The
confluence of increased use of expensive television ads and
increasingly lengthy campaigns has driven both major parties to
excesses in raising and spending political money, particularly
soft money. The campaigns of 1996 exhibited a dangerous rise in
such excess, including the use of so called independent non-
profit and tax-exempt groups whose unregulated expenditures on
issue ads that are really thinly disguised campaign ads have
made them a major force in our political life.
An investigation of what has happened to the campaign
finance system and what is needed to fix it was warranted and
had the potential to be a catalyst for a public uproar to bring
about the needed legislative changes to the system.
While the investigation produced some important
information, its high potential was not realized by the
Governmental Affairs Committee investigation as a result of the
Committee Majority's highly partisan approach to the
investigation. And this partisanship continues to be on
spectacular display in the Majority's report. Bringing balance
to the investigation was therefore left to the Minority, and we
fulfilled what we saw as our obligation as best we could. This
Minority Report is the culmination of our effort and contains a
comprehensive description of the Committee's investigation, a
set of findings that logically and compellingly follow from the
evidence presented, and the implications of our findings for
reform of the campaign finance system.
It is the hope of the Minority and all the other Democrats
in this Senate that the Senate will pass a strong campaign
finance reform bill this year. Failing to do that would mean
failure to take even a first step to dispel the growing
cynicism and lack of trust in our political system and the
growing notion of many Americans that our government is for
sale. In that notion lies the seed for the future destruction
of American democracy. We ignore it at our peril.
John H. Glenn, Ranking Member.
THE MINORITY REPORT
Executive Summary
INTRODUCTION
The founders of this country envisioned that American
political discourse would be based on the power of ideas, not
money, and that our elected representatives would be chosen by
the principles for which they stand, not the amount of money
they raise. Unfortunately, elected officials in the United
States have become so dependent on political contributions from
wealthy donors that the democratic principles underlying our
government are at risk. As Senator Glenn has warned, we face
the danger of becoming a government of the rich, by the rich,
and for the rich. Candidates for Congress and the presidency
spent over $1 billion on their 1996 election activities,
according to an estimate by the Annenberg Public Policy Center.
In order to raise that enormous quantity of money, some
candidates and party officials pushed the campaign finance laws
to the breaking point--and some pushed it beyond. The abuses
that occurred during the 1996 election exposed the dark side of
our political system and underscored the critical need for
campaign finance reform, as well as the need to enhance the
ability of the Federal Election Commission to enforce campaign
finance laws.
On March 11, 1997, the Senate voted unanimously to
authorize the Governmental Affairs Committee to conduct an
investigation of illegal and improper activities in connection
with 1996 Federal election campaigns. The Senate asked the
Committee to conduct a bipartisan investigation, one that would
explore allegations of improper campaign finance activities
``by all, Republicans, Democrats, or other political
partisans.'' This was a noble goal, and there were widespread
hopes that the Committee would conduct a serious, bipartisan
investigation, one that would investigate allegations of abuses
by candidates and others aligned with both major political
parties. In the end, however, the Committee's investigation
provided insights into the failings of the campaign finance
system, but it did not live up to its potential.
The Minority regrets the failure of the Committee to expose
the ways in which both political parties have pushed and
exceeded the limits of our campaign finance system.
Both parties have openly offered access in exchange for
contributions.
Both parties have been lax in screening out illegal and
improper contributions.
Both parties have become slaves to the raising of soft
money.
Violating the spirit and the letter of the Senate
resolution that established its investigation, the Committee
aggressively pursued allegations of wrongdoing involving
Democrats, but largely ignored allegations of wrongdoing
involving Republicans. As a result, the investigation became a
partisan exercise, losing credibility and significance.
Every one of the 320 subpoenas proposed by the
Majority was issued; fewer than half of the subpoenas proposed
by the Minority--89 out of 200--were issued.
Sixty-six deposition subpoenas requested by the
Minority were denied because they were directed to individuals
affiliated with the Republican National Committee and
conservative political groups, all of whom refused to cooperate
voluntarily with the Committee.
Thirteen deposition subpoenas issued to, but then
ignored by, individuals affiliated with the Republican Party,
were not enforced by the Committee. These subpoenas were
directed to top officers of the Republican National Committee,
the Dole for President campaign, Triad Management, and
Americans for Tax Reform.
Twenty-five of the 28 hearing days devoted to
fundraising practices examined the Democrats. Only three days
were allotted to look at possible Republican wrongdoing. Four
additional days were spent discussing the need for campaign
finance reform.
The partisan nature of the investigation was also
demonstrated by the Majority's repeated violations of the
Committee's longstanding rules of procedure, abrogation of
bipartisan agreements on Committee process, and the failure to
issue or enforce Minority-requested subpoenas. More
significantly, the failure by the Committee to enforce its
subpoena authority may have damaged the ability of the U.S.
Senate to compel information in future oversight and
investigative efforts.
The Minority Report brings some balance to the Committee's
investigation. Our Report does not shrink from or condone
illegal or improper conduct by Democrats. On the contrary, when
the evidence indicates misconduct on the Democratic side, that
misconduct is noted and condemned. The Minority Report also
lays out the evidence we were able to compile about fundraising
illegalities and improprieties on the Republican side. The fact
that both parties engaged in campaign abuses provides the
foundation of our most important conclusion, that the
underlying cause of the 1996 campaign scandal is our deeply
flawed system of campaign financing. The Committee
investigation has built an undeniable case for campaign finance
reform.
A SYSTEMIC PROBLEM
The Committee examined a host of 1996 election-related
activities alleged to have been improper or illegal. We heard
from fundraisers, donors, party officials, lobbyists,
candidates and government officials. Roger Tamraz, a
contributor to both parties, admitted making 1996 campaign
contributions for one reason, to obtain access to events held
in the White House. Buddhist Temple officials admitted
reimbursing monastics for making campaign contributions at the
temple's direction. A wealthy Hong Kong businessman hosted the
chairman of the Republican National Committee on a yacht in
Hong Kong Harbor and provided $2 million in collateral for a
loan used to help elect Republican candidates to office.
The Committee's investigation exposed these and other
incidents that ranged from the exemplary, to the troubling, to
the possibly illegal. But investigations undertaken by the U.S.
Senate are not law enforcement efforts designed to arrive at
judgments about whether particular persons should be charged
with civil or criminal wrongdoing, but, by Constitutional
design, are inquiries whose primary purpose must be ``in aid of
the legislative function.'' Accordingly, the most important
outcome of the Committee's investigation is the compilation of
evidence demonstrating that the most serious problems uncovered
in connection with the 1996 election involve conduct which
should be, but is not now, prohibited by law. Or as Senator
Levin has put it, the evidence shows that the bulk of the
campaign finance problem is not what is illegal, but what is
legal.
The systemic legal problems and the need for dramatic
campaign finance reform are highlighted in our Report and in
the following summary, which covers subjects addressed during
the hearings as well as subjects the Minority would have
addressed at the hearings if it had been allocated additional
hearing days. The summary is organized like the Minority Report
itself--both thematically and by chapter--and, like the Report,
it discusses a wide range of questionable conduct by persons
and organizations associated with the Republican and Democratic
Parties. But the Report also seeks to draw larger lessons about
what is needed to repair a campaign financing system in crisis.
In our democracy, power is ultimately to be derived from
the people--the voters. In theory, every voter is equal; the
reality is that some voters, to borrow George Orwell's phrase,
are ``more equal than others.'' No one can deny that
individuals who contribute substantial sums of money to
candidates are likely to have more access to elected officials.
And most of us think greater access brings greater influence.
It was this concern over linkages between money, access and
influence--amid allegations that Richard Nixon's 1968 and 1972
presidential campaigns accepted individual contributions of
hundreds of thousands, even millions, of dollars--that spurred
Congress to enact the original campaign finance laws. While
those laws have evolved over the 20 years since that time, the
goals have remained the same: To prevent wealthy private
interests from exercising disproportionate influence over the
government, to deter corruption, and to inform voters. To
achieve those goals, the law imposes both contribution limits
and disclosure requirements:
Certain categories of donors--including
corporations, labor unions, and foreign nationals--are
prohibited from making contributions to federal campaigns.
Individual donors are limited in the amount of
money they may contribute to federal campaigns.
All campaign contributions must be disclosed.
Violations of the law's contribution limits and disclosure
requirements have occurred since they were first enacted. For
example, corporations and foreign nationals prohibited from
making direct campaign contributions have laundered money
through persons eligible to contribute. Donors who have reached
their legal contribution limit have channeled additional
campaign contributions through relatives, friends, or
employees. Indeed, the investigation of the 1996 elections was
triggered by suspected foreign contributions to the Democratic
Party allegedly solicited by Democratic National Committee
(``DNC'') fundraiser John Huang. Indictments and convictions
have emerged involving contributors to both parties, including
Charlie Trie and the Lum family on the Democratic side, and
Simon Fireman, vice chair of finance of Senator Dole's
presidential campaign, and corporate contributors to the
campaigns of Representative Jay Kim of California on the
Republican side. The most elaborate scheme investigated by the
Committee involved a $2 million loan that was backed by a Hong
Kong businessman, routed through a U.S. subsidiary, and
resulted in a large transfer of foreign funds to the Republican
Party.
While the Committee's investigation uncovered disturbing
information about the role of foreign money in the 1996
elections, the evidence also shows that illegal foreign
contributions played a much less important role in the 1996
election than once suspected. Whether judged by the number of
contributions or the total dollar amount, only a small fraction
of the funds raised by either Democrats or Republicans came
from foreign sources. More importantly, the Committee obtained
no evidence that funds from a foreign government influenced the
outcome of any 1996 election, altered U.S. domestic or foreign
policy, or damaged our national security.
The Committee's examination of foreign money also brought
to light an array of fundraising practices used by both parties
that, while not technical violations of the campaign finance
laws, expose fundamental flaws in the existing legal and
regulatory system. The two principal problems involve soft
money and issue advocacy.
The federal election laws, as noted above, place strict
limits on campaigncontributions to federal candidates. Campaign
funds which meet all of the federal strictures are often called
``federal'' or ``hard'' money. But FEC regulations also permit
political parties to raise and accept contributions that do not meet
the law's strict requirements, if the funds are not intended to be used
to help specific federal candidates. That means, for example, under the
FEC regulations, parties may accept otherwise prohibited contributions
from corporations and unions and unlimited contributions from
individuals. Parties can then--legally--use this so-called ``non-
federal'' or ``soft'' money to help state and local candidates and for
generic, party-building purposes such as get-out-the-vote drives.
The Committee's investigation revealed that the legal
distinction created by the FEC between hard and soft money,
while clear on the fundraising side, has become all but
meaningless on the spending side. Both the Democratic and
Republican Parties raised vast amounts of soft money from
corporate, union and individual donors, and then used loopholes
in the law to spend that money helping specific candidates. The
biggest of these loopholes involves so-called issue advocacy,
in which communications, paid for in whole or part with soft
money, attack a candidate by name while claiming to be an issue
discussion outside the reach of federal election laws. This
loophole widened in 1996 due to rulings by a few courts giving
wide latitude to the definition of issue advocacy. These courts
held, in essence, that political communications are outside the
scope of federal election laws unless they contain so-called
``magic words'' (such as ``vote for,'' ``elect,'' or
``defeat'') advocating the election or defeat of a clearly
identified candidate. These court rulings led to over $135
million in televised ads by parties and other groups, almost 90
percent of which named specific candidates. This unlimited and
undisclosed spending, which the Annenberg Public Policy Center
has called ``unprecedented'' and ``an important change in the
culture of campaigns,'' may have changed the outcome of at
least some 1996 federal elections.
It is beyond question that raising soft money and
broadcasting issue ads are not, in themselves, unlawful. The
evidence suggests that much of what the parties and candidates
did during the 1996 elections was within the letter of the law.
But no one can seriously argue that it is consistent with the
spirit of the campaign finance laws for parties to accept
contributions of hundreds of thousands--even millions--of
dollars, or for corporations, unions and others to air
candidate attack ads without meeting any of the federal
election law requirements for contribution limits and public
disclosure.
The evidence indicates that the soft-money loophole is
fueling many of the campaign abuses investigated by the
Committee. It is precisely because parties are allowed to
collect large, individual soft-money donations that fundraisers
are tempted to cultivate big donors by, for example, providing
them and their guests with unusual access to public officials.
In 1996, the soft-money loophole provided the funds both
parties used to pay for televised ads. Soft money also supplied
the funds parties used to make contributions to tax-exempt
groups, which in turn used the funds to pay for election-
related activities. The Minority Report details, in several
instances, how the Republican National Committee deliberately
channeled funds from party coffers and Republican donors to
ostensibly ``independent'' groups which then used the money to
conduct ``issue advocacy'' efforts on behalf of Republican
candidates.
Together, the soft-money and issue-advocacy loopholes have
eviscerated the contribution limits and disclosure requirements
in federal election laws and caused a loss of public confidence
in the integrity of our campaign finance system. By inviting
corruption of the electoral process, they threaten our
democracy. If these and other systemic problems are not solved,
the abuses witnessed by the American people in 1996 will be
repeated in future election cycles. All that will change will
be the names, dates, and details.
FOREIGN MONEY
A substantial portion of the Committee's efforts was
directed at uncovering whether there was an illegal infusion of
foreign funds into the American political process during the
1996 election cycle.
The China Plan
In his opening statement on the first day of the
Committee's public hearings, Chairman Thompson stated that the
Committee had discovered a plan ``hatched by the Chinese
Government'' that was designed ``to pour illegal
contributions'' into American campaigns. Chairman Thompson
suggested that the Committee had evidence that this ``China
Plan'' had ``affected the 1996 presidential race.'' The
Committee did, in fact, receive information that Chinese
government officials had proposed a plan during the last
election cycle designed to promote its interests in the United
States. The Committee also discovered that the China Plan
focused not on the presidential race, but on lobbying and
promoting Chinese Government interests with Congress, state
legislatures and the American public. Although the evidence
presented to the Committee supports the conclusion that the
plan was implemented in a number of ways, there was ultimately
insufficient evidence presented to the Committee to show that
the plan involved the Chinese government making contributions
to the presidential campaign, let alone that any Chinese
government money had actually made its way into any federal
campaign, presidential or congressional. Based on the
information available to the Committee to date, the China Plan
was found to be of minimal significance to the issues
investigated by the Committee.
Haley Barbour and the National Policy Forum
The clearest example of foreign money being solicited and
directed into U.S. elections involves the Republican Party and
a Hong Kong businessman. It occurred when Haley Barbour,
chairman of the Republican National Committee
(``RNC'),persuaded Hong Kong businessman Ambrous Young to post
collateral of $2 million in support of a loan to the National Policy
Forum (``NPF''). NPF, a think tank also presided over by Barbour, was a
de facto subsidiary of the RNC. The collateral was posted by a shell
corporation that had no assets other than money transferred from Hong
Kong. Because of Young's help, NPF was able to obtain a $2 million bank
loan, and it quickly transferred the bulk of the loan proceeds to the
RNC which, in turn, channeled the money into congressional races around
the country. This was a clear case of foreign money being brought into
our domestic political process. This money transfer was conceived and
executed at the highest levels of the Republican Party.
Barbour's testimony that he did not know that the source of
the funds was foreign or that the money was intended for
infusion into the 1994 congressional elections was contradicted
by both documentary and testimonial evidence. Evidence before
the Committee demonstrated that Barbour was made aware on
several occasions, both before and after the loan was made,
that the collateral, $2 million in certificates of deposit, was
purchased with foreign money. Barbour himself was quoted on
several occasions stating that the money was needed for the
November 1994 congressional elections. His denials to this
Committee were not credible.
Both the Minority and Chairman Thompson agreed that the RNC
should repay its Hong Kong benefactor the $800,000 that was
forfeited as a result of NPF's default on the loan. Barbour
authorized the default after having given assurances that the
RNC would stand behind the NPF loan.
John Huang
John Huang, a U.S. citizen who emigrated from Taiwan in
1969, worked for several years for the Lippo Group, an
Indonesian-owned conglomerate. During the late 1980s, he became
active in Democratic Party politics. He raised money for
President Clinton's campaign in 1992 and later joined the
Department of Commerce. It appears that Huang may have raised
money for the Democratic National Committee while he was a
Commerce Department employee. If true, he may have violated the
Hatch Act, which proscribes the solicitation of campaign
contributions by federal employees.
After leaving Commerce, Huang joined the DNC staff as a
full-time fundraiser, concentrating on the Asian-American
community. On several occasions, he collected contributions
that he knew--or should have known--were improper and possibly
illegal.
Some Members of the Committee viewed Huang as a potential
espionage agent, and spent considerable time attempting to
establish that he relayed classified information to his former
employer, the Lippo Group, or to the Chinese government when he
was employed by the Department of Commerce. Huang offered to
testify without immunity from prosecution for any acts of
espionage or improper transfer of classified information. The
Majority did not pursue this offer. The evidence before the
Committee does not support the allegation that Huang served as
a spy or a conduit for contributions from any foreign
government, including China.
Yah Lin (``Charlie'') Trie
Yah Lin (``Charlie'') Trie, a U.S. citizen who emigrated
from Taiwan in 1974, was not a DNC employee, but he raised
substantial sums of money for the DNC and the Presidential
Legal Expense Trust, an entity established to raise money to
defray the legal bills of President and Mrs. Clinton.
Some of the money Trie raised appears to have come from
foreign sources, notably Ng Lap Seng (also known as ``Wu''), a
business associate of Trie's based in Macao. Trie appears to
have made some of his own political contributions from a bank
account that was funded with transfers from Wu.
The evidence before the Committee does not support the
allegations that Trie was acting on behalf of a foreign
government or that he was improperly attempting to influence
American foreign policy. However, there can be little doubt
that Trie hoped to promote his business interests by
capitalizing on his earlier friendship with President Clinton.
In February, 1997 Trie was indicted by the Department of
Justice for conspiracy to defraud the DNC and the FEC by making
and arranging illegal contributions utilizing foreign funds. He
has returned to the United States and has pleaded not guilty to
these charges.
Ted Sioeng
Individuals and companies associated with Ted Sioeng, an
Indonesian-born businessman who is not a U.S. citizen or a
legal resident, contributed large sums of money to both
Democrats and Republicans. These contributions enabled Sioeng
to gain access to high-ranking officials of both parties. The
Minority urged the Committee to hold hearings on Sioeng, but
none took place. This failure is striking since the Committee
focused enormous attention on John Huang and Charlie Trie and
other individuals linked to questionable Asian contributions.
As noted above, unlike Huang and Trie, individuals associated
with Sioeng contributed to both political parties.
Jay Kim
One of the best-documented examples of foreign
contributions to a federal candidate concerned U.S.
Representative Jay Kim, a California Republican, who pled
guilty last year to campaign finance violations stemming from
his 1992 and 1994campaigns. Kim's wife also pled guilty, while
a former campaign treasurer was convicted of criminal charges after a
jury trial. While examining the Kim case, the Minority found evidence
suggesting that there were ongoing improprieties during the 1996
election cycle. Moreover, a recent lucrative book deal between Mrs. Kim
and a South Korean publisher raises a serious question as to whether it
is an attempt to channel foreign funds to the Kims for improper
purposes. These transactions warrant further scrutiny.
While the above examples clearly show that foreign money is
a problem in the political process, the dimensions of the
problem must be kept in perspective. It should be noted that
the amount of foreign money that made its way into the election
campaigns was a small fraction of the total amount of money
contributed and the number of contributions received.
INDEPENDENT GROUPS
The Minority hoped for a broad bipartisan investigation
into the issue of how tax-exempt entities may have been used to
circumvent the campaign finance laws. The Minority joined the
Majority to issue a subpoena to the AFL-CIO, the Christian
Coalition, and nearly 30 other independent groups holding a
wide range of political ideologies and affiliations that
appeared to have played some role in the 1996 elections.
After the subpoenas were issued, however, the Majority
failed to enforce them, even in the face of open non-
cooperation by entities and individuals subpoenaed by the
Committee. The Minority indicated that it would support action
against any entity, whether associated with either the
Democratic or Republican Party, that failed to comply with a
valid Committee subpoena. However, by late summer 1997,
compliance by almost all of the independent groups had stopped.
Despite these obstacles, the Minority was able to establish
that several tax-exempt organizations spent millions of dollars
on behalf of Republican candidates through purported ``issue
ads'' and other campaign support. Even more disturbing, the RNC
funneled money through several theoretically ``independent''
groups and thereby effectively evaded the federal legal limits
on the spending of soft money contributions.
The RNC and Americans for tax reform
One of the most egregious examples of the misuse of tax-
exempt entities concerned the Republican National Committee's
transfer of money to Americans for Tax Reform (``ATR'').
Shortly before the November 1996 election, ATR received a $4.6
million ``donation'' from the RNC and spent that money on
direct mail and phone bank operations to counter anti-
Republican advertising on the Medicare issue. The evidence
collected by the Committee shows clearly that ATR acted as a
surrogate for the RNC, enabling the Republican Party to evade
campaign finance laws. The coordinated effort between the RNC
and ATR permitted the RNC to conserve hard dollars which the
RNC could then expend elsewhere. The alliance between the RNC
and ATR is a classic example of the soft money loophole being
exploited in a manner that pushed the limits of our campaign
finance laws.
These activities should have been exposed at public
hearings, but the Majority refused to permit such hearings. The
relationship between the RNC and ATR should be the subject of
continued investigation by the Department of Justice, the
Internal Revenue Service and the Federal Election Commission.
Triad and related organizations
The issue advocacy loophole was also exploited by Triad
Management Services, a for-profit company that claims to be in
the business of providing advice to conservative donors in
exchange for fees. In fact, Triad was funded by a handful of
wealthy Republican donors who used it as a mechanism to support
the election of conservative Republican candidates to the House
of Representatives and the Senate. Triad channeled millions of
dollars from its backers to two tax-exempt groups it had
established for the sole purpose of running attack ads against
Democratic candidates under the guise of ``issue advocacy.'' By
operating this way, Triad and its financial backers avoided the
disclosure and campaign contribution limits of the federal
election laws.
Triad itself made possibly illegal contributions by
providing free consulting advice and other assistance to
candidates. Moreover, the evidence suggests that Triad
conspired with contributors who had reached their maximum
contribution limit to evade the law by laundering additional
contributions through designated political action committees
(``PACs'') and then earmarking these contributions for certain
campaigns. The Department of Justice and the Federal Election
Commission should continue the investigation into the
operations of Triad to determine the nature and the extent of
any illegal activities by that organization.
One of the most unfortunate aspects of this entire
investigation was the decision by the Majority to unilaterally
reverse its pledge to the Minority that the Minority would be
afforded three hearing days in October or November, 1997. The
Minority was prepared to use the promised hearing days to
educate the American people about Triad.
The Christian Coalition
Among all the ``independent'' groups in the pro-Republican
camp, few have been as active as the Christian Coalition (``the
Coalition''). In local, state, and federal elections, the
Coalition spends substantial sums of money to distribute
millions of copies of itsvoter guides. It has acknowledged
spending between $22 million and $24 million on 1996 races, and working
to distribute about 45 million voter guides.
At the Minority's request, the Committee issued a subpoena
to the Christian Coalition, but the organization produced only
a handful of documents. It refused to provide copies of voter
guides, even though copies had been distributed publicly across
the country. Despite the lack of cooperation from the
Coalition, and the failure of the Majority to seek enforcement,
the Minority was able to piece together information about this
organization from other sources, including court papers in the
FEC's ongoing suit against the Coalition.
The Minority found that the Christian Coalition has
routinely circumvented federal election law by exploiting the
``issue advocacy'' loophole. Its voter guides, for example,
purport to be honest portrayals of candidates, examining how
their positions on controversial issues are in accord with the
Coalition. In fact, the guides are highly slanted publications,
characterized by distortions and omissions in order to help
Coalition-backed candidates. Although it purports to be a
nonpartisan, social welfare organization, the Christian
Coalition is one of the biggest proponents of the Republican
Party and Republican candidates.
Warren Meddoff and tax exempt groups
The evidence before the Committee on coordination between
Democratic officials and independent groups is not comparable
to the disturbing evidence of Republican coordination with
independent groups. The Committee examined activities
surrounding a written suggestion by White House Deputy Chief of
Staff Harold Ickes to Florida businessman Warren Meddoff that,
in response to Meddoff's request, identified organizations to
which tax-deductible contributions could be made. However,
there was no evidence presented that the groups identified by
Ickes, which do not run issue ads and focus mostly on voter-
registration activities, coordinated their activities with the
White House or the DNC. The Meddoff story sheds so little light
on the issue of improper coordination that it is questionable
that he would have been called to testify before the Committee
were it not for his allegation that Ickes had asked him to
shred the memorandum identifying the tax-exempt groups. This
allegation, as discussed in this Minority Report, is not
credible.
The Teamsters election and the DNC
The Committee investigated allegations of a possible
``contribution-swapping'' scheme proposed by Martin Davis, a
direct-mail consultant to the reelection campaign of Ron Carey,
former president of the Teamsters union. The essence of Davis's
proposal was that the Teamsters would make contributions to the
DNC in return for which Democratic Party officials would find a
donor to contribute to Carey's re-election campaign. The
evidence established that there were discussions between Davis
and various fundraising officials at the DNC about this
proposal.
While the evidence does not support the conclusion that a
contribution-swap ultimately took place, it is disturbing that
the matter progressed to the point where a possible contributor
for the Carey campaign was identified. This donor did not
ultimately contribute to the Teamsters because her status as an
employer made her ineligible to contribute to a union election.
Nevertheless, Martin Davis's comments to DNC officials should
have led them to suspect that Davis was improperly seeking to
influence the use of Teamsters funds to benefit the Carey
campaign. DNC officials should have immediately refused to take
any action in response to Davis's request.
THE HSI LAI TEMPLE EVENT
The Committee examined whether Vice President Gore knew or
should have known that a community outreach rally held at the
Hsi Lai Temple in California on April 29, 1996, was an event
used by Huang to encourage contributions to the DNC and,
therefore, should not have been held on the premises of a tax-
exempt religious organization. The evidence before the
Committee indicates that the Vice President neither knew nor
had reason to know that this was anything other than a
community outreach event. The evidence presented to the
Committee indicates that there had been plans for the Vice
President to appear at a fundraising luncheon at a restaurant
and then go to the Hsi Lai Temple for the community outreach
event. When the luncheon was canceled, the Hsi Lai Temple event
proceeded without any of the indicia normally associated with a
fundraiser. There was no admission price for attending, no
tickets were sold, no campaign materials were displayed, and
the Vice President's speech made no reference to the
solicitation of funds.
The evidence established that the day after the Vice
President appeared at the temple, DNC fundraiser John Huang
advised Maria Hsia, a prominent member of the Asian-American
community, that he needed to raise money and he asked her to
help. She, in turn, asked members of the temple to find
contributors. There is not a shred of evidence, however, that
the Vice President had any knowledge of this. Moreover,
although the donors were reimbursed for their contributions,
the source of the funds appears to have been domestic, not
foreign.
The evidence before the Committee shows that no aspect of
Vice President Gore's appearance at the temple was improper.
CONTRIBUTION LAUNDERING
The Committee learned that some improper reimbursement of
campaign contributions occurred in connection with the 1996
federal election cycle. A number of persons associated with
Trie and Wu appear to have been reimbursed for their
contributions using funds from accounts controlled by Trie.
Similarly, YogeshGandhi, a Los Angeles businessman, appears to
have made a $325,000 contribution in his name using funds supplied by a
Japanese businessman. Businesswoman Pauline Kanchanalak, while
reportedly wealthy in her own right, appears to have made substantial
contributions with funds supplied by her mother-in-law. All of these
contributions were improper and were returned by the DNC. There was,
however, no evidence presented to the Committee to suggest that any DNC
officials were aware that contributions were being reimbursed from
third parties. In addition, the evidence before the Committee does not
support allegations of impropriety related to $425,000 in contributions
by the Wiriadinatas.
The Committee also investigated several instances of
contributions to the RNC that were apparently laundered or
unlawfully reimbursed. For example, Michael Kojima contributed
$500,000 to the Republican Senate-House Dinner Committee in
1992, and the evidence strongly suggests that those funds had
actually come from several Japanese businessmen. Despite this
evidence, the RNC has kept $215,000 from that contribution.
Simon Fireman, a national vice chair of the Dole campaign,
and his company, Aqua Leisure Industries, Inc., were convicted
for using employees as conduits to make illegal corporate
contributions. Aqua Leisure employees contributed more than
$100,000 and were reimbursed with corporate funds laundered
through a Hong Kong trust. These contributions went to several
campaigns, including the Dole for President campaign. There was
a similar scheme involving contributions to the Dole for
President campaign by employees of Empire Sanitary Landfill,
Inc., and, apparently, DeLuca Liquor and Wine, Ltd.
Just as the DNC was unaware of having received laundered or
illegally reimbursed contributions, there was no evidence to
suggest that anyone at the RNC knowingly accepted such
contributions.
SOFT MONEY AND ISSUE ADVOCACY
The federal campaign finance laws provide that candidates
should finance their campaigns with so-called ``hard
dollars''--contributions received in relatively small dollar
amounts from individual donors and political action committees.
Soft money--which can be donated by individuals, corporations
and unions and in unlimited amounts--is not supposed to be
spent on behalf of individual candidates. And yet it is: Tens
of millions of soft dollars are raised by the parties and
spent, through such devices as ``issue advocacy'' ads, for the
benefit of candidates. The soft money loophole undermines the
campaign finance laws by enabling wealthy private interests to
channel enormous amounts of money into political campaigns.
Most of the dubious or illegal contributions that were examined
by the Committee involved soft money.
The Committee's investigation also showed that the legal
distinction between ``issue ads'' and ``candidate ads'' has
proved to be largely meaningless. The result has been that
millions of dollars, which otherwise would have been kept out
of the election process, were infused into campaigns obliquely,
surreptitiously, and possibly at times illegally.
The issue of soft money abuses is inevitably tied to the
question of how access to political figures is obtained through
large contributions of soft money. It is also tied to the
question of how tax-exempt organizations have been used to hide
the identities of soft money donors. A system that permits
large contributions to be made for partisan purposes, without
public disclosure, invites subversion of the intent of our
election law limitations.
THE NATIONAL PARTIES
It is beyond dispute that the present campaign finance
system is riddled with loopholes that invite abuse by both
parties. The flaws inherent in the system, however, do not
excuse poor judgment.
The evidence supports the conclusion that both parties
failed to scrutinize their fundraising practices and political
contributions with sufficient vigilance.
The Committee received evidence that the DNC did not
vigilantly supervise the fundraising of its employee John
Huang, who was not an experienced professional fundraiser and
who was tapping a source of funds--the Asian-American
community--that had not previously been heavily targeted for
substantial contributions. When the party received large
contributions from previously unknown contributors such as
Charlie Trie, Yogesh Gandhi, and others, it should have taken
special steps to ensure that these were legal and proper
donations and that all DNC fundraisers were familiar with--and
in compliance with--the rules. Such heightened vigilance is
important for any new source of contributions. Instead of
heightened vigilance, however, there appear to have been
instances where DNC officials ignored warning signals and
permitted improper contributions to be accepted.
The Committee also learned, however, that a very small
proportion of the money raised by the DNC during the 1996 cycle
was improper or illegal. The DNC raised $122 million and
voluntarily returned less than 200 out of 2.7 million
contributions, or .01% of the contributions it received.
The DNC also deserves criticism for the manner in which it
used access to political figures as a fundraising tool. Also of
concern were instances when DNC Chairman Donald Fowler
intervened on behalf of contributors in the face of admonitions
to refrain from doing so. While there is no basis for ascribing
improper intent to Fowler, he exhibited an insensitivity to
both the appearance and theimplications of his conduct.
Notwithstanding these failings, there was insufficient
evidence to support a claim that the DNC was engaged in a
systematic effort to disregard or evade the federal election
laws. None of the evidence suggests that the DNC condoned any
intentional misconduct. DNC fundraising personnel, with few
exceptions, performed their functions in a legal and ethical
manner.
Many of the RNC's activities were subject to similar
problems as the DNC. The RNC, for example, received foreign
contributions, gave access to top Republican congressional
leaders for large contributions, and held fundraising-related
events on federal property. However, because the RNC did not
comply with the Committee's document subpoena and did not make
RNC officials available for deposition, the Committee did not
subject allegations involving the RNC to the same level of
scrutiny as it did allegations involving the DNC.
CONTRIBUTOR ACCESS
One of the most troubling aspects of the campaign finance
system is that major contributors often enjoy added access to
decision-makers in the legislative and executive branches of
government. It is neither a mystery nor a surprise that the
drive of political campaigns to raise money enables those who
can provide funds to gain access to those who control the
government. Neither political party can claim the high road of
virtue on this issue, and abuses are pervasive in both
presidential and congressional fundraising.
For years, Republicans have openly offered contributors
access to congressional and political figures in their party.
One 1997 Republican invitation states that for a $250,000
contribution, a smorgasbord of benefits is available, including
sharing a table with the Senate or House committee chairman
``of your choice.'' Another 1992 invitation states in a burst
of candor: ``Benefits based on receipts.'' This practice of
promising access to political figures in exchange for
contributions is the offensive product of a campaign finance
system that remains badly in need of reform.
One of the most egregious examples of access being provided
in exchange for political contributions concerns businessman
Roger Tamraz. Evidence presented to the Committee indicates
that Tamraz used every tactic imaginable to gain administration
support for his oil pipeline scheme. Eventually, Tamraz
resorted to making campaign contributions to the Democratic
Party, just as he had given to the Republican Party when
President Reagan was in the White House. The sobering fact is
that the tactic was effective. Despite warnings from DNC staff
and opposition from National Security Council staff and Vice
President Gore's staff, Tamraz gained access to DNC events in
the White House.
It was equally troubling for the Republican Party to
provide access to Michael Kojima when President Bush was in
office--a subject not explored in any of the Committee's
hearings. Kojima, a notorious ``deadbeat dad'' who was pursued
by creditors, was seated with President Bush because he had
donated $500,000 to the Republicans. He also received special
assistance from U.S. Embassy officials for his private business
interests. After Kojima's attendance at the dinner was
publicized, the Republicans were forced to relinquish some of
the money he had contributed to Kojima's creditors. But the
party has--to this day--ignored strong evidence that Kojima
made his donation not with his own money, but with funds
transferred to him from Japanese businessmen. The Kojima event
may have contributed to subsequent campaign finance abuses. The
failure to prosecute Kojima during the Bush administration may
have sent a message to other donors that the campaign finance
laws were not taken seriously in Washington, a message that
could only have encouraged the excesses of 1996.
WHITE HOUSE FUNDRAISING TELEPHONE CALLS
Fundraising calls from the White House are not a new
practice. President Reagan made such calls as did President
Clinton.
After conducting an extensive investigation into telephone
calls made by President Clinton and Vice President Gore, the
evidence showed that the calls were not illegal. President
Clinton made fundraising calls for the DNC from the private
residence while Vice President Gore made DNC telephone calls
from his office, in all instances to persons who were outside
any federal building. None of these calls violated the
Pendleton Act, a 19th century law which forbids the
solicitation of campaign contributions from persons who are
located on federal property, and Chairman Thompson was correct
when he stated that no one would be prosecuted based on such
telephone calls.
SECRETARY BABBITT AND THE HUDSON CASINO
On the final day of the hearings, the Committee heard
testimony by Interior Secretary Bruce Babbitt and Paul
Eckstein, a lobbyist and former colleague of the Secretary.
Eckstein had unsuccessfully lobbied Secretary Babbitt to
approve an Indian trust application for the purpose of building
a casino near Hudson, Wisconsin. Secretary Babbitt and Eckstein
were questioned about allegations that Interior's denial of the
Hudson casino proposal was undertaken in response to political
pressure brought to bear by opposing tribes who were also
Democratic Party supporters.
Much of the hearing was devoted to the particulars of a
conversation between Secretary Babbitt and Eckstein about
Harold Ickes, then-Deputy Chief of Staff in the White House.
Several members of the Committee questioned whether Secretary
Babbitt had accurately described this conversation in
responding to an earlier inquiryfrom Senator John McCain. More
attention should have been paid, however, to the extensive evidentiary
record which demonstrated that Secretary Babbitt had played no role in
the decision and that the Interior officials who did make the decision
had no knowledge of either campaign contributions by the opposing
tribes or alleged ``pressure'' from the White House or the DNC to deny
the casino proposal.
WHITE HOUSE PRODUCTION
The Majority devoted two full hearing days to an effort to
establish that the White House Counsel's Office conspired to
withhold videotapes that showed the first few minutes of 44
coffees held at the White House. The evidence before the
Committee indicates that the tapes were not produced until
October 1997--about six months after they had been requested by
the Committee. But the evidence is also clear that shortly
after the request was received at the White House, an
appropriately worded directive was issued, asking for all
materials, including any videotapes, from persons within the
White House complex.
Evidence presented at the hearing strongly suggested that
the delay in producing the tapes was caused by the
unintentional mishandling of a fax by personnel at the White
House Communications Agency (``WHCA'). The WHCA is staffed by
career military personnel who, among their many
responsibilities, are charged with creating a videotape record
of presidential events in the White House. Had the White House
Counsel's Office fax been forwarded to them in its entirety,
WHCA personnel would have retrieved the tapes and the tapes
would have been produced on a timely basis. Allegations were
also made that the tapes may have been tampered with. The
Committee hired an expert to examine the tapes: after extensive
analysis he concluded there was no evidence of tampering.
Overall, the White House cooperated with the Committee's
investigative efforts. Hundreds of thousands of pages of
documents were voluntarily produced by the White House, many of
which shed important light on the fundraising practices being
examined by the Committee. In addition, over 50 witnesses were
provided by the White House for interview or deposition by
Committee staff without the need of subpoenas. During the
course of the investigation, however, criticisms arose about
delays in the production of certain categories of requested
materials. The Committee found no evidence that these delays,
although disappointing to the Committee, were the result of an
intention to obstruct the Committee's work. In addition to the
White House cooperation with the Committee, the DNC also
cooperated by producing over 450,000 pages of unredacted
documents and providing over 30 witnesses for interview or
deposition without the need of subpoenas. In contrast, the RNC
responded to its document subpoena, which was virtually
identical to the DNC's subpoena, by producing only 70,000 pages
of heavily redacted documents and providing no witnesses
voluntarily, and only two witnesses for depositions after
subpoenas were issued.
CONCLUSION
Despite a highly partisan investigation, the Committee has
built a record of campaign fundraising abuses by both Democrats
and Republicans. This record will hopefully be useful to the
Federal Election Commission, the Internal Revenue Service and
to the Department of Justice as they investigate the 1996
campaign. Most importantly, the Committee's investigation
should spur much-needed reform of the campaign finance laws and
strengthening of the Federal Election Commission. Congress
should provide the Federal Election Commission with the
necessary resources to significantly enhance its investigative
and enforcement staff. Ultimately, the most important lesson
the Committee learned is that the abuses uncovered are part of
a systemic problem, and that the system that encourages and
permits these abuses must be reformed.
PART 1 FOREIGN INFLUENCE
Chapter 1: Overview and Legal Analysis
FINDINGS
(1) Large contributors to both the Republican and
Democratic parties used funds from foreign sources to gain
access to top U.S. Government officials.
(2) Foreign money comprised only a small fraction of the
total contributions made during the 1996 election cycle, and
the evidence before the Committee suggests that, with the
exception of Republican National Committee Chairman Haley
Barbour and Representative Jay Kim, neither party's leaders or
candidates intentionally solicited or accepted foreign
donations. Nor did the evidence before the Committee suggest
that foreign donations altered U.S. policy or damaged American
national security.
(3) Although detection of foreign-sourced donations is
difficult, closer supervision of party fundraisers and a more
careful and complete review of large contributions may have
prevented some of these contributions from being accepted.
OVERVIEW OF FOLLOWING CHAPTERS
A primary objective of the Committee's campaign finance
hearings was to determine what role foreign money played in the
1996 elections and what impact, if any, it had on American
foreign policy. Media reports were rife with allegations that
foreign money had infiltrated American political campaigns to
win special consideration of private commercial ventures or
policy concerns. Such allegations, if true, threaten the
integrity of our electoral system, foreign policy, and national
security.
The Committee vigorously pursued these allegations. As the
following chapters demonstrate, the investigation substantiated
a host of disturbing facts involving both parties, including a
$2 million loan transaction involving a foreign national and
foreign funds resulting in the Republican Party benefiting from
$800,000 in foreign funds; large contributions to the
Democratic Party solicited by John Huang and Charlie Trie in
which foreign dollars were used and/or the identity of the true
contributor was hidden; large contributions to both parties
from apparently insolvent individuals such as Yogesh Gandhi and
Michael Kojima; repeated appearances at White House events and
Democratic National Committee (``DNC'') fundraisers by foreign
nationals attending as guests of DNC contributors; even an
organized effort to solicit contributions from foreign
nationals in South Korea, resulting in the criminal convictions
associated with the election campaigns of Representative Jay
Kim of California. In most cases, the Committee uncovered no
evidence that a recipient candidate or political party
intentionally solicited a contribution funded with foreign
money. However, in the cases involving the $800,000 and
convictions related to the Kim campaigns, the Committee did
obtain evidence that foreign money had been deliberately
targeted as a funding source.
Some of the transactions described in this and other parts
of the Minority Report, such as the conduit contributions
obtained by Trie, the Cheong Am contribution, and the
solicitation of foreign nationals in the Kim matter, involve
foreign money in apparent violation of federal law. Other
transactions initially portrayed as involving foreign money,
such as contributions from persons associated with the Hsi Lai
Temple, turned out not to involve foreign money, but the
apparent improper use of domestic funds. Many of the
transactions demonstrate that, during the 1996 election cycle,
the DNC had deficient procedures for supervising fundraisers
and detecting foreign contributions and exercised inadequate
oversight, including instances in which DNC senior officials
who observed questionable fundraising practices or
contributions failed to take the action needed to prevent
problems or wrongdoing. Still other transactions expose
existing vulnerabilities in federal election law, which,
although intended to prohibit foreign money in U.S. elections,
is not always as clear or as strong as required.
One critical question examined by the Committee was whether
either party made a systematic attempt to solicit foreign funds
for use in campaigns. After a year-long investigation, the
Committee found no documentary or testimonial evidence
indicating a deliberate plan by the DNC to pursue foreign
funds.1 The Committee did obtain documentary and
testimonial evidence that the RNC established and funded a tax-
exempt organization called the National Policy Forum (``NPF'),
helped it solicit foreign funds, and then used a portion of
those funds to advance Republican electoral activities in the
1994 and 1996 election cycles. In Senator Glenn's words, NPF
presents the only known case ``where the head of a national
political party knowingly and successfully solicited foreign
money, infused it into the election process, and intentionally
tried to cover it up.'' 2
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Footnotes at end of chapter.
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A second important issue addressed by the Committee's
investigation involved allegations that the Chinese government
had devised a plan to, in Chairman Thompson's words, ``pour
illegal money into American political campaigns'' and which
affected the 1996 congressional and presidential
elections.3 In the end, the evidence before the
Committee demonstrated that Chinese government officials had
proposed a plan during the last election cycle designed to
promote China's interests with members of Congress and state
legislators, not with presidential candidates. There was not
sufficient evidence to support the conclusion that any Chinese
government funds actually made their way into the 1996 federal
elections, congressional or presidential, and there was no
evidence that any steps that may have been taken by the Chinese
government affected the 1996 presidential race.
The evidence before the Committee indicates that foreign
money, as a whole, provided a small fraction of the
contributions involved in the 1996 elections. During the 1996
election cycle, the Democratic Party received over three
million contributions totalling about $346 million and returned
fewer than 200 individual contributions totalling about $3
million, of which an even smaller fraction involved foreign
money.4 The Republican Party received about $555
million in contributions and has returned about $137,000 in
foreign contributions, and there is another $1 million that
should also be returned, as this Report will
explain.5 The evidence before the Committee also
shows that, while contributors did win access to senior
decisionmakers, none obtained a change in U.S. domestic or
foreign policy.
Although foreign contributions did compromise a small
portion of campaign contributions during the 1996 election
cycle and U.S. policy was not altered, the seriousness of the
problem is established by the many disturbing facts that were
uncovered or substantiated during the investigation with
respect to both parties. As the chapters on John Huang and
Charlie Trie demonstrate, deficient DNC oversight in monitoring
fundraising activities and detecting foreign contributions
allowed a number of contributions derived from foreign sources
to enter the campaign finance system. The chapters on Ted
Sioeng and Michael Kojima demonstrate that similar oversight
deficiencies affected the Republican Party.6 The
chapters on NPF and Representative Kim document two instances
in which foreign funds were deliberately pursued. Together,
these chapters demonstrate that both parties failed to
adequately investigate large contributions for possible illegal
involvement of foreign nationals or possible use of foreign
funds; that both parties failed adequately to search out and
stop the pursuit of illegal foreign contributions; and that
both parties wooed large contributors by providing access to
the White House, presidents, vice presidents, and other senior
government officials. The Kojima chapter demonstrates that
these tactics and the resulting stain on the federal campaign
finance system are not new.
LEGAL ANALYSIS
The federal law barring foreign contributions in U.S.
elections is set forth in section 441e of Title 2 of the U.S.
Code. Section 441e is intended to prohibit foreign money from
playing any role in U.S. elections, but the statutory language
is not as clear or as strong as needed and should be
strengthened. Weaknesses in the existing legal prohibition may
hinder the criminal prosecutions and civil enforcement actions
needed to keep foreign money from influencing U.S. elections.
Section 441e(a) states:
It shall be unlawful for a foreign national directly
or through any other person to make any contribution of
money or other thing of value, or to promise expressly
or impliedly to make any such contributions, in
connection with an election to any political office . .
. or for any person to solicit, accept, or receive any
such contribution from a foreign national.7
``Foreign national'' is defined in section 441e(b) to include:
(1) a foreign government or foreign political party; (2) an
individual who is not a U.S. citizen or legal permanent
resident; or (3) a partnership, association, corporation,
organization, or other combination of persons organized under
the laws of or having its principal place of business in a
foreign country.
Section 441e's foreign money ban contains a number of
ambiguities which have been partially resolved by the Federal
Election Commission (``FEC'') and Department of Justice. For
example, the key FEC regulation, 11 C.F.R. 110.4, states that
section 441e's foreign money ban applies not only to
contributions by foreign nationals, but also to campaign
expenditures by foreign nationals.8 In addition, the
regulation states that the statutory ban extends not only to
federal elections, but also to state and local
elections.9 A third ambiguity is the statutory
language applying the foreign money ban to contributions made
``in connection with an election,'' which has led to questions
of whether the statute permits soft money contributions by
foreign nationals to parties or others for non-election-related
activities, such as payments for office building construction
or issue ads.10 Clear legal prohibitions on foreign
nationals in these three areas--campaign expenditures, state
and local elections, and soft money contributions--are vital to
keeping foreign money from influencing U.S. elections. While
most are addressed administratively, section 441e's foreign
money prohibition would clearly benefit from improved statutory
language.
A fourth set of issues involves foreign corporations which
establish subsidiaries in the United States. The statute is
silent on how these corporate entities are to be treated. The
FEC has determined that they may make campaign contributions
under certain circumstances. The key FEC regulation states that
a ``foreign national shall not direct, dictate, control, or
directly or indirectly participate in the decisionmaking
process'' of a U.S. corporation with regard to ``election-
related activities, such as decisions concerning the making of
contributions or expenditures'' or the administration of a
PAC.11 A 1982 FEC advisory opinion holds that a U.S.
subsidiary of a foreign corporation may lawfully make campaign
contributions in state and local elections, provided that the
subsidiary is organized under the laws of a state in the United
States, its principal place of business is in the United
States, and no foreign national controls or participates in the
contribution decision.12 One FEC Commissioner
strongly dissented, stating:
The plain language of Section 441e explicitly
prohibits ``a foreign national directly or through any
other person to make any contribution . . .'' in
connection with an election. [The US subsidiary] is a
``person'' under the definition in the Statute. . . .
The fact that the foreign national's assets go through
a USA subsidiary does not make a difference. . . . The
facts of this case are conclusive that the ultimate
source of the contribution will be [the foreign
national]. [The foreign national] owns [the U.S.
subsidiary]. They bought it. They paid for it. It's
theirs. But it cannot contribute its money to our
elections.
Despite this and other dissenting opinions taking the same
position,13 the FEC continues to permit U.S.
subsidiaries of foreign corporations to make soft money
contributions if the subsidiary operates under U.S. laws, in
the United States, and without the participation of a foreign
national in its contribution decisions.
In addition, a 1992 FEC advisory opinion states that a U.S.
subsidiary of a foreign parent must be able to ``demonstrate
through a reasonable accounting method that it has sufficient
funds in its account, other than funds given or loaned by its
foreign national parent,'' to pay for its campaign
contributions.14 The opinion states that a foreign
parent corporation ``cannot replenish all or any portion of the
subsidiary's political contributions.'' The opinion cites
approvingly an earlier advisory opinion prohibiting campaign
contributions by a subsidiary ``predominantly funded by a
foreign national parent, and whose projects were not yet
generating income.'' 15 These rulings attempt to
ensure that a U.S. subsidiary of a foreign corporation pays for
its campaign contributions with domestic and not foreign money.
These FEC rulings do not, however, resolve a key legal
issue for U.S. subsidiaries--the type of accounting
demonstration required. During the Committee's hearings, a
question was raised as to whether the 1992 FEC advisory opinion
requires U.S. subsidiaries to demonstrate that their
contributions are made from domestic profits or net earnings,
in order for these contributions to satisfy FEC regulatory
requirements.16 The opinion's actual language is
less explicit, however, requiring only a demonstration
``through a reasonable accounting method'' that ``sufficient
funds'' are in the subsidiary's account to pay for the
contribution, not counting ``funds given or loaned by its
foreign national parent.'' This language could be interpreted
to require the subsidiary to demonstrate only that, at the time
of the contribution, it had sufficient domestic funds in its
account to pay the contributed amount, without reference to its
ultimate net earnings or profits during a particular period of
time. Since both intrepretations of the 1992 advisory opinion
are reasonable, clarifying legislation or additional
regulations are needed to ensure that subsidiaries are fully
informed of their legal obligations with respect to such
contributions.
The following chapters demonstrate how compliance with
section 441e's foreign money ban can be difficult, even for
campaign organizations acting in good faith. With respect to
contributors who are individuals, one key difficulty is
ascertaining a person's legal status as a U.S. citizen or legal
permanent resident. Neither candidates nor political parties
have ready access to personal immigration and citizenship
data.17 It also can be difficult to determine
whether a U.S. citizen or legal resident who receives money
from abroad, either from a business or relative, is properly
using his or her own money to make a contribution or is instead
making an illegal contribution in the name of
another.18 With respect to corporations, it can be
difficult for a campaign organization to determine whether a
foreign national is participating, directly or indirectly, in a
corporation's contribution decisions. It is also difficult to
determine whether a corporation has sufficient domestic funds
to pay for its contributions, or whether a foreign parent is
planning to replenish a subsidiary's campaign
contributions.19 These practical enforcement
problems 20 are in addition to statutory ambiguities
that should be resolved through legislation clarifying and
strengthening section 441e's foreign money ban.21
footnotes
1 DNC finance chair Richard Sullivan testified that no
DNC plan for pursuing foreign money ever existed:
Sen. Glenn. I would like to know if at the DNC
when you were there, there was ever any guideline
put out to go for foreign money, and let me clarify.
I do not mean money raised from American citizens of
foreign extraction. I do not mean foreign money that
is legal from green card holders in this country or
things like that. I am talking about going after
foreign money from abroad and bringing it back into
our political system. Was there ever any such
guideline with regard to foreign money by that
definition that you had at the DNC?
Sullivan. No.
Sen. Glenn. Did Mr. Fowler [Chairman of the DNC]
ever discuss the possibility of going into that area
and trying to raise money from abroad, foreign money
as I defined it?
Sullivan. No.
Sen. Glenn. Was there ever any discussion pro or
con about whether you would even consider something
like that?
Sullivan. No.
Sen. Glenn. Was there ever any communication or
even a hint from the President or the Vice President
that we should include foreign money?
Sullivan. No. . . .
Sen. Torricelli. [W]as there ever any discussion
of duplicating the Republican National Committee's
efforts with the National Policy Forum by using a
tax-free vehicle, which became a conduit for foreign
money?
Sullivan. No.
Richard Sullivan, 7/9/97 Hrg., pp. 30-31, 116;
DNC Chairman Fowler testified:
During the 1995-96 electoral cycle, we at the
Democratic National Committee made mistakes. . . .
Those mistakes, however, were mistakes of process,
not intent. If any member of our staff or anyone
associated with our fundraising efforts did things
that were illegal or unethical, they did so in
violation of our policies. Our vetting was
deficient, but our purpose and values were good and
proper. To the best of my knowledge, there was no
intent by DNC officials to accept money from illegal
foreign sources. . . . If there was a plot or
conspiracy to pump money illegally into the
Democratic National Committee coffers, no one told
me about it. And to my knowledge, it did not happen.
Donald Fowler, 9/9/77 Hrg., pp. 4-5.
\2\ Senator Glenn, 7/8/97 Hrg., p. 22. See Chapter 3 on the
National Policy Forum. The evidence before the Committee includes a
resignation memorandum by NPF President, Michael Baroody, which cites
Chairman Haley Barbour's inappropriate ``fascination'' with soliciting
foreign money for NPF; an NPF document listing ``foreign''
contributions as a fundraising option; and testimony and documents
describing the successful solicitation of several foreign
contributions. In the most significant transaction, documents and
testimony chronicle how NPF, with the assistance of Barbour and the
RNC, obtained a $2 million loan in October 1994, collateralized with $2
million in certificates of deposit paid for with funds transferred from
Hong Kong dollars at the direction of a foreign national, Ambrous
Young; how $1.6 million of the loan proceeds were immediately
transferred to the RNC and used in its 1994 election efforts; how
Barbour met with Young on a yacht in Hong Kong in 1995 to ask him to
forgive repayment of the loan; how NPF unilaterally stopped repayment
five months before the 1996 elections, thereby halting a cash drain on
the RNC which had been supplying the repayment funds; and how, after
the election, NPF settled the loan with RNC funds wired to Hong Kong
under an arrangement that allowed non-repayment of approximately
$800,000.
\3\ Chairman Thompson, 7/8/97 Hrg., pp. 2, 4.
\4\ See FEC filings for Democratic National Committee, Democratic
Senatorial Campaign Committee, and Democratic Congressional Campaign
Committee; Exhibit 62: DNC In-Depth Contribution Review, DNC 0134-45.
\5\ See FEC filings for Republican National Committee, National
Republican Senatorial Committee, and National Republican Congressional
Committee. To date, the Republican Party has returned a $15,000 foreign
contribution made in 1995 by Methanex Management, Inc., a U.S.
subsidiary of a Canadian corporation; and about $122,000 in foreign
contributions made from 1991 through 1994 by Young Brothers Development
(USA). See, for example, Roll Call, 10/21/96 (Methanex contribution);
New York Times, 5/9/97 (Young Brothers contributions). The NPF has
apparently returned a $50,000 foreign contribution made in 1996 by
Panda Industries, Inc., a company owned by a foreign national, Ted
Sioeng. See Newsday, 9/14/97.
The Republican Party has not returned $800,000 retained in 1996
from NPF's default on a loan transaction involving a foreign national
and foreign dollars from Hong Kong; $25,000 from a 1996 contribution by
a foreign organization, the Pacific Cultural Foundation, which is based
in Taiwan; or $215,000 remaining from a 1992 contribution by Michael
Kojima that apparently utilized foreign funds from Japan. Each of these
matters is discussed in the following chapters.
\6\ See also Part 3, chapters 21 and 22 on contributions in the
name of another affecting both parties in 1996.
\7\ 2 U.S.C. 441e.
\8\ 11 C.F.R. 110.4(a)(1). The need to ban campaign expenditures as
well as contributions by foreign nationals is illustrated, for example,
in an incident involving the Embassy of India in Washington, which, in
1996, sent an unknown number of mailings to Indian-American voters in
New Jersey discussing one of the candidates running for the U.S.
Senate. The 1/30/96 letter, which was addressed to ``Friend'' from
Ambassador Shyamala Cowsik, Deputy Chief of Mission at the Embassy,
states: ``As you know, Congressman Robert Torricelli (D-NJ) is . . .
currently running for the New Jersey seat being vacated by Senator Bill
Bradley. You also know that Congressman Torricelli has consistently
been a strong critic of India. He was, in 1995, the original co-
sponsor, along with Congressman Dan Burton, of the amendment (H.R.
1425) to suspend development assistance to India.'' See also The Ethnic
NewsWatch, 11/15/96.
\9\ 11 C.F.R. 110.4(a)(1). Section 441e bars a foreign national
from making a ``contribution'' in connection with ``an election.''
``Contribution'' is defined in section 431(8)(A) of the law in terms of
an election ``for Federal office.'' This limiting language in the
definition of contribution may create an ambiguity as to whether the
foreign money ban extended to Federal, state and local elections, which
is resolved in the regulation.
\10\ See, for example, Legal Times, 1/6/97. FEC Advisory Opinon
1984-41 determined that it was acceptable for a foreign national to
contribute $500,000 to a U.S. charitable organization to broadcast
issue ads criticizing the ``liberal bias'' of the media. These ads did
not mention candidates, political parties, or elections. The FEC
deadlocked on three other proposed ads that did mention candidates,
parties or elections, and so provided no guidance on whether foreign
money may be used for those issue ads.
\11\ 11 C.F.R. 110.4(a)(3).
\12\ FEC Advisory Opinion 1982-10.
\13\ See, for example, dissenting opinion in FEC Advisory Opinion
1992-16.
\14\ FEC Advisory Opinion 1992-16.
\15\ FEC Advisory Opinion 1989-20.
\16\ See Committee hearing on 7/15/97.
\17\ No federal database exists with citizenship information for
persons born in the United States; campaign organizations have to
obtain such information from the birth records maintained by individual
states and U.S. territories. While the U.S. Immigration and
Naturalization Service does maintain a database of information about
naturalized citizens and legal permanent residents, federal law
prohibits the release of such personal information without the written
permission of the person that is the subject of the inquiry. See 5
U.S.C. 552(b)(6) and 552a; 28 C.F.R. Part 16. Even if a campaign
organization were to obtain written permission from a donor to request
citizenship or immigration information, replies to such inquiries would
likely consume too much time to be of practical use during a campaign.
\18\ 2 U.S.C. Sec. 441f states: ``No person shall make a
contribution in the name of another person or knowingly permit his name
to be used to effect such a contribution, and no person shall knowingly
accept a contribution made by one person in the name of another
person.''
\19\ See, for example, testimony of Thomas R. Hampson, an
experienced corporate investigator specializing in evaluating foreign
companies. Thomas R. Hampson, 7/15/97 Hrg., p. 62. Hampson was asked by
the Committee to examine companies related to Indonesia's Lippo Group,
including Hip Hing Holdings, a U.S. corporation. He testified that a
reasonably thorough search over two weeks of a number of different
public databases did not enable him to determine the gross or net
income of Hip Hing Holdings in the year in which it made a contribution
to the DNC. Thomas R. Hampson, 7/15/97 Hrg., pp. 82-84. He indicated
that this information is not a matter of public record nor easily
accessible, even to an expert investigator.
\20\An illustration is provided by In re Kramer, FEC MUR 4398, an
FEC civil enforcement action settled by conciliation agreement dated 8/
22/96.
Thomas Kramer, a foreign national, contributed a total of $322,600
in illegal campaign contributions during the 1994 election cycle to
both parties at the state, local and national level. He made these
contributions directly, through several Florida corporations he
controlled, and through several individuals used as contribution
conduits. His donations included $205,000 to the Florida Republican
Party and $65,000 to the DNC. His lawyer was quoted in the press as
saying that ``no fundraiser had ever inquired into Kramer's immigration
status or refused his funds because he was a foreign national'' and
that Kramer first learned he might be violating the law from reading a
newspaper article. Associated Press, 7/18/96.
Kramer voluntarily contacted the FEC, which ultimately fined him
$323,000. The press reported that some campaign organizations were
resisting refunding his illegal contributions. The Florida Republican
Party, for example, initially wrote to Kramer that his contributions
``had been received in good faith and, therefore, were not available
for refund,'' though it later returned a portion of the funds. The
Kramer case illustrates the widespread lack of awareness and
understanding of the law, the ease with which illegal foreign
contributions enter the campaign finance system, and an enforcement
apparatus that took action in this matter only after being contacted by
the wrongdoer.
\21\ S. 25, the McCain-Feingold bill, would make a number of the
legislative remedies needed to clarify and strengthen section 441e.
PART 1 FOREIGN INFLUENCE
Chapter 2: The China Plan
In early 1997, news reports appeared alleging that U.S.
federal intelligence agencies had discovered an attempt by the
government of the People's Republic of China (``Chinese
Government'') to increase its influence in the U.S. political
process. From February through December 1997, the Committee
considered these allegations.
The information gathered by the Committee shows that during
the 1996 federal election cycle, Chinese Government officials
decided to attempt to promote China's interests with the United
States Congress, state legislatures and the American public.
Following the 1995 congressional resolution advocating that
Taiwanese President Lee be permitted to visit the U.S., as well
as President Lee's subsequent visit, the Chinese Government
determined that Congress and state officials were more
influential in foreign policy decisions than the Chinese
Government had previously believed. The Chinese Government's
efforts have become known in the media as ``the China Plan.''
The Committee's public discussion of the China Plan began on
July 8, 1997, when Chairman Thompson opened the first day of
public hearings by asserting that the China Plan was ``hatched
during the last election cycle by the Chinese Government and
designed to pour illegal money into American political
campaigns.'' The Chairman explained that the information before
the Committee indicated that the Chinese Government had
apparently taken legal steps pursuant to the plan, such as
hiring lobbying firms, contacting the media and inviting more
Congress members to visit China. He also asserted that
``[a]lthough mostdiscussion of the plan focuses on Congress,
our investigation suggests it affected the 1996 Presidential race and
State elections as well.''
The Chairman's assertions implied that the non-public
information presented to the Committee included evidence that
the Chinese Government's activities had affected, or had some
meaningful impact on, the 1996 elections.
Based on the evidence presented to the Committee, the
Minority makes the following findings:
(1) Following the 1995 congressional resolution advocating
that Taiwanese President Lee be permitted to visit the U.S. and
President Lee's subsequent visit, Chinese Government officials
decided to attempt to increase the Chinese Government's
promotion of its interests with the U.S. Congress, state
legislatures and the American public. These efforts, which
became known in the media as ``the China Plan,'' reflected the
Chinese Government's perception that Congress was more
influential in foreign policy decisions than it had previously
determined.
(2) The non-public information presented to the Committee
to date does not support the conclusion that the China Plan was
aimed at, or affected, the 1996 presidential election.
(3) Although some steps were taken to implement the China
Plan, the non-public information presented to the Committee to
date does not support the conclusion that those steps involved
Chinese Government funds going to federal campaigns, either
congressional or presidential. During the Committee's public
investigation, the Committee learned that contributions derived
from foreign funds made their way into the 1996 federal
election. The non-public information presented to the
Committee, however, does not support the conclusion that these
contributions were tied to the China Plan, or to Chinese
Government officials. The non-public information presented to
the Committee does support the conclusion that the China Plan
was implemented with a relatively modest sum of money that was
spent on lobbying Congress, paying for members of Congress to
visit China, and increasing public relations with Chinese
Americans.
(4) The non-public information presented to the Committee
raised questions regarding the political activities of one
individual investigated by the Committee, Ted Sioeng, but the
information available to date was insufficient to support the
conclusion that his activities in connection with the political
contributions made by his daughter or by his associates in the
United States were connected to Chinese Government officials or
the China Plan. For information on Sioeng's activities explored
during the Committee's public investigation, see Chapter 7 of
this Minority Report.
Chapter 3: The National Policy Forum
One of the most striking examples of foreign money in
federal elections involved the National Policy Forum
(``NPF'')--Young Brothers Development loan transaction.
Republican National Committee (``RNC'') Chairman Haley Barbour
used grants and loans from the RNC to create NPF in 1993 (which
applied for tax-exempt exempt status under section 501(c)(4) of
the U.S. tax code as a social welfare organization). NPF was
designed to advance the Republican Party's agenda. In the hope
of finding funds to repay the RNC's loans, Barbour targeted
foreign sources of money. At the request of Barbour, Ambrous
Young, a Hong Kong businessman, agreed to post $2.1 million in
collateral, transferred from his Hong Kong business, for a bank
loan in the same amount to the NPF. NPF transferred the loan
proceeds to the RNC, which used them to help Republican
candidates in the 1994 Congressional elections. NPF eventually
defaulted on the bank loan. The RNC paid $1.3 million to Young,
but refused to repay the balance, resulting in an $800,000
benefit of foreign money to the RNC.
Based on the evidence before the Committee, we make the
following findings regarding NPF and this transaction:
(1) RNC Chairman Haley Barbour and the RNC intentionally
solicited foreign money for the NPF.
(2) The NPF was an arm of the RNC and, as the Internal
Revenue Service concluded, was not entitled to tax-exempt
status as a social welfare organization under section 501(c)(4)
of the U.S. tax code.
(3) Barbour solicited Ambrous Young, a foreign national,
and Young agreed to provide the collateral for a loan to NPF
for the purpose of helping Republican candidates during the
1994 elections.
(4) The evidence before the Committee strongly supports the
conclusion that Barbour and other RNC officials knew that the
money used to collateralize the NPF loan came from Hong Kong.
Barbour's testimony that he did not know about the foreign
source of the loan collateral was not credible.
(5) As a result of NPF's default on the loan, the RNC
improperly retained $800,000 in foreign money during the 1996
election cycle.
Chapter 4: John Huang
John Huang, an American citizen who emigrated from Taiwan
in 1969, is a former Lippo Group executive, Commerce Department
official, and Democratic National Committee (``DNC'')
fundraiser. Huang engaged in a number of activities that were
improper and possibly illegal during and prior to his tenure at
the DNC. In the end, the DNC returned over $1.7 million of the
almost $3.5 million in contributions attributable to Huang. The
Committee investigated whether Huang engaged in improper
fundraising activities. In addition, the Committee examined
allegations that Huang acted as an agent for a foreign
government or entity.
Based on the evidence before the Committee, we make the
following findings regarding Huang's activities:
(1) John Huang engaged in a number of improper and possibly
illegal activities during and prior to his service as a DNC
fundraiser. These activities ranged from failing to ensure the
legality or propriety of the contributions he solicited, to
obtaining foreign reimbursement for a 1992 corporate
contribution he directed, to possibly soliciting foreign
contributions. In addition, he appears to have improperly
solicited several contributions during his tenure at the
Commerce Department, in possible violation of the Hatch Act.
(2) There is no evidence before the Committee that DNC
officials were knowingly involved in Huang's misdeeds, but the
DNC did not adequately supervise Huang's fundraising, did not
adequately review the contributions that Huang solicited, and
did not respond appropriately to warning signs of his improper
activities. The DNC could have avoided some of Huang's misdeeds
had it more closely supervised Huang's activities and had it
not unwisely abandoned its previously-existing system for
checking the propriety of large contributions.
(3) Huang contributed and raised substantial sums of money
to benefit the DNC in order to gain access for himself and his
associates to the White House and senior Administration
officials.
(4) The evidence before the Committee does not establish
that Huang served as a spy or a conduit for contributions from
any foreign government, including the People's Republic of
China. The Committee's investigation yielded no direct support
for the allegation that Huang acted as either a spy or a
conduit for any foreign government.
(5) The evidence before the Committee does not establish
that Huang either misused his security clearance or improperly
disseminated classified information during his service at the
Commerce Department.
(6) The evidence before the Committee does not allow for
any definitive conclusion regarding the nature of Huang's
interactions with the Lippo Group during his tenure at the
Commerce Department andthe DNC. Huang's frequent contacts with
Lippo-related entities and his intermittent use of an office across the
street from the Commerce Department to receive faxes or mail cast
suspicion on Huang's activities while working for the Commerce
Department. Nevertheless, the absence of specific evidence on the
nature of his contacts with Lippo or the contents of the materials he
received makes it difficult to draw any conclusions regarding actual
misconduct or a conflict of interest within the meaning of the ethics
laws governing federal employees.
(7) Neither Huang's hiring at the Commerce Department nor
his receipt of a security clearance was inappropriate. At the
time of Huang's hiring, all Commerce Department political
appointees received interim clearances as a matter of course, a
practice the Department subsequently discontinued.
Chapter 5: Charlie Trie
Yah Lin ``Charlie'' Trie, an American citizen who emigrated
from Taiwan in 1974, raised and contributed substantial sums of
money to benefit the Democratic National Committee (``DNC'')
and raised funds for the Presidential Legal Expense Trust
(``PLET'') during the 1996 election cycle. Trie, who owned a
restaurant in Arkansas and became a friend of then-Governor
Clinton, opened a Washington, D.C.-based import-export company
in 1992, apparently to take advantage of his relationship with
the President-elect. He and his business associates had
frequent access to the White House. In April 1996, President
Clinton appointed Trie to the Commission on United States-
Pacific Trade and Investment Policy. Trie's international
business dealings with Ng Lap Seng (also known as Wu), a
wealthy Macao businessman, raised questions about the source of
Trie's contributions.
Based on the evidence before the Committee, we make the
following findings regarding Trie's activities:
(1) Charlie Trie contributed and raised substantial sums of
money to benefit the DNC in order to gain access for himself
and his associates to the White House and senior Administration
officials.
(2) Trie and his businesses received substantial sums of
money from abroad and used these funds to pay for some or all
of the $220,000 in contributions that Trie, his family and
businesses made to the DNC. The evidence before the Committee
suggests that some of the contributions may have been illegal,
and, in fact, Trie was recently indicted with respect to some
of these contributions. Trie has pleaded not guilty. The DNC
returned all $220,000.
(3) Trie and Wu used individuals who were legally permitted
to make campaign contributions as conduits to make
contributions to the DNC, in apparent violation of law.
(4) There is no evidence before the Committee that any DNC
officials were knowingly involved in Trie's misdeeds, but the
DNC did not adequately review the source of Trie's
contributions and did not respond appropriately to warning
signs of his improper activities.
(5) The evidence before the Committee does not establish
that the Government of the People's Republic of China provided
money to Trie or directed Trie's actions.
(6) The Presidential Legal Expense Trust, a private trust
not involved in campaigns, acted prudently and responsibly in
its dealings with Trie.
(7) There is no evidence before the Committee that Trie,
Wu, or anyone associated with them had any influence or effect
on U.S. domestic or foreign policy.
Chapter 6: Michael Kojima
Michael Kojima, a Japanese-born American citizen, first
gained public notice as a ``deadbeat dad'' who failed to pay
child support but gave $500,000 to the Republican Party to sit
with President Bush at a fundraising dinner in 1992. This
contribution, which the evidence before the Committee strongly
suggests Kojima paid for with funds obtained from Japanese
businessmen, appears to be the second largest source of foreign
money for either party during the 1990s--surpassed only by the
$800,000 obtained by the RNC from a Hong Kong corporation
through the National Policy Forum.
Kojima's story has since gained importance as an example of
a little-known contributor whose large contribution should have
been investigated before being accepted and should have been
returned when evidence emerged that it was from foreign
sources. Kojima's dealings with the Republican Party and the
Bush administration provide a context for understanding how
many of the events on which the Committee focused its attention
had precedent in previous campaigns and Administrations. The
Kojima matter illustrates that the receipt of large foreign
contributions, the provision of special access to large
contributors, and the use of the White House for fundraising
purposes are neither unprecedented practices nor confined to
one party.
Based on the evidence before the Committee, we make the
following findings with respect to Kojima's activities:
(1) Michael Kojima contributed substantial sums to the
Republican Party in order to gain access for himself and his
associates to President Bush and Bush administration officials
and the help of U.S. embassies abroad. With the help of a
Republican fundraising organization, the Presidential
Roundtable, and because of his status as a contributor, Kojima
obtained access to U.S. embassy and foreign officials to
advance his private business interests.
(2) Kojima's $500,000 contribution to the Republican Party
appears to have been derived from foreign funds. As a result of
his substantial contributions, Kojima was able to bring ten
Japanese nationals with him to a 1992 dinner with President
Bush. According to some of those foreign nationals, they
provided Kojima with significant sums of money for the express
purpose of facilitating their attendance at the dinner.
(3) The RNC has improperly retained $215,000 in apparent
foreign funds contributed by Kojima.
(4) The Republican Party failed to conduct an adequate
investigation of Kojima even when it had information that the
source of the funds was questionable.
Chapter 7: Ted Sioeng
Ted Sioeng, an Indonesian-born businessman who is not a
U.S. citizen or a legal resident, and other members of the
Sioeng family contributed to both Republican and Democratic
organizations during the 1990s. Sioeng has longstanding
relationships with business interests in the People's Republic
of China (``PRC'') and owns a pro-PRC newspaper in California.
The evidence before the Committee paints a disturbing picture
of fundraisers from both political parties courting an
individual (Sioeng) who, because of his status as a foreign
national, had no ability to make or direct legal contributions
under U.S. election laws.
Based on the evidence before the Committee, we make the
following findings with respect to political contributions from
Sioeng and related persons:
(1) The evidence before the Committee strongly suggests
that Ted Sioeng, a foreign national, was directly or indirectly
involved in a number of contributions to Democrats and
Republicans.
(2) Matt Fong, California State Treasurer, did not exercise
appropriate diligence in personally soliciting and receiving
$100,000 in contributions from Sioeng and helping solicit a
$50,000 contribution to NPF from a Sioeng-owned company. Fong
has since returned the $100,000 he received; NPF has reportedly
returned the $50,000 it received.
(3) The evidence before the Committee does not allow for
any conclusion as to whether Sioeng served as a conduit for
contributionsfrom any foreign government, including the
Government of China.
(4) Sioeng's contributions enabled Sioeng and his
associates to gain access to senior figures in both the
Democratic and Republican parties, including President Clinton,
Vice President Gore, and House Speaker Gingrich.
Chapter 8: Jay Kim
In July 1997, Representative Jay Kim (R-Ca.) and his wife,
June Kim, pled guilty to numerous violations of federal
campaign finance laws arising out of his 1992 and 1994
campaigns. The violations were part of a scheme which funneled
over $230,000 in illegal corporate funds, some of which were
directed by Korean nationals, into Kim's campaigns. Five
corporations pled guilty to making illegal contributions, and
Kim's campaign treasurer, Seokuk Ma, was convicted of
soliciting and accepting illegal contributions. Some of these
violations occurred well after the Kims became aware that they
were targets of a federal investigation.
Based on the evidence before the Committee, we make the
following findings regarding activities by the Kims:
(1) The Kims appear to have continued some of the same
troubling practices during the 1996 election cycle that laid
the foundation for the criminal misconduct in the prior two
election cycles, including using a campaign treasurer with no
knowledge of federal election law and instructing the treasurer
to sign blank checks and blank Federal Election Commission
forms.
(2) The evidence before the Committee suggests that June
Kim's recently-disclosed book deal with a South Korean
publishing company may be an attempt to inappropriately channel
foreign money to the Kims.
PART 2 FINDINGS ON INDEPENDENT GROUPS
Chapter 9: Overview and Legal Analysis
(1) Independent groups, including tax-exempt organizations,
corporations and unions, spent large sums of money to influence
the public's perception of federal candidates and campaigns and
the outcome of certain elections in 1996.
(2) During the 1996 election cycle, tax-exempt
organizations spent tens of millions of dollars on behalf of
Republican and Democratic candidates under the guise of issue
advocacy, in violation of the spirit and possibly the letter of
the tax code and election laws. Despite their election-related
activity, none of these organizations registered with or
disclosed their activities to the FEC. Moreover, because of
restrictions in the tax code with respect to such tax-exempt
organizations, these organizations may have violated their tax
status.
(3) Although many groups conduct activities that influence
the public's perception of federal candidates and campaigns,
they either are not required, or do not, register with or
disclose their activities with the FEC.
Chapter 10: The Republican Party and Independent Groups
The Republican National Committee (``RNC'') used tax-exempt
organizations for partisan political purposes during the 1996
election cycle. The RNC channeled over $5 million--directly
from party coffers--to organizations supposedly independent
from the Republican Party, and collected and delivered
significant additional sums from third parties to these groups.
Some of these organizations then used the funds to help
Republican candidates win election; two were actually founded
and controlled by RNC officials. Other tax-exempt organizations
served as conduits for Republican donors who used the
organizations to conceal their identities and evade federal
ceilings on campaign contributions.
Based on the evidence before the Committee, we make the
following findings with respect to the Republican network of
independent organizations:
(1) The Republican Party financed and participated in
election-related activities by tax-exempt organizations, in
part to evade the limits of federal election laws and to use
the organizations as surrogates for delivering the Republican
Party's message.
(2) The RNC directly funded, for purposes that benefited
the Republican Party, a number of tax-exempt organizations that
were supposed to operate in a non-partisan manner.
(3) The RNC also solicited, collected and delivered third-
party funds to tax-exempt organizations for election-related
activities to benefit the Republican Party.
(4) The RNC instructed and helped Republican candidates to
coordinate their campaign activities with independent groups.
Chapter 11: Americans for Tax Reform
Despite a commitment to nonpartisanship in its
incorporation papers, ATR engaged in a variety of partisan
activities on behalf of the Republican Party during the 1996
election cycle. For example, ATR accepted $4.6 million in soft
dollars from the Republican National Committee (``RNC'') and
spent them on election-related efforts coordinated with the
RNC. ATR acted as an arm of the RNC in promoting the Republican
agenda and Republican candidates, while shielding itself and
its contributors from the accountability required of campaign
organizations. Although ATR's refusal to comply with Committee
document and deposition subpoenas has kept the Committee from
learning the full extent of ATR's involvement with the RNC in
the 1996 elections, the evidence before the Committee strongly
suggests coordinated campaign efforts between the RNC and ATR
that appear to have circumvented hard and soft money
restrictions, evaded disclosure requirements and abused ATR's
tax-exempt status.
Based on the evidence before the Committee, we make the
following findings with respect to ATR's activities:
(1) The Republican National Committee improperly and
possibly illegally gave $4.6 million to Americans for Tax
Reform to fund issue advocacy efforts including mail, phone
calls, and televised ads. By using ATR as the nominal sponsor
of issue advocacy efforts, the RNC effectively circumvented FEC
disclosure requirements and the requirement to fund 65% of the
cost of its issue advocacy with hard (restricted) money.
(2) By operating as a partisan political organization on
behalf of the Republican Party, Americans for Tax Reform
appears to have violated its status as a tax-exempt, social
welfare organization under section 501(c)(4) of the tax code.
(3) ATR's issue advocacy activity was conducted, in part,
by an affiliate called the Americans for Tax Reform Foundation,
which appears to be a violation of the foundation's status as a
501(c)(3) charitable organization, contributions to which are
tax deductible.
Chapter 12: Triad and Related Organizations
Triad Management Services, Inc. is a for-profit corporation
owned by Republican fundraiser Carolyn Malenick. Malenick
incorporated Triad in the spring of 1996, but appears to have
operated the business as an unincorporated entity since at
least early 1995. Triad holds itself out as a consulting
business that provides advice to conservative donors about how
to maximize their political contributions. Triad oversaw
advertising in 26 campaigns for the House of Representatives
and three Senate races. Triad also advised at least 53
Republican candidates on ways to improve their campaigns.
Despite Triad's refusal to fully comply with the Committee's
subpoenas for both documents and testimony, substantial
evidence of wrongdoing by Triad wasdeveloped by the Minority.
Based on the evidence before the Committee, we make the
following findings with respect to the activities of Triad and
two non-profit organizations which it established:
(1) The evidence before the Committee suggests that Triad
exists for the sole purpose of influencing federal elections.
Triad is not a political consulting business: it issues no
invoices, charges no fees, and makes no profit. It is a
corporate shell funded by a few wealthy conservative Republican
activists.
(2) Triad used a variety of improper and possibly illegal
tactics to help Republican candidates win election in 1996
including the following:
(A) Triad provided free services to Republican campaigns in
possible violation of the federal prohibition against direct
corporate contributions to candidates. These services included
raising funds for candidates, providing consulting advice on
fundraising and political strategy, and providing staff to
assist candidates.
(B) The evidence before the Committee suggests that Triad
was involved in a scheme to direct funds from supporters who
could not legally give more money directly to candidates,
through political action committees (``PACs''), and back to
candidates. Triad obtained from Republican candidates names of
supporters who had already made the maximum permissible
contributions and solicited those supporters for contributions
to a network of conservative PACs. In many instances, the PACs
then made contributions to the same candidates.
(C) Triad operated two non-profit organizations--Citizens
for Reform and Citizens for the Republic Education Fund--as
allegedly nonpartisan social welfare organizations under
501(c)(4) of the tax code and used these organizations to
broadcast over $3 million in televised ads on behalf of
Republican candidates in 29 House and Senate races. Using these
organizations as the named sponsors of the ads provided the
appearance of nonpartisan sponsorship of what was in fact a
partisan effort conducted by Triad. Neither organization has a
staff or an office, and both are controlled by Triad. Over half
of the advertising campaign was paid for and controlled by the
Economic Education Trust, an organization which appears to be
financed by a small number of conservative Republicans.
Chapter 13: Coalition for Our Children's Future
Coalition for Our Children's Future (``CCF'') is a tax-
exempt organization under section 501(c)(4) of the tax code.
Between its creation in mid-1995 and the November 1996
election, CCF spent over $5 million on advertising in targeted
Congressional districts.
Based on the evidence before the Committee, we make the
following findings with respect to CCF's activities:
(1) Haley Barbour and others associated with the RNC
created Coalition for Our Children's Future (``CCF'') as a
purportedly nonpartisan, tax-exempt social welfare organization
under 501(c)(4) of the tax code and used CCF to carry out issue
advocacy campaigns on behalf of Republican candidates and
against Democratic candidates in 1995 and the first part of
1996.
(2) The evidence before the Committee suggests that several
Republican candidates solicited contributions for CCF from
their own supporters and coordinated with CCF to secure issue
ads that they believed would help their candidacy.
(3) The evidence before the Committee suggests that in
October 1996, CCF funded televised ads attacking Democratic
candidates with money donated by a contributor who obtained a
confidentiality agreement and oversaw development of the ads.
Based on the evidence before the Committee, it is likely that
this contributor was the Economic Education Trust, the same
entity that funded and perhaps controlled the development and
placement of ads through two tax-exempt organizations operated
by Triad.
Chapter 14: Christian Coalition
The Christian Coalition was founded by Reverend Marion G.
(``Pat'') Robertson, a former Republican candidate for
president, with $64,000 in seed money from the National
Republican Senatorial Committee (``NRSC''). Its longtime
executive director was Ralph Reed, a Republican activist. In
spite of Reed's extensive Republican political experience,
Robertson's ties to the Republican Party, and the infusion of
start-up funds from the NRSC, the Christian Coalition applied
for tax-exempt status as a nonpartisan social welfare
organization under section 501(c)(4) of the tax code. The
application has been pending and unapproved for over seven
years. In 1996 the Federal Election Commission (``FEC'')
brought suit in federal court against the Coalition for
allegedly coordinating election-related activities with
Republican candidates during the 1990, 1992, and 1994 election
cycles. Despite the Christian Coalition's refusal to respond to
the Committee's subpoena, the Minority was able to develop
information about the Coalition's election-related activities.
Based on the evidence before the Committee, we make the
following finding with respect to the Christian Coalition's
activities:
Although the Christian Coalition has applied for status as
a 501(c)(4) organization and claims to be a nonpartisan, social
welfare organization, the evidence before the Committee
suggests that the Christian Coalition is a partisan political
organization operating in support of Republican Party
candidates. The evidence of partisan activity includes:
spending at least $22 million on the 1996 elections; working to
distribute 45 million voter guides manipulated to favor
Republican candidates; and endorsing Republican candidates at
organization meetings.
Chapter 16: The Democratic Party and Independent Groups
In 1996, the Democratic National Committee (``DNC'')
contributed approximately $185,000 to five independent, tax-
exempt organizations, most of which were involved in voter
registration activities. In addition, Democratic Party
officials directed contributions to some of these
organizations. Independent groups associated with Democratic
issues also spent millions of dollars on issue ads, direct
mail, and related organizing activities largely benefiting
Democratic candidates.
Based on the evidence before the Committee, we make the
following findings with respect to the Democratic Party and its
activities involving independent organizations :
(1) During the 1996 election cycle, several independent
groups spent millions of dollars to promote Democratic issues
and possibly Democratic candidates through issue advocacy, and
voter education and registration.
(2) The evidence before the Committee, however, suggests
that the Democratic Party did not play a central role in
financing, or coordinating with, these groups.
Chapter 17: Warren Meddoff
Shortly before the 1996 election, Florida businessman
Warren Meddoff approached President Clinton at a Florida
fundraiser concerning a possible $5 million donation to the
President's campaign from Meddoff's associate. Subsequently
contacted by Harold Ickes, White House Deputy Chief of Staff,
Meddoff told Ickes that his associate wanted to make at least
some of his contributions tax deductible. Ickes prepared a memo
suggesting some possible tax-exempt and tax deductible
recipients. After sending the memo to Meddoff, Ickes received
word that a DNCbackground check of Meddoff and his associate
raised serious questions and that it would be better for the DNC to
decline Meddoff's offer of contributions. Ickes and Meddoff dispute
what happened next. Meddoff testified that Ickes told him to ``shred''
the memo; Ickes testified that he merely told Meddoff that the memo
``was inoperative.''
Based on the evidence before the Committee, we make the
following findings regarding these events:
(1) There is no evidence before the Committee suggesting
that Harold Ickes or any DNC official acted illegally in their
dealings with Warren Meddoff. Current law does not prohibit a
federal government employee or party official from directing
contributions to tax-exempt organizations.
(2) It would have been more prudent, as Ickes himself
testified, for Ickes to have immediately referred Meddoff to
the DNC. Meddoff sought suggestions on how to make a tax-
deductible contribution that would help President Clinton's
campaign. The Committee does not have sufficient evidence to
determine whether the organizations recommended by Ickes were
actually engaged in any partisan political activities. Ickes's
opinion that a contribution to such groups would benefit the
President's campaign does not establish that these
organizations were engaged in any activities that would have
been inconsistent with their tax-exempt status.
(3) The DNC acted appropriately by checking the backgrounds
of Meddoff and his associate and ultimately refusing their
proposed contribution.
(4) Meddoff is not a credible witness. His explanation to
the Committee of two past proposals on behalf of two different
persons to contribute $5 million to the Republican Party in one
case and the Democratic Party in the other case; his admission
of involvement in conduct that appears to be an attempt to
bribe a federal official; his apparent threats to his former
employer and a DNC fundraiser; and the fact that he never met
the person on whose behalf he was allegedly making a $5 million
contribution to help President Clinton, cast significant doubt
on his credibility.
Chapter 18: Teamsters
During the reelection campaign of International Brotherhood
of Teamsters President Ron Carey, consultants working for
Carey's campaign launched a ``contribution-swapping'' scheme to
help raise money for their campaign. As these fundraisers have
acknowledged in court proceedings, they illegally asked a
number of groups to donate money to Carey's campaign in
exchange for donations to those groups from the Teamsters union
funds. As a small part of this scheme, one of these
consultants, Martin Davis, sought the help of DNC officials in
locating donors willing to give money to Carey's campaign and
promised greater Teamsters donations to Democratic party
organizations in return. Evidence before the Committee suggests
that DNC officials took little action in response to this
request but that they did make an ultimately unsuccessful
effort at directing to the Carey campaign the donation of an
individual who sought to donate to the DNC, but whose foreign
citizenship made her ineligible to make that donation.
Based on the evidence before the Committee, we make the
following findings regarding these events:
(1) The evidence before the Committee indicates that the
DNC's efforts at finding a donor for the Carey campaign were
limited to exploring the legality of a possible donation from
one individual to the Carey campaign, but that donation did not
ultimately occur because the potential donor was not eligible,
under labor laws and Teamsters'' rules, to contribute to the
Carey campaign.
(2) Nevertheless, Martin Davis's comments to DNC officials
should have led them to suspect that Davis was improperly
seeking to influence the use of Teamsters funds to benefit the
Carey campaign. DNC officials should have immediately refused
to take any action in response to Davis's request.
Chapter 19: The Democratic Party and Other Independent Groups
During the 1996 federal election cycle, there were
allegations that ostensibly independent, tax-exempt groups
engaged in improper or illegal partisan political activity. The
alleged activity ranged from broadcasting issue ads that in
reality were candidate ads, to closely coordinating with one of
the national political parties. Unfortunately, the vast
majority of allegations against independent groups remain
unexplored by the Committee because subpoenas issued to most of
these groups were not complied with or enforced. Despite these
and other limitations, allegations regarding groups
traditionally associated with the Republican Party are
addressed in Chapters 10-15. Allegations regarding groups
traditionally associated with the Democratic Party, and
including those that were explored in public hearings, are
addressed in Chapters 17-18. This chapter addresses, to the
extent possible based on evidence submitted to the Committee,
allegations regarding certain other groups traditionally
associated with the Democratic Party.
Based on the evidence before the Committee, we make the
following findings regarding these allegations:
(1) During the 1996 election cycle, several independent
groups spent millions of dollars to promote Democratic issues
and possibly Democratic candidates through ``issue advocacy,''
voter education and voter registration.
(2) The Committee, however, uncovered no evidence that the
Democratic Party played a central role in contributing to, or
coordinating with, these groups. The Democratic National
Committee contributed only $185,000 to such groups in 1996,
compared to over $5 million the Republican National Committee
contributed to conservative groups in the last half of 1996
alone.
PART 3 FINDINGS ON CONTRIBUTION LAUNDERING/THIRD PARTY TRANSFERS
Chapter 20: Overview and Legal Analysis
The Federal Election Campaign Act (``FECA'') provides that
``no person shall make a contribution in the name of another
person or knowingly permit his name to be used to effect such a
contribution, and no person shall knowingly accept a
contribution made by one person in the name of another
person.'' 2 U.S.C. Sec. 441f. This prohibition serves two
purposes. (1) It helps guarantee that persons and entities
otherwise prohibited from making political contributions cannot
evade those restrictions by making donations using other
peoples'' names. (2) It ensures that no one seeking to
influence elections with their money can circumvent the
election laws' requirement of contributions limits and full
public disclosure by offering their money in someone else's
name rather than their own. The Committee's investigation
examined a number of individuals alleged to have engaged in
activities that violated this prohibition.
A number of individuals in both the Republican and
Democratic parties made contributions to candidates for federal
office and political parties through persons who were eligible
to contribute, in apparent violation of the Federal Election
Campaign Act.
Chapter 21: Contributions to the Democratic Party
The Committee examined a number of allegations of
contributions to the DNC that were ``laundered'' or made in the
name of persons who were not the real source of the
contributions.
Based on the evidence before the Committee, we make the
following findings regarding these contributions, all of which
have been returned by the DNC:
(1) The evidence before the Committee shows that a number
of individuals made contributions to the DNC or Democratic
organizations in the name of others. Some of these were hard
(restricted) money contributions, in which case they may be
improper or illegal; some of these were soft (unrestricted)
money contributions, in which case they may be technically
legal, but result in inaccurate contribution records at the
FEC. Among those whose activities the Committee investigated
are:
(A) Charlie Trie/Ng Lap Seng (``Wu''): Trie and Wu used
Keshi Zahn to arrange to have two legal permanent residents,
Yue Chu and Xiping Wang, contribute $28,000 in hard
(restricted) money to Democratic campaign organizations and
reimbursed them. There is no evidence before the Committee to
suggest that either Chu or Wang understood that their actions
potentially violated campaign finance laws. Trie and Wu also
used Zahn to make a $12,500 hard (restricted) money
contribution to the DNC.
(B) Pauline Kanchanalak: Kanchanalak used her mother-in-
law's money to fund $253,500 in contributions to the DNC,
$26,000 of which was hard (restricted) money. Although both
Pauline Kanchanalak and her mother-in-law Praitun Kanchanalak
were legal permanent residents of the U.S. and each, therefore,
lawfully could make contributions in her own name, the $26,000
contribution of her mother-in-law's money in Kanchanalak's name
appears to violate Section 441f.
(C) Yogesh Gandhi: Gandhi, a legal permanent resident,
appears to have used an associate's foreign-source money to
fund a $325,000 contribution in soft (unrestricted) money in
connection with a DNC fundraiser. Gandhi's bank records reveal
that he would not have been able to make that contribution
without significant wire transfers from Yoshio Tanaka, a
Japanese national who attended a DNC fundraiser with Gandhi.
Evidence before the Committee supports the conclusion that
Tanaka transferred the money to fund Gandhi's contribution.
(D) Arief and Soraya Wiriadinata: The Wiriadinatas, at one
time legal permanent residents, made contributions of over
$425,000 to the DNC, $20,000 of which appears to be hard
(restricted) money contributions. The contributions were made
in checks drawn on bank accounts funded with overseas transfers
from Soraya Wiriadinata's father. In light of representations
from Soraya Wiriadinata that her father transferred Soraya's
own money, the evidence before the Committee does not establish
that the $20,000 in hard money contributions came from another.
(2) The evidence before the Committee does not support a
finding that any DNC official knowingly solicited or accepted
contributions given in the name of another.
Hsi Lai Temple event
On April 29, 1996, Vice President Gore attended a DNC-
sponsored and John Huang-organized event at the Hsi Lai Temple
in Hacienda Heights, California. Vice President Gore's briefing
papers for the event described it as an outreach event with
members of the Asian-American community, but much controversy
has arisen regarding allegations that the DNC improperly used a
religious institution to host a fundraising event and that the
Temple funneled money through its monastics to the DNC.
Based on the evidence before the Committee, we make the
following findings regarding the event at the Hsi Lai Temple:
(3) From the perspective of Vice President Gore and DNC
officals, the Hsi Lai Temple event was not a fundraiser. There
is no evidence before the Committee that Vice President Gore
knew that contributions were solicited or received in relation
to the Temple event. The information received by the Vice
President regarding the event described it as an opportunity
for the Vice President to meet with members of the local Asian-
American community. John Huang assured DNC Finance Director
Richard Sullivan that the event was not a fundraiser, but
instead would involve community outreach. Moreover, the event
had none of the features of a fundraiser: no tickets were taken
or sold at the door; the speakers did not solicit donations;
and most of those who attended did not contribute to the DNC.
(4) John Huang and Maria Hsia used Vice President Gore's
appearance at the Temple to raise money for the DNC. Although
the event itself was not a fundraiser, Huang and Hsia,
unbeknownst to DNC officials or the Vice President, used it as
an opportunity to raise money for the DNC. Both before and
after the event, they suggested to Temple officials that they
collect contributions in connection with the Temple event.
Their efforts eventually yielded $65,000 in contributions from
persons associated with the Temple.
(5) There is no evidence before the Committee to suggest
that the money donated in connection with the Hsi Lai Temple
event was foreign in origin.
(6) Many of the donations made in connection with the Hsi
Lai Temple event appear to have violated federal campaign laws
prohibiting contributions in the name of another. The Temple
reimbursed the monastic donors for their contributions. There
is evidence to suggest that most of those writing the checks
did not understand that they were potentially violating federal
election law. Nevertheless, there appears to be little doubt
that most, if not all, wrote the checks to the DNC only because
the Temple asked them to do so and with the understanding that
they would not fund the contributions themselves.
(7) There is no evidence before the Committee that any DNC
official knew that contributions made by Hsi Lai Temple
monastics were of questionable legality.
Chapter 22: Contributions to the Republican Party
The Committee refused to devote sufficient resources,
despite repeated requests to do so by the Minority, to
investigating allegations of laundered contributions to the
Republican Party, including the Dole for President campaign,
RNC, and other Republican organizations. The Committee took
testimony at one of the Minority's three days of hearings on
the laundering scheme of Simon Fireman, a national vice
chairman of the Dole for President finance committee, and had
evidence with respect to other cases of proven and alleged
laundered contributions to Republican organizations.
Based on the evidence before the Committee, we make the
following findings regarding these contributions to the
Republican Party all of which have been returned:
(1) Simon Fireman, a national vice chairman of the Dole for
President campaign, used his company, Aqua Leisure Industries,
Inc., to reimburse contributions to several Republican Party
organizations made in the name of employees of Aqua Leisure.
Over $100,000 in contributions made by employees of Aqua
Leisure to the Bush-Quayle campaign, the RNC, and the Dole for
President campaign were actually corporate contributions from
Aqua Leisure. Fireman was convicted for his offenses.
(2) Empire Sanitary Landfill, Inc. reimbursed its employees
forover $110,000 in contributions the employees made to the
Dole for President campaign and other Republican campaigns. Empire was
convicted for its offenses.
(3) DeLuca Liquor & Wine, Ltd. reimbursed five of its
employees for $10,000 in contributions the employees and their
spouses made to the Dole for President campaign.
(4) There is no evidence before the Committee that anyone
in the Dole for President campaign, the Bush-Quayle campaign or
the RNC, other than Simon Fireman, knew about the above
activities.
PART 4 FINDINGS ON SOFT MONEY AND ISSUE ADVOCACY
Chapter 23: Systemic Problems of the Campaign Finance System
The Committee's investigation into campaign financing
during the 1996 election cycle exposed a system in crisis, with
the worst problems stemming not from activities that are
illegal under current law, but from those that are legal. The
massive use of soft, or unrestricted, money is a relatively new
phenomenon in the campaign financing system. Since 1988 it has
become the crux of many of the problems examined by the
Committee, including the offers of access for large
contributions and the use of party-run issue ads on behalf of
candidates.
Based on the evidence before the Committee, we make the
following findings with respect to the role of soft money and
issue advocacy in the 1996 elections:
(1) The most insidious problem with the campaign finance
system involved soft (unrestricted) money raised by both
parties. The soft money loophole, though legal, led to a
meltdown of the campaign finance system that was designed to
keep corporate, union and large individual contributions from
influencing the electoral process.
(2) The vast majority of issue ads identified specific
candidates and functioned as campaign ads.
(3) Both parties went to significant lengths to raise soft
money, including offering access to party leaders, elected
officials, and exclusive locations on federal property in
exchange for large contributions. Both parties used issue ads,
which were effectively indistinguishable from candidate ads and
which--unlike candidate ads--can be paid for in part with soft
(unrestricted) money, to support their candidates.
PART 5 FINDINGS ON FUNDRAISING AND POLITICAL ACTIVITIES OF THE
NATIONAL PARTIES AND ADMINISTRATIONS
Chapter 24: Overview and Legal Analysis
During the 1996 election cycle, spending by candidates,
their campaign committees, political parties, other political
committees and persons making independent expenditures totaled
a record-breaking $2.7 billion. Of that amount, the Democratic
and Republican Parties together spent almost $900 million, or
one-third of the total. The two presidential candidates,
President Clinton and Senator Dole, together spent about $232
million, or almost 10 percent of the total.
One of the primary objectives of the Committee's
investigation was to investigate allegations of improper and
illegal activities associated with fundraising by both parties
used to finance this campaign spending. The allegations
examined include the alleged misuse of federal property and
federal employees to raise funds, the sale of access to top
government officials in exchange for campaign contributions,
and the circumvention of campaign spending restrictions through
such devices as issue advocacy and coordination between the
parties and their presidential nominees.
I. Fundraising Practices of the National Parties
Chapter 25: DNC and RNC Fundraising Practices and Problems
The Committee investigated a number of the allegations of
improper conduct by the DNC during the 1996 election cycle,
taking 38 days of depositions, conducting 14 interviews,
receiving five days of public testimony and receiving over
450,000 pages of unredacted DNC documents. Despite repeated
requests from the Minority, allegations against the RNC were
not fully explored by the Committee, which took only two
depositions and one day of public testimony from RNC officials
limited to issues involving the National Policy Forum. Although
the RNC and DNC subpoenas were virtually identical, the
Committee received only 70,000 pages of RNC documents, many of
which were heavily redacted. The RNC's failure to comply with
the Committee's document subpoena or to make RNC officials
available for depositions, prevented the Committee from
learning the true scope of the Republican Party's campaign
activities during the 1996 election cycle.
Based on the evidence before the Committee we make the
following findings with respect to the overall fundraising
practices of the national parties:
(1) The evidence before the Committee establishes that both
political parties engaged in questionable fundraising
practices. Both parties scheduled events at government
buildings and promised access to top government officials as
enticements for donors to attend fundraising activities or make
contributions. Both parties used their presidential candidates
to raise millions of dollars in soft money donations in
addition to the $150 million provided in public financing for
presidential campaigns. Both parties worked with their
candidates to design and broadcast issue ads intended to help
their candidates' election efforts.
(2) The RNC's activities were subject to some of the same
or similar problems as the DNC's activities. The RNC received
foreign contributions, gave access to top Republican leaders
for large contributions, held fundraising-related events on
federal property, engaged in coordination between the
Presidential campaign and the national party and used
supposedly nonpartisan, tax-exempt organizations for partisan
purposes.
(3) The compliance systems of the DNC in the 1996 campaign
were flawed. Although the evidence before the Committee
indicates that the DNC fundraising staff as a whole attempted
to do their job in accordance with the law, isolated failures
of supervision coupled with a compelling desire to raise more
money led the DNC to accept hundreds of thousands of dollars in
contributions it otherwise would not have accepted. Despite
these problems, the overwhelming majority of contributions
received by the DNC appear to have been legal and appropriate.
(4) The position taken by the Republican Party in the 1992
and 1994 election cycles that it had no obligation to
investigate contributions or contributors is troubling. The
evidence before the Committee is insufficient to evaluate the
compliance procedures of the RNC during the 1996 election
cycle. Because the Committee did not have the full cooperation
of the RNC in complying with the Committee's subpoenas and
requests for information (and the Committee failed to enforce
the subpoenas), the Committee failed to fully assess the RNC's
practices and procedures for insuring the legality and
propriety of major contributions.
II. Use of Federal Property and Contributor Access
Chapter 26: Telephone Solicitations From Federal Property
Documents produced to this Committee by both the DNC and
the White House indicate that on a number of occasions the DNC
requested the President and the Vice President to make
telephone calls to solicit funds for the DNC. The Committee
reviewed evidence, including testimony and documents relating
to the circumstances surrounding these calls and analyzed the
laws applicable to these calls. The Committee also investigated
whether past presidents and other federal officials had made
fundraising phone calls.
Based on the evidence before the Committee, we make the
following findings with respect to fundraising calls made by
the President, the Vice President, and past presidents and top
officials:
(1) Telephone calls made on federal property to solicit
contributions from persons neither on federal property or
employed by the federal government have been made by elected
officials from both parties and prior administrations.
(2) There was nothing illegal about the one solicitation
telephone call known to the Committee made by the President.
(3) There was nothing illegal about the solicitation
telephone calls made by the Vice President.
Chapter 27: White House Coffees and Overnights
Beginning in late 1994 and continuing through the end of
the 1996 campaign, the President hosted a number of small
events known as ``coffees'' at the White House, some of which
were sponsored by the DNC Finance Division. Others were
sponsored by the DNC Political Division and the Clinton
campaign. The DNC and the President viewed the coffees as a
means for the President to reconnect with, spread his message
to, and motivate his political and financial supporters. Over
1,000 people attended these coffees. The Committee examined
these events and reviewed allegations that they included a
number of persons who should not have been granted access to
the President and violated federal law prohibiting the
solicitation or receipt of contributions in federal buildings.
The Committee also reviewed evidence on allegations that the
President improperly offered overnight visits to a number of
DNC contributors.
Based on the evidence before the Committee, we make the
following findings regarding the White House coffees and
overnights:
(1) The evidence before the Committee does not indicate
that the DNC coffees at the White House violated existing law.
The evidence before the Committee did not establish that anyone
solicited contributions at the coffees, and, in any event,
indicated that all but one of the coffees (about which the
Committee heard no testimony) occurred in areas of the White
House where solicitations are not prohibited by law.
(2) Affording campaign contributors access to White House
events, often where the President is in attendance, has been a
bipartisan practice over the years, but the DNC's use of these
events, such as coffees and overnights, during the last
election cycle was extensive and created an appearance of
offering access to the White House in exchange for campaign
contributions. There is no evidence before the Committee that
the coffees or overnights were offered in return for campaign
contributions.
(3) The DNC used poor judgment in permitting several
persons of questionable affiliation or character to attend
coffees as a favor to DNC contributors.
Chapter 28: Republican Use of Federal Property and Contributor Access
The practice of granting large contributors access to
elected officials and special locations on federal property,
such as the White House, is a longstanding fundraising
technique that has been used by both political parties. In
response to claims that practices under the Clinton
Administration were ``unprecedented,'' this Chapter examines
how the Republican Party and preceding Republican
Administrations have used the White House as a fundraising
tool, provided access to elected officials for large
contributors, and appointed large contributors to positions
within the government.
Based on the evidence before the Committee, we make the
following findings with respect to the offers of access by the
Republican Party:
(1) In the 1996 election cycle, the Republican Party
continued its longstanding practice of raising money by
offering, and providing, major contributors with access to top
Republican federal officials. These offers of access are
central components of Republican donor programs such as Team
100 and the Republican Eagles. They started in the 1970s and
continue today.
(2) Federal property has routinely been used by the
Republican Party in its fundraising efforts. The RNC has hosted
fundraising events on Capitol Hill, at the Bush White House,
the Pentagon, and at other federal government locations.
(3) The Bush Administration rewarded major contributors
with significant government positions, including
ambassadorships.
Chapter 29: Democratic Contributor Access to the White House
From 1993 through 1996, the Democratic National Committee
organized numerous events attended by the President, Vice
President or First Lady to which it invited supporters of the
Democratic Party and their guests. Many of these events were at
the White House. The Committee investigated the procedures used
by the White House and the DNC to assess and approve
individuals invited by the DNC to attend events in the White
House.
Based on the evidence before the Committee, we make the
following findings with respect to Democratic contributor
access to the White House:
(1) From 1993 through 1996, White House procedures for
assessing and approving individuals invited by the DNC to
attend events in the White House were similar to the procedures
used by prior administrations, but such procedures were
inadequate. The White House Office of Political Affairs relied
on the DNC (and in prior administrations, the RNC) to assess
the appropriateness of attendees at DNC (RNC) events at which
the President was present. Unfortunately, from 1993 through
1996, the DNC did not adequately perform that function.
(2) When asked to provide information regarding the foreign
policy implications arising from DNC-organized events, the
National Security Council performed its function.
Unfortunately, prior to 1997, the White House did not have a
formal structure to adequately assess and approve all attendees
at DNC events where the President was present.
Chapter 30: Roger Tamraz
Roger E. Tamraz is an American businessman involved in
investment banking and international energy projects. In the
mid-1990s, he sought to become a ``dealmaker'' in an oil
pipeline project that would cross the Caspian Sea region. In
the hope of obtaining U.S. Government support for his project,
Tamraz used his past relationship with the Central Intelligence
Agency (``CIA''), met with mid-level U.S. Government officials,
and made political contributions to the Democratic Party.
The Committee's investigation focused on whether officials
of the CIA, the National Security Council, the DNC, the White
House, or the Department of Energy improperly promoted Tamraz's
pipeline proposal or gave him access to high-level government
officials; why Tamraz was permitted to attend DNC events in the
White House when staff had recommended that he not have any
contact with high-level officials; and whether U.S. policy on
the Caspian Sea pipeline changed as a result of Tamraz's
political contributions or access to governmental officials.
Based on the evidence before the Committee, we make the
following findings with respect to the matters involving Roger
Tamraz:
(1) Roger Tamraz openly bought access from both political
parties.
(2) Tamraz's attendance at DNC events was based on
hispolitical contributions and was unwise given the warnings that he
might misuse such attendance. DNC Chairman Donald Fowler endorsed
Tamraz's attendance at these events, despite early warnings from DNC
staff and opposition from NSC officials and Vice President Gore's
staff.
(3) A Central Intelligence Agency official promoted
Tamraz's pipeline proposal in 1995, despite knowing that the
NSC opposed it.
(4) An Energy Department official promoted additional
political access for Tamraz in 1996, despite knowing that the
NSC and other officials opposed it.
(5) U.S. policy in the Caspian Sea was not affected by
Tamraz's lobbying, political contributions, or presence at DNC-
related events. This policy was solidified in early October
1995 and did not incorporate any aspect of Tamraz's proposal.
Chapter 31: Other Contributor Access Issues
Johnny Chung, a Taiwanese-American businessman, delivered a
$50,000 check made payable to the DNC to the White House in
1995. The Committee investigated whether Margaret Williams,
Chief of Staff to the First Lady, acted appropriately when she
was given this check. The Committee also reviewed whether
Chung's access to the White House--over 32 visits in 1995--was
appropriate.
Based on the evidence before the Committee, we make the
following findings with respect to Chung's contributions and
access:
(1) The evidence before the Committee shows that even
though Chief of Staff to the First Lady, Margaret Williams,
immediately placed the contribution from Johnny Chung to the
DNC in the mailbox, it would have been more prudent for her to
have refused to accept the check from Chung and told him to
give it directly to the DNC.
(2) Chung's access to the White House, which was based in
part on his contributions to the Democratic Party, was
excessive and inappropriate. On one occasion Chung was
permitted to bring foreign business associates to view the
President's delivery of a radio address without appropriate
vetting by the DNC or the White House.
iii. coordination between the national parties and their candidates
Chapters 32 and 33
During the 1996 election cycle, the Democratic National
Committee (``DNC'') and the Republican National Committee
(``RNC'') coordinated issue advocacy campaigns with the Clinton
campaign and the Dole for President campaign, respectively.
Both presidential campaigns paid for this issue advocacy with
millions of dollars in soft (non-restricted) money that the
candidates themselves helped to raise.
Based on the evidence before the Committee, we make the
following findings with respect to this matter:
(1) Both the Clinton campaign and the Dole for President
campaign benefited from spending by their respective parties in
excess of the spending limits applicable to presidential
candidates who accept public financing.
(2) Coordination of issue advocacy between the Clinton
campaign and the DNC and between the Dole for President
campaign and the RNC was legal under current campaign finance
laws.
(3) Both presidential campaigns coordinated fundraising to
pay for the issue advocacy of their respective parties.
PART 6 FINDINGS ON ALLEGATIONS OF QUID PRO QUOS
Chapter 34: Overview and Legal Analysis
Chapter 35: Hudson Casino
The Committee investigated and held a day of hearings on
the Department of the Interior's decision to deny a
controversial application of three Wisconsin Indian tribes to
take control of land near Hudson, Wisconsin, to open a casino.
Both the nearby Minnesota tribes who opposed it and the
Wisconsin tribes making the application hired lobbyists who
contacted various Administration officials in an attempt to
influence the Interior Department's final decision. The local
Hudson community and local, state and federal officials in
Wisconsin from both parties opposed the application. Both
before and after Interior's decision on the application, the
Minnesota tribes opposing it made significant donations to the
Democratic Party.
The Committee took testimony on whether political influence
affected Interior's decision, with particular focus on a
conversation Interior Secretary Bruce Babbitt had with Paul
Eckstein, who was a longtime friend and a former law partner of
the Secretary and who had been retained as a lobbyist for the
Wisconsin tribes, on the day Interior issued the decision
denying the application. Eckstein testified that he tried to
get the Secretary to reconsider the Department's imminent
decision to deny the application, and that during that
conversation Secretary Babbitt mentioned that White House
Deputy Chief of Staff Harold Ickes had directed the Secretary
to issue the decision. Secretary Babbitt testified that his
comment to Eckstein was a general statement reflecting the fact
that Ickes was Secretary Babbitt's official contact in the
White House and was intended to end an awkward and lengthy
conversation with Eckstein.
Based on the evidence before the Committee, we make the
following findings regarding these events:
(1) The evidence before the Committee supports the
conclusion that Secretary Babbitt did not act improperly with
respect to the Department of Interior's decision to deny the
Hudson trust application. The evidence shows that Secretary
Babbitt played no role in the Hudson trust decision, that he
did not hear from, or talk to, Harold Ickes about the decision,
and that the Interior officials who recommended denying the
trust application had no knowledge of either campaign
contributions by the opposing tribes or the alleged
``pressure'' from the White House or the DNC to deny the trust
application.
(2) However, Secretary Babbitt's actions with respect to
Eckstein, his letters to Senators McCain and Thompson, and his
testimony to this Committee regarding his conversations with
Eckstein were unnecessarily confusing. Secretary Babbitt's
letter to Senator McCain omitted the fact that Secretary
Babbitt had invoked Ickes' name to Eckstein even though that
allegation was at the center of Senator McCain's earlier letter
to Secretary Babbitt. The Secretary's subsequent letter to
Senator Thompson acknowledged that he did invoke Ickes' name
with Eckstein, but said that he did so only as a means to
terminate his conversation with Eckstein. Secretary Babbitt
then testified to this Committee that, even though he had not
spoken to Ickes about the trust application, he did not
technically mislead Eckstein when invoking Ickes' name because
the White House naturally wanted him to issue decisions in a
timely way. These statements, when taken together, are
confusing, but they are not directly inconsistent with the
facts.
Chapter 36: Tobacco and the 1996 Elections
During the 1996 election cycle, tobacco companies
contributed roughly $8.5 million in soft money to the
Republicans, much of which was raised by Haley Barbour. There
are grounds for suspecting that Barbour assisted the industry
in exchange for campaign money, but the Committee did not
investigate these troubling allegations.
Chapter 37: Cheyenne-Arapaho Tribes of Oklahoma
On June 17, 1996, two representatives of the Cheyenne-
Arapaho Tribes of Oklahoma (``Tribes'') ate lunch with the
President and five other guests at the White House. Two weeks
later, the Tribes donated $87,671.74 to the Democratic National
Committee (``DNC'). In August 1996, they contributed an
additional $20,000 to the party.
The Committee investigated allegations that the DNC
solicited $100,000 from a politically naive and poor Native
American tribe; improperly granted tribal members access to the
President of the United States; and illegally promised the
return of historic tribal lands currently used by the federal
government in a quid pro quo exchange for a contribution from
the Tribes' ``welfare'' fund.
Although no public hearings were held regarding the Tribes
and their contributions to the DNC, the Committee conducted
interviews and depositions of witnesses, as well as a review of
numerous documents.
Based on the evidence before the Committee, we make the
following findings regarding these events:
(1) No arrangement existed, or was ever contemplated,
between the Cheyenne-Arapaho Tribes of Oklahoma and the
Democratic National Committee or the Administration to return
tribal lands held by the federal government to the Tribes in
exchange for a political contribution to the DNC.
(2) The evidence before the Committee supports the
conclusion that the DNC and the Administration acted properly
and legally throughout the course of their dealings with the
Tribes.
PART 7 FINDINGS ON INVESTIGATION PROCESSES
Chapters 38-41
Senate Resolution 39 directed the Senate Governmental
Affairs Committee to conduct an investigation of illegal or
improper activities in connection with the 1996 Federal
election campaigns. By the specific terms of this resolution,
the Committee was not to limit its investigation to the
activities of only one political party or only one branch of
government, but was to investigate and inform the public about
the full nature of the problems associated with the last
election cycle, regardless of the party with which those
problems were associated.
We make the following findings regarding the process by
which the Committee conducted this investigation:
(1) The Committee's investigation was not bipartisan. The
Committee's investigation focused predominantly on persons and
entities associated with the Democratic Party. The Majority
devoted virtually no resources to exploring a variety of
serious allegations against those affiliated with the
Republican Party. Moreover, it refused to issue or enforce many
of the Minority-requested subpoenas related to the Committee's
mandate, simply because those subpoenas sought information from
Republican-related persons and entities. When the Minority
accumulated substantial evidence of Republican wrongdoing
despite these significant limitations, the Majority refused to
schedule hearings to allow for the public airing of this
information. As a result, virtually all of the Majority's
investigatory resources and Committee hearings focused upon
activities involving the Democratic Party and its associates.
(2) Although the Committee's investigation provided insight
on the serious shortcomings in our campaign finance system, the
failure to fully and impartially investigate wrongdoing in the
1996 federal elections, regardless of party, kept the Committee
from fulfilling its mandate and eliminated the ability to
produce a bipartisan report. The Committee's hearings did make
a contribution to the public's understanding of the ways in
which money influenced the 1996 elections. As a consequence of
the investigation's partisanship, the Committee cannot credibly
claim that it offered the American people a complete picture of
the illegal or improper activity that occurred during the 1996
federal elections. The Committee virtually ignored at least
half of the story of those elections, and the partisan
framework in which it presented and interpreted the evidence it
did uncover diminishes the Committee's ultimate findings and
conclusions.
(3) The Committee's failure to pursue enforcement actions
against those who failed to comply with the Committee's
subpoenas threatens to have lasting impact on the success and
credibility of future Senate investigations. The Committee's
acceptance of the refusal of groups and individuals to comply
with the Committee's subpoenas will make objective
investigations in the future much more difficult by emboldening
persons and entities to ignore future Senate subpoenas.
(4) The DNC made a good faith effort to comply with
Committee requests. To this end, the Committee conducted 38
days of depositions, 14 interviews, and five days of public
hearings of DNC witnesses. The DNC also produced over 450,000
pages of documents and hired over 30 additional staff to review
and prepare documents for production to the Committee.
(5) The RNC impeded the investigation. The RNC unilaterally
redacted documents and appears to have intentionally withheld
material documents. RNC witnesses failed to cooperate in
scheduling depositions, and, in the instances where depositions
were scheduled, they were unilaterally canceled.
(6) Entities supportive of the Republican party impeded the
investigation. Entities including the National Policy Forum,
Americans for Tax Reform, and Triad intentionally impeded the
investigation by failing to produce documents and witnesses
under subpoena.
(7) The White House Counsel's Office took appropriate and
reasonable steps to discover the existence of responsive
videotapes in response to the Committee's April 1997 document
request. There is no evidence before the Committee to suggest
that the White House Counsel's Office intended to obstruct the
work of the Committee.
(8) The evidence before the Committee is conclusive, based
on exhaustive technical analysis, that none of the videotapes
or audiotapes produced by the White House to the Committee have
been altered in any way.
PART 1 FOREIGN INFLUENCE
Chapter 2: The China Plan
In early 1997, news reports appeared alleging that U.S.
federal intelligence agencies had discovered an attempt by the
government of the People's Republic of China (``Chinese
Government'') to increase its influence in the U.S. political
process.1 From February through December 1997, the
Committee examined these allegations. The examination included
a consideration of both public and classified (``non-public'')
information.
---------------------------------------------------------------------------
Footnotes at end of chapter.
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Following the 1995 congressional resolution advocating that
Taiwanese President Lee be permitted to visit the United
States, as well as President Lee's subsequent visit, the
Chinese Government determined that Congress and state officials
were more influential in foreign policy decisions than the
Chinese Government had previously believed. The information
considered by the Committee shows that during the 1996 federal
election cycle, Chinese Government officials decided to attempt
to promote China's interests with the U.S. Congress, state
legislatures, and the American public.2 The Chinese
Government's efforts have become known in the media as ``the
China Plan.'' The Committee's public discussion of the China
Plan began on July 8, 1997, when Chairman Thompson opened the
first day of public hearings by asserting that the China Plan
was ``hatched during the last election cycle by the Chinese
Government and designed to pour illegal money into American
political campaigns.'' 3 The Chairman explained that
the information before the Committee indicated that the Chinese
Government had apparently taken legal steps pursuant to the
plan, such as hiring lobbying firms, contacting the media and
inviting more members of Congress to visit China.4
He also asserted that, ``[a]lthough most discussion of the plan
focuses on Congress, our investigation suggests it affected the
1996 Presidential race and State elections as well.''
5
The Chairman's assertions implied that the non-public
information presented to the Committee included evidence that
the Chinese Government's activities had affected, or had some
meaningful impact on, the 1996 elections.
Based on the evidence presented to the Committee, the
Minority makes the following findings:
findings
(1) Following the 1995 congressional resolution advocating
that Taiwanese President Lee be permitted to visit the U.S. and
President Lee's subsequent visit, Chinese Government officials
decided to attempt to increase the Chinese Government's
promotion of its interests with the U.S. Congress, state
legislatures and the American public. These efforts, which
became known in the media as ``the China Plan,'' reflected the
Chinese Government's perception that Congress was more
influential in foreign policy decisions than it had previously
determined.
(2) The non-public information presented to the Committee
to date does not support the conclusion that the China Plan was
aimed at, or affected, the 1996 presidential election.
(3) Although some steps were taken to implement the China
Plan, the non-public information presented to the Committee to
date does not support the conclusion that those steps involved
Chinese Government funds going to federal campaigns, either
congressional or presidential. During the Committee's public
investigation, the Committee learned that contributions derived
from foreign funds made their way into the 1996 federal
election. The non-public information presented to the
Committee, however, does not support the conclusion that these
contributions were tied to the China Plan, or to Chinese
Government officials. The non-public information presented to
the Committee does support the conclusion that the China Plan
was implemented with a relatively modest sum of money that was
spent on lobbying Congress, paying for members of Congress to
visit China, and increasing public relations with Chinese
Americans.
(4) The non-public information presented to the Committee
raised questions regarding the political activities of one
individual investigated by the Committee, Ted Sioeng, but the
information available to date was insufficient to support the
conclusion that his activities in connection with the political
contributions made by his daughter or by his associates in the
United States were connected to Chinese Government officials or
the China Plan. For information on Sioeng's activities explored
during the Committee's public investigation, see Chapter 7 of
this Minority Report.
introduction
After numerous press accounts were published discussing
information gathered by Executive Branch agencies regarding the
Chinese Government's plan to gain influence in the United
States, Chairman Thompson began the first day of the
Committee's public hearings by discussing these allegations.
Thereafter, the Committee's handling of the allegations became
one of the most hotly debated issues surrounding its
investigation into campaign finance activities.
Before describing the plan on July 8, 1997, the Chairman
cautioned that he was able to reveal only a small portion of
the information gathered by the Committee due to its non-public
nature. He stated, however, that the Committee had ``uncovered
a significant amount of documentary and other relevant
information'' 6 indicating that the Chinese
Government plan was ``one of the most troublesome areas'' of
the investigation and needed to ``be placed on the public
record . . . as soon as possible and in a careful and accurate
manner.'' 7
The Chairman then described the plan as one ``hatched
during the last election cycle by the Chinese Government and
designed to pour illegal money into American political
campaigns.'' 8 He asserted that ``high-level Chinese
Government officials'' 9 crafted the plan and that
``the Committee has identified specific steps taken in
furtherance of the plan.'' Such steps, he claimed, were
undertaken by ``Chinese Government officials and individuals
enlisted to assist in the effort.'' 10
The Chairman also asserted that the plan had been
implemented by legal as well as illegal means.11
According to the Chairman, the legal activities proposed by the
Chinese Government included ``retaining lobbying firms,
inviting more Congresspersons to visit China, and attempting to
communicate Beijing's views through media channels in the
United States.'' 12 Immediately following the
statement that illegal actions were involved, he asserted:
Although most discussion of the plan focuses on
Congress, our investigation suggests it affected the
1996 Presidential race and State elections as well. The
Government of China is believed to have allocated
substantial sums of money to achieve its
objectives.13
In response to these assertions, Senator Glenn said that
``the Committee should go just as far as the facts take us.''
14 Several Senators also immediately disagreed with
the Chairman's conclusion that the China Plan had ``affected''
the presidential race, believing instead that the non-public
information showed that the plan was focused exclusively on
Congress. On the first day of hearings, Senator Levin pointed
out that ``China's target in 1995 and 1996 was not the White
House. It was the Congress.'' 15 In fact, Senator
Levin noted that press reports indicated that the China Plan
was focused on lobbying Congress, and that foreign countries
had spent $86 million to lobby the U.S. Government in the first
half of 1996 alone, with Japan registering expenditures of $17
million in six months.16 He concluded that the China
Plan expenditure which had been referred to during the public
hearing that morning was a small fraction of the $86
million.17 The amount referred to during the public
hearing that morning was less than one candidate typically
raises to run for election to the U.S. House of
Representatives.
On July 15, 1997, Senators Glenn and Lieberman issued a
joint statement explaining their position:
We are in absolute agreement as to the intelligence
information known to us and the conclusions that can be
drawn with certainty from that evidence. We
acknowledge, and never denied, that the information
shown to us strongly suggests the existence of a plan
by the Chinese Government--containing components that
are both legal and illegal--designed to influence U.S.
congressional elections.
However, as we also both agree, it is not clear from
the evidence that the illegal aspects of such a plan
were ever put into motion. Nor is there sufficient
information to lead us to conclude that the 1996
presidential election was affected by, or even part of,
that plan.18
Senator Durbin predicted that because the evidence pointed
to the plan's focus on Congress, ``this Committee will not
touch that issue'' and will instead focus only on any possible
link between China and the Democratic presidential
campaign.19 And, indeed, the Committee's
investigation of the China Plan focused on the sole question of
whether the Chinese Government actually made campaign
contributions to the Democratic National Committee or the
Democratic presidential campaign. After two months of hearings,
Senator Durbin again commented that ``[t]his investigation
kicked off with the Chairman's statement that we were setting
out to find evidence of an effort by the Chinese Government to
influence the outcome of the 1996 Presidential election. I
don't believe there's been any evidence presented to support
that . . . [P]erhaps there will be in the weeks to
come.''20
Ultimately, despite the attempt by the Majority to tie
China to a variety of contributions to the Democratic Party,
the Committee to date has not received information in its
closed proceedings, or in its open proceedings, that supports
the assertion that the China Plan ``affected the 1996
presidential race.''
the committee's investigation
The Committee's investigation of the China Plan consisted
primarily of gathering non-public information already obtained
by Executive Branch agencies. The Committee began requesting
information from the agencies in February 1997, and thereafter
received and reviewed boxes of responsive documents. The
Committee also held closed hearings on July 28, 1997, and
September 11, 1997, and received numerous staff briefings
during the course of its investigation, which terminated on
December 31, 1997. The Committee was informed that the non-
public information from the Executive Branch agencies should
not be understood to represent the full picture of any issue
that was under investigation.
With that caveat, the Committee reviewed non-public
information to determine the extent to which the Chinese
Government's activities affected the 1996 federal elections.
This chapter sets forth conclusions based on the non-public
information made available to the Committee. A more detailed
classified report has been lodged with the Office of Senate
Security, located in the United States Capitol.
The Minority believes that it is the responsibility of the
Committee to clearly distinguish between conclusions based on
non-public information, not available to the public, and public
information that is available to both the Committee and members
of the public. This chapter focuses on conclusions based on the
non-public information reviewed by the Committee. Where public
information is discussed, it is clearly noted as such, although
this chapter does not fully address conclusions that may be
drawn from the Committee's public proceedings. The Committee's
public investigation is discussed elsewhere in this Minority
Report and, unlike the Committee's closed proceedings, is based
upon information that is available for public review and
analysis.
This chapter discusses background on federal law regulating
the political activities of foreign governments and companies
in the U.S.; the results of the Committee's closed proceedings
regarding the China Plan; and information not pursued by the
Committee in its closed proceedings. The Minority response to
the Majority Chapter on the China Plan is located in Part 9 of
this Minority Report. See Part 9, Response to Majority Chapter
18.
background
Foreign involvement in the American political process has
long been permitted under federal law. In 1938, the federal
government enacted the Foreign Agents Registration Act
(``FARA'') to govern the activities of all individuals in the
United States who engage in lobbying, political activities or
public relations on behalf of foreign governments or
companies.21 As amended, FARA requires individuals
who conduct political or public relations activities on the
behalf of foreign governments or political parties to register
as ``foreign agents'' and disclose their expenditures. An
``agent'' is defined as one who acts ``at the order, request,
or under the direction or control of a foreign principal, or of
a person whose activities are directly or indirectly
supervised, directed, controlled, financed, or subsidized in
whole or in part by a foreign principal. . . .'' 22
Registration is not required if the individual is acting in his
or her capacity as an official of a foreign government or a
member of the news media.23 Beginning in 1996,
individuals who lobby on behalf of foreign companies or other
foreign private interests, as opposed to foreign governments,
may register under the Lobbying Disclosure Act.24
Promotional activities on behalf of foreign governments or
other interests have increased dramatically as the world
economy has become more integrated. Foreign governments and
companies are affected by, among other things, U.S. trade
policies, foreign aid decisions, intellectual property
protections, and tourism.25 As the world economy
becomes more integrated, decisions made in the United States
have an impact on the ability of foreign governments and
companies to prosper.
A report published by the Asian Development Bank in 1997
noted that ``[c]ountries that are well integrated into
international production networks and widely exposed to market
trends abroad will be much better placed to benefit than those
that remain isolated.'' 26 The report suggested that
Asian governments:
Be open to foreign direct investment, and to capital
markets more generally [because] free capital mobility
allows firms to tap into funds from abroad and to
create new and flexible capital structure with partners
in other parts of the world.27
The report also noted that prosperous Asian countries are
``increasingly relying on international joint ventures,
strategic relationships and information-sharing partnerships.''
28
It comes as no surprise that lobbying and promotional
activities of foreign countries in the United States have
increased in recent years. In 1992, the Justice Department
reported that Hong Kong interests spent nearly $80 million on
lobbying and public relations in the United States, with Japan
spending over $60 million, Canada $22.7 million, and Mexico
$1.5 million on lobbying for passage of the North American Free
Trade Agreement alone.29 By 1996, a summary of the
Justice Department figures showing that foreign interests spent
over $400 million on such activities in the first six months of
1996 alone.30
Despite the fact that China is the most populous country in
the world, the Chinese Government reportedly spent only
$450,000 on lobbying in 1991 and 1992. Chinese Government and
private companies together spent approximately $2 million in
the first half of 1996, only a fraction of the multimillion
dollars spent by other countries.31
Although many foreign governments and companies have
increased attempts to promote their interests in the United
States, they are forbidden by federal law to influence the
electoral process in the United States. Federal law bans (1)
foreign contributions to political campaigns and (2) campaign
expenditures paid for by foreign entities.32
A key issue raised in connection with the China Plan was
whether the Chinese Government had proposed or undertaken to
promote its interests in the United States by legal and proper
means, or whether its activities may have amounted to illegal
Chinese Government interference in the 1996 election process.
the china plan
Events leading up to the China Plan
From 1949 to the early 1970s, the Chinese Government
maintained only sporadic diplomatic relations with the United
States. In the 1970s, the Chinese and U.S. governments began to
strengthen and expand diplomatic ties and subsequently
completed a diplomatic exchange in 1979.33
Evidence indicates that prior to 1995, the Chinese
Government approach to promoting its interests in the United
States was focused almost exclusively on using traditional
diplomatic levers such as official summits and meetings with
high-level Executive Branch officials.34 In these
meetings, Chinese Government officials often negotiated with
U.S. officials by using the appeal of China's huge commercial
market.35 U.S. companies were also known to lobby
the U.S. government on issues that benefited both the companies
and China.36 In the 1990s, the news media reported
on the increase of U.S. companies lobbying for favorable trade
policies regarding China.37 This became known as the
``New China Lobby'' and consisted of ``representatives of
business groups with trade and investment interests in China,
including AT&T, General Motors and Boeing.'' 38 In
addition, prominent Americans were reported to be involved in
promoting increased economic relationships with China, the most
notable being Henry Kissinger, who has maintained business ties
to the Chinese company CITIC. Others included George Shultz,
Cyrus Vance, Lawrence Eagleburger Jr., and Brent
Scowcroft.39 The New China Lobby apparently urged
U.S. officials to uphold Beijing's trade privileges with the
United States because American exports to China were rapidly
increasing and creating American jobs.40
U.S. exports to China have grown from $3 billion in 1980 to
$38 billion in 1994.41 Between 1991 and 1996, U.S.
exports to China increased by 90.5 percent and the U.S.
Department of Commerce designated China as one of the top 10
``Big Emerging Markets'' offering the largest potential for
U.S. goods and services in the years ahead.42 Total
trade between the two countries had risen from $4.8 billion in
1980 to $63.5 billion in 1996, making China the fourth largest
U.S. trading partner.43 President Clinton has
renewed China's Most Favored Nation's trade status each
year.44
In light of the increased economic relations between China
and the United States, foreign policy experts debate why it
seems in the 1990s ``that China is about to replace Japan as
America's new post-Cold War bogeyman?'' 45 One
reason discussed was the negative American response to the
Chinese Government's treatment of human rights, demonstrated by
the Chinese Government's suppression of movements within China
to promote democracy.46 Another reason, from the
Chinese perspective, was that ``the coming to power of a China-
bashing Congress is perceived as part of an increasing anti-
Chinese atmosphere in Washington.'' 47 Evidence
presented to the Committee during its investigation supports
the conclusion that the Chinese Government, beginning in 1994,
was concerned that decisions by Congress would harm Chinese
Government interests.48
In its relationship with the United States, China has
traditionally been concerned with U.S. policy toward Taiwan.
Chairman Thompson explained in his opening statement:
Although the United States maintains no official ties
with the Government of Taiwan, our diplomatic relations
with the Government of China have long been influenced
by our ties to Taiwan. This is largely because the
Government of China considers Taiwan a rogue province
and suspects it of seeking independence from the
mainland.49
In early 1995, Taiwanese President Lee Teng-hui requested a
visa to enter the United States to attend events associated
with his college reunion scheduled to be held in June 1995.
Following this request, some predicted that Congress would
pressure the President to permit Taiwan's President Lee to
visit the United States.50 And, in fact, in March
1995, Congress passed a resolution calling for the
Administration to grant the visa to President Lee.51
President Clinton subsequently agreed to grant the visa. In
June 1995, news reports stated that President Lee had made a
``triumphal first private visit'' to the United States, which
included attending events in New York hosted by his alma mater,
Cornell University.52
The Chinese Government immediately protested the decision
to grant President Lee a visa. The Chinese Government, working
through traditional diplomatic channels, suspended ongoing
treaty negotiations and recalled its ambassador to the United
States.53
Information about the China Plan
At the same time, Chinese Government officials developed a
set of proposals to promote the Chinese Government's interests
with Congress and the American public, particularly Chinese
Americans. The proposals, which have become known in the media
as the China Plan, were prompted by the Chinese Government's
surprise that Congress had successfully lobbied the
Administration to grant a visa to President Lee. The Chinese
Government was aware that President Clinton initially had been
opposed to the visa and concluded that the influence of
Congress over foreign policy and other decisions was more
significant than it had previously determined. When formulating
its plan, Chinese Government officials also acknowledged that,
compared to other countries, particularly Taiwan, it had little
knowledge of, or influence over, policy decisions made in
Congress.
The plan was formulated in Beijing and was provided to
Chinese Government officials in the United States. The plan
instructed Chinese officials in the United States to increase
their knowledge about members of Congress and increase
diplomatic contacts with members of Congress, the public and
the media. The plan also suggested ways to lobby Congress.
The China Plan, as proposed by Chinese Government
officials, was clearly designed to gain influence with the U.S.
Congress and the American public. During its investigation, the
Committee was informed during a closed hearing that the China
Plan was designed to study and make decisions on how to work
with members of Congress.54 As set forth in the non-
public information provided to the Committee to date, it was
unclear whether the China Plan proposed funnelling campaign
contributions to Congressional elections, but it was clear that
it was not aimed at influencing the 1996 presidential
race.55
Implementation of the China Plan
The Committee also investigated how the Chinese Government
may have implemented the China Plan. As proposed, the China
Plan suggested activities that are legal in the United States
as well as activities that could be illegal, depending on how
they were implemented. As noted above, it is legal for foreign
governments to promote their interests in the United States
through lobbying, public relations and other political
activities, as long as the individuals conducting these
activities are official diplomatic representatives of the
foreign government or have registered under the Foreign Agents
Registration Act. However, individuals acting on behalf of
foreign governments may violate U.S. law if they lobby or
conduct political activities without registering under that Act
or if they attempt to influence U.S. elections through campaign
contributions.
Legal activities
The Committee received evidence that the Chinese Government
implemented at least some of the legal proposals contained in
the plan. The Chinese Government took steps to gather public
information about specific members of Congress and to otherwise
increase its lobbying of Congress by such means as inviting
more members of Congress to visit China. The Committee learned
that Chinese Government officials increased cultural exchanges
with Chinese Americans, and the Chinese Government expressed
concern that the majority of Chinese Americans, particularly
those living in California, supported Taiwan.56
The Committee also learned that the Chinese Government
created a special ``legislative working group'' in Beijing,
entitled The Leading Group on the U.S. Congress. The Committee
was informed that the Leading Group included high-level Chinese
Government officials and was similar to other committees within
the Chinese Government that pursue policy initiatives, such as
the Chinese Government's Leading Group on Foreign
Affairs.57 Public information confirms that the
Chinese Government has a variety of ``leading groups'' as part
of its Government structure and that many of the groups contain
high-level Chinese Government officials.58 The
Committee was also informed that the Leading Group on the U.S.
Congress apparently was a shell organization. Public
information confirms the formation of the Leading Group on the
U.S. Congress, with some diplomats and scholars stating that
the group attempted to promote its interests with lawmakers and
the American public, but was not effective.59
Other information obtained by the Committee suggests that
Chinese Government officials held meetings to discuss how to
implement the China Plan and to consider how to raise money to
implement the proposals.
Illegal activities
The Committee did not receive sufficient information from
its non-public investigation to conclude that the China Plan,
as implemented, resulted in illegal activity connected to U.S.
federal elections. However, the Committee did receive
sufficient information to suggest that illegal activities may
have occurred on the state level.
During a closed Committee hearing held on September 11,
1997, agency officials informed the Committee that the
information they had to date demonstrated that the China Plan
had been implemented by Chinese Government officials by
lobbying Congress, encouraging increased public relations with
Chinese Americans, and possibly becoming involved in political
activities at the state level. The agencies reminded the
Committee that the information given to the Committee, while
representing all the information that was then available,
should not be considered complete. However, the agencies
testified that the information at that time did not include
information that any illegal activities had occurred on the
part of the Chinese Government in relation to congressional or
presidential elections.60 The agencies also
cautioned the Committee that there could be violations of law
if U.S. companies or persons were lobbying on behalf of China's
interests, as opposed to their own, but did not register under
the Foreign Agents Registration Act.61
As Senators Glenn and Lieberman concluded upon review of
the China Plan evidence:
[T]he information shown to us strongly suggests the
existence of a plan by the Chinese government--
containing components that are both legal and illegal--
designed to influence U.S. congressional elections.
[I]t is not clear from the evidence that the illegal
aspects of the plan were ever put into
motion.62
As is evident from the events leading up to the formulation
of the China Plan, the contents of the plan itself, and current
information regarding its implementation, Chinese Government
officials designed the China Plan to promote the Chinese
Government's interests with Congress and the American public.
There was insufficient information presented to the Committee
to conclude that the China Plan resulted in illegal activity by
the Chinese Government in relation to the 1996 federal
elections.
Individuals under investigation and the China Plan
Information obtained by the Committee suggests that Chinese
Government officials discussed ways to use ``intermediaries''
to implement the China Plan. Chinese Government hoped to use
the influence of individuals in the United States by
encouraging U.S. companies with interests in China to lobby for
pro-Beijing trade policies and by encouraging Chinese Americans
to promote pro-Beijing policies in the press and with
Congress.63
The Committee explored the possibility that the Chinese
Government may have used other individuals to promote Chinese
Government interests in the United States. During the
Committee's public investigation, a number of individuals were
alleged to have participated in a variety of political
activities, including making or arranging for political
contributions to federal elections that were possibly funded
from sources in Asian countries. The individuals included John
Huang, Maria Hsia, Ted Sioeng, Charlie Trie, Johnny Chung,
James Riady, and Yogesh Gandhi.
During the Committee's closed investigation, the Committee
sought any nonpublic information available on these
individuals. During a closed Committee hearing on July 28,
1997, Committee Members took testimony from the Executive
Branch agencies regarding the non-public information available
on this topic. One Member asked, ``Is there any evidence that
some of these people may have been intermediaries for the China
plan or for PRC money [to the 1996 federal elections]?'' A
senior executive official answered in the negative, based on
the non-public information available at the time of the hearing
in late July, 1997.64
Ted Sioeng
After the closed hearing in late July 1997, additional
information was provided to the Committee in September and
November of 1997. The information concerned certain activities
of Ted Sioeng, an Indonesian businessman who has family members
living in California and business interests in China. The
Committee learned that Chinese government officials in
California were aware of, and possibly encouraged, Sioeng's
purchase of a Los Angeles-based newspaper. Sioeng purchased the
International Daily News in 1995 and succeeded in having the
paper report from a pro-Beijing perspective.65 There
was also information suggesting that Sioeng met with Chinese
officials in 1995 and 1996.
Sioeng also may have been involved in directing or funding
contributions to American political entities and campaigns. The
public information obtained by the Committee suggests that
Sioeng personally directed contributions to Republican
California officials in 1995.66 According to public
information, Sioeng was involved in these
contributions,67 but the source of the contributions
is difficult to determine.68 The non-public
information suggests that approximately half of the just over
$100,000 used for these contributions may have come from
unknown sources in China.69 According to public
information, one of the officials, Republican California State
Treasurer, Matt Fong, has returned the $100,000 he received
from Sioeng.70
The Committee's public investigation of Sioeng's activities
also explored contributions to federal entities in 1995 and
1996 made by Sioeng's daughter, Jessica Elnitiarta, or by
companies Elnitiarta legally controls. Elnitiarta is an
American citizen and businesswoman living in Los Angeles who
contributed $50,000 to the National Policy Forum, an arm of the
Republican National Committee, and $250,000 to the Democratic
National Committee.71 Elnitiarta informed the DNC
and this Committee that she had made the contributions to both
the NPF and the DNC and that she used appropriate funds to do
so.72 Bank records obtained as part of the
Committee's public investigation suggest that the origin of the
funds contributed to the NPR and the DNC could not be
conclusively determined, but that the funds contributed to the
DNC did derive either from Elnitiarta's personal account or
from the accounts of domestic business interests she
controlled.73
The Committee's non-public investigation did not provide
sufficient information regarding whether Elnitiarta's
contributions to the NPF or the DNC were directed by Sioeng or
were derived from unknown sources in China. Based on all the
information before the Committee, however, including the
information regarding Sioeng's apparent contacts with Chinese
Government officials, the Minority believes that these
activities warrant further investigation, including whether
Sioeng directed any of the contributions to state officials or
federal parties or entities. For a full discussion of the
public information regarding Sioeng's activities, see Chapter 7
of this Minority Report.
The Committee received non-public information mentioning a
few other individuals scrutinized in its public investigation:
John Huang, Maria Hsia and the Riadys.
John Huang
Regarding John Huang, one piece of non-public information
that mentioned his name was factually incorrect based on other
known information, and the other contained an unsubstantiated
hearsay speculation gathered in 1997 after Huang's campaign
finance activities were well-publicized. For a discussion of
the Committee's public investigation of Huang, see Chapter 4 of
this Minority Report.
Maria Hsia
Regarding Maria Hsia, the Committee received non-public
information connecting some activities she undertook while an
immigration consultant in the state of California in the early
to mid-1990s to Chinese Government officials. This information
did not involve her activities with respect to fundraising, and
there was no information presented to the Committee during its
investigation that connected Hsia's fundraising activities to
the Chinese Government. In an affidavit submitted to the
Committee, Hsia strongly objects to this allegation, outlines
her ties to Taiwan and the U.S., and describes her activities
while an immigration consultant in California.74 In
light of the incomplete investigation of the Committee on this
issue, the Minority believes that the Committee lacks
sufficient information about Hsia to endorse or rebut these
serious allegations. The fact that the Majority emphasizes
these allegations throughout its Report without putting the
allegation in context or addressing this information is
troubling. For a discussion of the Committee's public
investigation of Hsia, see Chapters 4 and 21 of this Minority
Report.
The Riadys
Regarding Mochtar and James Riady, there was no non-public
information presented to the Committee that provided relevant
information not already uncovered in the Committee's public
investigation. The Committee's public investigation, including
hearing testimony by an expert witness called by the Majority
in July, 1997, covered the Riady's business dealings throughout
the world, including dealings within China and with the Chinese
company China Resources.75 Public information
confirms that the Riadys have a multi-million dollar
international business that does business within China and with
China Resources.76 According to public information,
China Resources, while being a trading and investment company
owned by the Chinese Government with subsidiaries involved in
hundreds of joint ventures, also allegedly has some
relationship with Chinese Government intelligence
officials.77 The non-public information provided to
the Committee to date, however, does not support the conclusion
that the Riadys' business dealings consist of foreign spying or
other similar intelligence activities. For a discussion of the
Committee's public investigation of the Riadys, see Chapter 4
of this Minority Report. For a response to the Majority's
allegations regarding these individuals, see Part 8 of this
Minority Report.
Intermediaries: Relation to the committee's public investigation
Despite numerous searches and documents produced by the
Executive Branch agencies, the non-public information presented
to the Committee to date suggests that the political activities
of one individual, Ted Sioeng, may possibly be linked to
Chinese Government officials or the China Plan.78
The non-public information received by the Committee to date,
however, is insufficient to conclude that Sioeng participated
in federal political contributionsto the National Policy Forum
or the Democratic National Committee made by his daughter or her
companies in 1995 and 1996 or that those funds were derived from the
Chinese Government or other sources in China.
One of the problems confronted by the Committee when
examining the role of potential fundraising ``intermediaries''
in closed sessions was the use of the term ``foreign agent.''
In popular culture, the term ``foreign agent'' suggests that an
individual is participating in illegal foreign spy activity. As
used by the Executive Branch, however, the term also describes
individuals who conduct legitimate activities in the United
States on behalf of other countries. This broader definition of
``agent'' used in the Committee's non-public information
resulted in misleading allegations.
Notwithstanding the allegations that derived from
misleading information provided to the press, the non-public
information presented to the Committee does not support the
conclusion that the fundraising activities in the 1996 federal
election cycle investigated by the Committee during its public
investigation were connected to Chinese Government officials or
to the China Plan. The agencies were careful to note, however,
that their investigations are ongoing.
It is also important to note that the Committee received
information during its public investigation that raised
troubling questions of private individuals using foreign funds
to make contributions to state officials and federal entities,
including Matt Fong, the National Policy Forum, and the
Democratic National Committee. Although the non-public
information presented to the Committee to date does not provide
information tying these private individuals' federal
fundraising to any foreign government, the public information
presented to the Committee in open session did raise questions
regarding the source of a number of those contributions and the
activities of a number of individuals. Again, it is important
to note that the goals of this chapter are (1) to clearly
distinguish between conclusions based on non-public versus
public information obtained by the Committee and (2) to set
forth conclusions based only on the non-public information
reviewed by the Committee to date. Despite the insufficiency of
the non-public information on fundraising matters, the public
information regarding the fundraising activities of certain
individuals is troubling and is discussed elsewhere in this
Minority Report. The public information is also available for
public review and analysis.
Political contributions to Federal elections
Another issue raised in connection with the China Plan was
whether there was non-public evidence showing that Chinese
Government officials had used Chinese Government funds,
directly or indirectly, to make political contributions to
federal elections in the United States. (The information
obtained by the Committee regarding state elections is
discussed above in relation to Sioeng's activities with state
officials in California.)
There was evidence that the Chinese Government, by setting
forth its proposals, was attempting to influence U.S.
congressional decisions and elections, but there was
insufficient information to conclude that the China Plan, as
proposed or as implemented, involved Chinese Government
political contributions to congressional campaigns. During a
closed hearing of the Committee held on July 28, 1997, senior
Executive Branch officials knowledgeable about the information
were questioned about the effect of the China Plan on
congressional elections. Senator Glenn asked whether the
documents provided to the Committee to date discussed only
activities surrounding Congress. The officials responded
affirmatively.79 However, based on testimony during
the July 28, 1997 closed hearing, as well as additional
testimony during a September 11, 1997 closed hearing, there was
no evidence that the Chinese Government had actually made
illegal campaign contributions to members of
Congress.80
The Committee also investigated whether the information
provided to the Committee suggested that the China Plan, as
proposed or as implemented, involved Chinese Government
political contributions going to the 1996 presidential
election. The debate on this issue began on July 8, 1997, when
Chairman Thompson concluded that the China Plan may have
``affected the 1996 Presidential and State races.''
81
As set forth above, the Committee already had learned that
the China Plan, as proposed, was not aimed at the Executive
Branch or the presidential race. The Committee nonetheless
considered whether Chinese Government officials had taken steps
to arrange placing money into the presidential election, or
whether it took any actions at all that may have ``affected''
the 1996 presidential race. During the Committee's closed
hearing on July 28, 1997, Senator Glenn asked the Executive
Branch agencies:
Is there any indication that the 1996 Presidential
race may have been affected by the Chinese plan?
82
The agencies' officials responded in the negative, with the
understanding that the response was based on the information
available at the time and that the available information could
not represent a complete picture of any issue under
investigation.83 The Chairman then followed up on
Senator Glenn's questions by stating:
If I may follow up on one point for clarification.
You were asked about any evidence affecting the '96
Presidential campaign. . . . I believe you said you had
no evidence from your . . . investigation. Do you have
evidence from your . . . investigation or can you tell
us? 84
A senior Executive Branch official responded negatively
again.85
On July 28, 1997, the information presented to the
Committee clearly did not support the conclusion that the China
Plan affected the 1996 congressional or presidential races,
either through illegal means, such as Chinese Government funded
political contributions. In the following months, the Committee
received additional non-public information, but that
information regarded possible Chinese ``intermediaries'' and is
discussed above. The information and conclusions on the issues
regarding political contributions to federal campaigns and,
ultimately, the conclusion about any effect the Chinese
Government may have had on those federal elections, remain the
same.86
Political contributions: Relation to the committee's public
investigation
In its public investigation, the Committee received
evidence of foreign funds from businessmen in a variety of
Asian countries coming into the American political system from
1993 to 1996. In particular, the Committee received public
information that the DNC returned approximately $3 million in
political contributions, a portion of which was determined to
derive from foreign funds. These events raised troubling
questions that are addressed elsewhere in Part 1 of this
Minority Report. During its closed proceedings and
investigation, the Committee did not receive non-public
information tying these fundraising activities in the 1996
federal election cycle to the China Plan or the Chinese
Government.
Information Not Pursued By The Committee
Although the Committee's gathering of non-public
information focused on the China Plan and the Chinese
Government, the Committee received information surrounding the
1996 federal election cycle that the Committee decided not to
pursue, as follows:
Although the Committee discovered that the China
Plan was aimed at influencing Congress and discovered that
specific steps had been taken to influence Congress, the
Committee did not pursue this information in order to determine
what activities may have occurred regarding specific members of
Congress.
The Committee received numerous documents
suggesting that other Asian governments had developed plans to
promote their interests in the United States. These plans
proposed taking actions similar to those contained in the China
Plan, including lobbying, using intermediaries, and encouraging
ethnic Americans to contact U.S. officials. The Committee did
not pursue this information or attempt to determine whether the
plans were implemented.
The Committee received documents suggesting that
several non-Asian governments also had plans to promote their
interests in the United States. Many of these plans were
similar to the China Plan, while others set forth more detailed
activities to gain influence in the United States. The
Committee did not investigate these issues.
The Committee received information that
intelligence agents of a foreign country attended a Republican
presidential fundraiser in 1995. This information was discussed
by the Committee, but the issue was not pursued.
conclusion
During the Committee's public investigation, evidence was
presented that established that a portion of the $3 million in
contributions that were returned by the Democratic National
Committee derived from foreign funds. The public evidence also
established that some of the funds came from private
individuals or companies in a number of Asian countries and
that the funds may have been used to provide access to DNC
events. The public evidence received by the Committee is
discussed in detail in Chapters 3 through 8 of this Minority
Report. The public information, in conjunction with the non-
public information that China and other countries proposed
plans to influence the political process raised legitimate
questions of whether any foreign government funds were used to
make political contributions during the 1996 election cycle. In
light of the Committee's focus on the Chinese Government, the
Committee examined that issue, but the nonpublic information
presented to the Committee during the course of its
investigation did not support the conclusion that the funds
from a variety of Asian countries were connected to the Chinese
Government. In addition, the non-public information does not
support the conclusion that the China Plan, or its
implemention, was directed at, or affected, the 1996
presidential election. Ultimately, the China Plan and the
allegations derived from the Committee's review of nonpublic
information were found to be of minimal significance to the
issues investigated by the Committee.
footnotes
\1\ New York Times, 1/2/97; Washington Post, 3/13/97; Time 3/97.
\2\ This chapter has been reviewed by Executive Branch agencies to
ensure that it does not contain classified information. During that
review, the Executive Branch agencies informed the Committee that their
review of both the Majority and Minority chapters on this issue did not
include any position regarding the conclusions reached by the Majority
or the Minority.
\3\ Chairman Thompson, 7/8/97 Hrg., p. 2.
\4\ Chairman Thompson, 7/8/97 Hrg., p. 4.
\5\ Chairman Thompson, 7/8/97 Hrg., p. 4.
\6\ Chairman Thompson, 7/8/97 Hrg., p. 2.
\7\ Chairman Thompson, 7/8/97 Hrg., p. 1.
\8\ Chairman Thompson, 7/8/97 Hrg., p. 2.
\9\ Chairman Thompson, 7/8/97 Hrg., p. 4.
\10\ Chairman Thompson, 7/8/97 Hrg., p. 4.
\11\ Chairman Thompson, 7/8/97 Hrg., p. 4.
\12\ Chairman Thompson, 7/8/97 Hrg., p. 4.
\13\ Chairman Thompson, 7/8/97 Hrg., p. 4.
\14\ Senator Glenn, 7/8/97 Hrg., p. 19.
\15\ Senator Levin, 7/8/97 Hrg., p. 47.
\16\ Senator Levin, 7/8/97 Hrg., p. 47.
\17\ Senator Levin, 7/8/97 Hrg., p. 47.
\18\ Joint Statement by Senator John Glenn and Senator Joseph
Lieberman, 7/15/97.
\19\ Senator Durbin, 7/8/97 Hrg., p. 82.
\20\ Senator Durbin, 9/9/97 Hrg., pp. 146-47.
\21\ Foreign Agents Registration Act, 22 U.S.C. 611 et seq. (1997).
\22\ Foreign Agents Registration Act, 22 U.S.C. 611(c).
\23\ Foreign Agents Registration Act, 22 U.S.C. 623; 611(d).
\24\ Lobbying Disclosure Act of 1995, 2 U.S.C. 1601 et seq. (1997).
\25\ Congresional Research Service Issues Brief, China-U.S. Trade
Issues, 1/23/98, pp. 7-8.
\26\ Emerging Asia; Changes and Challenges, Asian Development Bank
Publication 010297, 1997, p. 33.
\27\ Emerging Asia; Changes and Challenges, Asian Development Bank
Publication 010297, 1997, p. 33.
\28\ Emerging Asia; Changes and Challenges, Asian Development Bank
Publication 010297, 1997, P. 33.
\29\ South China Morning Post, 11/3/93; New York Times, 7/1/93.
\30\ The Hill, 6/27/97.
\31\ Department of Justice data provided to the Committee; New York
Times, 3/14/97; New York Times, 7/9/97; South China Morning Post, 8/15/
93.
\32\ Federal Election Campaign Act, 2 U.S.C. 441e; Federal Election
Commission regulations, 11 C.F.R. 110.4.
\33\ Political Handbook of the World, 1997, Eds. Banks, A. Day, Al.
and Miller, T. CSA Publications, Binghamton, NY, p. 168.
\34\ Closed Committee Hearing, 7/28/97 Hrg., p. 5.
\35\ Closed Committee Hearing, 7/28/97 Hrg., p. 5; see e.g., Boston
Globe, 3/24/97.
\36\ New York Times, 3/14/97; Boston Globe, 3/24/97.
\37\ Business Times, 5/19/94; The Economist, EIU Ltd., 2/8/93.
\38\ Senator Glenn, 7/9/97 Hrg., pp. 153-156; Business Times, 5/19/
94.
\39\ Boston Globe, 3/24/97.
\40\ The Economist, The Economist Intelligence Unit, Ltd., 2/8/93.
\41\ Business Times, 2/7/95.
\42\ Congressional Research Service Issue Brief, China-U.S. Trade
Issues, 1/23/98, pp. 12-13.
\43\ Congressional Research Service Issue Brief, China-U.S. Trade
Issues, 1/23/98, p. 1.
\44\ New York Times, 3/9/97; Washington Post, 3/20/97; Star
Tribune, 3/22/97; Los Angeles Times, 3/23/97 and 3/25/97; Houston
Chronicle, 3/27/97; Financial Times, 10/27/97.
\45\ Business Times, 2/7/95; New York Times, 6/6/96P; Chicago
Tribune, 8/27/96; New Republic, 7/31/95; Boston Globe, 1/7/96;
Pittsburgh Post-Gazette, 3/31/96.
\46\ See, e.g., Washington Post, 3/1/97.
\47\ Business Times, 2/7/95; New York Times, 6/6/96; Chicago
Tribune, 8/27/96; New Republic, 7/31/95; Boston Globe, 1/7/96;
Pittsburgh Post-Gazette, 3/31/96.
\48\ Closed Committee Hearing, 7/28/97, pp. 6-7.
\49\ Chairman Thompson, 7/8/97 Hrg., pp. 2-3.
\50\ Washington Post, 3/31/95; Financial Times, 3/8/95; Daily
Yomiuri, 3/28/95; South China Morning Post, 3/24/95.
\51\ H. Con. Res. 53, passed 3/29/95; see also S. Con. Res. 9, 3/6/
95; H. Con. Res. 33, 3/6/96.
\52\ Washington Post, 6/11/95; see also Los Angeles Times, 6/8/95;
Washington Post, 6/10/95.
\53\ Houston Chronicle, 8/25/95; Senator Thompson, 7/8/97 Hrg., p.
3.
\54\ Staff Briefing, 7/24/97.
\55\ Closed Committee Hearing, 7/28/97, p. 41.
\56\ Closed Committee Hearing, 7/28/97, p. 7.
\57\ Closed Committee Hearing, 9/11/97.
\58\ South China Morning Post, 8/21/96 (generally); South China
Morning Post, 11/5/97 (Leading Group on Foreign Affairs); Washington
Post, 3/11/97 (head of the Leading Group on Foreign Affairs is also
involved in ``discussions about how China might improve relations with
American lawmakers.''); British Broadcasting Corp., 7/8/94 (Leading
Group on Financial Affairs); Japan Economic Newswire, 11/16/95 (Chinese
Government's Leading Group on Taiwan Affairs includes intelligence
official); South China Morning Post, 1/7/97 (Leading Group on Military
Affairs); Japan Economic Newswire, 11/30/95 (Leading Group established
to oversee the 1999 handover of the Portuguese colony to mainland
China); Xinhau News Agency, 3/28/95 (Leading Group established on
Mining Resources).
\59\ Christian Science Monitor, 3/13/97. This group has also been
referred to as ``The Leading Group on U.S.Congressional Affairs.'
\60\ Closed Committee Hearing, 9/11/97.
\61\ Closed Committee Hearing, 9/11/97.
\60\ Joint Statement by Senator John Glenn and Senator Joseph
Lieberman, 7/15/97.
\63\ Staff Briefing, 8/5/97.
\64\ Closed Committee Hearing, 7/8/97, P. 54.
\65\ Staff interview with David Ma, 8/24/97; Staff interview with
Jessica Elnitiarta, 6/19/97; Los Angeles Times, 5/18/97.
\66\ Matt Fong deposition, 9/19/97, pp. 14-19, 29, 30 & 35-37.
\67\ Matt Fong deposition, 9/19/97, pp. 14-19, 29, 30 & 35-37.
\68\ See Chapter 7 of this Minority Report.
\69\ Closed Committee Hearing, 9/11/97.
\70\ Matt Fong deposition, 9/19/97, pp. 66-67.
\71\ Memorandum from Steve Hendershot, Special Agent detailed to
the Senate Investigation, entitled ``Jessica Elnitiarta Record
Review,'' 8/22/97; Staff interview with Jessica Elnitiarta 6/19/97;
Letter from Thomas McFish, counsel to Jessica Elnitiarta, to the
Committee, 6/18/97; Los Angeles Times, 7/4/97; Newsweek, 3/10/97.
\72\ Staff interview with Jessica Elnitiarta, 6/19/97.
\73\ See Chapter 7 and supporting citations.
\74\ Declaration of Maria Hsia, 2/23/98. Hsia received a Committee
subpoena on May 19, 1997 that requested her to provide testimony
regarding her campaign finance activities in the United States. In
response, Hsia asserted her Fifth Amendment rights and did not provide
such testimony. The allegations regarding Hsia's alleged connections to
the Chinese Government appeared several months later, in November of
1997. When these allegations were made, Hsia requested the opportunity
to provide information to the Committee about these issues and on
February 23, 1998, she submitted a sworn declaration to the Committee.
\75\ Thomas Hampson, 7/15/97, Hrg. pp. 67-71.
\76\ Thomas Hampson, Hrg., 7/15/97; Washington Post, 7/18/97;
Newsweek, 2/24/97.
\77\ Washington Post, 7/17/97; Newsweek, 2/24/97; Financial Times,
8/21/93; Time, 5/5/97; Washington Post, 7/18/97; Business Wire, 1/7/98;
Xinua Wire Service, 11/10/92.
\78\ Closed Committee Hearings, 7/28/97 and 9/11/97; Closed
briefings, 11/7/97, 12/5/97, 1/22/98.
\79\ Closed Committee Hearing, 7/28/97, pp. 43-44.
\80\ Closed Committee Hearing, 7/28/97, pp. 4, 30, 32, 69.
\81\ Chairman Thompson, 7/8/97 Hrg. pp. 2-3.
\82\ Closed Committee Hearing, 7/28/97, p. 44.
\83\ Closed Committee Hearing, 7/28/97, p. 44.
\84\ Closed Committee Hearing, 7/28/97, p. 46.
\85\ Closed Committee Hearing, 7/28/97, p. 46.
\86\ The only closed hearing on the China Plan that was recorded or
transcribed was the one held on July 28, 1997. The other hearings were
not transcribed, but are supported by briefing papers submitted by the
agencies.
PART 1 FOREIGN INFLUENCE
Chapter 3: National Policy Forum
Early in the investigation Chairman Thompson divided the
hearings into two ``phases'' and focused the first phase on the
issue of foreign money and foreign influence in the 1996
elections. There was evidence of foreign money going to both
the Republican National Committee (``RNC'') and the Democratic
National Committee (``DNC'), but there was no evidence that
foreign money influenced any policy decisions of the Clinton
Administration or that it had any bearing on the outcome of the
1996 presidential election. To the extent that foreign money
may have influenced the 1994 Congressional elections, there is
evidence with respect to money funneled to the Republican
National Committee through the National Policy Forum (``NPF').
Starting in 1993, Haley Barbour, the chairman of the RNC,
carried out a scheme to collect foreign money by channeling the
funds through the National Policy Forum, a tax-exempt
organization controlled by the RNC. The RNC did this by
arranging for a foreign businessman to put up collateral for a
bank loan to the NPF. Shortly after the NPF received the loan,
it transferred more than $2 million to the RNC which, in turn,
channeled the money into the 1994 congressional races around
the country. The NPF subsequently defaulted on the bank loan--
freeing up still more money for the RNC in 1996.
While the evidence shows that foreign money in this case
did not affect U.S. policy or the 1996 presidential election,
it does suggest that foreign money played an important role for
the RNC in the mid-term elections of 1994.
findings
(1) RNC Chairman Haley Barbour and the RNC intentionally
solicited foreign money for the NPF.
(2) The NPF was an arm of the RNC and, as the Internal
Revenue Service concluded, was not entitled to tax-exempt
status as a social welfare organization under section 501(c)(4)
of the U.S. tax code.
(3) Barbour solicited Ambrous Young, a foreign national,
and Young agreed to provide the collateral for a loan to NPF
for the purpose of helping Republican candidates during the
1994 elections.
(4) The evidence before the Committee strongly supports the
conclusion that Barbour and other RNC officials knew that the
money used to collateralize the NPF loan came from Hong Kong.
Barbour's testimony that he did not know about the foreign
source of the loan collateral was not credible.
(5) As a result of NPF's default on the loan, the RNC
improperly retained $800,000 in foreign money during the 1996
election cycle.
introduction
During the Committee's investigation into the 1996
election, which entailed 31 days of public testimony, the
Minority was allowed to present witnesses on only three days.
In that period, the Minority was able to demonstrate how the
RNC solicited and benefitted from foreign corporate money
channeled through a Florida shell corporation to collateralize
a bank loan to the National Policy Forum--a Republican National
Committee-created ``think tank.'' The proceeds of the loan went
to the RNC. (Although this was not, technically speaking, a
loan guarantee, it had the same effect. All parties involved in
the transaction called it a guarantee, and that term is
frequently used in this chapter for the sake of
convenience.1) As Senator Glenn noted in his opening
statement on July 8, the first day of the Committee's hearings,
``This story . . . is the only one so far where the head of a
national political party knowingly and successfully solicited
foreign money, infused it into the election process and
intentionally tried to cover it up.'' 2 The
testimony with respect to NPF supports Senator Glenn's
statement.
---------------------------------------------------------------------------
Footnotes at end of chapter.
---------------------------------------------------------------------------
The loan transaction may have constituted an illegal
foreign contribution to the Republican National Committee.
Ambrous Young, a Hong Kong businessman who had relinquished his
American citizenship, transferred funds from Young Brothers
Development (Hong Kong) to a U.S. company called Young Brothers
Development (USA). This foreign money was used to provide
collateral for a loan to the National Policy Forum from a U.S.
bank. The loan proceeds were then transferred to the RNC which,
in turn, used the money to fund Republican congressional
campaigns in 1994. The evidence before the Committee shows that
Haley Barbour, who was chairman of both the RNC and the NPF,
solicited the loan guarantee, knew that the money was coming
from a foreign source, and intended that the funds be used on
behalf of Republican candidates. Some testimony suggests that
Barbour intended from the very outset that the loan guarantee
would be absorbed by his Hong Kong-based benefactor upon
default by NPF.
The Minority's investigation of the National Policy Forum
was hampered by a lack of cooperation from both witnesses and
lawyers for the NPF. Although the Committee deposed 14 people,
some individuals, such as former NPF President Daniel Denning,
simply refused to answer a significant number of appropriate,
substantive questions. Others, including Barbour, refused to be
deposed until a few days before the hearings commenced. The
lawyer for the NPF maintained that the subpoena issued on April
9 was invalid, and he refused to comply with it even after an
order was issued by Chairman Thompson on July 3. The Majority
never enforced the order.3
The documents received by the Committee were obtained
almost entirely through voluntary production by individuals
associated with Young Brothers, who fully cooperated with the
investigation. Ambrous Young submitted to a voluntary
deposition in London. His U.S. lawyer, Benton Becker, and his
Washington representatives, Richard Richards and Steve
Richards, voluntarily offered their testimony to the Committee.
Becker also voluntarily appeared at the Committee's hearings.
Additionally, at the instruction of Ambrous Young, Becker made
numerous documents relevant to the loan transaction available
to the Committee, briefed the Majority and Minority staffs on
the history and significance of the documents, and made YBD
personnel available to Committee staff upon request. The
Committee's investigation of the National Policy Forum was
immeasurably enhanced by the cooperation it received from
Ambrous Young, his counsel, and others associated with Young
Brothers Development.
haley barbour
Haley Barbour chaired the Republican National Committee
from January 1993 until January 1997. A few months after
becoming RNC chairman, Barbour founded the National Policy
Forum; he chaired it while he was RNC chairman. Although
Barbour did not oversee the NPF's day-to-day operations, he
played an important role in its political activity, its
fundraising, and its expenditure of funds.
Barbour was deposed by the Minority on July 20, 1997, and
he testified voluntarily before the Committee on July 25. He
denied knowledge of the origin of the funds used to guarantee
the loan, disputed the view that the NPF was an arm of the RNC,
and claimed that no one ever intended that the proceeds of the
Young Brothers Development loan guarantee would be used in
election campaigns. Barbour's version of events is contradicted
at several key junctures by numerous witnesses as well as by
documents obtained by the Committee.4
ambrous young
Ambrous Young was born and raised in mainland China but
moved to Taiwan at an early age, adopting Taiwanese
citizenship. In 1969, following his marriage to a U.S. citizen,
Young became a U.S. citizen, but retained his Taiwan
citizenship. He relinquished his U.S. citizenship in late 1993
or early 1994.5 By the 1980s, Young was a very rich
man and a supporter of the Republican Party, as were his three
sons. In the mid-1980s, Young became friendly with the then-RNC
chairman, Richard Richards, who became an adviser and business
associate.
In 1991, Alex Courtelis, the chairman of the RNC's ``Team
100'' donor program, approached Young about investing in real
estate in Orlando, Florida. Courtelis owned several shopping
centers in north Florida and he knew that Young was interested
in making a major investment in the United States. He proposed
that Young buy part of the Riverwalk Shopping Center in Orlando
for approximately $13 million.6 Young formed a
Florida corporation, Young Brothers Development (``YDB
(USA)''), to be the purchasing vehicle. Young's lawyer, Benton
Becker, a former counsel to President Gerald Ford, was
appointed an officer and director of the company, while Richard
Richards, who served as Young's Washington representative, was
designated president and chairman. The corporation was funded
with $2.7 million transferred from its Hong Kong parent
corporation, Young Brothers Development (``YBD'').7
The purchase of the shopping center fell through due to
conflicting appraisals of the property's worth. Most of the
$2.7 million was transferred back to Hong Kong, but, as Becker
testified, ``some funds were retained by the Florida
corporation to pay for a commitment Mr. Young has made to Mr.
Courtelis during Mr. Young and Mr. Courtelis's discussion on
the shopping center purchase.'' 8
Courtelis had asked Young to become a member of Team 100,
the Republican organization that required at least a $100,000
contribution to the party to join. Young decided that the newly
formed corporation, YBD (USA), should purchase the membership
so that his sons and Richards could participate in Team 100-
sponsored events. Courtelis directed that two checks be
written: one for $75,000 to the Republican National State
Election Committee, and a second for $25,000 to the Florida
Republican Party. Over the course of the next two years YBD
(USA) issued checks totaling nearly $50,000 to various
Republican entities. All of this money was supplied by the Hong
Kong parent corporation. Acknowledging that this was foreign
money being used to finance U.S. election activity, the RNC
eventually returned these checks in 1997.
Young currently manages YBD as an international holding
company for businesses ranging from aerospace to macadamia nuts
in several countries around the globe, including China, Italy,
and Australia.
origin of the national policy forum
In 1993, Barbour, working with Donald Fierce, his friend,
business partner, and RNC chief strategist, created the
National Policy Forum as a ``think tank'' for the exchange of
Republican ideas. The organization applied to the Internal
Revenue Service for tax-exempt 501(c)(4) status, which would
have prohibited it from engaging in partisan or primarily
political activity. According to the testimony of several
witnesses, Barbour touted the creation of NPF as a plank in his
platform when he ran for the chairmanship of the RNC, stating
that he believed that the Republican Party had failed to
generate new ideas that could be integrated into a Republican
ideology.9 In June 1993, Barbour announced that
Michael Baroody, a prominent Republican, would be NPF's first
president. Barbour himself was the chairman of NPF as well as
the RNC, and he arranged for the RNC to provide NPF with
several hundred thousand dollars in start-up
money.10
Baroody was apparently committed to creating a genuine
think tank. He set about implementing what he believed to be
Barbour's vision of holding participatory conferences around
the country on a variety of public policy issues (``the
Forum''). He hired a large staff and began identifying
conference sites and participants. However, it appears that,
almost immediately, Baroody and Barbour began to clash over the
operations of NPF. Baroody was interested in making the
conferences open--even bipartisan--events where there would be
a legitimate exchange of ideas. Barbour, on the other hand,
appears to have wanted to use NPF to strengthen the Republican
Party's base and to give the party's supporters an opportunity
to participate in formulating a national Republican policy
platform. On at least one occasion, when Baroody suggested that
a Democratic office holder participate in one of the
conferences, Barbour objected.11 Nevertheless,
Barbour has characterized NPF as ``the most participatory
public policy institution ever,'' and he claimed 10,000 people
attended forums held in more than 30 states.12
THE BARBOUR-BAROODY SPLIT
An even more contentious issue between Baroody and Barbour
developed over the question of how to fund the Forum. Baroody
felt that the Forum should embody American values and American
issues and therefore believed foreign fundraising would be
inappropriate. From the outset, however, Barbour wanted to
explore foreign sources of fundraising. In an extraordinary
memorandum, Scott Reed, the executive director of the
Republican National Committee, listed ``foreign'' under the
heading of ``fundraising'' as an issue to be discussed with
Barbour in a meeting on June 2, 1993.13 From the
inception of NPF, its creators were contemplating raising
foreign money. This memorandum, written only weeks before the
announcement of the creation of the National Policy Forum, is
extraordinary for another reason: The RNC executive director
was making recommendations on the structure, goals, and
personnel for a supposedly independent, nonpartisan
organization.
According to both Barbour and Baroody, they only discussed
the issue of raising money from foreign sources on one
occasion. That discussion nevertheless apparently led Baroody,
who resigned one year later, to characterize Barbour as having
a ``fascination'' with foreign money.14 Baroody
testified that he never viewed a foreign contribution to the
NPF as illegal, but later he recalled telling Barbour: ``We
could get the money; that would be easy. But it would be
wrong.'' 15 As he explained in more detail during
his testimony, he felt such a contribution would be
``[i]nappropriate, unseemly, and imprudent.'' 16
As the rift between Barbour and Baroody deepened, Barbour
brought in a trusted ally, Daniel Denning, as NPF executive
vice president in early 1994. Denning had held numerous
positions in the Republican Party and the federal government
and was working for General Electric before joining NPF. With
Denning in place, Barbour began an aggressive fundraising
campaign. W. Lyons Brown, a wealthy Kentucky businessman and
Republican contributor, was tapped to be fundraising chairman.
Denning, with Barbour's knowledge and presumed approval,
continued to explore foreign sources of funding. Denning raised
the issue of foreign fundraising with Baroody but was rebuffed,
as Barbour had been before him.17 Unbeknownst to
Baroody, Denning then approached Fred Volcansek, a former
Commerce Department official under President Bush,
international businessman, and GOP fundraiser, to be a
fundraising consultant for NPF. According to Volcansek, Denning
``was consumed with the need to raise money.'' 18
Volcansek testified that he, Denning, and Fierce met at
Fierce's northern Virginia home in the spring of 1994 to
discuss foreign fundraising options. Baroody was kept out of
the loop, even though, technically, Denning was his
subordinate.19
funding the npf
Fred Volcansek testified that at the meeting held at
Fierce's home, he and the others discussed the need for funds
for the ``ongoing operations at the National Policy Forum'' and
noted that ``the Republican National Committee was very
interested in seeing that the National Policy Forum repaid [a
loan it had outstanding with the RNC] so that the Republican
National Committee could utilize those funds in appropriate
ways during the 1994 election cycle . . .'' 20 In
other words, Volcansek's early discussions with a top RNC
official, Fierce, were about raising money for NPF to help the
GOP in 1994.
According to Volcansek, they also discussed where to seek
the funds and what financing vehicle made the most sense.
Fierce, Barbour's confidant, first suggested raising money from
foreign sources. Fierce, Denning, and Volcansek decided on
three possible sources of foreign money. They also decided that
they should seek a loan guarantee and not a conventional loan
because a loan guarantee could be arranged more quickly. What
is significant about the meeting among Denning, Fierce, and
Volcansek is that the NPF president, Michael Baroody, was not
aware of their plans to raise foreign money. As Volcansek
testified, ``I neither met Mr. Baroody then or discussed
anything with him then nor have I met him to this day.''
21 Indeed, Baroody first learned of the meeting at
Fierce's house when he testified before the Committee on July
23, 1997.22
Apparently, Volcansek's first choice for raising funds
abroad did not pan out. Volcansek's second choice was Ambrous
Young, whom he had met through Richard Richards. Volcansek and
Richards were friends who had known each other in Utah and
Washington, where Volcansek often visited Richards's offices.
Volcansek recommended to Barbour that he approach Young to
solicit a large contribution.23
baroody resigns
On June 28, 1994, Michael Baroody submitted his resignation
as president of NPF to Haley Barbour. Baroody submitted both a
resignation letter and a confidential explanatory
memorandum.24 While the letter only relayed
Baroody's intent to resign, the memorandum, which the Committee
obtained from sources other than the National Policy Forum,
outlined in some detail Baroody's reasons for leaving. It is an
extraordinary document. First and foremost, Baroody objected to
Barbour's ``fascination'' with foreign money. Secondly, Baroody
stated his belief that Barbour had allowed the ties between the
NPF and the RNC to erase the necessary barriers between the two
ostensibly independent entities. Baroody wrote: ``I believe
that what has happened over many months has undermined my
efforts, distorted our purpose, blurred the separation of the
RNC and the NPF in such a way as to conceivably jeopardize our
501(c)(4) application, and has occasioned the inexcusable,
heavy-handed treatment of volunteers with the NPF.'' Baroody
continued:
I had understood at the outset that this would be an
organization separate from the RNC. Though both would
be chaired by you, they would operate distinctly. I had
this understanding not only because you and others told
me so, but because the deliberate decision had been
made to organize the NPF under section 501(c)(4) of the
Federal Tax Code. That provision requires separate
operation. Especially in recent months, it has become
increasingly difficult to maintain the fiction of
separation.25
In his testimony before the Committee, Baroody repeated some of
the examples that he had provided in his letter: the overlap of
staff, the partisan nature of the conferences, the NPF's
increasing indebtedness to the RNC, and the general lack of
autonomy that he felt.26
Barbour's testimony contradicted Baroody's statements.
Barbour stated that the NPF ``was and is a separate
organization from any other organization.'' 27
Barbour categorically denied that the NPF was an ``arm or
subsidiary of the RNC.'' However, a number of documents
contradict Barbour's assertion. For example, a memorandum
obtained by the Committee from the files of Jo-Anne Coe, the
former finance vice chairman of the RNC, referred to the NPF as
``the Republican National Committee's 501(c)(4).''
28 Similarly, in an RNC document, Henry Barbour,
Haley Barbour's nephew, referred to the NPF as an ``issue
development subsidiary'' of the RNC.29 A third
document, from RNC Team 100 staff member Kevin Kellum, asked
Barbour for his recommendation on how to distribute a $1
million pledge from gambling magnate Steve Wynn. One option
calls for the entire amount to go to the RNC or Republican
Party affiliates. Two alternative options provide for anywhere
from $250,000 to $500,000 to go to NPF, demonstrating that for
financial purposes, NPF was closely enough tied to the RNC as
to warrant a significant portion of a party
contribution.30 In addition to Baroody's views,
Coe's memo, Henry Barbour's memo, and Haley Barbour's actions,
there is a February 21, 1997, ruling by the Internal Revenue
Service denying the NPF its 501(c)(4) status because it
conducted itself in a highly partisan fashion. The IRS relied
in part on NPF's close relationship with the RNC in terms of
overlapping directors and interconnected finances. For example,
the IRS decision letter states, ``[The] partisanship is
exhibited in the key officers and personnel that founded and
operate [the] organization.'' The ruling also states that the
NPF ``was created for the partisan objective of promoting a
particular political party'' and that ``it operated primarily
for the benefit of the Republican Party and politicians
affiliated with the Republican Party.'' 31
THE NPF UNDER JOHN BOLTON
After Baroody resigned, he was replaced temporarily by
Daniel Denning. Ultimately, John Bolton, a former Reagan and
Bush Administration official, assumed the presidency of the
NPF. NPF also changed its focus from grassroots conferences to
``megaconferences,'' where top industry officials, lobbyists,
and Republican members of Congress convened to discuss issues
that were often the subject of legislation pending before the
U.S. Congress. In his testimony before the Committee, Barbour
characterized the conferences as ``serious events'' where ``the
quality of the presentations was high.'' 32 The
megaconferences, however, were clearly intended to help raise
money for NPF, which was by now heavily in debt to the RNC. For
example, a February 8, 1996, NPF memo regarding ``Fundraising
Projections'' states:
NPF will continue to recruit new donors through
conference sponsorships . . . In order for the
conferences to take place, they must pay for themselves
or turn a profit. Industry and association leaders will
be recruited to participate and sponsor those forums,
starting at $25,000.33
Other evidence shows how this fundraising tactic was put into
use. In March 1995, an NPF megaconference on telecommunications
at which Senate Majority Leader Bob Dole and other Republicans
spoke, provoked complaints from communications companies that
had been asked for $25,000 donations to NPF. One newspaper
reported:
[E]ven though the $25,000 payment is not mandatory to
attend, company representatives professed surprise at
the size of the contribution request. ``It's pretty
astounding,'' said one invitee. ``If this doesn't have
`payment for acces' (to top GOP lawmakers) written all
over it, I don't know what does.'' 34
Moreover, a memorandum to Bolton from two NPF employees, Grace
Wiegers and Dianne Harrison, notes that $200,000 from US West
was provided when NPF agreed to raise issues of concern to the
company at a telecommunications megaconference.35
But even the megaconferences and the personal fundraising
efforts of Bolton, Barbour, and Brown were not enough to keep
the Forum in sound financial health. The RNC had to transfer
funds to the NPF continually to help the organization meet its
expenses. Between June 1993 and September 1996 the RNC made
over 50 transfers of funds to the National Policy Forum for a
total of over $4 million.36 The internal RNC process
for approving transfers of funds supports the view that the NPF
was merely an extension of the RNC. According to the testimony
of the RNC's Scott Reed, either Denning or Baroody called him
to request loans from the RNC.37 Reed rarely
questioned why the money was needed; he would simply pass the
request on to Jay Banning, an administrator at the RNC, who
made sure that the loan documents were prepared, the money was
transferred, and the general counsel's office was kept
informed.38 According to Reed, Barbour knew about
the loans and did not object.39
It is not completely clear why NPF was so expensive to run.
It is possible that the staff was being used for partisan
purposes relating to the 1994 elections and the Contract with
America. Such nonpartisan activity might explain why in 1994,
an election year, the staff ballooned from 20 to over 50.
Even if some of NPF's staff were being used for election
activities, payments to at least one consultant, Joseph
Gaylord, seem hard to justify. Gaylord, a strategist and
political consultant to House Speaker Newt Gingrich, was hired
as a fundraising consultant for the NPF by Denning and has
acknowledged that he was paid $7,500 a month. Gaylord had no
written contract and had no idea how much money he
raised.40 In fact, Gaylord was never given any
indication of what he was expected to raise.41 The
available evidence suggests that during the time he was a
consultant to the NPF--more than a year--Gaylord raised less
than half of what he was paid. Among the contributions he
successfully obtained was a $25,000 check from Panda
Industries, a business associated with Asian businessman Ted
Sieong. (See ``Other Foreign Contributions,'' below.)
BARBOUR SOLICITS AMBROUS YOUNG
In the summer of 1994, Barbour decided to pursue the
suggestion by NPF fundraiser Fred Volcansek that Ambrous Young
be approached for a loan or loan guarantee. Volcansek provided
Barbour with a set of talking points for a discussion with
approach Richard Richards, Young's U.S. representative. The
talking points, which Volcansek developed in concert with
Fierce and Denning, encouraged Barbour to tell Richards that
the Republican Party had a chance of capturing the Congress,
but only if the party obtained badly needed funds. Volcansek
made no distinction between the NPF and the RNC in the
memorandum.42
Richards testified at the hearing that Barbour telephoned
him and said:
We have a problem. We at the National Committee have
loaned the forum $3 million . . . of money that we can
use in the campaign, but, we have got a problem. We
need to be able to take it out of the forum for our
purposes, and we can't take it out unless we replace it
with something because the forum has overhead and other
expenses. And I understand you represent a well-to-do
Chinese fellow in Hong Kong who has previously been a
beneficiary to the Republican Party. Would you be
willing to talk to him about loaning us $3 million for
that purpose? 43
After Barbour talked with Richards, Volcansek provided
Richards with a set of talking points for an approach to
Ambrous Young.44 Richards called Young and asked him
if would consider making a $3.5 million contribution to the
National Policy Forum. The same themes that Volcansek had
supplied to Barbour were reiterated to Young. Volcansek and
Richards went to Hong Kong to meet with Young and to explore
further the possibility of a donation to the National Policy
Forum. Young agreed to consider a contribution, and said he
would meet with Barbour in Washington. As soon as Volcansek
returned to Washington he worked with Denning and Fierce to set
up a meeting between Young and Barbour.
On August 29, 1994, Barbour hosted a dinner at Sam and
Harry's restaurant in Washington, D.C. The guests included Mr.
and Mrs. Ambrous Young, Barbour, Fierce, Richard Richards,
Steve Richards, Volcansek, and Denning. Barbour and Young
testified that the dinner was largely a social occasion, but at
some point in the evening there was some discussion of Young's
potential involvement with the National Policy Forum. For
instance, quoting from his interview with Young on the subject
of the August dinner, Becker testified that using the proceeds
of a loan to pay off the existing debt to the RNC was ``freely
discussed at the dinner . . .'' 45 Young stated in
his deposition that during the dinner he told Barbour that any
loan or loan guarantee would originate from Hong Kong: ``The
discussion was basically Mr. Haley Barbour requested me to
consider for the loan of $3.5 million and assured me of the
safe return of the loan. . . . I could not commit nor have the
power to commit, but requested him to give us more information
so that we can present it to the YBD (Hong Kong) board of
directors for further consideration.'' 46 Barbour
claims he does not remember any discussion of this issue but
does remember offering Young the opportunity to contribute a
series of articles about China policy to the Forum's
publication, Common Sense.47
Following the dinner, Volcansek prepared an NPF proposal
for Ambrous Young. Once again, Volcansek tried to impress upon
Young the need to assist the Republican Party. As Volcansek
testified, his proposal was designed to convince Young that the
funds provided a ``greater opportunity to enhance what the
Republican National Committee was going to do in the 1994
election cycle.'' 48 Volcansek also stipulated in
the NPF proposal that:
Chairman Barbour is committed to continuing his
fundraising efforts on behalf of the NPF's work and
fully intends for the NPF to repay the loan. However,
if there is any default by the NPF, he will authorize
the guarantee of the RNC and ask for the Republican
National Committee's ratification. As Chairman of the
RNC and the NPF, he intends to be certain that neither
organization defaults on its obligations.49
Volcansek clearly represented that the RNC was willing to
indemnify the NPF and thereby indemnify Young on the loan
guarantee. He claims he developed the specific language with
another domestic fundraising source, whom he did not
identify.50
In addition to presenting Young with Volcansek's NPF
proposal, Barbour personally contacted Young to encourage him
to make a loan. According to Young's attorney Benton Becker,
the men had ``numerous telephone conversations.'' 51
At some point during the next several weeks, Young made the
decision to assist Barbour and the NPF, although he decided
against a direct loan--perhaps on the advice of Volcansek,
Denning, and Fierce who, as noted earlier, had decided that a
loan guarantee could be organized more expeditiously than a
direct loan. On September 9, Barbour was notified of Young's
willingness to assist when Stephen Young, Ambrous's son, hand-
delivered a letter to Barbour on the stationery of Young
Brothers Development (Hong Kong). Young made clear that he
``preferred to support the Republican Party under the same
manner which we have done in the past if NPF's existing
requirement can be obtained from other channels.'' He also
decided to provide a guarantee of only $2.1 million and not the
$3.5 million that had been originally requested. And he noted
in the letter that Barbour had represented that the money was
``urgently needed and directly related to the November
election.'' 52 At this point Young asked Becker to
work out the details.53
THE LOAN TRANSACTION
Before committing Young to any written arrangement, Becker
endeavored to determine how much risk his client would assume
if he provided the NPF with a loan guarantee. Working with
David Norcross, the general counsel to both the NPF and the
RNC, Becker wanted to know what the NPF's balance sheet looked
like and what assurances in the event of a loan default Haley
Barbour was willing to offer. Daniel Denning, the chief
operating officer of NPF, provided Becker with a list of
fundraising pledges and commitments that reflected an
increasingly robust and financially healthy organization--
albeit one based on contributions that had been either promised
or were expected.54 Becker was provided records that
reflected that current NPF pledges exceeded $2 million. He was
told that ``all committed pledges in the past had always been
100 percent honored.'' 55
Even more reassuring to Becker was the letter he received
from Barbour on August 30 telling him that in ``the event NPF
defaults on any debt, I will ask the Republican National
Committee to authorize me to guarantee and pay off any NPF
debts. I am confident the RNC would grant me such authority at
its next meeting, provided there is valid outstanding debt of
NPF to a U.S. bank or other lending institution guaranteed by a
U.S. citizen or domestic corporation.'' 56 Becker
had not asked specifically for the letter, although he had
indicated to Norcross ``that before Mr. Young's corporation
would involve itself with this loan guarantee that we would
like to see some sort of fall-back positions by the RNC in the
event of a default by the NPF.'' 57 Becker discussed
the content of Barbour's letter with Richard Richards, a former
RNC chairman. Richards told Becker he considered Barbour's
statements in the letter to be a firm RNC commitment to protect
YBD (Hong Kong) against any loss in the event of an NPF default
of its bank loan. Becker therefore considered Barbour's letter
as a form of RNC indemnity for the NPF.58 This is,
of course, another strong indication that the NPF was nothing
more than a subsidiary of the RNC.
Finally, Becker had asked Norcross to provide him with an
independent opinion as to the legality of the
transaction.59 At Norcross's request, Mark Braden, a
lawyer at the Washington firm of Baker and Hostetler, provided
that opinion. Although considered an election law expert,
Braden was far from ``independent.'' He was a former general
counsel to the RNC and involved with other nonprofit
organizations connected to the RNC, as is discussed Chapter 12
of the Minority Report. Moreover, as Becker testified, Braden
had been ``given the relevant facts that formed the basis for
this opinion letter'' by his RNC successor.60
Finally, Becker received Braden's ``independent'' opinion
letter not from Braden himself, but from Norcross.61
Braden opined that the loan guarantee transaction was entirely
appropriate. He wrote, ``We have been assured (and assume it to
be true) that the partial repayment by NPF of such outstanding
loan obligations will not be made to a political committee as
defined by the [Federal Election Campaign] Act.'' 62
On October 7, the structure of the loan guarantee was
agreed upon and memorialized in a letter from Daniel Denning to
Benton Becker and Ambrous Young.63 Six days later,
$2.1 million was wired from YDB, Hong Kong to YBD (USA) in
Florida. Within 24 hours the money was wired from Florida to
Signet Bank in Washington where it was used to purchase 11
certificates of deposit that were in turn used to collateralize
a $2.1 million loan from the bank to the NPF. The plan was that
as the NPF paid off the loan, CD's would be released by the
bank. The funds from the released CD's would be wired back
directly to YBD (Hong Kong)--where the money to buy them had
originated.
There are three notable aspects to the way in which the
transaction was structured. First, steps were taken to conceal
the origin of the funds by passing them through the Florida
corporation. The money was only ``parked'' in the Florida
account of Young Brothers Development, (USA) for several hours.
YBD (USA), did not have sufficient funds of its own to purchase
the CD's used as collateral.64 Volcansek testified
that ``because [NPF] was a 501(c)(4) corporation, the source of
those funds, whether they be foreign or domestic, was
irrelevant from a legal perspective. And so, therefore, any
discussions that we had on it, nobody focused on it because we
didn't consider it to . . . be an issue.'' 65
Nevertheless, Volcansek admitted that ``Yes, I remember telling
Mr. Barbour, Mr. Fierce, and Mr. Denning that this money would
be coming from the Hong Kong corporation through the U.S.
corporation as a loan to the U.S. corporation, and that it
would be put up as the collateral for the loan guarantee.''
66
Second, after NPF received the money, $1.6 million was
wired almost immediately to the RNC--leading to the inescapable
conclusion that Barbour, the chairman of both organizations,
all along had wanted the RNC to benefit from the loan
guarantee. Third, after the NPF made several of the initial
loan payments, CD's were released and, at Becker's direction,
the funds were wired to Hong Kong--confirming that the money
was Hong Kong corporate money.
funding the contract with america
In his testimony before the Committee, Haley Barbour argued
that the NPF could not have been a funnel to the RNC because
``NPF failed to repay nearly $2.5 million the RNC loaned it
over four years ago.'' 67 He called the notion of
using the NPF to somehow circumvent the campaign finance laws
``goofy.'' 68 His argument, of course, only makes
sense if one accepts the premise that the two organizations
were separate. But, as shown above, the organizations were not
independent. The contribution of over $2 million in foreign
money in the form of a loan guarantee to the NPF provided a
critical infusion of funding to the RNC. Although in public
testimony Barbour contradicted his earlier private
representation that the money was needed in the 1994 elections,
he did acknowledge that ``the goal of the national committee,
of the RNC, was that we wanted to put money into the campaigns
late.'' 69
Although the NPF received the loan proceeds on October 13
and immediately used $500,000 to pay off outstanding bills, the
NPF's comptroller, Stephen Walker, asked Signet Bank not to
disburse the remaining $1.6 million to the RNC until October
20.70 The most likely explanation for Walker's
request is that the RNC wanted to delay public disclosure of
this inflow of funds to the FEC until after the November
elections. October 19 was the last day of the FEC reporting
period. Barbour admitted in his testimony before the Committee
that he would have wanted a delay so that prospective GOP
donors would continue to believe there was a need to
donate.71 When the funds were transferred to the
RNC, money was sent to 21 congressional races in 16
states.72
The November election was a stunning success for the
Republicans. They captured the Congress for the first time in
50 years. The money provided by Young Brothers contributed to
that success. Barbour testified that the RNC had not needed the
money, but this is belied by the RNC's bank records and by
Barbour's own statements at the time. Richard Richards and
Volcansek testified that the money would be used for the 1994
races.73 Moreover, it is clear that on at least two
days, had it not been for the NPF infusion of cash, the RNC
soft money account would have been in the red.74
Following the 1994 election, Barbour wrote to thank Young
for his help and scribbled at the bottom of his letter,
``You're a champ.'' 75 A few weeks later, Young came
to the United States and spent the day in Washington being
escorted around Capitol Hill by Barbour. According to Young, he
met with Speaker Gingrich and Senate Majority Leader Bob Dole
and had his photo taken with both GOP leaders.76
After the visit, Barbour wrote to Young, ``I am delighted you
were able to meet with both Senator Dole and Speaker Gingrich.
They were pleased to hear your views on developments in Asia.
Your discussion of the PRC leadership and how you see the next
several years . . . was of great interest. . . . Your role as a
key advisor on Asian policy is essential to both me and the
NPF.'' 77
Testimony diverges considerably on what happened next.
Richards and Young remember that Barbour approached Young in
Hong Kong in 1995 about forgiving the loan.78
According to Young and Richards, Young refused Barbour's
overture and demanded that the loan be repaid. Barbour claims
that the issue of forgiveness was not broached at this point;
that Young had considered it a possibility from the beginning--
even before the loan guarantee was in place.79 In
his testimony before the Committee, Volcansek contradicted
Barbour on this point: ``One fact is crystal clear. When the
loan was first made, it was not the intention of anyone that
the certificates of deposit posted as collateral for the Signet
loan to National Policy Forum would be forfeited to pay the
loan.'' 80
the trip to hong kong
In the summer of 1995, Haley Barbour travelled to Hong Kong
and raised the issue of forgiveness of the loan guarantee at a
meeting on Young Brothers Development's corporate yacht,
``Ambrosia.'' In essence, Barbour was proposing that NPF
default on the loan, that Young Brothers's posted collateral be
forfeited, and that YBD thereafter decline to pursue any civil
action for reimbursement of loss against the NPF or RNC.
Barbour was travelling in the Far East on his way back from a
meeting of the International Democratic Union of which he was
the U.S. chairman. Accompanied by Ed Rogers, his law firm
partner, and Kirk Blalock, his assistant at the RNC, Barbour
claims that when he asked Young to forgive the loan, Young said
he would consider it.81 Young, however, testified
that he told Barbour that the money was corporate money and
that he could not act without the authority of his Hong Kong
board of directors. Moreover, according to Young, he told
Barbour that the Hong Kong financial authorities annually
audited his company and that this kind of contribution to an
American political party would raise concern.82 The
discrepancy concerning Young's answer is important because if
Young is correct, Barbour was on notice--yet again--that the
money used to guarantee the loan to the NPF was Hong Kong
corporate money. This completely contradicts Barbour's
testimony at his deposition that he did not become aware until
1997 that the funds used to collateralize the NPF loan came
from Hong Kong.83 Indeed, the very fact that Barbour
was discussing this issue on a corporate yacht in Hong Kong
Harbor undermines the credibility of his testimony that he did
not know the source of the posted collateral was in Hong Kong.
the trip to china
Young and Barbour met again several months later when Young
accompanied Barbour and Richard Richards on a trip to Beijing.
According to Barbour, the trip had been planned for many months
and had been rescheduled on more than one occasion. In his
deposition, Barbour acknowledged that he saw it as an
opportunity to lobby Young for forgiveness on the NPF loan
guarantee.84 All participants testified that no
business was transacted, although Young, Barbour, and Richards
all have business interests in China. Young testified that he
had not wanted to go to China, but relented only after Barbour
made an appeal. But Richards indicated that Young had agreed to
go because it ``put powder on his face'' to be seen in the PRC
with the chairman of one of America's major political
parties.85
In China, the Barbour entourage met with the Chinese
foreign minister in what Barbour described as a courtesy call.
The meeting lasted approximately half an hour, and no
substantive discussion occurred. In the evening, an official
from the Foreign Ministry hosted a dinner for the
delegation.86 Again, this appears to have been a
purely social affair. The next day was devoted primarily to
sightseeing. Any discussion of forgiving the Young loan
guarantee was apparently brief and unproductive.87
the default
During the spring of 1996 the RNC was in financial
distress. Not only had it extended millions of dollars in loans
to the NPF, but it had virtually subsumed the Dole presidential
campaign by hiring staff and running ``issue'' ads on the
candidate's behalf. The NPF, for its part, had missed a loan
payment to Signet Bank in March. This caused serious concern on
the part of Young's lawyer, Benton Becker. After discussions
with RNC General Counsel Norcross and with lawyers at Signet
Bank, a decision was made by NPF officials to postpone the
payment--to engage in an ``allonge,'' a banking term, whereby a
missed payment is tacked onto the end of the loan schedule.
This seemed to be an adequate solution, but in June the NPF
again missed a payment. This time, the NPF chose not to
reschedule the payment, but instead stated that it would make
no further payments. NPF did not advise Becker or Young. It
only advised Signet Bank, which then notified Becker that NPF
had defaulted and that the collateral would be forfeited in 60
days.88 Becker, in turn, informed Richards and
Young.
Becker and Richards immediately began to try to find a
solution. Richards tried to call John Bolton, the NPF
president, no fewer than ten times. Bolton refused to accept
his calls and never called him back.89 Becker wrote
to Norcross and suggested that perhaps the issue of the RNC's
reimbursement of YBD and its promise to ``guarantee and pay off
any YBD debts'' could be raised by the RNC budget committee at
the Republican National Convention in August.90
Norcross agreed to have it placed on the agenda, but when the
budget committee convened and the issue was raised, Bolton
tabled it.91 According to Richards, himself a past
RNC chairman, the chairman chooses the membership of the budget
committee and controls the agenda. Had Barbour been willing to
have the issue of repayment to the NPF raised, Richards
believes it would have been done. Absent Barbour's approval,
the motion was tabled.92
By September, Richards felt completely frustrated in his
attempts to settle the issue amicably. On the 17th he wrote
Barbour what he now describes as an ``angry'' letter in which
he recited the chronology of the loan guarantee, clearly
stating once again that the money used for the loan guarantee
was known from the outset to be Hong Kong corporate
money.93 This was at least the fifth time Barbour
had been made aware that the funds supplied for the NPF loan
guarantee were of foreign origin. The letter reiterates that
the money had been slated to help the Republicans win the
Congress in 1994.94 In his deposition before the
Committee, Richards maintained that the entire letter was
accurate except for one part which he claimed was skewed by his
anger--a reference to ``business opportunities'' in exchange
for forgiveness.95
Barbour testified that he regarded the Richards letter as
so replete with inaccuracies and misstatements that he did not
take it seriously. Barbour said he believed the letter was
nothing more than ``a negotiating tool to put pressure on me .
. . It's also why I didn't give it credibility.'' 96
He disputes any charge that he should have been placed ``on
notice'' as to the origin of the money by the letter. In fact,
the evidence is overwhelming that Barbour knew from the outset
that the money used to collateralize the loan came from Hong
Kong. Barbour's denials to the contrary are not credible.
In early November 1996, the NPF, fearing a lawsuit was
imminent, agreed to settle with YBD (Hong Kong) for the $1.5
million loss YBD had sustained.97 The funds were
wired from the Republican National Committee to the NPF which,
in turn, wired the money to Young Brothers Development (Hong
Kong).98 For the NPF, the fiction of Young
Brothers's U.S. subsidiary seemed no longer necessary. Ambrous
Young had forfeited--involuntarily--nearly $800,000. He thought
he had a promise from Haley Barbour, but it was never honored.
In fact, Young said he never heard from Barbour
again.99
other foreign contributions
The NPF loan guarantee was not the only contribution from a
foreign source received by NPF. At least one, and perhaps two
additional large contributions came from foreign sources. As
was the case with the NPF loan, the foreign contributions would
have been legal if NPF were a legitimate nonprofit organization
rather than an arm of the RNC. Because NPF was a unit of the
RNC, the law's prohibition against foreign money being used for
election activity is applicable.
During John Bolton's tenure as president, the NPF received
a $25,000 contribution from a foreign organization known as the
Pacific Cultural Foundation.100 When asked during a
March 16, 1997 television interview to ``tell the American
people who gave hundreds of thousands of dollars to the
National Policy Forum and did any of that money come from
overseas,'' Barbour responded, ``None of the money came from
overseas . . . period.'' 101 However, Barbour might
have recalled that both he and Bolton communicated with the
Taipei Economic and Cultural Representative Office with regard
to the contribution.102 Barbour even personally
thanked ``Ambassador [Jason] He,'' noting that the ``generous
contribution'' would enable NPF ``to continue to develop and
advocate good international policy.'' 103 Testifying
before the Committee, Barbour admitted that he was aware that
Ambassador He was the U.S. representative of the Taiwanese
Government and that the Taipei Economic and Cultural
Representative Office functions as the de facto embassy for the
Government of Taiwan. Despite being the only contribution the
Committee has discovered that is directly tied to a foreign
government, the National Policy Forum never returned the
contribution.104
Another contribution that may be of foreign origin is a
$50,000 contribution to NPF from Panda Industries,
Inc.,105 a corporation associated with Ted Sioeng, a
nonresident alien.106 Companies and individuals
associated with Sioeng have contributed to both Democratic and
Republican candidates and to the Democratic National
Committee.107 Sioeng is reputed to have ties to
Chinese officials and possible involvement in the China Plan
discussed in Chapter 2 of the Minority Report.108
The NPF contribution was made on July 18, 1995, and has been
reported by the press to have been returned by
NPF.109 More information about this contribution is
provided in Chapter 7.
conclusion
As chairman of the Republican National Committee, Haley
Barbour established and controlled a tax-exempt organization
which he may have used in violation of the federal tax laws and
election laws. Although the National Policy Forum claimed to be
a nonpartisan, ``social welfare'' organization, Barbour used it
initially to assist the Republican Party in policy-formation,
by organizing fora where the party could receive grassroots
input. The fora also helped to energize Republican activists.
Barbour next used the National Policy Forum as a way to bring
together powerful lobbyists and Republican policy-makers on
Capitol Hill to raise money for both the Forum and for the
Republican Party at large. Lastly, he used the National Policy
Forum as a means to funnel money to the Republican National
Committee in order to promote the Contract with America in 1994
and finance Republican campaigns in 1996. It is this last
``use'' on which the Committee focused its investigation.
Barbour has always maintained, correctly, that tax-exempt
organizations can legally accept foreign contributions.
Political parties, however, cannot accept such contributions.
The critical question, then, is whether or not Barbour knew
that the money he solicited from Young Brothers was foreign
corporate money and whether he intended that those funds be
used by the RNC for election purposes. Barbour claims that he
had no knowledge of the origin of the Young Brothers
collateralized funds, that the party did not need the money,
and that he never solicited the contribution with the idea that
it would be used to help the Republican Party in any campaign.
Barbour's version, however, is riddled with inconsistencies and
contradicted by virtually every other witness with knowledge of
the loan transaction.110
Barbour claims that he first learned in 1997 that the money
used for the YBD loan guarantee was of Hong Kong origin.
Barbour's testimony is contradicted by testimony and
documentary evidence from Ambrous Young, Stephen Young, Fred
Volcansek, Richard Richards, and Benton Becker, all of whom
maintain that Barbour and/or his close advisers were aware that
the YBD money used to collateralize the loan originated in Hong
Kong. Ambrous Young testified that he told Barbour on two
occasions that the money was from Hong Kong: at the August 1994
dinner in Washington, D.C., and in 1995 on the yacht in Hong
Kong. Stephen Young hand-delivered a letter from his father to
Barbour in September 1994 on YBD, (Hong Kong) stationery in
which Young repeated Barbour's statement that the money was
``urgently needed and directly related to the November
election.'' Volcansek testified he informed Barbour of the
origin of the money at a meeting at RNC headquarters in the
summer of 1994. Richard Richards' September 17, 1996, letter,
which Barbour acknowledges receiving, clearly states that the
money came from Hong Kong. Volcansek and Becker also testified
that key RNC officials who were close to Barbour were also
aware of the source of the YBD loan guarantee: Volcansek told
Fierce, an RNC strategist, even before the approach was made to
Young, and Becker believes that David Norcross, the RNC general
counsel, was also aware. In the face of all of this evidence,
Barbour's denials are not credible. He had to know that the
money guaranteeing the NPF loan originated in Hong Kong.
Moreover, as noted above, evidence before the Committee shows
that Barbour knew the loan proceeds would be transferred to the
RNC, which would then use the funds for electoral purposes.
Barbour also is not credible on the question of forgiving
the loan. Barbour testified that Ambrous Young was inclined to
forgive the loan and that Young had told him this even before
the loan guarantee was in place. Young flatly contradicts
Barbour on this point, noting that he told Barbour on the yacht
in Hong Kong that he could not forgive the loan unless he had
the approval of the YBD (Hong Kong) board, because the company
was subject to Hong Kong Government audits. Richard Richards
was aware of the meeting on the yacht and he testified that
Barbour ``raised the issue of forgiveness for the first time,''
and not, as Barbour testified, before the loan guarantee was
even in place. Documents provided to the Committee by Young and
Becker clearly demonstrate that Young and counsel were angry
and disappointed upon learning of NPF's default of its bank
loan. Barbour also testified in his deposition that Volcansek
had been a party to conversations concerning forgiveness even
before the loan guarantee was signed,111 but
Volcansek flatly denied than any such conversations took
place.112 The decision to default on the loan,
according to Barbour, was made by himself and NPF's president,
John Bolton.113 But Bolton stated under oath that he
was ``instructed, not consulted'' about Barbour's decision to
default.114
During the hearings on the NPF, Chairman Thompson expressed
on several occasions his concern over Barbour's role in
securing the YBD loan guarantee. At one point, Senator Thompson
remarked to Barbour: ``It would seem to me that you would
think, in retrospect, anyway, that all of this, plus the fact
that you were heading both organizations, plus the fact that it
was your platform, and the fact that you provided the seed
money, would make any appearance of any foreign involvement
that much more radioactive . . .'' 115 The Chairman
continued, ``[W]hen you are sitting on a boat in Hong Kong
harbor talking to a gentleman who is a resident of--a citizen
of Taiwan, I mean that does raise certain other potential
implications in terms of appearances.'' 116 Thompson
concluded, ``[I]t looks to me like you had a situation where
this gentleman, whether he is a citizen or not, caused his
company to put up some money that was lost at a time when he
was thinking, anyway, that the RNC had a moral obligation to
step in there and do what it could. . . . And he is holding the
bag to the extent of $800,000. So legalities aside, you know a
deal is a deal, and don't you think maybe you and I both ought
to urge that that thing be looked at again?'' 117
The Minority believes that the RNC has both a moral and a legal
obligation to return the $800,000 foreign contribution.
footnotes
1 When a loan is guaranteed, the bank can invoke the
guarantee if the borrower defaults. If a third party has posted
collateral, the bank can seize all or part of the collateral. Whichever
approach is used, the guarantor or collateral-provider loses money if
the borrower defaults.
2 Senator Glenn, 7/8/97 Hrg., p. 22.
3 Chairman Thompson said that he ``was proud of [the]
fact'' that the Committee had issued a subpoena on April 9, although he
never explained why he refused to enforce the order he issued after NPF
failed to comply with the subpoena. Senator Thompson, 7/23/97 Hrg., p.
34. He also said that ``if information comes to my attention that they
or anybody else violates the order, we will take appropriate action. .
. .'' Senator Thompson, 7/23/97 Hrg., p. 38. He never did.
4 See appendix A: Chart showing instances where Haley
Barbour's testimony is contradicted.
5 Barbour testified that he was aware that there was
some question as to the citizenship of Ambrous Young at the time the
loan was being negotiated. Haley Barbour, 7/24/97 Hrg., p. 231. Senator
Torricelli raised the possibility that Young's dealings with NPF were
to curry favor with the Republican leadership in Congress who, at the
time, were considering tax treatment of expatriates. Senator
Torricelli, 7/23/97 Hrg., pp. 152-53. Becker declined to provide any
information on the matter of Mr. Young's renouncement of his US
citizenship, citing attorney-client privilege. Benton Becker, 7/23/97
Hrg., p. 137.
6 Benton Becker, 7/23/97 Hrg., pp. 40-42.
7 Benton Becker, 7/23/97 Hrg., p. 41.
8 Benton Becker, 7/23/97 Hrg., p. 41.
9 Scott Reed deposition, 7/11/97, p. 22; Haley Barbour,
7/24/97 Hrg., pp. 161-6.
10 Exhibit 263: NPF Press Release, 6/21/93.
11 Exhibit 273: Memorandum from Michael Baroody to Haley
Barbour regarding Baroody's reasons for resignation from NPF, 6/28/94.
12 Haley Barbour, 7/24/97 Hrg., pp. 111, 113.
13 Exhibit 258: Memorandum from Scott Reed to Haley
Barbour, Michael Baroody and Ken Hill regarding NPF action, 6/2/93.
Scott Reed did not testify before the Committee, although he did submit
a statement. In that statement, he explained his reference to the June
2 memorandum: ``At that time, American subsidiaries of foreign
companies had shown an interest in contributing to the NPF. I believed
at that time and believe today that the NPF legally could accept such
contributions. What I did not know was Chairman Barbour's position on
accepting these donations. I thought that he needed to make a policy
decision and give the NPF some staff direction. That is why I
highlighted this issue, among others, in my memorandum.'' Scott Reed
statement, 7/22/97. Barbour apparently did give the staff direction on
the issue: Proceed to solicit foreign money.
14 Exhibit 273: Memorandum from Michael Baroody to Haley
Barbour regarding Baroody's reasons for resignation from NPF, 6/28/94.
15 Michael Baroody, 7/23/97 Hrg., p. 192.
16 Michael Baroody, 7/23/97 Hrg., p. 192. Baroody also
testified that he discussed the concept of foreign fundraising with
Bill Brock, a former RNC chairman, U.S. senator, and NPF board member.
According to Baroody, Brock also thought it would be inappropriate to
raise money abroad. Michael Baroody, 7/23/97 Hrg., p. 204. Brock was
not interviewed by the Committee.
17 Michael Baroody, 7/23/97 Hrg., p. 208.
18 Fred Volcansek, 7/24/97 Hrg., pp. 56, 37-39.
Volcansek believes he was asked to help because of his extensive
international connections. Volcansek, 7/24/97 Hrg., p.58. Volcansek
testified, however, that during 1995 he succeeded in raising several
hundred thousand dollars from domestic sources. He made no reference to
even attempting to raise money from foreign sources after recommending
Ambrous Young. Fred Volcansek, 7/24/97 Hrg., p.15.
19 When asked why, as president of the NPF, he was not
kept informed of Denning's activities, Baroody replied, ``I cannot
answer that.'' Michael Baroody, 7/23/97 Hrg., p. 211.
20 Fred Volcansek, 7/24/97 Hrg., p. 28.
21 Fred Volcansek, 7/24/97 Hrg., p. 31.
22 Michael Baroody, 7/23/97 Hrg., p. 248.
23 According to Volcansek, Steve Richards had told him
that Ambrous Young might be interested in supporting the National
Policy Forum because he was looking around for a think tank to which he
could donate. Fred Volcansek, 7/24/97 Hrg., p.33. However, Steve
Richards flatly denies that Ambrous Young ever said anything about
looking for a think tank or that Richards ever made such a statement to
Volcansek. Steve Richards deposition, 7/22/97, p. 17.
24 Exhibit 273: Memorandum from Michael Baroody to Haley
Barbour regarding Baroody's reasons for resignation from NPF, 6/28/94.
25 Exhibit 273: Memorandum from Michael Baroody to Haley
Barbour regarding Baroody's reasons for resignation from NPF, 6/28/94.
26 See Michael Baroody, 7/23/97 Hrg., pp. 193, 212-21.
27 Haley Barbour, 7/24/97 Hrg., p.116.
28 Memorandum from Jo-Anne Coe to Dole contributor
Philip Anschutz, 5/29/95, DFP 004294.
29 Exhibit 259: Memorandum from Haley Barbour, John A.
Moran, and Max M. Fisher to Team 100 Members regarding Team 100
Structure and Activities, 6/10/93. In his testimony before the
Committee, Barbour disavowed the memorandum and claimed that ``it was
written by a staff member who happened to be my nephew. . . . But he
screwed up.'' Haley Barbour, 7/24/97 Hrg., p. 160, 161. Barbour then
explained, ``When I started and ran for chairman and said I thought
there should be a policy institute, I was thinking it should be part of
the RNC. As we went along, it became clear to me, before the National
Policy Forum was founded, that that wasn't the right way to do it.''
Haley Barbour, 7/24/97 Hrg., p.161. During Baroody's testimony,
Chairman Thompson observed, ``In a 501(c)(4), you are allowed some
political activity. It is not supposed to be partisan political
activity, but you are allowed some. But you are not supposed to be a
subsidiary of a party.'' Chairman Thompson, 7/23/97 Hrg., p. 25.
30 Exhibit 327: Memorandum from Kevin Kellum to Haley
Barbour regarding Stephen Wynn, CEO of Mirage Resorts, 2/23/96,
R013574. Barbour was at a complete loss to provide any credible
explanation as to why Kellum would be writing him such a memorandum. He
testified, ``It's--it looks to me like he is--and, again, I have no
recollection of this . . . but it looks to me like he's recommending
three scenarios.'' Barbour continued, ``Well, I-- you know, I'm seeing
this for the first time, don't know if I've ever seen it before
today.'' When Minority Chief Counsel Alan Baron reminded Barbour that
the memorandum was addressed to him, Barbour responded, ``And I don't--
I understand that . . .'' Haley Barbour, 7/24/97 Hrg., p. 157.
31 Exhibit 353: Letter from the Internal Revenue Service
to the National Policy Forum denying NPF tax exempt status, 2/21/97.
The Committee obtained yet another document, Signet Bank's Commercial
Credit memorandum, in which the Bank's credit analyst, responsible for
assessing the creditworthiness of the NPF, concluded essentially that
NPF was financially sound because it was an offshoot of the RNC.
Exhibit 297: Signet Bank Commercial Credit Memorandum, 10/12/94.
32 Exhibit 353: Letter from the Internal Revenue Service
to the National Policy Forum denying NPF tax exempt status, 2/21/97;
Haley Barbour, 7/24/97 Hrg., p. 15.
33 SIG 00197. This memorandum had been
provided to Signet Bank by NPF.
34 Daily Variety, 3/7/95; See also, Daily Variety, 3/9/
95; The Village Voice, 8/6/96.
35 Exhibit 309: Memorandum from Grace
Weigers and Dianne Harrison regarding megaconference sponsorships, 5/
24/95. This memorandum should have been produced to the Committee, but
it was not. Instead the Committee obtained it from another source.
36 See Appendix B.
37 Scott Reed deposition, 7/11/97, pp. 58, 59.
\38\ Scott Reed deposition, 7/11/97, pp. 64, 66.
\39\ Scott Reed deposition, 7/11/97, p. 62.
\40\ Joseph Gaylord deposition, 9/16/97, pp. 16-18.
\41\ John Bolton deposition, 7/15/97, p. 5.
\42\ Exhibit 277: Talking points for Haley Barbour, 7/28/94.
\43\ Richard Richards, 7/25/97 Hrg., p. 69.
\44\ Exhibit 278: National Policy Forum proposal for Ambrous Young,
8/15/94, 00280029.
\45\ Benton Becker, 7/23/97 Hrg., p. 107.
\46\ Ambrous Young deposition, 6/24/97, p. 35. Becker
also testified that ``Mr. Richards has advised me and informed me that
he, too, had conversations with people at the RNC on that matter
[source of funds'']. Benton Becker, 7/23/97 Hrg., p. 164.
\47\ Haley Barbour, 7/24/97 Hrg., p. 194. Young eventually did
contribute to the publication. Becker testified that ``the publication
of the articles was not of great concern to Young.'' Benton Becker, 7/
23/97 Hrg., pp. 44, 45.
In response to Young's claim that he told Barbour that the funds
would originate from Hong Kong, Barbour testified, ``[A]ll I can tell
you is if he ever mentioned anything about a Hong Kong board or about
Hong Kong authorities, either I didn't understand what he was talking
about or I just didn't hear him.'' Haley Barbour, 7/24/97 Hrg., p. 143.
\48\ Fred Volcansek, 7/24/97 Hrg., p. 38.
\49\ Fred Volcansek, 7/24/97 Hrg., pp. 38, 39.
\50\ Fred Volcansek, 7/24/97 Hrg., p. 39. According to Becker,
shortly before the August 29, dinner, Young asked for his opinion about
providing a loan guarantee to the National Policy Forum. Becker
consulted with Richard Richards and ``we were all of the opinion that
the RNC should serve as a form of safety net or guarantor to Mr.
Young's company. . .'' Benton Becker, 7/23/97 Hrg., p. 45.
\51\ Benton Becker, 7/23/97 Hrg., p. 44.
\52\ Exhibit 289: Letter from Ambrous Young to Haley Barbour
regarding support of the Republican Party and NPF, 9/9/94, 0040.
\53\ When Senator Lieberman asked why Young, no longer an American
citizen, would agree to help the Republican Party, Benton Becker
testified, ``Mr. Young had spent many years in Republican functions and
activities, was very active in Republicans Abroad and then was active,
I believe, in the Reagan years and still had an affection for the
Republican Party. . . . I think Mr. Young also saw that--some
possibility that at some point in time his sons, who were American
citizens, would come into and control and run his business and that
kind of involvement with high government officials in Washington--at
least the ability to sit and have dinner with them, or lunch, would not
be harmful. He uses an expression, Senator, that I had never heard
before, and his expression is, ``It put powder on my face.'' It is an
expression that he tells me is of Oriental extraction, and what he
meant by that is that it made him feel better and perhaps allowed him
to walk among people that he would not normally be able to.'' Benton
Becker, 7/23/97 Hrg., p. 121.
\54\ Becker testified: ``Based on what I saw, although
approximately $2 million in debt to the RNC at the time, the National
Policy Forum appeared to be taking in significant contributions, mostly
from well-respected Fortune 500 companies.'' Benton Becker, 7/23/97
Hrg., p.46.
\55\ Benton Becker deposition, 6/3/97, p. 44.
\56\ Exhibit 285: Letter from Haley Barbour to Benton Becker
regarding loan guarantee for the National Policy Forum, 8/30/94, 0037.
\57\ Benton Becker, 7/23/97 Hrg., p. 67.
\58\ Benton Becker, 7/23/97 Hrg., pp. 46-47.
\59\ Benton Becker, 7/23/97 Hrg., p. 70.
\60\ Benton Becker, 7/23/97 Hrg., p. 95.
\61\ Benton Becker, 7/23/97 Hrg., p. 146.
\62\ Exhibit 292: Letter from Mark Braden to Benton Becker
regarding the loan guarantee, 10/6/94, 0065. Senator Specter pointed
out, ``Mr. Braden is very explicit in his understanding that it will
not be paid to a political committee, and that, in fact, is what is
done. . .'' Senator Specter, 7/23/97 Hrg., p. 144. The money was
provided to the Republican National State Election Committee
(``RNSEC''), the RNC's ``soft money'' account. Contributions to this
account are not to be used for federal election activity, although it
is common knowledge and practice for both parties to ignore the law's
prohibitions on the use of soft money and to spend it on federal
election activity.
\63\ Exhibit 293: Letter from Daniel Denning to Ambrous Young and
Benton Becker, 10/7/94. It is noteworthy that the bank extended credit
to the National Policy Forum because of the Forum's relationship to the
RNC. Signet Bank's commercial credit memorandum states, ``While NPF is
a new customer to the bank, Signet has a longstanding relationship with
the RNC with whom NPF shares a top-level management.'' The memorandum
recommends ``approval of credit facility as outlined above. This rating
recommendation is based on the excellent collateral quality, the proven
ability of Haley Barbour to generate political contributions, and the
close relationship between the borrower and the Republican National
Committee.'' Exhibit 297: Commercial Credit Memorandum, 10/12/94.
\64\ Benton Becker, 7/23/97 Hrg., p. 123. According to Becker, the
decision to use a collateralized loan guarantee was the bank's, because
it ``recognized that the financial statement of YBD (USA), absent the
$2.1 million that it acquired from its parent, would not support
collateralization.'' Becker, 7/23/97 Hrg., p. 123.
\65\ Fred Volcansek, 7/24/97 Hrg., p. 42.
\66\ Fred Volcansek, 7/24/97 Hrg., p. 44. Volcansek claims that the
only reason the money passed through Young Brothers, Florida, was
because ``[the bank] felt better about dealing with a U.S.
corporation.'' Fred Volcansek, 7/24/97 Hrg., p. 69. However, there is
nothing in the documents supplied by the bank to support this view.
\67\ Haley Barbour, 7/24/97 Hrg., p. 120.
\68\ Haley Barbour, 7/24/97 Hrg., p. 120.
\69\ Haley Barbour, 7/24/97 Hrg., p. 221.
\70\ Exhibit 299: Letter from Steven S. Walker to Kevin Killoren,
Signet Bank, 10/13/94, NPF 000315.
\71\ Haley Barbour, 7/24/97 Hrg., p. 190.
\72\ FEC Records. See Appendix C: Soft Money Transfers Out After
Young Brothers Loan.
\73\ See e.g., Richard Richards, 7/25/97 Hrg., p. 107; Fred
Volcansek, 7/24/97 Hrg., pp. 27-28.
\74\ FEC Records, post general records for RNSEC account 10/20/94--
11/28/94. See Appendix D: RNC's Soft Money Account Was Negative Without
Foreign Linked Funds.
\75\ Exhibit 302: Letter from Haley Barbour to Ambrous Young, 11/
29/94.
\76\ Ambrous Young deposition, 6/24/97, pp. 50-51, 71.
\77\ Exhibit 304: Letter from Haley Barbour to Ambrous
Young, 1/31/95.
\78\ Ambrous Young noted: ``On one of his trips to the Far East
[Barbour] stopped over in Hong Kong and I invited him to join me for a
drink, and he asked me to consider whether I can forgive the loan. [The
conversation took place] on our yacht belonging to the company.''
Ambrous Young deposition, 6/24/97, p. 55. Similarly, when Richard
Richards was asked by counsel, ``Do you recall that Mr. Barbour met
with Mr. Young on Mr. Young's yacht?'' Richards responded: ``I
understand they did, when Haley went over the first time and asked him
to forgive the loan. I wasn't there. But I know I heard Haley talk
about the yacht.'' Richard Richards deposition, 6/10/97, p. 80.
Richards also testified at the hearing: ``I received a telephone call
from Mr. Fred Volcansek--I don't recall the date--and he told me that
Chairman Barbour was going to Hong Kong, he was going to visit with Mr.
Young, and at that time he was going to ask Mr. Young to forgive the
loan. . . . I called Mr. Young to give him a heads-up that this may
occur, and he called me after he met with Chairman Barbour and told me
that Chairman Barbour had indeed asked him to forgive the loan.''
Richard Richards, 7/25/97 Hrg., p. 75.
\79\ Haley Barbour, 7/24/97 Hrg., pp. 147-48.
\80\ Fred Volcansek, 7/24/97 Hrg., p. 17.
\81\ According to Barbour, ``he was saying that they would make a
contribution to pay off the loan. That's what I was thinking he was
trying to tell me.'' Haley Barbour, 7/24/97 Hrg., p. 145. At his
deposition, Young testified to the opposite, i.e., that Haley Barbour
suggested YBD make a $2 million contribution to the RNC, which money
the RNC would use to pay off the NPF loan. Young categorically refused.
Ambrous Young deposition, 6/24/97, p. 59.
\82\ ``I said no in the manner of an apology. I explained to him
that we have difficulties to do that because the YBD (USA) money, which
was guaranteed under the form of certificate, deposit certificate for
the Forum loan, was a loan from YBD (Hong Kong), and YBD (Hong Kong),
we are facing government audit every year. Without justification, the
directors of the board, who approve such loan, could face government
punishment. So, therefore, I explained this cannot be done.'' Ambrous
Young deposition, 6/24/97, p. 57.
\83\ Haley Barbour deposition, 7/19/97, p. 129. At the very least,
it strains credulity that Barbour was on a yacht in the middle of Hong
Kong harbor with a man whose citizenship he claims not to have known
and to have never felt compelled to inquire whether the money
contributed to the NPF was of foreign origin. As Senator
Thompson put it, ``But when you are sitting on a boat in the Hong Kong
harbor talking to a gentleman who is an evident of--a citizen of
Taiwan, I mean that does raise certain other potential implications in
terms of appearances.'' Chairman Thompson, 7/24/97 Hrg., p. 169.
\84\ Haley Barbour deposition, 7/19/97, p. 105.
\85\ Richard Richards, 7/25/97 Hrg., p. 102.
\86\ Haley Barbour deposition, 7/24/97, p. 104.
\87\ Haley Barbour deposition, 7/24/97, p. 105.
\88\ Exhibit 333: Letter from John S. Bredin to Benton Becker
regarding the promissory note and credit and security agreement, 6/4/
96, 0159.
\89\ Richard Richards deposition, 6/10/97, p. 50.
\90\ Exhibit 340: Letter from Benton Becker to David Norcross
regarding National Policy Forum's outstanding loan from the Signet
Bank, 7/15/96, 0177.
\91\ Richard Richards, 6/10/97 deposition, pp. 46-47.
\92\ Richard Richards, 6/10/97 deposition, p. 48.
\93\ Richard Richards, 6/10/97 deposition, p. 53.
\94\ Exhibit 349: Letter from Richard Richards to Haley Barbour
regarding the YBD loan to NPF, 9/17/96, RB 014591.
\95\ Richard Richards deposition, 6/10/97, p. 70.
\96\ Haley Barbour, 7/24/97 Hrg., p. 146.
\97\ Signet Bank sent an interest payment of about $50,000 to YBD
(HK) and copied the NPF on the transfer. NPF, in turn, deducted that
amount from the $800,000 settlement it had agreed to pay YBD. Benton
Becker, 7/23/97 Hrg., p. 183.
\98\ See Exhibit 351: Letter from Benton Becker to the National
Policy Forum regarding the dispute between the National Policy Forum
and Young Brothers Development (USA), Inc., 11/11/96, 0201.
\99\ Ambrous Young deposition, 6/24/97, p. 62.
\100\ Haley Barbour acknowledged the contribution was foreign in a
7/3/97 memo to NPF board members. Exhibit 372: Memorandum to the
National Policy Forum Board Members from Haley Barbour, 7/3/97, NPF
003388.
\101\ Exhibit 374: Partial transcript of ``Meet the Press,'' 7/13/
97, replaying videotape of 3/16/97 interview with Haley Barbour. Months
after the first interview, Barbour called interviewer Tim Russert to
apologize for misleading Russert about the source of NPF's
contributions.
\102\ Exhibits 381 and 382: Memos from John Bolton to Michael Hsu,
Special Assistant, Taipei Economic and Cultural Representative Office
in the United States, 8/7/96, NPF 003204 and NPF 003200.
\103\ Exhibit 383: Letter from Barbour to Ambassador He, 8/22/96,
NPF 003203.
\104\ Haley Barbour, 7/24/97 Hrg., pp. 134-35.
\105\ Letter dated 6/18/97 from Thomas P. McLish, counsel, Akin,
Gump, Strauss, Hauer & Feld, to Majority Counsel, Senate Governmental
Affairs Committee special investigation, attachment entitled,
``Tentative List of Political Contributions.''
\106\ Staff interview with Jessica Elnitiarta, 6/19/97.
\107\ Staff interview with Jessica Elnitiarta, 6/19/97.
\108\ See Chapter 2 on the China Plan and Chapter 7 on Ted Sioeng;
see also Los Angeles Times, 7/20/97.
\109\ See Chapter 2 on the China Plan and Chapter 7 on Ted Sioeng;
see also Los Angeles Times, 7/20/97; Newsday, 9/14/97.
\110\ See Appendix A: Comparison of Barbour's Testimony with
Documentary and Testimonial Evidence of Others.
\111\ Haley Barbour deposition, 7/19/97, pp. 96-99.
\112\ Fred Volcansek deposition, 7/21/97, p. 95.
\113\ Haley Barbour deposition, pp. 111, 139-140.
\114\ John Bolton deposition, 7/15/97, pp. 66-67.
\115\ Chairman Thompson, 7/24/97 Hrg., p. 167.
\116\ Chairman Thompson, 7/24/97 Hrg., p. 169.
\117\ Chairman Thompson, 7/24/97 Hrg., p. 170.
PART 1 FOREIGN INFLUENCE
Chapter 4: John Huang
John Huang, a former Lippo Group executive, Commerce
Department official, and DNC fundraiser, personifies a
significant aspect of the fundraising problems endemic to the
1996 elections. Apparently driven by a desire to be perceived
as an important fundraiser in Democratic Party circles, Huang
engaged in a number of activities that were improper and
possibly illegal during and prior to his tenure at the DNC. In
the end, the DNC returned over $1.6 million in contributions
attributable to Huang. The evidence before the Committee
supports the claim that Huang engaged in improper fundraising
activities. The evidence before the Committee does not support
other allegations lodged against Huang, including the serious
charge that he served as a spy for the People's Republic of
China or any other foreign government.
FINDINGS
Based on the evidence before the Committee, we make the
following findings regarding Huang's activities:
(1) John Huang engaged in a number of improper and possibly
illegal activities during and prior to his service as a DNC
fundraiser. These activities ranged from failing to ensure the
legality or propriety of the contributions he solicited, to
obtaining foreign reimbursement for a 1992 corporate
contribution he directed, to possibly soliciting foreign
contributions. In addition, he appears to have improperly
solicited several contributions during his tenure at the
Commerce Department, in possible violation of the Hatch Act.
(2) There is no evidence before the Committee that DNC
officials were knowingly involved in Huang's misdeeds, but the
DNC did not adequately supervise Huang's fundraising, did not
adequately review the contributions that Huang solicited, and
did not respond appropriately to warning signs of his improper
activities. The DNC could have avoided some of Huang's misdeeds
had it more closely supervised Huang's activities and had it
not unwisely abandoned its previously-existing system for
checking the propriety of large contributions.
(3) Huang contributed and raised substantial sums of money
to benefit the DNC in order to gain access for himself and his
associates to the White House and senior Administration
officials.
(4) The evidence before the Committee does not establish
that Huang served as a spy or a conduit for contributions from
any foreign government, including the People's Republic of
China. The Committee's investigationyielded no direct support
for the allegation that Huang acted as either a spy or a conduit for
any foreign government.
(5) The evidence before the Committee does not establish
that Huang either misused his security clearance or improperly
disseminated classified information during his service at the
Commerce Department.
(6) The evidence before the Committee does not allow for
any definitive conclusion regarding the nature of Huang's
interactions with the Lippo Group during his tenure at the
Commerce Department and the DNC. Huang's frequent contacts with
Lippo-related entities and his intermittent use of an office
across the street from the Commerce Department to receive faxes
or mail cast suspicion on Huang's activities while working for
the Commerce Department. Nevertheless, the absence of specific
evidence on the nature of his contacts with Lippo or the
contents of the materials he received makes it difficult to
draw any conclusions regarding actual misconduct or a conflict
of interest within the meaning of the ethics laws governing
federal employees.
(7) Neither Huang's hiring at the Commerce Department nor
his receipt of a security clearance was inappropriate. At the
time of Huang's hiring, all Commerce Department political
appointees received interim clearances as a matter of course, a
practice the Department subsequently discontinued.
huang's early career
John Huang was born in Fujian province, China,1
and raised in Taiwan.2 In 1969, he came to the
United States to study in the graduate business administration
program of the University of Connecticut.\3\ He became a
naturalized U.S. citizen in 1976.4
---------------------------------------------------------------------------
Footnotes at end of chapter
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During the 1970s, Huang began a career as a banker in the
Washington area.5 In late 1979, he moved to Kentucky
and worked for First National Bank of Louisville.6
Two years later, he joined Union Planters National Bank in
Memphis.7 In 1983, Huang was transferred to Hong
Kong to head Union Planters's Far East representative
office.8 While in that post, he met Indonesian
businessman James Riady, who was a legal permanent resident in
the U.S. for many years and whose family owns the Lippo Group,
an international conglomerate.
Huang first went to work for the Riadys in February 1985,
when he became a vice president and director of international
banking for the Hong Kong Chinese Bank,9 in which
the Riadys' Lippo Group held a large stake. Simultaneously, he
served as a vice president and Far East manager of the Little
Rock-based Worthen Bank, which was also partly owned by the
Riady family in partnership with Stephens Inc., a major
investment banking firm based in Little Rock, Arkansas. Huang
reported to James Riady who was then residing in Arkansas.
During Riady's tenure in Arkansas, Riady met and became
friendly with then-Governor Bill Clinton.10 Huang
later said he met the Governor when he led a trade mission to
Asia.11 During business trips to Arkansas, Huang
also met several people with ties to Governor Clinton, some of
whom--like Huang himself--would later follow him to Washington
after he was elected President.
In 1984, after running into problems with bank regulators
in Arkansas, the Riadys shifted their focus to California. In
1984, James Riady acquired control of Bank of
Trade,12 a small institution that specialized in the
Asian-American market,13 and renamed it LippoBank of
California.14 Riady moved from Little Rock to Los
Angeles and, in 1986, he appointed John Huang president and
chief operating officer of the California bank.15
Huang remained with LippoBank of California until the
summer of 1988, when he went to New York to become general
manager of Bank Central Asia.16 Although it was not
part of the Lippo Group, the Riadys were large investors in
Bank Central Asia and, according to Huang, they managed
it.17 In January 1990, Huang moved from New York
back to California to become president of USA Operations for
the Lippo Group, responsible for overseeing all of Lippo's U.S.
interests. He also served as vice chairman of the California
bank.18
background on the lippo group
The Lippo Group was founded in Indonesia by Mochtar Riady,
father of James Riady and the son of immigrants from the Fujian
province of China.19 Mochtar Riady got his start in
business by operating a bicycle shop in Indonesia catering to
bicycle traders from his native province.20 In 1960,
he entered the banking business when he raised $200,000 in
equity for a failing bank from other ethnic Chinese in
Indonesia. By 1990, the Lippo Group had grown astronomically
and diversified from its financial services base to
manufacturing and real estate development.21 Unlike
most conglomerates, Lippo Group ``is an unconsolidated
federation of companies with a multibillion-dollar asset base,
a second major base in Hong Kong and activities throughout the
Pacific Rim,'' 22 in the words of an academic study.
All companies in the group are fully or partially owned and run
by the Riady family.23 By the mid-1990s, the Lippo
Group was a multibillion-dollar conglomerate headquartered in
Indonesia and with a second large base of operations in Hong
Kong. It was active in about a half-dozen
countries.24
In the 1990s, the Lippo Group began a major effort to
invest and conduct business in China. Like many other major
companies hoping to enter the Chinese market, the Lippo Group
did so by entering into joint ventures with companies
controlled by the Chinese government. In particular, Lippo
forged a close relationship with a Chinese government-owned
trading company called China Resources, Ltd. China Resources is
a multi-national company based in Hong Kong whose revenues
exceeded $250 million last year.25 Despite concerns
expressed by some Members of the Committee, this relationship
does not signal Chinese government control of the Lippo
Group.26 Thomas Hampson, a private investigator
called by the Majority to testify on the structure of the Lippo
Group, testified that foreign nationals who do business in
mainland China--a socialist and centralized economy--very often
work with government-owned companies.27 Indeed,
numerous American corporations, including General Motors,
Boeing, Coca-Cola, Eastman Kodak, and Microsoft, have entered
the Chinese market through joint venture relationships with
Chinese government-owned companies.28
The Lippo Group also has been involved in business ventures
with several major American companies, including First Union
Corp. and Wal-Mart Stores Inc., and with various European and
Japanese concerns. One well-known American who has done
business with Lippo is Pat Robertson, the television evangelist
who founded the Christian Coalition. In 1995, a company chaired
by Robertson teamed up with Lippo and a Malaysian real estate
firm to launch a cable TV venture in mainland
China.29
huang's activities on behalf of the lippo group
Huang's professional responsibilities on behalf of the
Lippo Group appear to have been threefold. First, he was
responsible for overseeing LippoBank of California
(``LippoBank'') and three U.S. holding companies: Hip Hing
Holdings, San Jose Holdings, and Toy Center Holdings. Each
holding company owned one or more pieces of California real
estate in varying stages of development. Although the
properties generated some income from rent, all of the
companies apparently operated at a net loss until
1994.30
Second, Huang was responsible for building the name of the
Lippo Group in the U.S. and stimulating business in the Asian
American community, the financial community, and the government
and political communities. Third, Huang was the country liaison
between Lippo Group headquarters and their U.S. contacts. James
Alexander, a former LippoBank president, best described Huang's
varied roles, testifying that Huang was the person who took him
around to meet important clients, who escorted him when he
visited Jakarta, and was the person to whom he turned when he
had a bank matter that needed to be resolved. Harold Arthur, a
subsequent LippoBank president, summed up by stating, ``I
presumed [what Huang did from day to day] was business
relations and client development.'' 31
To fulfill his responsibility to promote the Lippo Group,
Huang engaged in a tremendous amount of networking and became
active in numerous organizations, including the Asia Society,
the Committee of 100, the Chinese Chamber of Commerce, the
California Taiwan Trade and Investment Council, the Asian
Business League, Asian American Development Enterprises, the
Chinatown Service Center, the Foreign Trade Association, the
Asian Pacific American Legal Center, the National Association
of Chinese Bankers, the Hong Kong Association of Southern
California, the Independent Bankers Association of America, and
the Indonesian Cultural Association.32 Huang also
sat on two advisory state commissions: the California World
Trade Commission and the California State Advisory Commission
on Economic Development.33 He was not merely a
member of these organizations, he held officer positions in
almost all them. For example, he was a director of Committee of
100, a bipartisan national organization of Chinese American
leaders in the arts, academia, public service, business and the
sciences, whose membership is by invitation only. Other members
of Committee of 100 include prominent Chinese American leaders,
including Yo-Yo Ma, I. M. Pei, Chang-Lin Tien and David Henry
Hwang.34
In his capacity as country liaison for the Lippo Group,
Huang oversaw visits to the U.S. by members of the Riady family
and other Lippo officials, acted as a broker for potential
business associates of the group, and assisted delegations
visiting from Asia as requested by Group officials. In this
capacity, Huang handled such events as the Lippo delegation's
attendance at the 1993 Seattle ASEAN conference, the visit to
Atlanta by a visiting Chinese delegation from Beijing, and the
hosting of a breakfast for a second visiting delegation from
Beijing.35
As part of his role in building the Lippo and Riady
profiles, Huang was also very active in government and in
politics. Between the time he assumed the position as Director
of U.S. Operations in 1990, and the time he went to the
Department of Commerce in 1994, Huang oversaw the making of a
number of political contributions through domestic subsidiaries
of the Lippo Group, to state local and federal candidates.
Huang also volunteered to raise funds, to host receptions, and
to build support for candidates within California's Asian
American community.
In the course of his political fundraising,36
Huang formed relationships with members of the Asian American
community who were involved in Democratic politics. In 1988,
for example, he worked with Democratic activist Maria Hsia in
the Pacific Leadership Council (``PLC''), ``a group formed to
raise money and lobby for Asian American interests,''
37 in the words of a press report. In April of that
year, the PLC held a Democratic fundraising event in James
Riady's Los Angeles home that raised about
$110,000.38 Huang also personally contributed
$10,000 to the Democratic Senatorial Campaign Committee
(``DSCC'') in 1988.39 In the fall of 1988, he hosted
a fundraiser for Senator John Breaux of Louisiana, who was then
head of the DSCC.40 The following January, Huang,
Maria Hsia, and other members of the Pacific Leadership Council
led a trade mission to Taiwan with then-California Lt. Governor
Leo McCarthy. Then-Senator Al Gore of Tennessee joined the
delegation in Taiwan.41
In 1992, Huang volunteered to raise money for the Clinton
presidential campaign in the Asian-American
community.42 Huang assisted with the organization of
a fundraising dinner in October 1992 that raised $250,000 for
the campaign from Southern California's Asian-American
community.43 Huang has testified that he became a
fundraising volunteer because Governor Clinton ``had been a
friend to us since the Arkansas time, [and] we [felt] obligated
to help a friend.'' 44
Political contributions
As a part of his responsibilities as Lippo Group's country
representative, Huang oversaw three domestic holding companies
incorporated in California: Hip Hing Holdings, Toy Center
Holdings, and San Jose Holdings. Each of the three companies
owned real estate in California at various stages of
development. Hip Hing Holdings owned a series of adjoining
parcels of property in the Chinatown area of Los Angeles with
an assessed value of $9.8 million.45 In addition to
its property holdings, Hip Hing Holdings was used by the Lippo
Group to pay expenses associated with the Group's activities in
the United States. These expenses included salaries for John
Huang and other staff and consultants employed by the Group,
and costs associated with hosting visiting delegations of
businessmen. Employees of Hip Hing Holding would regularly send
faxes to Indonesia requesting reimbursement of itemized
expenses of Hip Hing Holdings and the other subsidiaries.
Records produced by Hip Hing Holdings show that on August
12, 1992, the company made a $50,000 contribution to the DNC
Victory Fund. Juliana Utomo, a Hip Hing employee who handled
general administration of the companies from 1994 forward, told
the Committee that decision-making with regard to contributions
in 1992 and 1993 rested with John Huang.46 Utomo
stated that she did not know that the $50,000 paid to the
Victory Fund was a political contribution; in fact, she stated
that she did not know the purpose of the
disbursement.47 A request for reimbursement for
expenses of Hip Hing Holdings specifically sought reimbursement
for the DNC contribution.48 The Committee was unable
to depose or interview anyone who had actual knowledge
regarding whether this contribution was reimbursed; however, in
light of the fact that Hip Hing Holdings sought reimbursement
for the contribution, and the fact that the holding company had
not generated sufficient income in 1992 to cover the cost of
such a contribution, it seems likely that the contribution was
reimbursed with Lippo funds from abroad.49 A
reimbursement would likely have converted the Hip Hing Holdings
contribution into a foreign contribution under FEC rules for
U.S. subsidiaries of foreign companies.50
In September 1993, the DNC received additional
contributions from Hip Hing Holdings and from two other holding
companies: San Jose Holdings and Toy Center Holdings. Hip Hing
Holdings and Toy Center Holdings each made $17,500 in
contributions to the DNC while San Jose Holdings contributed
$15,000.51 Unlike the contribution in 1992, however,
the requests for reimbursement for the months in which the
contributions were made do not contain requests for
reimbursements of these contributions.52 Also,
unlike the $50,000 contribution from Hip Hing Holdings in 1992,
each of the companies generated sufficient rental income to
support the cost of the 1993 contributions. In 1993, Hip Hing
Holdings generated $35,200 in income from rental of the
undeveloped property, while San Jose Holdings generated
$155,979 in income, and Toy Center Holdings generated $167,000
in income.53 Accordingly, unlike the 1992
contribution, there is no evidence that the 1993 contributions
made by Lippo-related entities were reimbursed with money from
abroad.
There is no evidence that the DNC was aware of the
reimbursement of the 1992 contribution. Thomas Hampson also
testified that, despite being an expert corporate investigator,
he was unable to discover Hip Hing Holdings's 1992 income using
publicly available information.54 It appears that no
one knew of the reimbursement of this contribution until the
Committee's hearing. After the hearing, the DNC promptly
refunded the $50,000.
James Riady and his wife Aileen were also strong supporters
of the Democratic Party and President Clinton. Between August
and October 1992, they contributed half a million dollars to
state parties in California, Michigan, Louisiana, Ohio, North
Carolina, Arkansas, and Georgia.55 In addition, the
Riadys made a $200,000 contribution to Clinton's 1993 Inaugural
Committee.56 As James and Aileen Riady were both
legal permanent residents of this country at the time, they
were entitled to make the contributions. However, the size and
number of the contributions have led to allegations that Huang
later received his position at the Department of Commerce as a
favor to the Riadys. While it appears likely that James Riady
was one of several individuals who supported Huang's efforts to
obtain a post in the Clinton Administration, as discussed
below, the Committee found no evidence that Riady or Huang
targeted the specific Department of Commerce position to which
he was ultimately appointed.
Prior to his employment with the Department of Commerce,
Huang received a large severance package from the Lippo Group.
Questions have been raised about whether this bonus was payment
in advance for services it was anticipated Huang would perform
while at the Department of Commerce. The reported amount of
this bonus has varied widely. In February 1994, Huang received
an after-tax bonus of $132,000.57 According to the
testimony of Juliana Utomo, it was the policy of the Lippo
Group to pay annual bonuses in the first months of the new year
and that it was fair to conclude that this bonus was Huang's
1993 annual bonus.58 Upon his departure from the
Group, Huang received a severance package including an after
tax bonus of $284,000, slightly more than double his 1993
annual bonus.59 While very generous, a study of the
Lippo Group specifically notes that the Group is known for its
generous bonuses of one and a half to three months' salary, a
factor which helps attract qualified management. At the time of
his departure, Huang, as country representative for the U.S.,
ranked well up in the corporate structure of the
Group.60
Allegations were also raised regarding favorable treatment
of LippoBank of California as a result of the Riadys' and
Huang's political contributions. The California bank, which is
very small by U.S. banking standards with about $50 million in
assets, has been riddled with regulatory problems and has
received three cease and desist orders from the FDIC since
1990.61 The Committee was presented with no evidence
that the bank ever sought or received assistance from
regulators as a result of political contributions. At hearings,
former bank President Harold Arthur and Hip Hing Holdings
employee Juliana Utomo testified that the bank never sought
special help or relief from recipients of Riady's political
contributions or connections.62
Huang's Tenure At The Department Of Commerce
Huang's appointment
There was nothing improper or inappropriate in the
appointment of Huang to a position at the Department of
Commerce; nor were any procedures or regulations ignored or
circumvented in the decision-making process that led to his
placement. Moreover, as described below, Huang was recommended
for an administration position by three United States Senators,
several high-ranking state officials, and the Asian Community
Outreach and Priority Placement components of the Office of
Presidential Personnel. His placement was also in conformity
with the stated desire of both President Clinton and then-
Secretary of Commerce Ron Brown for the federal government to
benefit from increased racial and gender diversity within the
senior levels of the administration. Moreover, he was the
personal choice of his immediate supervisor, Charles Meissner,
the Assistant Secretary for International Economic
Policy,63 and his appointment was made with the
approval or consultation of the Undersecretary for the
International Trade Administration.
At the time he first sought an appointment from the Clinton
Administration in 1992, Huang had over 20 years of business
experience in banking and management, and much of his
experience was international. As a result of his work, he had
extensive contacts within the Asian business community, both in
the U.S. and abroad. Huang had also personally raised funds for
the Clinton campaign in 1992, and his employer, James Riady,
had contributed generously to the Clinton campaign. Huang was a
typical candidate for an appointed position within a new
administration.
Shortly after the 1992 election, Huang submitted his resume
to the Office of Presidential Personnel. In the documents he
submitted, Huang laid out his philosophy in seeking an
appointment as follows:
Our attitude toward life should totally dwell on a
concept ``to serve others''--to serve others base[d]
upon each individual's ability. . . . We want many good
and qualified Asian Americans to answer the call to
serve this country which we have all chosen to come to
establish ourselves; to raise our family and to educate
our children. . . . It will be an important agenda for
the Administration to bring this group of resourceful
people together to make further contribution to this
country.64
Huang initially had been considered for a position with the
Small Business Administration. A memorandum dated April 19,
1993, from Gilbert Colon and Maria Haley of the Office of
Presidential Personnel to then-Director Bruce Lindsey stated:
``It should be noted that there is another qualified candidate
for this position, Mr. John Huang, a banker from California,
who has handled small business and has international
expertise.'' 65 Although Huang was not selected for
this position, the Office of Presidential Personnel continued
to screen his file for a potential appointment.
On October 18, 1993, Gary Christopherson, White House
Associate Director for Presidential Personnel, wrote a memo to
Lindsey recommending Huang for appointment as Principal Deputy
Assistant for International Economic Policy at the Department
of Commerce.66 Christopherson testified that his
decision to recommend Huang was based on his review of Huang's
resume and background, an analysis of the requirements of the
Commerce position, and information supplied by Martha Wantanabe
and Melinda Yee of the Asian Community Outreach
section.67 He also indicated that the selection of
Huang was not a major cause for deliberation in an office that
handled placement of three or four thousand
candidates.68
Huang had support from a number of quarters, including
state and federal elected officials.69 In addition,
Huang's name appeared on lists of potential appointees
submitted to the Office of Presidential Personnel by both the
DNC and the Asian Community Outreach section. As a result,
Huang was placed on a list of priority candidates by the
office's Priority Placement section. Christopherson testified:
Huang was considered to be a high priority placement
by the Asian community. That's how I viewed him, as a
high priority placement as well. What is important to
understand in this is that one of the roles I played in
Presidential Personnel was to be a strong advocate of
diversity coming into the administration. . .
.70
Christopherson noted that the addition of Huang to the group of
priority candidates ``seemed to be a reasonable fit as a
priority placement, and we were clearly looking for Asian
people to get into various places--we clearly needed them in
the Department of Commerce.'' 71 After review by
Christopherson, Huang's name was included in a list of priority
placements which was then forwarded to the Department of
Commerce. The Office of Presidential Personnel did not have
unilateral authority to make an appointment--Huang's placement
had to be approved by the appropriate authorities at the
department.72
At the time of Huang's consideration, Jeffrey Garten was
the Under Secretary of the Commerce Department's International
Trade Administration (the ``ITA'').73 In testimony
before the Committee, Garten stated that he received a list of
priority placement candidates from the White House and that
Huang's name was on that list.74 Garten testified
that he gave that list to Charles Meissner, one of five
Assistant Secretaries within the ITA, and that Meissner
selected Huang as his Principal Deputy Assistant, a position
which was akin to a chief of staff.75 Huang was
selected for his position in early 1994; he began work in July
1994.
Huang apparently received the same level of review as other
candidates for political appointments. He was never considered
a ``must-hire.'' 76 In fact, his application sat for
over six months before an appropriate match was found for
him.77 Although perhaps not as thorough as one might
wish, the process by which Huang was appointed appears to have
been typical of a new administration that seeks to fill
hundreds of slots in dozens of agencies as quickly and
efficiently as possible.78
Huang's role at Commerce
The position for which Huang was hired was viewed as
primarily administrative rather than policy-making. Garten
testified that at the time of Huang's hiring, he and Meissner
had a conversation in which they agreed that Huang ``could be
of use, someone who could basically handle the substantial
administrative burdens which [Meissner] would not be able to
handle because of his travels,'' but that Garten specifically
voiced concerns about Huang's ability to handle matters of
policy.79 As Garten explained:
Under Secretary Brown, we set a very fast pace. It
was extremely dynamic. We were extremely focused and I
felt that Mr. Huang did not have the requisite
experience for policy matters. That's not to say he
didn't have it for other issues. . . .80
During his tenure at Commerce, Huang acted as anticipated
by Meissner and Garten--as a functional chief of staff for
Meissner. Describing Huang's role, ITA Deputy Undersecretary
David Rothkopf testified in a deposition that, ``[H]is
responsibility was to sort of do what Chuck [Meissner] wanted,
be there when Chuck couldn't be there, handle administrative
functions within IEP.'' 81 Over time, however, Huang
did come to have some policy responsibilities, particularly for
Taiwan. According to Garten, this came about because Meissner
felt Huang's knowledge of Taiwan would be useful.82
Garten was aware of this expansion of Huang's role and did not
object, so long as Huang was supervised by
Meissner.83
Documents produced by Commerce reflect that Huang was the
primary individual assigned to oversee the Dragon Gate power
project in Taiwan and that he accompanied Meissner on a trip to
Taiwan to discuss the project.84 Huang also authored
a ``Taiwan Country Strategy'' for integrating Taiwan into the
Big Emerging Market (``BEM'') strategy within the China
Economic Area.85 The BEM strategy was the
cornerstone of the International Trade Administration policy
under Garten.86
Documents also reflect Huang's involvement with or
attendance at meetings or briefings on Vietnam, South Korea,
Japan, and Singapore.87 Huang also played a role in
assisting ITA with congressional relations, another role common
to the Deputy Assistant Secretary position.88
Finally Huang performed an active outreach role, attending a
diverse array of events, including embassy receptions, speaking
engagements, and informational briefings with high-level
foreign officials.
During the hearings there was a claim that Garten attempted
to ``wall off'' Huang from policy matters having to do with
China.89 An allegation was made that Garten felt
that Huang should not receive information pertaining to China
and wanted to make sure that he did not receive such
information. Although Garten testified that Huang was excluded
from policy matters related to China, he did not testify that
Huang should not receive information about China and testified
that he never issued any sort of directive that Huang not
receive such information.90
It appears that the decision to exclude Huang from China
policy matters resulted from internal battles over jurisdiction
and control. Garten had created an ``inside team'' within ITA
to deal with the high-profile trading areas of Asia and,
specifically, with China. As Garten testified before the
Committee:
We created a real high performance team. The only
people that in my view were qualified to deal
especially with China given its enormous significance
and sensitivity were people that had a lot of
experience in the policy area. . . . A lot of people
didn't make the cut. I don't want to say [Huang] was
the only one.91
Indeed, not even Meissner was allowed to play a role in China
policy. Garten acknowledged that responsibility for China,
which ordinarily would have been under the purview of Meissner
and the IEP division, was handled by himself and by his deputy,
David Rothkopf.92
The creation of the ``inside team'' caused a great deal of
tension and resentment within various factions of the
ITA.93 Various witnesses have suggested that
Meissner and the IEP division he oversaw were particularly
affected and that Garten and Rothkopf had essentially removed
all authority for key trading countries from the respective
division heads in order to work on these high-profile issues
personally.94 This tension between Garten and
Meissner is reflected in an October 4, 1994, memorandum from
Garten to Meissner.95 In the memorandum, Garten
specifically noted that Huang and another Asian-American
appointee ``are not up to what I need at this time. I am not
running a training program so I have to be brutal in terms of
getting results.'' 96
The real point of the memo however, was to respond to
Meissner's perception that the responsibilities of his division
are being usurped. Garten stated:
I know I have created a big problem for you
particularly on Asia, but even more broadly. I am truly
sorry. But the reason we have achieved such good
results in the first 18 months, even though
confirmations were very late is because I ignored the
fiefdoms in ITA and spread responsibility to those who
could handle them including David [Rothkopf]ing. . . .
It works because I have flattened the structure and
spread responsibility.97
It is clear, then, that Huang was not singled out as someone to
be ``walled off'' from matters pertaining to China. Numerous
people who otherwise would have had responsibilities relating
to China--including the Assistant Secretary for IEP-- were
similarly ``walled off'' from Garten's power team. None of
those individuals were in any way formally restricted from
participating in, or receiving information about, countries in
their official areas of responsibility.
This conclusion is confirmed by the fact that Huang was
permitted to receive briefings with respect to China. Garten's
decision that Huang was not to be involved in China policy did
not result in an instruction that he was not to receive any
information about China. Indeed, that very question was put to
John Dickerson, the security officer responsible for briefing
Huang:
Senator Specter. Did you know that there had been a
judgment made by higher-ups, by Mr. Garten, that Mr.
Huang should be walled off from information about
China?
Mr. Dickerson. No, I did not.98
When asked during his deposition if he would have changed his
briefings to Huang had he been ``aware that Jeff Garten had
told Charles Meissner. . . that he wanted John Huang to be
walled off from China issues,'' Dickerson indicated that, like
other witnesses, he believed Garten was excluding Huang from
China policy to retain personal control over those issues:
As I started to say before, I think I would have had
to have a better understanding of what Jeff Garten was
talking about. My understanding of the article that I
read in the press was that this was sort of
bureaucratic squabbling between officials of Commerce
and that I do not think the implication was that Jeff
Garten thought John Huang was a person who could not be
believed with intelligence information. I think it was
more a foil played by Frank [sic] Garten and people
directly under him to retain the policy-making
decisions on some of these issues.99
Huang's security clearance and access to classified information
Perhaps as a result of the misimpression that Huang was
excluded from information pertaining to China, another
impression has been created that Huang obtained access to
classified material to which he was not entitled. This, in
turn, fueled speculation that Huang was somehow passing
classified material on to the Lippo Group, the Chinese
government, or both. The Committee's investigation of Huang's
security clearance and his access to classified information
revealed no evidence that Huang gained--or even attempted to
gain--access to classified information beyond that to which he
was entitled in the normal course of his duties. Nor did the
investigation reveal any evidence that Huang misused or
compromised any of the information to which he had access.
Granting of top secret clearance
Huang was granted an interim security clearance prior to
assuming his duties at Commerce. While there has been no
evidence presented to the Committee that Huang even knew he had
such a clearance, much less used it, this fact has been used by
some to suggest that for some nefarious reason Huang was given
special treatment. In fact, between January 1993 and March
1997, all political appointees to the Department of Commerce--
totaling close to 240--were granted interim top secret
clearances.100
Interim security clearances were granted on the basis of a
review of the appointee's job application, his application for
a security clearance, a credit check, and a check of the NCIC
law enforcement database.101 An interim clearance
allowed an appointee access to classified material pending a
complete background investigation.102 The policy of
granting interim security clearances to all political
appointees was established in January 1993 by Steven Garmon, a
career government employee and the head of the Commerce
Department's Security Office. Garmon had established this
policy in reaction to criticism which had been leveled at the
Security Office in previous administrations over the delays
political appointees had faced in obtaining their clearances
and their consequent inability to attend certain meetings or
receive certain information.103
In accordance with this policy, the Security Office, after
receiving paperwork authorizing Huang's hiring in February
1994, performed a limited background check and granted an
interim clearance.104 The procedure used in the
granting of Huang's interim clearance was identical to that
used for all other political appointees to the Commerce
Department.105 Indeed, a memorandum regarding
Huang's interim clearance which cited ``the critical need for
his expertise in the new Administration for Secretary Brown''
was nothing more than a form memorandum containing boilerplate
language and was not specifically related to
Huang.106
Huang was never notified of this approval prior to
beginning work at the agency, nor was he given a security
briefing by the Security Office until assuming his
position.107 He thus could not have made any use of
this interim clearance until he actually started working at
Commerce.108
The Commerce Department made a blanket decision to grant
interim top secret clearances to all political appointees with
no consideration as to whether a particular appointee needed
access to top secret information or whether the need for the
information was so immediate that it justified the granting of
an interim clearance pending a full background investigation.
This procedure was largely designed to insulate the Security
Office from complaints from new appointees that the lack of a
clearance was interfering with their work, but it was properly
reversed by Secretary William Daley in 1997.109
Huang's access to classified information
Huang was the Principal Deputy Assistant Secretary for
International Economic Policy. This position could have
entitled him to a broad array of classified information;
however, there was no evidence presented to the Committee that
Huang exploited his position to gain access to information
beyond that appropriate to his duties. Indeed, the record
before the Committee shows that Huang declined opportunities to
expand his access.110
Huang's predecessor at the Department of Commerce,
Republican appointee Richard Johnstone, held a clearance at a
higher level than Huang's top secret clearance.111
Robert Gallagher, Director of the Office of Executive Support
in the Office of the Secretary of Commerce, testified that to
the best of his recollection, he was approached by Huang's
supervisor, Meissner, about getting a higher level clearance
for Huang because of Huang's responsibilities in filling in for
Meissner when Meissner was on travel. Gallagher stated:
I believe that Mr. Huang's superior suggested that
Mr. Huang could receive a higher level of clearance and
I concurred. And then I believe I probably talked to
Mr. Huang about receiving that higher level of
clearance and what it would entail for him to do so,
how long it would take, how much paperwork was involved
and how much it would cost. And at that point, I
believe that Mr. Huang said he didn't think it was
worth it in either time or money and so we dropped the
matter.112
If Huang had a desire to have access to the most highly
sensitive information available to the Department, a higher
level clearance would have provided him with that access.
Despite the suggestion of his superior and the example of his
predecessor, Huang declined the opportunity.113
Another opportunity for Huang to increase his access to
sensitive information lay in his cable profile. A cable profile
is an internal document which determines the clearance level
and subject matter for which an official will receive State
Department cable traffic. Huang's profile indicated that he was
to receive material up to the secret level. Because Huang held
a top secret clearance, he could have restructured his cable
profile to receive significantly more cable information. He
never did so.114
In addition, Huang's profile called for him to receive only
traffic addressed directly to him or to the office of the
Principal Deputy Assistant Secretary. By contrast, Johnstone,
Huang's predecessor, had established a cable profile for
himself that included material relevant to all areas of IEP's
business, regardless of his level of involvement in the
work.115 Johnstone based his need for this
information on his desire to have general background
information on all of the work of IEP.116 This
profile included all information on the General Agreement on
Tarrifs and Trade (``GATT''), China, the Middle East, APEC,
information on areas where travel was planned, information on
individual projects of the IEP, and political issues of the
regions of IEP.117 Although Huang could have done
similarly, he never attempted to change his profile, as noted
above.
While much has been made of the number of intelligence
briefings Huang received, he was actually briefed far less
frequently than Johnstone and other Commerce officials who
received weekly briefings.118 Huang received oral
briefings from John Dickerson of the Department's Office of
Intelligence Liaison (``OIL'') 37 times in 14 months, an
average of 2.5 times per month.119
Dickerson testified that the subjects of the briefings
included ``areas of international relations and trade that we
seem to feel were his responsibility.'' 120
Briefings of this type took an average of 20 minutes, and the
contents were largely at the discretion of the briefing
officer. Huang was shown documents during briefings; however,
the documents were not left with him, and he was not allowed to
take notes about them. Dickerson further testified that Huang
was not particularly interested in the material on which he was
briefed:
Q: During your briefings, did he ask you a lot of
questions?
A: I would say he asked very few questions.
Q: Did he seem to be aggressively pursuing classified
information?
A: No, to the contrary. He was not very aggressive in
that regard at all.
Q: Do you have any reason to believe that he handled
classified information in an improper fashion?
A: I have no reason to believe that.121
Overall, Huang appears to have been a passive recipient of
briefings provided to him as a matter of routine. He further
appears to have had minimal interest in gaining access to
classified information.122 Dickerson told the
Committee that had he believed Huang to be a security risk he
would not have given him classified information.123
No evidence was presented to the Committee that Huang
mishandled or compromised any classified material provided to
him. Indeed, this very question was put to three security
officials from the Department of Commerce:
Q: To your knowledge, was there ever any time when he
divulged any classified information that was not given
to people fully cleared to receive it, or misused any
of this intelligence information in any way, all three
of you?
Mr. Dickerson. No.
Mr. Gallagher. No, sir.
Mr. McNair. No, sir.124
The fact that Huang had made use of a spare office in the
Washington, D.C., offices of Stephens, Inc. (``Stephens'')
during his tenure at Commerce was thought to support an
allegation that Huang was passing classified information to the
Lippo Group, the Chinese government, or both.125 No
evidence was presented to the Committee, however, to prove that
Huang used the Stephens office for such purposes. Indeed, no
conclusive evidence was ever presented to the Committee as to
exactly what Huang did at the Stephens office.
Huang's use of the Stephens office
Stephens, Inc. is one of the largest investment banking
firms in the U.S. It is based in Little Rock and has offices in
Washington and other cities. Stephens has a business
relationship with the Lippo Group that dates back to 1977. In
the 1980s, Huang, as a Lippo employee, was involved in Lippo's
dealings with Stephens. As a result, Huang has had a long
personal relationship with Vernon Weaver, who headed Stephens's
Washington office. It was this office, located across the
street from the Department of Commerce, that Huang made use of
while employed at Commerce. Indeed, many of Huang's visits to
the Stephens office involved a meeting or lunch with
Weaver.126
The Committee's investigation of Huang's use of the
Stephens office focused on the testimony of two clerical
employees: Paula Greene and Celia Mata. Greene worked as an
administrative assistant in the Stephens office from 1993
through 1996, while Mata worked as a receptionist. Vernon
Weaver was interviewed by committee staff in the early stages
of the investigation, but was not later asked to give a
deposition or public testimony.
According to the testimony of Greene and Mata, Stephens had
a spare office that was used by visiting Stephens employees and
friends of the firm. The office was not specifically set aside
for Huang's use and there was no special arrangement for him to
use this office.127 The office, which contained a
desk, a telephone, and a chair, was located two doors down from
where Greene sat.128 In order to enter the suite
where the office was located, a visitor would have to ring a
bell and be buzzed in by Mata.129 Regular Stephens
employees all had a key to the suite--Huang was never given a
key.130
According to Greene, anyone who used the spare office had
unrestricted access to the photocopier and fax
machines.131 There were no security or recordkeeping
measures in place to monitor such use.132 Green
testified that anyone using the machines would have to pass two
receptionists and several other offices to get to the
machines.133 No testimony was ever presented from
anyone in the Stephens office who had witnessed Huang using
either the photocopier or the facsimile machine.
Greene did testify that Huang used the phone in the
Stephens office. The Committee subpoenaed Stephens's telephone
records; however, even after analyzing the records, the
Committee was unable to find a reasonable basis for attributing
specific calls to Huang's use of the spare office and was
unable to indentify any inappropriate calls on the
records.134
Greene testified that Huang was the most frequent non-
employee user of the spare office, visiting about once or twice
a week.135 Mata's testimony, however, was that Huang
``would come, you know, once or twice every week or there would
be, like, weeks where he wouldn't come.'' 136 She
also stated that his visits would last ``the most, ten
minutes'' 137 Not only were Huang's visits short in
length, but they occurred primarily at lunchtime,138
a time when he would have been seen by a number of people
moving in or out of the office. This would hardly seem to
comport with the behavior of someone who was trying to
surreptitiously pass classified information to foreign
contacts.
Greene testified that she would notify Huang if any
packages or facsimiles came into the Stephens office for
him.139 This was done at Weaver's
request.140 Greene testified that she was
specifically instructed by Weaver to speak directly to Huang if
she had to notify him of a package or fax, and not to leave a
detailed message if he was unavailable.141 While it
was insinuated that this was a peculiar practice (and indeed,
Greene stated this was not Weaver's usual practice), Greene
testified that it was her impression that Weaver merely did not
want his name to ``appear on the logs very frequently'' in
order to ``avoid bad appearances.'' 142
Greene stated that she would put any packages or faxes for
Huang in the ``in'' box of the spare office. She said that she
was not aware of Huang sending packages from the Stephens
office, only receiving them.143 With regard to
facsimile transmissions, Greene testified that Huang received
two to three such transmissions per week.144 She was
unaware, however, of the nature or source of these
transmissions.145
The evidence received by the Committee failed to support
allegations that Huang used the Stephens office to pass
classified information to the Lippo Group, the Chinese
government, or anyone else. Indeed, the evidence before the
Committee failed to establish in any manner what Huang's
purpose was in using the Stephens office. What the evidence
showed was that Huang stopped by the Stephens office from time
to time at lunch to visit with Weaver, to use the telephone, or
to pick up packages or messages. It is possible that Huang's
use of the Stephens office was for no other purpose than
maintaining personal contacts. Indeed, the Committee did
receive evidence that throughout his tenure at Commerce, Huang
continued his personal involvement with many organizations,
including the Committee of 100.146 The evidence
simply does not allow conclusive determinations to be made.
What is clear, though, is that Huang's use of the Stephens
office was open and obvious, not secretive as might be expected
from one attempting to pass classified information.
Huang's post-Commerce clearance
The final issue pertaining to Huang's access to classified
information concerns the fact that he had an active security
clearance for over a year following his departure from
Commerce. This fact has been used to insinuate that Huang was
involved in a scheme to continue obtaining classified material.
Once again, however, there is no evidence that Huang used this
clearance after leaving Commerce or that he even knew that his
clearance was active.147 Indeed, the evidence
establishes that due to procedures required for any use of a
security clearance, Huang would not have been able to make use
of the clearance even if he had attempted to do
so.148
During his tenure at Commerce, Huang found himself in the
midst of a turf battle among several factions due to the
changes that Garten had made to the way the ITA conducted
business. Huang, Assistant Secretary Meissner, and several
other officials had been marginalized in favor of those
supported by Garten.149 After a little more than one
year, Huang began to make inquiries and ultimately secured a
position at the Democratic National Committee as a fundraiser.
Evidence presented to the Committee established that
Meissner attempted to retain Huang as a consultant after he
announced his intention to leave Commerce.150 Such
an arrangement was conceived as a way for Huang to assist
Meissner during the transition period between the time he left
and the time his replacement was found.151 Before
obtaining approval for the arrangement, Meissner initiated
paperwork for such a consulting position, an application for a
clearance through the Defense Industrial Security Clearance
Office of the Department of Defense (``DISCO''). This type of
clearance is generally used for government contractors.
Meissner discussed this proposed arrangement with Alan
Neuschatz, Director of Personnel, and Tim Hauser, Deputy Under
Secretary. Both men immediately disagreed with the idea and
told Meissner that the appointment would not be approved.
Meissner, however, determined to take the proposal up with more
senior officials. In response, Neuschatz penned a note which
was attached to the paperwork for this proposed appointment.
Neushchatz described the note in deposition testimony in the
following terms:
I knew Meissner had wanted to make this appointment,
and what I was saying to them here is . . . I think
this issue is dead, and that's because we told him, no,
we weren't going to do it. But it may not be, and the
``may not be'' reflects Meissner's parting shot that he
was going to discuss this upstairs.
So what I'm telling them is to hold on to this
package for a while, or at least until the smoke
clears, meaning we get absolute clear and final
guidance. I didn't want to throw paperwork away that
might actually be needed eventually, but I didn't think
it would be needed.152
Meissner did, in fact, take the issue up with Will
Ginsberg, Secretary Brown's Chief of Staff. Ginsberg ultimately
denied the request, and Huang never became a consultant. While
the consultant position was in the process of being denied, the
paperwork for the security clearance that went along with the
position was still going forward. An administrative assistant
at IEP stated that she had walked the application for the
security clearance up to the security office at the direction
of Meissner prior to the final decision not to make Huang a
consultant.153 The request for the security
clearance went forward in one office, while the authority to
make the underlying appointment was being considered, and
ultimately denied, in another. Neuschatz described this process
in the following terms:
The fact that the ITA Security Office acted without
authorization, I think, reflects more their desire to
support management than any intent to circumvent it.
Clearly what happened was staff approached the ITA
Security Office and said ``Meissner . . . is going to
convert Huang to a consultant and we'll need the
appropriate clearance.''
These people, I think, in the interest of minimizing
red tape and minimizing confusion, put the train on the
track assuming that they had Meissner's authorization.
What they could not have known was that when Meissner
approached me and [Deputy Undersecretary] Tim Hauser
who do have the authority to approve positions such as
this, we turned it down cold.154
On December 14, 1995, the Defense Department sent a form to
the Commerce Security Office indicating that Huang had been
granted a clearance through the DISCO. According to the
testimony of the two highest-ranking members of the Commerce
Security Office,155 a clerk filed Huang's DISCO
clearance form with all other DISCO clearance forms received
from the Defense Department. The form remained in the file
until it was discovered in January 1997.156
According to the Deputy Director of the Security Office,
proper procedure would have been for the DISCO clearance to
have been input into the Security Office database. Due to
personnel changes in the Security Office, however, some 90 days
went by during which no one was inputting incoming DISCO
clearances into the database. Had the clearance been input in
mid-December, it conceivably would have raised issues because
Huang was still on the payroll and still had a clearance.
Further, had it been properly input, the Security Office would
have been aware of the DISCO clearance when it was notified in
January 1996 that Huang had left Commerce.157
In his deposition, Neuschatz stated that after learning
that Huang's clearance had been extended, he investigated
whether Huang had used the clearance to gain access to
classified material.158 This investigation led him
to conclude that Huang had never attempted to gain such access
nor could he have done so had he tried.159 According
to Neuschatz, classified document access has two components:
clearance and need to know. The granting agency has to verify
clearance for any request for access from outside of that
agency.160 Neuschatz told Senate investigators that
for Huang to have used his clearance, a request would have to
have been forwarded from the issuer, and a record would have
been kept. No such request was ever found in Commerce's
records. Furthermore, Huang's clearance was contingent on his
contemporaneous employment in some manner with Commerce. As
Neuschatz described it:
Because the requirements for the issuance of the
clearance went away with the disappearance of his job;
therefore, this really was not a valid clearance once
he terminated his employment with [DOC].161
Testimony is unequivocal that no one in ITA was notified of
the clearance. In fact, there is no evidence that anyone other
than the clerk who initially filed the form was aware that the
clearance existed. This includes Huang. Neuschatz testified,
``I have no reason to believe that Huang would have been aware
of this [extension].'' 162
While the fact that Huang neither knew about nor used the
clearance dispels any concern about sinister motives with
respect to this episode, the fact that the security clearance
was granted even though the consultancy was not reveals a
failure in the Department of Commerce security screening
procedures.
No evidence of espionage
While the Committee's investigation uncovered some serious
shortcomings in the operation of the Commerce Department's
Security Office, there was no evidence presented to the
Committee that any security measures were circumvented,
ignored, or compromised specifically to benefit Huang. Indeed,
to the extent that these shortcomings led to the approval of
Huang's clearance prior to his arrival at Commerce and to the
extension of his clearance after he had departed, the evidence
before the Committee shows that Huang was not even aware of
these facts.
More importantly, there was no evidence presented to the
Committee that Huang exploited his position at the Commerce
Department to pass classified information to the Lippo Group,
the Chinese government, or anyone else. Indeed, the evidence
shows that Huang availed himself of considerably less
information than he could have obtained in light of his
position. He declined the opportunity to obtain a higher level
of clearance, he declined the opportunity to broaden his access
to cable traffic, and he declined the opportunity to use his
intelligence briefings from the OIL to aggressively pursue
classified information.
Evidence before the Committee does not allow for any
conclusion with respect to Huang's continued contact with the
LippoBank in California. In his deposition, James Per Lee,
current President of the LippoBank California, testified that
he had undertaken an internal investigation of Huang's calls to
the bank that showed Huang's calls from the Department of
Commerce to the bank were largely an exchange of telephone
messages received for Huang by the executive secretary and that
conversations with Huang lasted an average of three
minutes.163 Per Lee later publicly stated that in
his investigation of the calls he saw no indication Huang was
``in any way relaying messages abroad.'' 164 Despite
being interviewed and deposed by the Committee, subpoenaed to
appear for hearing, and given a date and time for testimony,
less than forty-eight hours before his scheduled appearance,
Per Lee's testimony was abruptly canceled.
It should also be noted that at the outset of this
Committee's hearings Huang offered to come before the Committee
and to testify fully about any allegations that he may have
misused his position on behalf of foreign governments or
corporations. While he requested limited immunity, he offered
to testify without immunity with respect to matters pertaining
to espionage, economic espionage, or the unlawful disclosure of
classified information. Although the Minority does not conclude
that Huang's offer of testimony is proof of his innocence, we
do believe that in light of the lack of evidence to the
contrary, his offer to testify without reservation regarding
these allegations--and with all the applicable penalties of
perjury attendant to such testimony--should be given some
consideration. Unfortunately, the Committee did not pursue
Huang's offer and, as a result, a potentially important
opportunity to receive a response to these allegations was
lost.
The evidence before the Committee--or more appropriately,
the lack thereof--was encapsulated in the following exchange
during the Committee's questioning of the CIA's John Dickerson
and Robert Gallagher of the Department of Commerce Security
Office:
Senator Durbin. Gentlemen, if I can try to summarize
my own view of where we have come to this point in
regard to Mr. Huang, I think there are two concerns and
perhaps a third. The first concern is whether or not
Mr. Huang played fast and loose in his fundraising
activities, especially when it came to raising foreign
funds, and the second concern is whether or not he
compromised our national security. . . .
I want to ask you open-ended questions, not
shepherding you in any direction here, just to get your
opinion based on what you knew then and what you know
now. Mr. Gallagher, maybe I will start with you, and
maybe Mr. Dickerson can follow.
First, is it your opinion that Mr. Huang was properly
cleared to learn classified information at the
Department of Commerce?
Mr. Gallagher. Yes, sir.
Senator Durbin. Mr. Dickerson, is that your opinion,
or do you have an opinion?
Mr. Dickerson. That is my opinion, yes.
Senator Durbin. Has anything come to light since this
controversy has arisen to change your view on that? Mr.
Gallagher?
Mr. Gallagher. I have seen no evidence to the
contrary. No, sir.
Senator Durbin. Mr. Dickerson?
Mr. Dickerson. And similarly, I have seen no evidence
that would indicate that.
Senator Durbin. Now, the second thing, the second
charge is that Mr. Huang while at the Department of
Commerce was shown things he should not have seen for
any number of reasons, his business connections, his
security clearance, whatever.
Mr. Gallagher, based on what you knew then, is there
any question in your mind as to what you showed Mr.
Huang and whether or not what Mr. Dickerson showed Mr.
Huang and whether he should have seen it?
Mr. Gallagher. In terms of the information that my
office controls, we were 100-percent correct in what we
showed him.
Senator Durbin. Now, with all the information that
has come out and all the allegations since today, do
you believe there are things that Mr. Huang should not
have seen at the U.S. Department of Commerce?
Mr. Gallagher. I think we have to distinguish between
the information and allegations. All I have seen is
allegations. Until I saw hard evidence of these
allegations and as long as he continued to have both
his need-to-know and his clearance, we would continue
to brief him as we had.
Senator Durbin. Mr. Dickerson, the same questions.
Did you feel that you were showing things, did you have
any suspicion in your mind, that Mr. Huang should not
have seen while he worked at the Department of
Commerce?
Mr. Dickerson. No, I had no suspicions whatsoever
that what I was showing him was inappropriate for him.
Senator Durbin. And today, based on allegations and
information, do you have a different view?
Mr. Dickerson. No, I don't have a different view
because I have no personal knowledge that he did
anything in an unauthorized manner in the handling of
this classified information.
Senator Durbin. The third allegation appears to be
that he may have misused the information which was
given to him, may have compromised a source or
compromised the information. As you sit there today,
Mr. Gallagher, do you have any information to suggest
that that is the case?
Mr. Gallagher. I have never been presented with any
evidence to prove or disprove that allegation.
Senator Durbin. Mr. Dickerson?
Mr. Dickerson. I would echo what Mr. Gallagher has
said in that regard.
Senator Durbin. Now, I assume in your business, when
you are sharing delicate and secured classified
information that there is a counterintelligence aspect
to this to determine whether or not the people that you
are sharing it with are keeping it to themselves, is
there not? Mr. Gallagher?
Mr. Gallagher. Certainly, with all intelligence, sir.
Senator Durbin. Now, in terms of this period of time,
some 13 months at the Department of Commerce, was there
any evidence that the information that was being shared
with Mr. Huang or anyone at the Department at that time
was being compromised?
Mr. Gallagher. I was not presented with any such
evidence.
Senator Durbin. Mr. Dickerson?
Mr. Dickerson. To the best of my knowledge,
no.165
Evidence of solicitations of contributions
While there was no evidence presented to the Committee to
support an allegation that Huang engaged in espionage while
employed at the Commerce Department, there were indications
that he may have engaged in soliciting donors to the Democratic
National Committee while so employed. Specifically, Huang may
have been involved in soliciting donations by Kenneth and A.
Sihwarini Wynn, Mi Ahn, and Arief and Soraya Wiriadinata while
employed at the Commerce Department. Although the evidence is
not conclusive, it is sufficient to warrant further
investigation by appropriate authorities.
Evidence before the Committee shows that on August 1, 1994,
Wynn, the president of Lippoland, Ltd., and his wife each made
a $5,000 contribution to the DNC in connection with an event
celebrating the President's birthday.166 The check
tracking form completed by the DNC for these donations listed
John Huang as the solicitor.167 This was only one
month after Huang had begun working for the Department of
Commerce and almost a year and a half before he began working
for the DNC. When questioned in a deposition about this
listing, David Mercer, DNC deputy finance director (and the
individual responsible for filling out the form), testified
that he did not know at the time that Huang was working at the
Commerce Department.168 He further testified that he
did not recall who solicited the Wynns, nor how he received the
checks from the Wynns.169
Slightly over a year later, on October 12, 1995, Wynn
contributed $12,000 to the DNC in connection with another
event.170 This time, the DNC tracking form listed
Jane Huang (John Huang's wife) as the solicitor.171
Just before Jane Huang's name, however, is a word that has been
crossed out. This word appears to be ``John.'' 172
When questioned about this contribution, Mercer testified that
he did not know if Jane Huang had solicited this contribution
and further, that he ``did not know the circumstances leading
to this check being submitted.'' 173 When asked how
he knew to put Jane Huang's name down as the solicitor, Mercer
first stated that someone told him to, but he could not
remember who it was.174 Mercer then suggested in the
alternative that he may have done so because of his
recollection that the Huangs were associated with the
Wynns.175 Upon being asked why he chose to put Jane
Huang's name down if his recollection was that the Huangs
generally were associated with the Wynns, Mercer stated he
could not recall.176
The DNC's listing of John Huang as the solicitor for the
Wynns' August 1994 contributions, followed by what appears to
be a listing of John Huang's name on the October 1995
contribution--only to be crossed out in favor of Jane Huang--
tends to support the allegation that Huang was involved in
soliciting contributions while a Commerce employee. Moreover,
Mercer's testimony with respect to these contributions raises
more questions than it answers.
Similar questions are raised with respect to a contribution
by Mi Ahn. On June 12, 1995, Ahn, the president of Pan Metals,
contributed $10,000 to the DNC in connection with a
Presidential Gala.177 The DNC check tracking form
filled out by Mercer lists Jane Huang as the
solicitor.178 When asked in his deposition why he
listed Jane Huang as the solicitor, Mercer testified that he
did not have a clear recollection and that it ``either [had]
something to do with either sending the check or getting the
check to us in some way involved or knowing Mi Ahn. . . .''
179 Asked directly if he knew Jane Huang had
solicited Ahn's check, Mercer stated, ``I don't know that for a
fact.'' 180
It appears, however, that John Huang may have been involved
in the Mi Ahn solicitation. Evidence was presented to the
Committee that on May 26, 1995--two-and-a-half weeks before
Ahn's contribution--four telephone calls were placed between
Huang and Ahn.181 Ten days later--on June 5, 1995--
two more phone calls were placed.182 On June 6,
1995, Mercer called Huang at the Commerce Department and left
the following message: ``Have talked to Mi, thank you very
much.'' 183
When asked why he was thanking Huang, Mercer testified: ``I
don't know. I don't recall. It could have been he gave me her
number. It could have been a number of things. I don't know
particularly what I was thanking him for.'' 184
Again, Mercer's testimony with regard to his listing of Jane
Huang as the solicitor and his inability to recall his reason
for thanking John Huang leaves room for concern about Huang's
role as the possible solicitor of this contribution.
Jane Huang was also listed as the solicitor of two
contributions made in November 1995 by Arief and Soraya
Wiriadinata.185 The Wiriadinatas, who were permanent
legal residents at the time of their contributions, are the
daughter and son-in-law of Hashim Ning, a business associate of
Lippo founder Mochtar Riady. Between 1995 and 1996, the
Wiriadinatas contributed about $450,000 to the DNC in multiple
checks. Once again, when questioned as to how he knew to credit
the two 1995 contributions to Jane Huang, Mercer stated that it
was ``[t]hrough an understanding prior of the Wiriadinatas
having association with the Huangs.'' 186 Mercer
could not recall, however, how he had come to that
understanding,187 nor could he recall what his
understanding was as to how they were associated.188
When asked why he didn't put John Huang down as the solicitor,
Mercer testified as follows: ``I don't recall why. I, you know,
I don't recall. I didn't, you know--I don't. . . [sic] I don't
recall. Jane could have--I could have been told that Jane was
the one that brought these checks in. I don't know.''
189
Committee staff interviewed the Wiriadinatas concerning
their contributions. According to Arief Wiriadinata, they first
met John Huang when he came to visit Soraya's father in the
hospital in the summer of 1995.190 Huang encouraged
the Wiriadinatas to support the Democratic Party at that time,
although it does not appear that he directly solicited a
specific contribution.191 Indeed, the Wiriadinatas
first contributions were not until November 1995.192
According to the Wiriadinatas, the November 1995 contributions
were solicited by John Huang.193 In fact, Arief
Wiridiadinata told the Committee staff that all of their
contributions were made in consultation with John
Huang.194 When asked if any of their contributions
had been solicited by Jane Huang, the Wiriadinatas stated that
they had never met Jane Huang, nor did they believe that they
had ever spoken to her.195
The evidence clearly indicates that John Huang played a
role in the contributions from the Wiridinatas and that this
role began while he was still an employee of the Department of
Commerce. Moreover, the evidence also points to his having
played a role in the contributions of the Wynns and Mi Ahn.
These instances are all worthy of further investigation by the
appropriate authorities to determine whether John Huang
violated the Hatch Act, which limits certain political activity
by federal employees, or other campaign laws.
Perhaps even more disturbing is the documentary evidence
which shows the DNC listing Huang as a solicitor during a time
when he was a Commerce Department employee. The fact that David
Mercer, DNC's deputy finance director, listed Huang as a
solicitor and called him at the Commerce Department, combined
with Mercer's questionable recollection regarding the tracking
form containing Jane Huang's name, raises serious questions
about the forthrightness of Mercer, the procedures at the DNC
at this time, and the level of oversight that was provided in
connection with Huang's activities. Indeed, this lack of
oversight proved even more problematic once Huang joined the
DNC staff.
hiring huang to work at the dnc
Having perhaps become disillusioned with his position at
the Department of Commerce as a result of internal power
struggles within the ITA, Huang began searching for another way
to serve the Administration. That search led him to the DNC.
Although he had raised money for the 1992 Clinton
campaign,196 he had done so at that time as an
unpaid volunteer fundraiser. The position he sought in 1995 was
that of a full-time paid fundraiser. In seeking this position,
Huang apparently utilized the network of contacts he had
developed while working for the Lippo Group.
In his deposition before the Committee, C. Joseph Giroir,
an Arkansas lawyer for the Lippo Group and a friend of John
Huang, said he learned of Huang's interest to move to the DNC
to raise money in the Asian-American community.197
As he conveyed this information to then-DNC Finance Chairman,
Truman Arnold, he learned that Arnold was leaving his post at
the DNC. As a result, in the summer of 1995, Giroir arranged a
meeting with DNC Chairman Donald Fowler to suggest that Fowler
hire Huang as a fundraiser.198 Because Giroir was
viewed by the DNC as a potential contributor, DNC Finance
Director Richard Sullivan attended the meeting with Fowler. In
his deposition, Sullivan testified that he thought Giroir came
on too strong and, for some reason, ``had rubbed him [Fowler]
the wrong way during their meeting.'' 199 Sullivan
speculated that, perhaps because of this, Fowler did not want
to hire Huang.200 Fowler testified in his own
deposition that he did not immediately commit to hiring Huang
because the DNC did not have room on its staff for any new
fundraisers at that time.201
On September 13, 1995, Huang, Riady, and Giroir met with
Sullivan and Fowler in the Four Seasons Hotel in Washington,
D.C.202 Sullivan recalled this meeting as fairly
social; it was called for Riady to get to know Fowler, since
``he thought Don was a player and that they wanted to get to
know each other on a social basis.'' 203 Fowler
testified that Giroir ``made it clear . . . that he would like
Mr. Huang hired at the DNC.'' 204
Later that same day, Huang, Giroir, Riady, and Riady's
wife, Aileen, went to the White House for a visit with White
House staff and the President.205 Also in attendance
was Bruce Lindsey, deputy counsel to the President. By all
accounts, this visit was a social call.206 Riady had
lived in Little Rock during the 1980s and met the President
during that period. Riady supported the President during his
gubernatorial campaigns, during his presidential campaign, and
after his election as well. Giroir testified that there was no
structure to the September 13 visit; people were just talking.
In fact, Giroir had no recollection of any mention of Huang
going to the DNC.207 But Lindsey recalled a
discussion of the importance of the Asian-American community to
the President's re-election effort and the suggestion that
Huang would be well-suited to work on such an initiative at the
DNC.208
After that visit, and because, according to Lindsey, it was
his experience that most people preferred to move from politics
to government, rather than vice versa, he subsequently
contacted Huang to ensure that he was interested in moving to
the DNC. Lindsey testified in a deposition that the President
may have indicated to him that if Huang, in fact, wanted to
move to the DNC, that it would be a ``good idea,'' but he
stated that this was not a directive 209 from the
President to ``follow up'' on the discussion.210
Lindsey ultimately informed White House Deputy Chief of Staff
Harold Ickes of Huang's interest.211
On September 26, 1995, Huang and Giroir also met informally
with newly-appointed DNC Finance Chairman Marvin Rosen to
discuss Huang's desire to move to the DNC.212 This
meeting had been arranged by Mark Middleton, a former White
House staffer from Arkansas. Rosen indicated during this
meeting that he would look into the idea of initiating a DNC
outreach program within the Asian-American
community.213
At the time, the DNC had employees who were responsible for
political and fundraising outreach in most minority
communities, including the African-American community, the
Hispanic community, and women's groups. During the period that
Huang was being interviewed, the DNC had an employee who was
responsible for political outreach in the Asian-American
community, Bill Kaneko; however, it did not yet have a staff
person responsible for Asian-American fundraising. In his
deposition before the Committee, Kaneko testified that he
understood that Huang left Commerce to ``give the Asian
community an opportunity to participate in the political
process.'' 214 Other witnesses confirm that when
Huang was being interviewed by the DNC, he indicated that he
was interested in Asian-American outreach generally, not just
fundraising, and witnesses involved in Huang's hiring testified
that they perceived Huang as capable of providing the necessary
assistance to the DNC's political and fundraising outreach
efforts for the Asian-American community, particularly in
California.215
Rosen testified that Ickes subsequently asked him to
formally interview Huang.216 Such an interview took
place at DNC headquarters in November 1995, with Rosen and
Sullivan, who were later joined by Fowler.217 During
the interview, Huang suggested that he could help to raise
money in the Asian-American community for the 1996 campaign,
citing his effectiveness in raising funds during the 1992
campaign.218 According to Sullivan, Huang felt
``there was a void in terms of outreach from the national
parties to the Asian-American community.'' 219
Fowler, Rosen, and Sullivan agreed.220 Recognizing
the untapped potential of the Asian-American community for
Democratic fundraising efforts and political outreach, Fowler
decided, on Rosen and Sullivan's recommendation, to hire Huang
to manage the DNC's outreach efforts to this
community.221
In negotiating his position and salary with the DNC, Huang
said that he needed credibility to raise money in the Asian-
American community because he was older than most other
fundraisers.222 Fowler called it ``a technique to
convey respect and prestige,'' 223 and thought that
giving Huang an elevated title would ultimately benefit the
DNC.224 They negotiated the title of Vice Chair of
Finance, a title normally reserved for volunteer fundraisers
who are elected as honorary officers of the DNC and do not
raise money full time. While Rosen was unfazed by the
title,225 DNC General Counsel Joseph Sandler was
concerned because this position did not actually exist for paid
staff. Sandler ultimately acceded to the request.226
Salary was another concern for Huang. Seeing himself as a
successful, older, more experienced person (he was 50 years
old), Huang initially wanted a salary comparable to the one he
had received at Commerce.227 Sullivan testified that
they decided to pay Huang a salary of $60,000 and also to give
him a lump-sum, bonus-type payment at some point.228
Huang readily accepted this arrangement; indeed, Sullivan
testified that Huang did not seem all that concerned about his
salary.229
Huang's understanding of applicable law
DNC procedures require every paid fundraiser to receive an
oral briefing on campaign finance law and to familiarize
himself with a written packet of information.230
During the 1996 election cycle, the briefings were conducted by
DNC General Counsel Sandler or his deputy, Neil Reiff. Reiff
testified in his deposition that these briefings covered many
topics, including which contributions are allowable under the
law, as well as what the DNC considers appropriate or
inappropriate contributions. Most importantly, Reiff said,
fundraisers were told to seek advice from the general counsel's
office if they had any questions about specific
contributions.231
Sullivan testified that he was ``nervous'' about Huang's
fundraising because Huang was inexperienced in raising money
full time. Sullivan testified that he requested Huang be given
a special, individualized briefing.232 Sam Newman,
director of the DNC's National Finance Council, who shared an
office with Huang, testified that he recalled Huang attending
one of the group briefings; Sandler had a vague recollection of
this.233 Although there is some discrepancy between
the testimony of Sandler and Sullivan as to what type of
briefing Huang received, there is no dispute that he was
briefed on the applicable law, and, in fact, a copy of the
DNC's training materials was found in Huang's files after he
left.234
In addition to whatever type of initial briefing he may
have received, Huang also received assistance from the general
counsel's office following his first major fundraising event.
According to Sandler, DNC Treasurer Scott Pastrick suggested
that Sandler review with Huang some of the checks Huang had
collected from that event. Sandler testified that he believed
this suggestion was made because the Asian-American community
for which Huang was responsible was a new one being tapped for
funds, and therefore some of the donors would be unfamiliar to
the DNC.235 Marvin Rosen, DNC Finance Chair, also
believed that this briefing was necessary because some of the
contributors to that event were connected to American
subsidiaries of foreign corporations. In Rosen's mind, this
automatically raised a red flag and called for review,
especially for contributions from a new
fundraiser.236 DNC policy required that all
contributions by U.S. subsidiaries of foreign corporations be
approved by the general counsel's office.237
Sandler testified that he did conduct such a review with
Huang. Within days of Huang's first event, a February 19, 1996
fundraiser at the Hay Adams Hotel in Washington, D.C., Sandler
had a 45-minute meeting with Huang during which he reviewed
checks about which Huang had questions, asked Huang the
citizenship status of each individual who wrote a check, and
inquired into the ownership of corporations that
donated.238 He then inquired into the basis of
Huang's knowledge and was satisfied from Huang's disclosures
and claims of firsthand knowledge (which, according to Sandler,
is traditionally the best information on which to rely) that
the checks were legal. During this meeting, Sandler and Huang
reviewed the legal limits on contributions. Sandler testified
that he felt comfortable that Huang was familiar with the rules
he was to follow.239
Having received an initial briefing on the laws and
procedures applicable to campaign contributions, and having
gone over specific instances of concern following his first
fundraiser, Huang should have known what kinds of contributions
the DNC could and could not accept. In light of this training,
Huang's involvement in organizing a number of fundraisers which
brought in questionable--and in some cases, illegal--
contributions is disturbing.
Huang's fundraisers
As was true of other fundraisers targeting ethnic
communities, Huang was assigned various dates for events to
organize at which the President or the Vice President would be
in attendance. Once given a date, Huang would have been
responsible for reaching a certain fundraising goal. During his
tenure at the DNC, Huang oversaw the following fundraising
events, all held in 1996:
February 19 event at the Hay Adams Hotel,
Washington, D.C.;
May 13 event at the Sheraton Carlton Hotel
in Washington, D.C.;
July 22 event at the Century Plaza Hotel in
Los Angeles; and
July 30 event at the Jefferson Hotel in
Washington, D.C.240
In addition, after the July 30 event, Huang continued to help
raise money at events,241 such as the President's
birthday party in August 1996 at Radio City Music Hall in New
York City.
February 1996 Hay Adams APALC events, Washington, DC
The first fundraising event for which Huang was responsible
was actually a series of two events on February 19 and 20, 1996
at the Hay Adams Hotel in Washington, D.C. These events were
held in connection with the Asian Pacific American Leadership
Council (``APALC''). The APALC had been created to engage and
empower Asian-Pacific Americans, give them a stronger voice in
the Democratic Party, and focus on issues of concern to the
community.242 Ultimately, it was also used as the
fundraising arm for this community within the DNC. Mona Pasquil
testified that she was responsible for forming the APALC in
late 1995. She testified that it was born out of her traveling
and meeting with Asian-Pacific American leaders who recognized
that there was no caucus within the DNC for this ethnic
group.243
The events included a dinner with the President on February
19 and breakfast with the Vice President and a tour of the
White House on February 20. Individuals paid $12,500 each to
attend these events.244 The Hay Adams events were
organized to coincide with a ``summit'' of Asian-Pacific
Americans at the Mayflower Hotel in Washington, D.C. on
February 24, 1996.245
It is estimated that around 100 people attended the Hay
Adams event. By all accounts, these events were successful in
bringing Asian-Americans into the DNC. Fowler testified in his
deposition that he recalled the events as positive in terms of
outreach to the Asian-American community. He stated that there
were a number of Asian nationalities represented and that he
appreciated that diversity. He said he never gave a second
thought to the citizenship of these individuals.246
According to DNC records, the DNC raised $716,000 from this
event from 50 individuals or corporations.247 A
number of these contributions turned out to be suspect,
however, leading the DNC ultimately to return over $100,000
from this event.
A total of $50,000 was returned to Charlie Trie, Keshi
Zhan, Yue Chu and Xiping Wang. Trie attended the event and, in
fact, was the event's co-chairman. Neither Chu nor Wang
attended. These contributions--which are discussed in detail in
Chapters 5 and 21 of the Minority Report--were returned because
of questions as to the source of the funds contributed.
Pauline Kanchanalak, a Thai businesswoman, and her sister-
in-law, Duagnet Kronenberg, attended the event and contributed
$35,000. Their contributions were similarly returned by the DNC
when it was determined that the funds contributed by
Kanchanalak were actually those of her mother-in-law (see
Chapter 21).
Finally, monastics from the Hsi Lai Buddhist Temple are
also recorded as having contributed $25,000 to this event.
Although none attended, Maria Hsia, a longtime Democratic
activist and Temple devotee, did.248 These
contributions were returned to the U.S. Treasury over questions
that the monastics may have been reimbursed for their
contributions (see Chapter 21).
As noted above, Joseph Sandler, DNC general counsel,
testified that after the event, Huang came to see him with
contributions about which he had questions. Sandler testified
in his deposition that he did not recall whether any of the
contributions they reviewed were returned as a result of their
conversation, but Huang initiated the return of several
contributions within a month of the event because of questions
of citizenship of the donors.249
The evidence before the Committee does not establish that
Huang, or any other DNC employee or official, knew at the time
that any of the returned contributions had problems.
Kanchanalak appeared as a successful businessperson and had a
long history of contributions. Trie likewise also appeared
successful. There is no hard evidence establishing Huang's
knowledge of reimbursements to the monastics, as explained
below and in Chapter 21 of the Minority Report.
In addition, Jessica Elnitiarta, who runs her family's real
estate company, Panda Estates Investment Inc., had been
contacted by Huang about attending this event. On February 10,
1996, Elnitiarta contributed $100,000 to purchase eight seats
at the event. Among Elnitiarta's guests at the event were her
father, Ted Sioeng, and two of Sioeng's business associates.
Elnitiarta did not attend the event herself because of an
unexpected illness in her family.250 Elnitiarta was
eligible to contribute (she is a legal permanent resident), and
her contributions have not been returned. (Sioeng-related
contributions are discussed in detail in Chapter 7.)
May 13, 1996 Sheraton Carlton event, Washington, DC
Huang's next major event was held at the Sheraton Carlton
Hotel in Washington, D.C., on May 13, 1996, attended by the
President. This event was attended by approximately 100 people.
Approximately $579,000 was raised at this event from 20
individuals and corporations.251
Over half of the money raised at this event came from one
individual--Yogesh Gandhi. Gandhi, a permanent legal resident
of the United States, contributed $325,000 to the DNC in
exchange for 26 tickets to the event.252 This
contribution was attributed in DNC records to both Huang and
Trie.253 This contribution was ultimately returned
when the DNC could not verify the source of Gandhi's funds; it
was later determined that Gandhi used foreign funds from Japan
supplied by an associate to pay for the
contribution.254 A detailed discussion is provided
in Chapter 21.
In addition, contributions totalling $125,000 were deemed
inappropriate and were returned to legal permanent residents
Soraya and Arief Wiriadinata, the daughter and son-in-law of
Lippo associate Hashim Ning, because the source of the funds
could not be verified.255 The Wiriadinatas are not
listed as having attended the event. Their contributions are
discussed in detail in Chapter 21 of the Minority Report.
Charlie Trie's $10,000 contribution to this event was also
returned.256
In all, the DNC returned $475,000 of the $579,000 raised at
this event.257
July 22, 1996 Century Plaza Hotel event, Los Angeles
One event for which there is relatively little testimony
and only a few documents is an APALC gala organized by Huang at
the Century Plaza Hotel in Los Angeles on July 22, 1996. A
three-page briefing paper prepared for the President, the
keynote speaker at the event, shows that the DNC expected to
raise one million dollars from the 700 expected attendees; this
was to be a ``hard money'' event. Most of the attendees were
from California.258 News organizations have reported
that the event was a ``who's who of Asian Americans,''
including Ted Sioeng and James Riady.259
Monastics from the Hsi Lai Buddhist Temple were recorded as
having contributed $30,000 to this event, although only the
Temple's abbess attended.260 These contributions
have been returned as a result of questions as to whether the
monastics were reimbursed for their contributions, as explained
in Chapter 21 of the Minority Report. A contribution of $3,000
from one of Charlie Trie's companies was returned for
insufficient information. Other contributions totalling $25,000
were returned because, according to the DNC, it was
inappropriate for the DNC to have accepted such contributions,
contributions were not made by the named donor, the decision to
contribute was participated in by a foreign national, or simply
because there was insufficient information.261
A total of $58,500 worth of contributions was returned by
the DNC from this event,262 which the DNC recorded
as having raised $367,850.263
July 30, 1996 Jefferson Hotel event, Washington, DC
Richard Sullivan testified that the White House had open
dates for July 1996 which were available to the DNC for events.
He and Marvin Rosen offered one of these dates to Huang.
According to Sullivan, he and Huang were clear that Huang
should only agree to organize an event on this date if he
thought he could organize another ``hard'' money event that
would raise $400,000 to $500,000. According to Sullivan, Huang
said he could meet these criteria.264
This event--which turned out to be the final event Huang
organized--was held on July 30 at the Jefferson Hotel in
Washington, D.C. It turned out to be a small gathering of
individuals, many of whom were not eligible to contribute to
the DNC.265 Contrary to the instructions given to
Huang for this event, most, if not all, of the contributions
Huang raised at this event were large, soft-money
contributions.
In addition to the President and other DNC officials,
attendees at the event, many of whom brought spouses and
children, included James Riady of the Lippo
Group,266 his wife Aileen, and three prominent
Taiwanese businessmen: Eugene T.C. Wu, chairman of the Shin
Kong Group, a conglomerate that includes Taiwan's second-
largest life insurance company; Sen Jong (Ken) Hsui, president
of Prince Motors Co. in Taipei and a former member of the
central committee of Taiwan's Kuomintang party; and James L.S.
Lin, a Taiwanese business associate of Wu.267 Hsui,
who has U.S. residency status, contributed $150,000 to the DNC
which has been attributed to this event.268
Other contributions attributed to this event were from
Jessica Elnitiarta's Panda Investments; Loh Sun International,
a Los Angeles firm that imports Chinese cigarettes to the U.S.;
and Edmund Pi of Hacienda Heights, California.269 In
total, this event took in $259,000 270--far short of
expectations.271
Neither Wu nor Lin made contributions to the DNC in
connection with this event, nor did anyone else who attended
this event who was ineligible to contribute. The question has
been raised, however, as to why the President was dining at a
DNC event with such a small group of individuals, many of whom
were ineligible to contribute to the DNC. Although this event
was designed as a fundraiser, videotapes of the event show that
the President discussed current events and issues of ethnic
diversity but did not discuss fundraising.272 While
there is nothing illegal about such an event--so long as those
who are ineligible to contribute do not in fact do so--there is
a legitimate issue that can be raised with respect to the
perception that such an event creates. This issue could have--
and should have--generally been addressed in advance through a
more careful review of attendees at small dinners with the
President, Vice President or First Lady and greater supervision
of DNC fundraisers and the fundraising process.
Another important question is why Huang, who had promised
to raise $400,000 to $500,000 in ``hard'' money at this event,
would put together an event with only a limited number of
participants, a large proportion of whom were ineligible to
contribute. Unfortunately, the Committee was unable to obtain
an answer to this question from Huang. All we are left with is
Sullivan's speculation that perhaps Huang was trying to impress
the attendees (all of whom he knew) with his ability to arrange
an intimate gathering for them with the President of the United
States.273
With respect to this event, and all of Huang's other
events, there is no evidence that either the White House or the
DNC had any knowledge of any illegal contributions as a result
of these events to the DNC at the time the contributions were
made.
Other Huang activities
In addition to organizing fundraising events, Huang was
involved in a number of other activities on behalf of the DNC
that were of questionable propriety.
Hsi Lai Temple event
On April 29, 1996, Vice President Gore attended an event
organized by Huang and held at the Hsi Lai Temple in Hacienda
Heights, California. The Hsi Lai Temple is the largest U.S.
branch of the Fokuangshan Buddhist Order, a Taiwan-based
Buddhist sect. The Temple operates under an umbrella
organization called the International Buddhist Progress
Society, a nonprofit organization incorporated in
California.274 Approximately 100 community leaders
and others from the Asian-American community had lunch with the
Vice President at this event.
Criticism of the Temple event arises from three sets of
allegations: that the event was a DNC fundraiser in possible
violation of tax laws barring religious organizations from
engaging in campaign activities; that the Temple reimbursed
Temple monastics for DNC contributions in possible violation of
federal election laws barring contributions in the name of
another; and that the Temple used foreign funds for the
reimbursements in possible violation of federal election laws
barring foreign contributions. The latter two allegations are
discussed in detail in Chapter 21 of the Minority Report which
concludes that Temple reimbursements did take place, though
without the use of foreign funds and without the knowledge of
the Vice President or officials at the DNC. This section
focuses on the event itself and the involvement of Huang and
the Vice President.
In 1996, the Vice President routinely attended fundraisers
and community outreach events organized by the DNC to motivate
financial and political supporters during the
campaign.275 Documents show that the Vice
President's office was involved in scheduling two possible
events for the Vice President in the Los Angeles area in April
1996, one of which was supposed to be a fundraising lunch at a
private restaurant and the other a community outreach event at
the Hsi Lai Temple. The evidence suggests that the fundraising
lunch was canceled a few weeks before it was to take place, and
Huang invited the persons scheduled to attend the lunch to the
Hsi Lai Temple instead.
The evidence before the Committee shows that the Temple
event was not a DNC fundraiser. It was not proposed, agreed to,
organized or conducted as a fundraiser. The event was proposed
by the Temple, and the Vice President agreed to it as a
community outreach event. Invitations made no mention of
fundraising or an admission price to attend the event. No
tickets were taken or sold at the door; no campaign materials
were present; neither the Vice President nor any other speaker
ever solicited contributions or thanked attendees for
contributing; and most of those who attended did not contribute
to the DNC.
The evidence also shows, however, that Huang did use the
Temple event to raise money for the DNC, both from a small
number of persons who attended the event and from Temple
monastics who did not attend the event. Contributions totaling
$159,000 were attributed in DNC records by Huang to this
event.276 There is no evidence before the Committee,
however, that the Vice President had any knowledge of Huang's
activities or reason to believe that Huang used the Hsi Lai
Temple event to raise funds for the DNC.
The Vice President and the Temple event
In 1996, the DNC frequently requested that the Vice
President attend fundraisers and community outreach events in
different cities across the country. The Vice President's
office worked with the DNC to schedule dates and locations that
fit into his busy schedule.Typically, the DNC would identify a
city where they wanted to hold an event and then request a date from
the Vice President's office to schedule it. During the early planning
stages, the only details provided to the Vice President's office were
cities and dates for proposed DNC events.277 The scheduling
staff would then present the DNC proposals to the Vice President for
his approval. The Vice President would sign off on cities and dates,
not the exact sites for events.278 Kimberly Tilley, the Vice
President's director of scheduling, testified about the general process
of scheduling the Vice President at a DNC event in another city. She
stated:
. . . as an example there would be a request for the
Vice President, let's say, to go to Chicago, and we--I
would talk to the Vice President and say there is a
request for you to go to Chicago for a DNC event and
here's what's happening on your family schedule, are
you okay with this, and he would sign off on
that.279
Tilley explained that as the date drew near, the scheduling
office would work on the details and often discovered that the
site had been changed. She testified, ``many times we would
find out that it was not in Chicago. It was in Winnetka.''
280
When the Vice President attended a DNC event in a
particular city, other events were generally scheduled before
and after the DNC event. The other events on the Vice
President's schedule would often include speeches, meetings and
appearances at other locations near the DNC
event.281 The different events scheduled for a
particular day would often change and not be finalized until
shortly before the Vice President's trip to a city. Scheduling
by the Vice President's office for April 1996 events was
handled in the usual manner. Early in the planning process for
April 1996, the Vice President agreed to travel to California
long before the details of the trip were determined. The
details, including the number of events he would attend, the
cities he would visit and the sites of each event, were
determined over a period of time and were not finalized until
shortly before the Vice President's trip.
Beginning in January 1996, the DNC proposed a series of
fundraisers for the President and Vice President to schedule in
April, May and June.282 No specific dates or sites
were identified; the DNC simply suggested in its proposed
calendar a month and a city in which to hold a fundraiser. A
January 2, 1996 memo from Harold Ickes to the Vice President
and others included a proposal that the Vice President attend
three DNC fundraisers in the month of April in Washington,
D.C., Los Angeles and San Jose.283 The event sites
for the proposed cities were not identified in the DNC's
proposal.
Between January 2 and February 22, 1996, the Vice
President's office worked on the general DNC request to
schedule fundraisers for the Vice President to attend in
California in April 1996. As an example, the Vice President's
ever-changing California trip included a proposal to add an
event in San Francisco that was later dropped.284
While the schedule changed often, there is no evidence that the
Hsi Lai Temple was considered as a potential site for an event
during the early planning stages of the Vice President's trip
to California.
In March 1996, the dates of the Vice President's trip to
California and the events he would attend were still not
determined. Tilley received an e-mail message from one of her
assistants on March 12, 1996, that showed the Vice President
would travel to San Jose and Los Angeles for three days, from
April 27th to the 29th, and that he could attend ``some
combination of possible Olympic torch event in LA, DNC
fundraisers in San Jose & LA'' and ``Family/Private time.''
285
On March 15, Tilley sent the Vice President an electronic
message asking if he would like to give a keynote address at an
event in New York on ``the same evening that you wanted to fly
out to California overnight and then do the two fund-raisers in
San Jose and L.A. while Sarah and Mrs. Gore visit colleges. . .
. We've confirmed the fund-raisers for Monday, April 29th.''
286 The Vice President responded that, ``If we have
already booked the fund-raisers, then we have to decline.''
287
While some have tried to claim that the Vice President's
use of the word ``fund-raisers'' in this message proves that he
knew the Temple event was a fundraiser, it proves only that the
Vice President was planning to attend a fundraising event in
Los Angeles well before the Temple event was added to his
schedule and had coordinated the date with when his daughter
was visiting colleges.288 As discussed below, an
invitation to visit the Temple was extended by the Temple for
the first time on March 15th and was not formally incorporated
into the Vice President's schedule for another month, after an
evaluation by the Vice President's national security adviser.
The Vice President's deputy chief of staff David Strauss
testified at the Committee hearing that the confirmed ``fund-
raisers'' referenced in the Tilley message could not possibly
refer to the Temple event because that event had not yet been
scheduled.289 ``There wasn't even an event scheduled
at the temple on the 15th of March,'' Strauss said. ``That
occurred much later.'' 290 The Tilley message
demonstrates that the Temple event was a separate consideration
from the DNC fundraising events that the Vice President had
agreed to attend in California.
The Temple event was first proposed during a March 15th
meeting between the Vice President and the head of the Temple,
the Venerable Master Hsing Yun.291 This meeting had
been arranged by Huang and Maria Hsia, a fellow Democratic
activist in the Asian-American community.292 In an
interview with Committee investigators, the Master said, ``I
only met with Gore for 10 minutes. We had a very polite
conversation, then I departed.'' 293 Briefing papers
for the Vice President state that the two ``discussed Master
Hsing Yun's charity work in California and elsewhere.''
294 At the end of this brief meeting, the Master
invited the Vice President to visit the Hsi Lai Temple in
California.295 Vice President Gore responded that he
would consider it since he was expecting to be in California in
late April.296 This exchange reinforces the fact
that the Vice President was already planning to visit
California at the time of this meeting, and the Temple visit
was a possible additional event, rather than the original
reason for his visiting the area.
The evidence indicates that after the meeting between the
Temple's master and the Vice President, Huang and Hsia began
planning two events in the Los Angeles area for April 29, a
fundraising lunch at the Harbor Village Restaurant in Monterey
Park and an Asian-American community outreach event at the
Temple. Although the Harbor Village Restaurant in Monterey Park
has no record of a reservation for April 1996,297 a
draft invitation produced to the Committee by Hsia corroborates
the planning for this event and that the organizers originally
proposed two different events at two different locations for
the Vice President.298 Moreover, a March 23, 1996,
letter from Hsia to the Vice President demonstrates that the
Vice President was specifically told of the plans for two
events. The letter to the Vice President stated:
John Huang has asked me to help with organizing a
fundraising lunch event, with your anticipated
presence, on behalf of the local Chinese community.
After the lunch, we will attend a rally at Hsi Lai
Temple where you will have the opportunity to meet
representatives from the Asian American community and
visit again with Master Hsing Yun. The event is
tentatively scheduled for April 29 and I am hoping you
will be able to attend.299 [emphasis added]
Further corroboration that two events were planned was
provided by Charlie Woo, an attendee of the Temple event and
contributor to the DNC, who told Committee staff that Huang had
contacted him to attend an April event with the Vice
President.300 Woo identified this event as
originally scheduled to be held at the Harbor Village Chinese
Restaurant in Monterey Park. Woo said Huang called with the
location change to the Hsi Lai Temple less than a month before
the event and Woo was told that due to scheduling problems,
there would only be this one event. Because Huang never told
him otherwise, Woo said he arrived at the Temple event ``with a
check in my pocket'' believing that he was going to a
fundraiser. He said that he thought it was ``weird'' that there
was ``no mention of money at the event.'' 301
At some point in early April 1996, the DNC canceled the Los
Angeles fundraiser but not the community outreach event at the
Hsi Lai Temple.302 Huang contacted Richard Sullivan,
the DNC's finance director, to inform him that there were
problems with the proposed site for the
fundraiser.303 Sullivan testified,
I think Maura (McManimon) and/or John said they were
having problems working in the location, and then . . .
subsequently, I believe John told me that the place
that he wanted--that the home--I believe it was a home
that he wanted to have it at--would not work with the
Vice President's schedule, that he was doing things
downtown and couldn't put enough time in the schedule
to get out to this home--it may have been a restaurant,
but I remember it as a home--and that he had to change
the location. Then he came back, I think a day or two
later, and said that he wanted to do it at a
temple.304
One or two days later Huang and Sullivan discussed the Hsi
Lai Temple as a possible site for a DNC event. Sullivan told
Huang ``you can't do a fundraiser at a temple,'' 305
and Sullivan was assured by Huang that the temple event would
not be a fundraiser.306 Instead, the Hsi Lai Temple
event was intended to express appreciation to past contributors
to the DNC and to encourage others in the Asian American
community to contribute in the future.307 Huang told
Sullivan that he ``would not charge people'' and that he ``was
going to invite people for free'' to attend the ``community
outreach'' event at the temple on April 29, 1996.308
On or about April 3, 1996, Sullivan informed the Vice
President's office of the changes and told them that the temple
event would be an ``outreach event,'' not a
fundraiser.309 Strauss does not recall this specific
conversation with Sullivan and Huang, but he testified that he
had no reason to believe that he did not have such a
conversation with them.310
The evidence before the Committee indicates that the Temple
event was not actually incorporated into the Vice President's
schedule until the latter half of April. Documents prepared for
a scheduling meeting for the Vice President's California trip
and a memorandum by Huang reflect the fact that as late as
April 11th, two weeks beforehand, the Hsi Lai Temple had not
been confirmed by either the White House or the DNC as the site
for an event.311
In mid-April 1996, the Hsi Lai Temple event was
characterized by some staff members as a fundraiser while
others, who worked closest on the April 29, 1996 schedule,
believed it was a community outreach event. In several internal
communications, including e-mails and memos between staff
members, the term ``fundraiser'' was used to describe the Hsi
Lai Temple event. The director of the scheduling office,
Tilley, testified, ``I think that there was a certain
sloppiness in the terms we were using, whether it was finance
or fundraising.'' 312
The scheduling office usually referred to an event from the
DNC Finance Department as a fundraiser, even though it may not
have been a fundraiser.313 Tilley testified that:
A: ``There were traditional fundraisers that were
ticketed events at the door. There were events that
were community outreach like this Asian-Pacific where
it was part of the DNC Finance plan, where in order for
someone to be a member, there was a certain amount of
money they paid to be a part of that, you know,
committee or whatever they called; and then there were
those people to whom they wanted to reach out to, who
they hoped would become donors.
Q: And would you define outreach events as different
than fundraisers?
A: Yes, I would.317
On April 11, 1996, the day of the ``Preliminary California
Meeting'' Huang faxed a memorandum to Kim Tilley regarding a
``Fundraising lunch for Vice President Gore 6/29/96 [sic] in
Southern California.'' in which he wrote:
Per our discussion this morning, I have furnished the
following information to you regarding the proposed
event.
1. Proposed location: Hsi Lai Temple, Hacienda
Heights, California.
This temple was established by Venerable Master Hsing
Yun during 1980's with many structures including Large
dinning [sic] facility . . . To show his appreciation
and friendship to Vice President Gore, Master Hsing Yun
would like to host this upcoming Vice Presidential
event in L.A. . . .
3. Hsi Lai Temple has hosted other political events
before . . .
5. . . . Please let me know if I can provide any
further information. I certainly would appreciate to
know the answer asap if we can proceed on this matter.
If so, in what parameters can we do, or not
do.315
Jackie Dycke, who worked on the April 29, 1996 schedule
until mid-April, before it was reassigned to Ladan Manteghi,
prepared notes for the April 11th meeting which included the
following information: ``DNC Luncheon in LA/Hacienda Heights:
1000-5000 head/150-200 people.'' 316 Dycke testified
that she obtained this information for a proposed event from
Maura McManimon who worked with John Huang for the
DNC.317
The character of an event would often change during the
scheduling process. Strauss was questioned during the Committee
hearings about the scheduling process and he testified:
Q: Is it common in your experience with regard to the
Vice President's schedule and how it evolves that an
event may be contemplated, but that over time and
indeed on fairly short notice, its character could
change or the event itself could be canceled?
Mr. Strauss. That is correct.
Q: Does that happen often?
Mr. Strauss. That is correct.318
As of April 11, 1996, Huang, an organizer of the Hsi Lai
Temple event, had not yet received confirmation that the Vice
President would even be attending an event at the Hsi Lai
Temple on April 29, 1996. Other documents, including an April
19th message just ten days before the event, indicate that a
decision on the Temple event was delayed pending an evaluation
by the Vice President's national security advisers who approved
the event but cautioned against permitting it to be
characterized as one favoring Taiwan.319 John
Norris, who works in the Vice President's foreign policy
office, wrote a note to Bill Wise, deputy director of the Vice
President's foreign policy office, regarding the Hsi Lai Temple
event. In his April 16, 1996 note, Norris wrote:
State notes that any affair involving Taiwan involves
some risk of political exploitation by people from
Taiwan.
State's advice is to make John Huang of the DNC
responsible for managing the event to ensure the VP is
not embarrassed--
--the event is for the Chinese community of Southern
California; it is not a ``Taiwan'' event;
--there are no Taiwan flags or KMT symbols or other
signs that would be embarrassing for the VP;
--no Taiwan politician should be allowed to exploit
this event.320
Wise wrote a hand note to Leon Feurth, the Vice President's
National Security Advisor, on the bottom of Norris's April 16,
1996, note with his opinion regarding the Hsi Lai Temple site.
Wise wrote:
I think it may be difficult for the sponsors to meet the
three criteria suggested by State--but they will certainly
claim that they can.
* * * * *
I suspect the VP might get to go ahead since we cannot
point to a specific problem.'' 321
On April 19, 1996, Norris received an e-mail message from
Robert Suettinger regarding the foreign policy ramifications of
holding an event at the Hsi Lai Temple. Suettinger wrote:
This is terra incognita to me. Certainly from the
perspective of Taiwan/China balancing, this would be
clearly a Taiwan event and would be seen as such. I
guess my reaction would be one of great, great caution.
They may have a hidden agenda.322
Tilley explained that the Vice President's National
Security Office needed to approve the Hsi Lai Temple as an
appropriate site for the Vice President to visit, based on
foreign policy considerations. Tilley testified, ``for an event
like this, we would not have proceeded--the Vice President
would not have done it if the National Security Office had not
signed off.'' 323 In response, the Vice President's
office informed the Temple that the Vice President could attend
the event only if all Taiwanese national symbols were removed
from the site before the event took place.324 The
Temple agreed to this condition.
Once the event was agreed to, the evidence indicates that
the Vice President's staff organized it as a community outreach
effort, rather than a fundraiser. When the event was officially
added to the Vice President's schedule in the latter half of
April, the key scheduler responsible for the event in the Vice
President's office was Ladan Manteghi who, in mid-April, had
assumed responsibility for the Vice President's April 29
schedule. Manteghi testified at her deposition that she clearly
understood the event to be a community outreach event and not a
fundraiser.325 She testified as follows:
Q. Do you recall ever discussing with Kim Tilley
whether or not the event at the Hsi Lai Temple--what
type of an event it was?
A. She and I had conversations, obviously, about the
event and the type of event it would be, and it was to
be an outreach event and to basically give us exposure
to the Asian community and vice versa as well. You
know, this was something very major for them as well as
for us in the sense that this was monumental in
demonstrating an ability to participate in the
political process and to have the ability to vote. . .
. I am an immigrant, and I know what a phenomenal
sensation that is. . . . [T]hat's why this was such a
great effort in terms of outreach to this community and
the Vice President having an opportunity to be exposed
to the community and to talk about leadership and
activity. . . .
Q. Did you have any conversations with John Huang or
Maura McManimon or anyone with the DNC about whether
this was a finance-related event?
A. We had conversations, and if this were a finance
event, we would have spoken in terms of dollar amounts
and people's donations to participate in the event, and
no such conversation ever took place, neither with John
Huang nor with Maura McManimon.
Q. Or with anyone else at the DNC?
A. Or with anyone else at the DNC or the Vice
President's Office. . . .
Q. [D]o you recall if you received any documentation
that talked about the Hsi Lai Temple event being a
fundraiser?
A. No, I do not. . . . I would have known from the
advance people if, you know, there were some indication
of money. In the typical setting of a fundraiser,
again, somebody who would have given a significant
amount of money . . . they would have an opportunity to
shake the Vice President's hand separately from 150
people. But that was not the case, and I would have had
a conversation with John Huang, and that didn't happen.
. . .
Q. Did you ever discuss with anyone . . . about if
you had concerns that the event was taking place at the
Hsi Lai Temple, which was a religious center?
A. No, I did not, because . . . I asked the question
of John to . . . explain the significance of the Temple
to me, and he did, and I was comfortable with the fact
that this was a place where the community congregates
on special occasions . . . not only a holy place, but
also a community center. . . .
Q. And you stated earlier that after the press
accounts came out you were surprised because you didn't
know anything about any fundraising activities.
A. That's correct. I mean, those were all accounts
that came out in the press, and it was rather shocking
to me.
Q. Because you had been talking with John Huang prior
to the event, and you had had no discussions with him
about fundraising activities?
A. That's correct. . . . [T]his was such a ``feel
good'' type event, if I can really say. . . . [W]e're
delving into yet another group that has been a part of
Americana for so many years, and you know, these people
were so excited about this event. . . .
Q. So there was never a time that you believed that
this was going to be a fundraiser?
A. No.326
Despite this critical testimony from the key scheduler in
the Vice President's office, the Majority refused to call her
as a hearing witness, rejecting a unanimous request from
Committee Democrats to have her testify.327
The other person on the Vice President's staff who played a
key role in the Temple event was the Vice President's deputy
chief of staff, David Strauss, who personally briefed the Vice
President about the event, counseled him on the type of remarks
that would be appropriate at the event, and actually
accompanied the Vice President to the Temple event. Strauss
testified unequivocally that he understood the event to be a
community outreach event and not a fundraiser, and informed the
Vice President accordingly.328 Strauss testified:
I was the person who was solely responsible for
telling the Vice President what this event was. He
relied on my judgment about this event. I explained to
him what the event was all about, suggested to him what
sort of remarks to make that would be appropriate for
this event. I take full responsibility for the Vice
President's knowledge about this event. He got the
significant information from me and from the briefing
book.329
The briefing book, which Strauss testified that the Vice
President would have reviewed immediately prior to the Temple
event, also presented it as a community outreach event and not
a fundraiser.330 Particularly compelling are the
differences between the briefing materials given to the Vice
President for the Temple event compared to the briefing
materials given to him for a San Jose fundraiser later the same
day. The briefing materials for the Temple event described it
as a DNC Asian-Pacific American Leadership Council luncheon
honoring Vice President Gore. Talking points prepared for the
Temple event did not include any references to campaign
contributions or any amounts being raised by the event, nor did
they call for the Vice President to thank the participants for
making a contribution.331 Furthermore, the talking
points prepared for the Hsi Lai Temple event were much longer
than the boilerplate fundraising speech and covered many
different issues, including ethnic diversity. In contrast, the
briefing materials prepared for the San Jose fundraiser
specified the amount of money to be raised at the event:
332
This is the first San Jose-based event during the
Clinton/Gore Administration, so most of the guests are
new supporters of the DNC. San Jose Mayor Susan Hammer
has been extremely helpful with this event as co-chair
with George Marcus, the event host. Estimated
attendance at the reception is 100-125 guests. This
event is raising $250,000 for the DNC. [Emphasis
added.] 333
That type of information was not included in the Temple
briefing materials.
In addition, the event itself was conducted like a
community outreach event and not as a fundraiser. No money was
collected at the door, no campaign materials were present, and
no one discussed contributions at the event. According to an
audio tape of the event produced to this
Committee,334 the Vice President never made a
request for contributions during his speech nor did he thank
the luncheon attendees for their support.335 He
spoke instead about diversity in America.
Individuals who attended the Hsi Lai Temple luncheon on
April 29, 1996, verified that the event did not appear to be a
fundraiser. John Aloysius Farrell, a Boston Globe reporter, the
Venerable Master Hsing Yun, and David Strauss attended the
April 29, 1996, luncheon and provided consistent accounts that,
based on the objective evidence at the event and the content of
the Vice President's remarks, the Hsi Lai Temple event was not
a fundraiser.
On September 4, 1997, Farrell provided significant
confirmation that the Hsi Lai Temple event did not appear to be
a fundraiser. Farrell accompanied the Vice President on the
``marathon trip from Washington to California on April 29,
1996, and interviewed the vice president on Air Force II.''
336 Farrell wrote:
. . . Gore's own words and actions at the Buddhist
temple, witnessed by a Globe reporter and described
here for the first time, give credence to the Vice
President's assertion that while he knew there was a
fund-raising component to the event, he viewed it more
as a good-will visit with Asian-American leaders.
Although other party leaders warmed up the audience
with political rhetoric, Gore's remarks were non-
partisan and restrained, markedly different from the
biting one-liners he offered at another fund-raiser
that evening in Northern California.
At the Hsi Lai Temple, Gore spoke in personal terms
of his acquaintance with Hsing Yun, the venerable maser
and leader of the temple and its growing worldwide
congregation, and of the U.S. tradition of tolerance
for immigrant cultures. Gore made no explicit pitch for
contributions. . . .337
The Venerable Master Hsing Yun confirmed in his interview
with Committee staff that fundraising was not discussed at the
Hsi Lai Temple event. He stated, ``In addition to Buddhists,
there were also Catholic, Protestant, and Muslim friends at the
event, also some people I didn't know. . . . We did not speak
about the campaign or anything about politics or donations.''
338
Strauss, who attended the event with the Vice President,
explained to the Committee that the Vice President did not give
a fundraising speech at the Hsi Lai Temple event. Strauss
testified, ``it was a very good speech, but it had nothing to
do with fundraising.'' 339 Strauss described the
Vice President's speech to the Committee:
A: . . . typically my role for this sort of event,
what I would try to do is quickly size up the situation
for the Vice President. I talked briefly to Congressman
Matsui who had heard the Vice President a week or so
beforehand give what I called his E Pluribus Unum
speech, and after consulting with Congressman Matsui, I
suggested that considering the nature of this group,
where you had Asians, Hispanics, African Americans,
that that would be an appropriate set of remarks for
this particular event, and in that speech, he would
refer to the richness of our diversity and what a
strength it is in this country and draw the comparison
with Bosnia, Rwanda, Burundi, Nagorno-Karavakh. I mean,
he had this very moving speech about tolerance that he
would make, and that those were the remarks that he
made at this particular event.
Q: Did it include any request for money or any thank
you for people having contributed?
A: It did not.340
Strauss also testified that the event did not appear to be
a fundraiser. The typical elements of a fundraiser or a
political event were not present at the Hsi Lai Temple on April
29, 1996: there were no ticket tables, no one collected or
asked for contributions, there were no political campaign
posters, there was no campaign literature, nobody tried to
recruit volunteers for the campaign and nobody thanked
attendees for making a financial contribution.341
Strauss concluded that the Hsi Lai Temple event was not a
fundraiser:
Q: Based on your experience and all the years that
you have been doing this sort of thing and attending
hundreds of fundraisers, did this appear to you to have
the indicia of a fundraiser, this event?
A: I believe that I know what a fundraiser is, and
this was not a fundraiser.342 [emphasis
added]
Other attendees at the event confirm that it did not appear
to be a fundraiser. Charlie Woo, mentioned earlier, told
Committee investigators that there was ``no mention of money at
the event.'' 343 Mona Pasquil, DNC Western States
political director and former director of Asian-Pacific
affairs, testified that she saw no signs of fundraising, such
as a table at the door, name tags, checks being exchanged, or
solicitations for money.344 DNC Chairman Fowler
described it as an ``outreach event'' similar to those he
attended at churches in the 1960s; not everyone who attended
also contributed, and there were none of the typical trappings
of a fundraiser.345 DNC Chairman Donald Fowler
testified, ``[T]here were three people who made presentations
there--myself, the temple master, and the Vice President. None
of the three of us made any reference to raising money,
contributing money, giving money before or after.''
346
Persons associated with the Temple who helped organize the
event also indicated that they did not consider the event to be
a fundraiser.347 Man-Ho, assistant to the Temple
abbess, testified at the hearing that Temple personnel did not
focus on fundraising during planning before the
event.348 In her deposition, she said that the
guests ``were not required to pay a buck for [the] luncheon. .
. .'' 349 She also told the Committee that she did
not see anything at the event that would indicate that it was a
fundraiser.350 The head of the Temple, Venerable
Master Hsing Yun, provided a statement to the Committee with
consistent information.351
The evidence also indicates that no invitation associated
with the event contained anything remotely resembling a
solicitation.352 Such solicitations are generally
included in invitations to DNC fundraisers and range from a
price stamped on the invitation to a card enclosed with
different contribution levels.353 The absence of any
solicitation or admission price on any invitation is further
evidence that a contribution was neither required nor expected,
and the purpose of the event was not to raise funds.
Further, most of the attendees did not
contribute.354 For example, Ted Sioeng, his wife,
daughter and two other relatives were invited by Huang and
attended the event without making any
contribution.355 While DNC records attribute 42
contributions to the Temple event, 12 of which were from
monastics who did not attend the event itself, and only another
15 or so were from attendees. That means of the 100 or so
persons who attended the event, only about 15 contributed in
connection with their attendance.356
The allegation has been made that the participation of John
Huang and Maria Hsia in organizing the event should have told
the Vice President that the event was a fundraiser, but both
had previously been involved in arranging non-fundraising,
political outreach events for the Asian-American community. For
example, both helped organize a September 27, 1993, meeting
with Asian-American leaders that was described in the Vice
President's briefing papers as an Asian-American community
outreach event.357 Moreover, Hsia had been involved
in the organization of only one prior fundraiser for the Vice
President but had organized his 1989 trip to Taiwan with the
Pacific Leadership Council which had no fundraising aspects.
And as indicated above, Huang had never given any indication to
anyone on the Vice President's staff that any fundraising was
involved in the Temple event.358
Strauss addressed this issue in his testimony to the
Committee. He testified emphatically that he had no knowledge
that the Vice President or anyone on the Vice President's staff
knew anything about the post-event fundraising activities
engaged in by Huang or Hsia.359 Strauss testified:
Q: Prior to the time that the newspaper articles
appeared in the fall of 1996, did you have any reason
to believe that anybody on the Vice President's staff
had heard that there was any fundraising engaged in by
Ms. Hsia, by virtue of a call from Huang?
A: I have no knowledge that anyone did know.
Q: Did you ever know anything about contributions
having been collected or monies having been collected
prior to the April 29th event at the Hsi Lai Temple?
There has been testimony that a certain amount of money
was generated in advance of the event.
A: I had no knowledge of that.
Q: Do you have any reason to believe that the Vice
President knew anything relative to this event, either
prior to the event or that after the event any monies
had been collected?
A: I have no reason to believe that he knew anything
about this.360
Ladan Manteghi, the scheduling staff person who put
together the final details of the Vice President's April 29,
1996 schedule, confirmed that the information regarding Huang
and Hsia's activities were a surprise to the Vice President's
staff when they were first reported by the news media. She
explained in her deposition that the scheduling staff was
``meticulous'' and that they ``scrutinized, really,
everything'' to make sure that ``all the i's were dotted, the
t's crossed.'' 361 She testified:
A: So that's where the element of surprise came in
when all the accounts started coming out. It was, like,
wait a minute, we really went through everything, and
so how could this be? This seems really kind of off the
wall. You know, from my perspective, that's how it
seemed.
Q: So there was never a time that you believed that
this was going to be a fundraiser?
A: No. By the time I received it, this was not going
to be a fundraiser.362
There are two types of evidence suggesting that the Temple
event was a fundraiser. The first involves the fact that Huang
did solicit contributions in connection with the event, as
discussed below, but there is no evidence that the Vice
President had any knowledge of those solicitations. The second
involves several internal communications--e-mails and memoranda
between staff members for the Vice President--that refer to the
Temple event as a ``fundraiser,'' 363 as discussed
above. Relevant testimony included Tilley's statements
regarding the ``sloppiness in the terms we were using, whether
it was finance or fundraising,'' 364 and Strauss's
testimony that the character of an event would often change
during the scheduling process, making it difficult to ensure
that the proper term was used.365 In addition,
Tilley testified that the Vice President's scheduling office
usually referred to an event from the DNC Finance Department as
a fundraiser, even though it may not have been a
fundraiser.366
From the perspective of Vice President Gore, the Vice
President's office, and the DNC, the Hsi Lai Temple event was
not a fundraiser. There is no evidence before the Committee
that Vice President Gore knew that contributions were solicited
or received in relation to the Temple event. The information
received by the Vice President regarding the event described it
as an opportunity for the Vice President to meet with members
of the local Asian-American community. John Huang assured DNC
Finance Director Richard Sullivan that the event was not a
fundraiser, but instead would involve community outreach.
Moreover, the event had none of the trappings of a fundraiser.
John Huang and the Temple event
Although the Temple event was not a fundraiser and Huang
had represented that to Richard Sullivan, DNC finance director,
when specifically asked, Huang did use it as an opportunity to
obtain contributions to the DNC. Huang attributed $159,000 in
DNC contributions to this event. Many of these contributions
were from monastics at the Temple and were subsequently and
possibly illegally reimbursed by the Temple. (See Chapter 21 of
the Minority Report.) 367
As mentioned above, Sullivan testified that, while he was
not involved in the day-to-day planning of this event, he
ensured that Huang knew that he could not hold a fundraising
event at a Temple, and Huang confirmed to him that he was aware
of this restriction.368 Sullivan further testified
that he facilitated a conference call between himself, Huang
and David Strauss, Deputy Chief of Staff to the Vice President,
to reassure Strauss that the event was not a
fundraiser.369
It appears, however, that when the original fundraiser
tentatively planned for the Harbour Village restaurant was
canceled, Huang invited the guests for that event to the
``community outreach'' event at the Temple. Huang then
apparently used the Temple event to solicit contributions
despite his contrary representations to the DNC.
Man-Ho, the assistant to the abbess at the Temple,
testified that at a particular meeting of monastics, the abbess
told monastics that it would be all right for them to ask
devotees to contribute $5,000 to come to the luncheon and have
their picture taken with the Vice President. Man-Ho testified
that she did not know whose idea this was, though it appears
that, from other evidence, this likely was the result of
direction from Maria Hsia or John Huang.370
On April 28, 1996, the day before the event, at the third
of three meetings between Man-Ho and Huang,371 Man-
Ho handed Huang a list of names and amounts contributed prior
to the event.372 Despite Huang's representations to
Sullivan and Strauss, Huang told Man-Ho that any other devotees
who would like to attend the event could do so for $2,500, as
opposed to the $5,000 that had been requested until
then.373
Prior to the April 29 event, checks written out to the DNC
were collected totaling $45,000.374 In addition,
some who contributed before the event also had their pictures
taken with the Vice President.375
Man-Ho testified that on April 30, the day after the Temple
event, Maria Hsia called her to say that ``John Huang hoped
that the Temple could contribute more money,'' 376
since only $45,000 of an anticipated $100,000 had been
collected. The ensuing facts of how the monastics contributed
additional amounts to help Huang reach this goal are covered in
Chapter 21 of the Minority Report. Man-Ho testified that she
believed that the money the monastics collected was given to
Huang later that day.377
While there is no evidence that Huang spoke directly with
anyone at the Temple regarding a request for additional
contributions, it is clear that Hsia communicated Huang's
fundraising appeal. She also assisted the monastics, for a fee,
with many immigration matters and advised them on other legal
matters. Yi Chu testified that the Temple monastics had been
responding to fundraising requests by Hsia since 1993. Though
the amount requested was larger than previous requests, it was
viewed, once again, as helping Hsia, and the Temple complied.
Huang and Hsia had known each other for a long
time,378 and it is likely that Huang would have
known about Hsia's relationship with individuals associated
with the Temple.379 There is insufficient evidence,
however, to determine whether Huang knew that the Temple
planned to reimburse its monastics' contributions to the DNC.
John H.K. Lee and the Cheong Am America contribution
Huang's involvement in obtaining a $250,000 contribution
from Cheong Am America in the spring of 1996 is disturbing for
a number of reasons. This incident not only involves a campaign
contribution later discovered to have been paid for with
foreign funds at the direction of a Korean national, it also
demonstrates Huang's apparent willingness to disregard
established DNC procedures for evaluating contributions.
Cheong Am America, Inc. was a joint venture between two
South Korean firms that were considering constructing a large-
screen television manufacturing plant in Carson, California.
The two firms were the Cheong Am Group and Ateck Company. The
Cheong Am Group was headed by Korean businessman John H.K. Lee,
the moving force behind the joint venture. Lee was later
revealed to be a convicted criminal and was subsequently
indicted in Seoul in connection with this matter.380
Ateck, a $50 million company with a history of successful
manufacture of large-screen televisions, was headed by Korean
businessman Young Chull Chung, whom Lee was pressing to finance
the U.S. plant.381 Their joint venture, Cheong Am
America, was established in February 1996 as a U.S. subsidiary
of the Cheong Am Group.382 If the large-screen
television manufacturing plant had been built, it apparently
would have been the first of its kind outside of
Asia.383
In the spring of 1996, Lee contacted Carson mayor Michael
Mitoma and told him that before a final decision could be made
on building the plant in Carson, Lee and his associates would
like to meet with President Clinton.384 Lee had been
advised to contact Mitoma by Lucy Ham, a Choeng Am America
officer and friend of Mitoma.385 In testimony before
the Committee, Mitoma said that he agreed to try to arrange a
meeting for Lee by telephoning Doris Matsui, Deputy Director of
the White House Office of Public Liaison in charge of Asian
American issues. When Matsui failed to return his telephone
messages,386 Mitoma called the DNC at the suggestion
of Ham, who was aware that an Asian American was organizing
fundraising events with the President.387 The person
Mitoma talked to at the DNC was Huang.
Mitoma and Huang apparently had several discussions about a
possible meeting between Cheong Am America associates and the
President, including Lee's preference for a 30-minute private
meeting in Washington or Korea.388 Mitoma told the
Committee that the final arrangement reached was that Lee,
Chung, Lucy and Won Ham, and Mitoma would attend a small
fundraising dinner with the President on April 8, 1996, at the
Sheraton Carlton Hotel in Washington. In exchange, Cheong Am
America would make a contribution to the DNC covering five
dinner tickets at $50,000 apiece, for a total of
$250,000.389 Although Cheong Am America did in fact
purchase five tickets to the dinner, what actually took place
was a five to ten minute meeting in a hotel reception
room.390
Documents show that on April 8--the day of the dinner--
Huang faxed DNC finance director Sullivan a two-page
handwritten document, ``per our conversation,'' stating that
Cheong Am America was looking for ``a large U.S. broadcasting
company'' for a joint venture to manufacture and market large-
screen televisions, with the plant to be built in Carson. The
document listed five meeting ``participants,'' identified Lee
as chairman of the Cheong Am Group in Korea, and inaccurately
identified Chung as head of a Cheong Am Group ``division.''
391 In response to the fax, Sullivan sent a
memorandum--also dated April 8--to Doug Sosnick and Karen
Hancox of the White House Office of Political Affairs stating
that the Carson mayor wanted ``five minutes'' with the
President that evening ``before our first dinner'' to discuss
the proposed plant in Carson.392 Neither document
indicated that the Cheong Am representatives would be attending
the dinner itself.393
Mitoma told the Committee that in a phone call on the day
of the dinner, Huang had hinted that it might only be possible
for Lee to have a private meeting with the President and not
attend the dinner.394 Mitoma testified that he was
upset by this conversation in light of the large sum of money
Lee was paying for an opportunity to dine with the President.
He testified that, in addition, Lee was flying into Washington
from Korea for the sole purpose of attending the dinner and
bringing the check with him from Korea.395
Mitoma told the Committee that when his party arrived at
the Sheraton Carlton Hotel, they waited for about an hour in
the hotel lobby before being met by Huang.396 They
were then ushered into a ``side room.'' 397
According to Mitoma, he handed Huang the $250,000 check while
they were in the lobby, prior to being taken to the side
room.398 Mitoma testified that the President arrived
in the side room and a brief meeting followed. Mitoma indicated
that he told the President that Lee was interested in opening a
manufacturing plant that would create much-needed jobs in
Carson, and that the President said that was a ``very good
idea'' and he hoped it would happen.399 Mitoma
testified that Lee and the others then had their pictures taken
with the President.400
While Mitoma's testimony makes clear that neither he, Lee,
nor Chung advocated any substantive policy change nor requested
special treatment during or after the meeting,401
the evidence before the Committee indicates that Cheong Am
America's $250,000 contribution was made for the sole purpose
of obtaining access to the President. The evidence also
demonstrates that Huang was an apparently willing and
uncritical participant in an apparent sale of access.
The evidence also indicates that Huang apparently failed to
meet his core responsibility of carefully evaluating the
$250,000 contribution to ensure that the DNC could properly
accept it. A 1995 DNC memorandum, authored by DNC General
Counsel Sandler, required all contributions from U.S.
subsidiaries of foreign corporations to be thoroughly reviewed
by the DNC general counsel's office before
acceptance.402 The memorandum identified four
requirements for accepting such contributions: (1) the
subsidiary must be incorporated and have its principal place of
business in the U.S.; (2) the subsidiary must have sufficient
funds from its own U.S. operations to support the contribution;
(3) the subsidiary cannot be reimbursed by the foreign owners
or parent corporation for its contribution; and (4) the
decision to contribute must be made by U.S. citizens or
permanent residents and not by foreign nationals.403
The last paragraph of the memorandum stated the following:
Each situation must be examined on a case-by-case
basis before any decision to accept a contribution can
be made. As we discussed, the procedure should be that
you or your staff discuss the situation with Neil or
myself, that DNC counsel review the above requirements
with counsel or another official of the company, and
that either the company confirm to us in writing that
the requirements have been met or that we issue a
letter to the company setting out their factual
representations to us showing that these requirements
have been met and confirming that on the basis of those
representations the contribution is
lawful.404 [Emphasis in original.]
The evidence indicates that Huang, due to his DNC training,
knew or should have known of these DNC procedures and legal
requirements.405 Mitoma testified that at one
point--it is unclear whether it was before or after he had
delivered the check--Huang asked him whether Cheong Am was
incorporated in the United States and whether the contribution
would be drawn on a bank account belonging to the U.S.
corporation. Mitoma stated he responded in the affirmative
after checking with Lucy Ham at Cheong Am
America.406 He testified that Huang never asked him
whether any foreign national, such as Lee or Chung, was
involved in the contribution decision, or whether the company
was using U.S.-generated income to pay for the
$250,000.407
According to DNC Finance Director Sullivan, when Huang gave
him the $250,000 check in April 1996, he told Huang that he had
expected personal contributions from Ham and her husband (who
were U.S. citizens), and expressed concern about the
eligibility of Cheong Am America to contribute. Sullivan
testified that Huang told him that he held onto the check for
two days, and Sullivan assumed, based on his conversation with
Huang, that he had run the check by the general counsel's
office. He said:
I remember looking at it with him and saying, are you
okay with this and have you vetted this with Sandler,
and he responded, yes.408
Sandler testified, however, that Huang had not discussed
the Cheong Am contribution with him prior to September 1996,
when the DNC received information that there might be a problem
with the contribution.409
A memorandum dated September 20, 1996, attended by Sandler
and Jake Siewert, states that after learning on September 19th
that there might be a problem with the contribution, the DNC
immediately investigated, uncovered significant questions, and
returned the funds the same day, seven weeks before the
election.410 The memorandum states:
The DNC's fundraiser [Huang] understood that the
company had been in existence in the U.S. for some
months. He also was led to believe that all three of
the company's principals . . . were U.S. citizens or
permanent residents. . . . We learned yesterday . . .
the company had no operations in the U.S. at the time
the contribution was made . . . [and] one of the three
principals, its chairman, John Lee, was not a U.S.
citizen. The DNC's fundraiser had been led to believe
that Mr. Lee was a permanent resident because he has a
social security number, and had resided in Los Angeles
for some time; there may have been some confusion
because his son is a permanent resident. The other two
principals are in fact U.S. citizens and it is our
fundraiser's firm understanding that these two made the
decision to contribute. However, the involvement--and
presence at the fundraiser--of Mr. Lee, raises
sufficient additional questions . . . that we would not
have accepted the contribution had we known Mr. Lee was
not a permanent resident.411
The memorandum admits, ``In this case, the [DNC's] normal
vetting process broke down.'' 412 Sandler also
testified at his deposition that when he asked Huang about the
contribution in September, Huang admitted that he ``had made a
mistake.'' 413
The evidence is clear that, with respect to the Cheong Am
America contribution, Huang apparently failed to follow the
DNC's procedures for evaluating contributions from U.S.
subsidiaries of foreign corporations. He did not ask all of the
required questions of the company and apparently failed to
consult the DNC general counsel's office. When asked by
Sullivan in April if he had spoken with the general counsel's
office, Huang apparently indicated that he had, even though the
general counsel has testified that the first time he was
contacted about the contribution was in September. While the
evidence does not establish that Huang knew that foreign
nationals had participated in the contribution decision and
used foreign funds to pay for the contribution, the evidence
does show that Huang knew that Lee had flown in from Korea for
the dinner and had originally wanted to meet with the President
in Korea. Given these facts, Huang should have exercised
greater care in determining whether Lee was a foreign national,
whether Chung, his Korean partner, had participated in the
contribution decision, and whether funds from Korea had been
used for the contribution.
DNC officials should have exercised more careful oversight
over Huang's fundraising. However, once the DNC became aware of
questions about the Cheong Am contribution, it initiated a
prompt investigation, Huang admitted his missteps to Sandler,
and the DNC immediately returned the funds.
June 18, 1996, DNC coffee at the White House
Another event Huang helped organize was a DNC coffee held
at the White House on June 18, 1996. This was the only coffee
Huang attended.414 Thai businesswoman Pauline
Kanchanalak also attended with several of her business
associates who were foreign nationals and nonresidents and,
therefore, ineligible to contribute to the DNC. Kanchanalak was
known at the DNC as a significant contributor.415
The Committee investigated whether Huang sold access to the
President through this coffee or whether he made a solicitation
at the coffee. The Committee did not receive testimony from
Huang, or from Kanchanalak, who reportedly has left the
country.
Also present at the coffee were Clarke Wallace, executive
director of the U.S.-Thailand Business Council, which promotes
trade and investment between Thailand and the United States;
Beth Dozoretz, a volunteer fundraiser for the DNC, and her
guests, Renee and Robert Belfer; the DNC's Donald Fowler and
Marvin Rosen; and Bob Nash, Director of Presidential Personnel.
Kanchanalak was a well-established supporter of the DNC
prior to the 1996 election cycle.416 Sullivan
testified that she had been giving to the DNC since at least
1991.417 She was active in Asian-American political
circles, and as an existing DNC Trustee, had attended the
inaugural Asian Pacific American Leadership Council dinner with
Vice President Gore on November 2, 1995.418 Huang
was put in charge of Kanchanalak's ``account.'' 419
In late spring 1996, Kanchanalak expressed her desire ``to
come and bring a couple of people to [a] coffee.''
420 Sullivan testified that he initially opposed
Kanchanalak's list of proposed coffee attendees because they
did not serve the purpose of cultivating new contributors and
appeared to be designed as an opportunity for Kanchanalak to
impress her business clients.421 Thus, unlike the
many other DNC events at the White House in which both
established and prospective Democratic supporters were invited,
the June 18, 1996 coffee did not involve an opportunity for the
President to interact with a variety of party supporters but
rather appeared to be a favor for Kanchanalak. However, John
Huang was insistent that her Thai guests must be allowed to
attend,422 and Sullivan and Rosen acceded.
Sullivan testified that it was his sense that Kanchanalak
wanted to attend this coffee to impress her clients from the CP
Group, a large Thai conglomerate, and that the DNC included
Kanchanalak and her guests as a favor to her.423 FEC
records also indicate that ``P. Kanchanalak'' gave
contributions of $85,000 on June 19, 1996, and $50,000 on July
10, 1997, and Pauline Kanchanalak's sister-in-law, Duagnet
(Georgie) Kronenberg, gave $50,000 on June 19, 1996. Two
contributions from attendees to this event were attributed to
this coffee. For internal tracking purposes, the DNC assigns
``codes'' to contributions associated with particular events.
Because coffees were not considered ``fundraisers,'' they did
not normally have contributions credited to them.424
While both the DNC and the White House both approved the
list of prospective attendees, this is the very system which is
to blame for the fact that this coffee occurred at all. For
instance, the knowledge that a donor was ``insisting'' on
bringing her business associates to a DNC coffee with the
President should have raised a warning flag for Sullivan, who
had earlier expressed concerns about Huang's fundraising.
The second allegation is of a possible solicitation at the
coffee. Karl Jackson, a Republican, was President of the U.S.-
Thailand Business Council with which Kanchanalak was also
involved.425 Jackson testified that he was invited
to the coffee a day before it was held and was told that
representatives of the council, including the chairman, would
be there.426 Jackson said he understood this to be a
policy meeting with the President and was surprised when he
heard ``DNC'' mentioned as he arrived at the White House for
the coffee.427 Jackson alleged that at the beginning
of the coffee, Huang stood up and said ``Elections cost money,
lots and lots of money, and I am sure that every person in this
room will want to support the re-election of President
Clinton.'' 428 Jackson was contradicted by other
attendees.429
The Committee heard public testimony from three of the nine
attendees at this coffee: Jackson, Wallace, and Dozoretz.
Committee staff also deposed Wallace, Dozoretz, and Robert
Belfer, but not Jackson. Much of this testimony focused on
Jackson's allegation.
Wallace testified that he did not consider the coffee to be
a fundraiser. He said ``what it appeared to be was a
relationship-building type event with major donors.''
430 Wallace recalled that the President introduced
Huang to the group at the end of the coffee, not at the
beginning as Jackson recounted.431 Wallace testified
that at that time:
John Huang spoke and he said [to] the President,
``Thank you very much for being here, Mr. President,''
and I think speaking more to the table, he said, ``as
you know,'' he said, ``this President is the right man
to lead [the] country into the 21st century, into the
next millennium and I think we have one small hurdle''
or something like that, ``which is the elections in
November and I'm sure you will do everything you can to
support that, support the--everyone at this table will
do what they can to support the President.''
432
Wallace has no independent recollection of Huang making any
statement about ``elections being expensive,'' although he does
not contest that this may have been said.433 Wallace
testified in his deposition that he did not understand Huang to
be suggesting to the coffee attendees that they themselves
should contribute. Rather, Wallace testified that he
interpreted Huang's remarks as follows: ``Helping to either . .
. raise money or help to strengthen the DNC somehow either
through networking to get people to support the President or .
. . networking to get people to give donations.''
434
Dozoretz has been a volunteer DNC fundraiser since 1992 and
is familiar with fundraising events and how they are organized
and carried out.435 She testified that she has never
been told that if she raised a certain amount of money she
would be given access to the President; indeed, she said she
was always told that access to the President was not dependent
upon the quantity of contributions given.436 Prior
to press accounts, Dozoretz does not recall anyone at the DNC
referring to the coffees as fundraisers.437
Dozoretz who unlike Jackson, sat right next to Huang at the
coffee, testified that Huang did not solicit the coffee
guests.438 She said that she would have remembered
if Huang had solicited the coffee attendees because ``he would
have been soliciting people that I brought to the coffee. He
would have been soliciting me, and I certainly would have
remembered it, and I certainly would have left there having a
clear understanding that he worked for the DNC.''
439 In fact, she initially thought Huang was a
member of Kanchanalak's group.440
Dozoretz's guest at the coffee, Robert Belfer, likewise
testified he never formed the impression that he was attending
a fundraiser. In his deposition, Belfer testified: ``Nothing
occurred in that room to lead me to understand that I was asked
or expected to give money as a result of that coffee. . . . I
was not asked at the coffee, nor did I hear anybody else being
asked at the coffee to give money.'' 441 Belfer also
had no recollection of Huang making any remarks during the
coffee. In his deposition, Belfer testified that he, too,
assumed that Huang was a member of Kanchanalak's Thai
delegation, and he would have ``clearly had an understanding
that [Huang] was somehow not a part of this delegation if he
got up and gave a fundraising pitch to the people there.''
442
Jackson is the only coffee attendee who recalls Huang
making a solicitation for money. Jackson's own testimony
reveals that even his version of what Huang purportedly stated
was not an express solicitation. Others who attended the coffee
do not support even this version of Jackson's testimony; even
Jackson's subordinate at the U.S. Thailand Business Council,
Clarke Wallace, does not support Jackson's recollection. It is
noteworthy that over 1,000 people attended numerous coffees
over two years and that Jackson, a longtime Republican, is the
only attendee who claimed that there was a solicitation at a
coffee.
The Pendleton Act prohibits solicitations for political
contributions on federal property. Under the Pendleton Act,
such solicitations are prohibited only in certain areas of the
White House. This coffee occurred in the Map
Room,443 which has been expressly excluded from the
prohibition on solicitations on federal property. While the
alleged solicitation, even if it had occurred, might not have
been illegal, it would have been improper. The preponderence of
evidence before the Committee, however indicates a solicitation
did not, in fact occur.444
Rawlein Soberano
Rawlein Soberano, is an independent consultant and also co-
founder and vice president of the Virginia-based Asian American
Business Roundtable (``AABR''). The AABR is a small
organization that helps promote Section 8(a) contracts between
its members (small, disadvantaged companies) and the federal
government.445 Soberano testified before the
Committee that he met with Huang for lunch in early August 1996
to discuss potential sponsors for the annual AABR dinner
banquet.446 Soberano alleged that when the
conversation turned to a discussion of the AABR's small
operating budget, Huang offered to provide the organization
with $300,000.447 He described the offer in the
following terms:
And I told him about the organization. I remembered
that it was during the discussion about the budget when
he mentioned--and I remember this as if it was
yesterday. He said, ``Perhaps we can help you out,''
and that's when I looked at him and said ``How?'' and
he said categorically and plainly, ``We can give you
$300,000 and you can give it back to us later, and you
can give 15 percent for the organization,'' but that is
when I told him, ``John, this conversation never took
place.'' 448
As a result of this alleged conversation, Soberano inferred
that Huang was offering to provide the AABR with money that he
thought may come from the DNC. Soberano testified, however,
that Huang never identified either the source of the money that
could be provided to the AABR or to where the money would be
repaid by the AABR.449 In both his deposition
testimony and his hearing testimony, Soberano also confirmed
that Huang never used the word ``DNC'' during their
conversation.450 Soberano also testified that he did
not ask Huang any follow-up questions, nor did the two have any
other discussion at all about this except for the alleged
statements recounted above.451
The Committee was presented with no evidence to support
Soberano's allegations. Soberano's calendar, which was produced
to the Committee, shows no appointment with Huang on the date
in question. Soberano admitted that he did not make
reservations for his lunch with Huang452 and that he
knew of no one who saw the two at the restaurant.453
Soberano also stated that following the incident, he did not
tell his boss at the AABR or anyone else, including his wife,
about his alleged conversation with Huang.454
Soberano's understanding of his conversation with Huang is
subject to question. Soberano's allegation is based on his
understanding of a brief comment by Huang, a man with whom he
had never before had a one-on-one conversation.455
Soberano is a registered Republican and former political
appointee of the Bush Administration.456 Soberano
did not come forward with this story until six months after
this alleged event. His supervisor, a Republican activist, set
up a meeting with a Washington Post reporter without Soberano's
approval to urge Soberano to levy this charge against
Huang.457 In fact, Soberano testified that he had
refused to meet with reporters for many weeks and only did so
after his supervisor set up an appointment without conferring
with him.458 In the Post story that resulted from
this interview, his supervisor appeared on the front page
although she had no involvement with or knowledge of the
activities at issue.459 Based on this evidence, the
possibility cannot be ignored that Soberano misunderstood his
conversation with Huang and that he was encouraged to assume a
fundraising violation based on much publicized media accounts
of allegations against Huang.460
The DNC's supervision of Huang
Richard Sullivan, former DNC finance director, testified
that as early as the Sheraton Carlton event in May 1996, he was
concerned and ``nervous'' about the number of foreign nationals
attending events organized by Huang.461 Despite this
concern, Sullivan stated that he did not closely monitor
Huang's fundraising in the months following this event because
he believed Huang was reviewing questionable contributions with
DNC general counsel Joseph Sandler.462 However, the
only time Sandler reviewed contributions with Huang was after
Huang's first fundraising event in February. Despite his
concerns, there is no evidence that Sullivan ever raised the
issue directly with Sandler or ever talked to Sandler to see if
there were, in fact, any problems with the contributors Huang
was soliciting.
Following the Jefferson Hotel event, Sullivan became
particularly concerned about small events organized by Huang
with significant numbers of non-citizens in
attendance.463 Although attendees at DNC events are
often allowed to bring a guest, even if the guest is a
noncitizen without permanent residence, Sullivan was worried
about the impression created by an intimate DNC event with the
President at which a large portion of the guests were unable to
contribute because they were neither citizens nor permanent
legal residents. Sullivan believed such events could invite
unwanted press stories.464
Sullivan also felt that it was possible that Huang had set
up the Jefferson Hotel dinner as a way to impress his former
boss, James Riady, and the other guests with his ability to
arrange an intimate dinner for them with the
President.465 Sullivan, however, apparently took no
steps to stop the dinner or to expand the number of attendees.
Sullivan evidently was aware of the guest list because he
testified that he had run the list by Karen Hancox at the White
House for her approval.466 Sullivan also testified
that after the event Marvin Rosen, the DNC finance chairman,
mentioned to him that some of the attendees were nonresidents
and, thus, ineligible to contribute.467
Although Huang had been hired to develop outreach efforts
in the Asian Pacific American community, Rosen testified that
he and Sullivan ultimately became concerned with Huang's
failure to broaden the contributor base among this community.
It appeared that Huang was inviting the same people to his
events time and time again.468 Rosen stated that the
DNC was looking for new sources of money, and he and Sullivan
did not feel that Huang was producing such new
sources.469 None of these concerns, however, led
Rosen or Sullivan to scrutinize the contributors that Huang was
bringing in, or to supervise him more carefully. Ultimately,
the DNC did forbid Huang from arranging events at which the
President would be in attendance.470
While the DNC may not have had evidence that Huang was
involved in soliciting foreign contributions, it does appear
that there were sufficient concerns about the nature of the
events Huang was involved in to warrant better supervision of
his activities by his DNC supervisors
conclusion
John Huang has been a central figure of the Committee's
investigation into the 1996 federal elections, and the Minority
believes that this scrutiny was fully justified. Although he
did not hold a senior position in either the Democratic
National Committee or any other Democratic organization, he has
been linked to a large number of questionable and possibly
illegal contributions. It would be impossible to conduct a
serious inquiry into party fundraising without taking a close
look at such an individual as well as the environment in which
he operated. Who is John Huang? How was he hired as a
fundraiser? How was he trained? How did he carry out his
fundraising responsibilities? How well was he supervised and
monitored by his superiors? The Committee examined all of those
issues, and this chapter is an attempt to provide answers.
But John Huang was a subject of the Special Investigation
not only because of alleged fundraising abuses. Since the fall
of 1996, he has been accused--directly or through insinuation--
of betraying his country, the United States, by acting as a spy
for the People's Republic of China. The evidence gathered by
this Committee does not support that allegation and, in some
respects, seriously undermines it. The evidence shows that
Huang did nothing to exploit his Commerce Department post to
obtain classified information. Morever, Huang stated, through
his attorney, that he was willing to testify before the
Committee with a limited grant of immunity that would not have
protected him from prosecution for any form of espionage or
mishandling of classified information.
Although the espionage allegations were not substantiated
by the Committee's investigation, the Committee did find ample
grounds for concern about the way Huang conducted himself when
he was employed by the Democratic National Committee. No one at
the DNC appears to have condoned Huang's improprieties, but the
record shows that warning signs were ignored and that the DNC
failed in its responsibility to ensure that Huang was complying
with internal DNC policies and the federal campaign finance
laws.
footnotes
1 John Huang SF-171 Application for Federal Employment,
DOC 03AM0042.
2 John Huang SF-171 Application for Federal Employment,
DOC 03AM0042.
3 John Huang SF-171 Application for Federal Employment,
DOC 03AM0042.
4 John Huang SF-86 Application for Sensitive Position,
DOC 03AM0047.
5 Los Angeles Times, 10/21/96; Washington Post, 5/13/97.
Huang spent seven years at American Security Bank in Washington,
starting as a trainee and working his way up to assistant vice
president.
6 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
7 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
8 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
9 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
10 Newsweek, 10/21/96.
11 Time, 12/11/96.
12 Los Angeles Times, 11/17/96.
13 American Spectator, 12/96.
14 Los Angeles Times, 11/17/96.
15 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
16 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
17 John Huang Deposition, 10/30/96 in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
18 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL): Huang SF-171, DOC 03AM0042.
19 Harvard Business School Profile of the Lippo Group,
1992, pp. 1-3.
20 Harvard Business School Profile of the Lippo Group,
1992, pp. 1-3.
21 Harvard Business School Profile of the Lippo Group,
1992, pp. 3, 7.
22 Harvard Business School Profile of the Lippo Group,
1992, p. 1.
23 Thomas Hampson, 7/15/97 Hrg., pp. 64-65.
24 Harvard Business School Profile of the Lippo Group,
1992, pp. 1-3.
25 Time Magazine, 5/5/97.
26 Thomas Hampson, a private investigator called to
testify on the structure of the Lippo Group testified that China
Resources is used by the Chinese government as ``an agent of espionage,
economic military and political.'' However, Hampson introduced no
evidence that the Lippo Group engaged in espionage, economic or
otherwise, testifying that he had no information that would indicate
there was any activity on the part of the Chinese Government through
China Resources or through Lippo, in the United States. Thomas Hampson,
7/15/97 Hrg., pp. 71-73, 77-78. Hampson also testified that China
Resources has a broader purpose, ``to foster trade and to promote
development to the mainland's economy. Through business ties it has
established, the group seeks out technology that the country needs and
buys it.'' Thomas Hampson, 7/15/97 Hrg., pp. 70-71.
27 Thomas Hampson, 7/15/97 Hrg., p. 56.
28 Thomas Hampson, 7/15/97 Hrg., pp. 80-81.
29 Fort Worth Star-Telegram, 10/31/96; Thomas Hampson,
7/15/97 Hrg., pp. 76-81.
30 Exhibit 105.
31 Harold Arthur, 7/15/97 Hrg., p. 98.
32 John Huang SF-86 Application for Sensitive Position,
DOC 03AM0047.
33 John Huang SF-86 Application for Sensitive Position,
DOC 03AM0047.
34 HHH 2378. Documents produced to the Committee by Hip
Hing Holdings indicate that Huang was asked to join Committee of 100 in
1993. HHH 2378. His work with this organization continued through his
work with this organization after he left Lippo for the Department of
Commerce. See 9/22/95 Committee of 100 directory identifying Huang as
Director.
35 Hip Hing Holdings documents, HHH 3037-38, 4609, 4967-
68.
36 Los Angeles Times, 10/21/96.
37 Los Angeles Times, 12/23/96.
38 Los Angeles Times, 12/23/96.
39 Washington Post, 10/18/96.
40 Washington Post, 5/13/97.
41 Los Angeles Times, 12/23/96.
42 John Huang Deposition, 10/30/96, in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
43 Los Angeles Times, 12/23/96.
44 John Huang Deposition, 10/30/96 in Judicial Watch
Inc. v. Dept. Commerce, CA. 95-0133 (RCL).
45 Los Angeles County, CA tax records of holdings of Hip
Hing Holdings.
46 Juliana Utomo, 7/15/97 Hrg., p. 14.
47 Juliana Utomo, 7/15/97 Hrg., p. 53.
48 Exhibits 101, 104: Profit and Loss statements of
Lippo Group Holding Companies, HHH 0233, HHH 0236-37, CHI 0085.
49 Exhibit 103.
50 See legal analysis in Part 1 Overview (Chapter 1),
supra.
51 FEC public disclosure reports of contributions by Hip
Hing Holdings, Toy Center Holdings and San Jose Holdings. See
www.tray.com for contribution records.
52 Lippo Group holding companies requests for
reimbursement of expenses from August to December 1993, HHH 0236-37.
53 Exhibit 105. During the July 15 hearing, Senator
Thompson referred to an Advisory Opinion issued by the Federal Election
Commission, the summary of which states that ``in order for a
contribution to be legal, a domestic subsidiary must make contributions
out of net profits.'' Advisory Opinion 1992-16. While the Opinion holds
it is proper for the particular domestic subsidiary seeking the Opinion
to make contributions from its net profits, it does advise whether
contributions from the net income of a domestic subsidiary operating at
a loss are permissible. See legal analysis in Chapter 1, supra.
\54\ Thomas Hampson, 7/15/97 Hrg., pp. 82-83.
\55\ 1992 Riady contribution checks to state parties, HHH 1360,
1362-63.
\56\ 1992 Riady contribution checks to the Inaugural Committee, HHH
1361.
\57\ Check from Hip Hing Holdings to John Huang dated 2/3/94, HHH
5067.
\58\ Juliana Utomo, 7/15/97 Hrg., pp. 39-40.
\59\ Check from Hip Hing Holdings to John Huang dated 7/15/94, HHH
5184.
\60\ Harvard Business School Profile of the Lippo Group, 1992, p.
B4.
\61\ The main issue in the cease and desist orders has been the
quality of the loan assets and the balance of capital reserves relative
to the loan portfolio, in part because of the poor performance of the
bank prior to Lippo's purchase of it. See Harold Arthur's opening
statement, pp. 12-14, 7/15/97 Hrg., p. 92. However, in 1990, the bank
was found to have failed to file a number of reports of international
wire transfers over $10,000 in violation of the reporting provisions of
the laws meant to combat money laundering. While the FDIC referred this
action to other agencies, the evidence before the Committee does not
indicate that any investigation of money laundering was ever initiated
against the bank.
\62\ Harold Arthur, 7/15/97 Hrg., p. 145; Juliana Utomo, 7/15/97
Hrg., p. 58.
\63\ Assistant Secretary Charles Meissner was a victim of the 1996
plane crash in Croatia which also claimed the life of Commerce
Secretary Ron Brown, among others.
\64\ EOP 002062-067.
\65\ Gary Christopherson deposition, 6/4/97, p. 140.
\66\ DOC Document No. 03AK0461.
\67\ Gary Christopherson deposition, 6/4/97, pp. 42-46.
\68\ Gary Christopherson deposition, 6/4/97, p. 47.
\69\ EOP 002068, 002071, 009452, 009454, 009487.
\70\ Gary Christopherson deposition, 6/4/97, p. 41.
\71\ Gary Christopherson deposition, 6/4/97, pp. 50-51, 53.
\72\ Gary Christopherson, 7/16/97 Hrg., p. 50.
\73\ Jeffrey Garten, 7/16/97 Hrg., p. 117.
\74\ Jeffrey Garten, 7/16/97 Hrg., p. 118.
\75\ Jeffrey Garten, 7/16/97 Hrg., p. 119.
\76\ Gary Christopherson, 7/16/97 Hrg., p. 23.
\77\ Gary Christopherson, 7/16/97 Hrg., p. 49.
\78\ Gary Christopherson deposition, 6/4/97, pp. 42-46.
\79\ Jeffrey Garten, 7/16/97 Hrg., pp. 120-21.
\80\ Jeffrey Garten, 7/16/97 Hrg., p. 120.
\81\ David Rothkopf deposition, 6/2/97, p. 30.
\82\ Jeffrey Garten, 7/16/97 Hrg., p. 121.
\83\ Jeffrey Garten, 7/16/97 Hrg., p. 121.
\84\ DOC Documents 03BA1258 and 03BA0891.
\85\ DOC Document 03CC0269.
\86\ DOC Document 03CC0269.
\87\ DOC Documents 03AB2372, 03BA2959, 03BA2974, 03BA1754 and
03BA1755.
\88\ The requests that Huang fielded from Senators and
Representatives on behalf of their constituents included requests from
Congresswoman Ileana Ros-Lehtinen, whose constituent, Dr. Donn J.
Tilson, wanted a list of U.S. companies doing business in Ecuador (DOC
document 03BA2985); Senator Daniel Moynihan, who inquired on behalf of
Louis R. Soto, who wanted licensing forms for the export of tires to
South America (DOC document 03BA2982); Congressman Bob Goodlatte, whose
constituent, Gregory W. Feldmann, was seeking information on incentives
available to companies interested in purchasing companies in Mexico
(DOC document 03BA3053); Congressman John Tanner, who wanted
information on crossing the border with equipment for missionary work
and taking tour groups into Mexico for Dr. Ernest C. Gambrell (DOC
document 03BA3050); and Senator Trent Lott, who contacted Huang on
behalf of Marcus Byrd seeking assistance removing squatters on his
company's land holdings in Costa Rica (DOC document 03BA2987).
Additionally, Huang, Susan Blackman and Hong Phong-Pho presented a
briefing to Rep. Bennie Thompson regarding Vietnam (DOC document
03AB0148).
\89\ Wall Street Journal, 7/14/97.
\90\ Jeffrey Garten deposition, 6/3/97, p. 82.
\91\ Jeffrey Garten, 7/16/97 Hrg., p. 137.
\92\ Jeffrey Garten, 7/16/97 Hrg., p. 122.
\93\ See generally David Rothkopf deposition, 5/22/97; Timothy
Hauser deposition, 6/2/97; Alan Neuschatz deposition, 5/22/97.
\94\ Alan Neuschatz deposition, 5/22/97, p. 17.
\95\ DOC Document 03AB0172.
\96\ DOC Document 03AB0172.
\97\ DOC Document 03AB0172.
\98\ Senator Specter, 7/16/97 Hrg., pp. 156-157.
\99\ John Dickerson deposition, 5/30/97, p. 13.
\100\ Joseph Burns deposition, 5/3/97, pp. 100-101.
\101\ Joseph Burns deposition, 5/3/97, pp. 99-100.
\102\ Steven Garmon deposition, 5/23/97, p. 28.
\103\ Steven Garmon deposition, 5/23/97, pp. 33-34. In March 1997,
pursuant to an executive order doing away with interim clearances and
in response to a request by Secretary Daley, the Security Office
changed its policy to require a request from a supervisor before any
employee, career or political, be granted a temporary clearance.
\104\ In the course of the limited background check, an NCIC
computer notation surfaced on John Huang. The NCIC form states that
Huang was ``arrested or received 8/17/72'' and lists ``Agency-USINS
Baltimore,'' and ``Charge--Dep Proc.'' When he received this
information, the reviewing officer took it to his supervisor Al
Buskirk. Buskirk testified that while he was unable to determine
whether Huang had been arrested from the face of the NCIC form, his
review of Huang's SF-171 and SF-86 revealed that Huang had married an
American citizen on 8/6/72, several days before he entered the country.
Based on his own understanding of the immigration process, Buskirk
concluded that Huang was fingerprinted as a required step in the
administrative citizenship process. Documents obtained from INS support
Buskirk's supposition and confirm that Huang appeared at the INS in
Baltimore on August 17, 1972, where a Record of Deportable Alien form
was filled out noting his marriage. A fingerprint card in his file
dated 9/5/72 indicates that the result of the FBI check was that he had
never been arrested. On August 30, 1972, Huang applied for permanent
resident status. No deportation proceedings were ever initiated against
John Huang and he has never been arrested.
\105\ Steven Garmon deposition, 5/23/97, pp. 76-77. Huang's file
contained the typical form letter from the Security Office noting that:
``____ is granted this waiver [of the OPM background investigation] due
to the critical need for his expertise in the new Administration for
Secretary Brown.''
\106\ Steven Garmon deposition, 5/23/97.
\107\ Paul Buskirk, 7/16/97 Hrg., p. 29; staff interview with Lewis
Williams, 6/12/97.
\108\ Questions have also been raised about Huang obtaining
classified information from outside DOC during this period. In order
for an individual with a clearance to receive classified information
from an outside agency, the individual's clearance must be ``passed''
from the Security Office of the employing agency to the Security Office
of the agency granting access to the information. Whenever a clearance
is ``passed'' to another agency, a form is filled out authorizing the
clearance being passed. No such forms exist indicating Huang's
clearance was passed at any time.
\109\ Gordon Burns deposition, 5/23/97, pp. 101-102.
\110\ Robert Gallagher deposition, 5/30/97, p. 13.
\111\ Staff interview with Richard L. Johnston, Jr., 6/12/97.
\112\ Robert Gallagher deposition, 5/30/97, p. 13.
\113\ Robert Gallagher deposition, 5/30/97, p. 13.
\114\ Staff Interview with Lewis Williams, 6/12/97.
\115\ Staff Interview with Lewis Williams, 6/12/97.
\116\ Staff Interview with Lewis Williams, 6/12/97.
\117\ Staff Interview with Lewis Williams, 6/12/97.
\118\ Robert Gallagher deposition, 5/30/97, pp. 7, 15.
\119\ John Dickerson deposition, 5/5/97, pp. 6, 8.
\120\ Robert Gallagher deposition, 5/30/97, p. 7.
\121\ Robert Gallagher deposition, 5/30/97, p. 15.
\122\ John Dickerson deposition, 5/5/97, pp. 8-9.
\123\ John Dickerson deposition, 5/5/97, pp. 8-9.
\124\ Senator Glenn, 7/16/97 Hrg., p. 213.
\125\ Chairman Thompson, 7/17/97 Hrg., p. 4. In his opening
statement, the Chairman referred to Huang's use of the Stephens office
in the following terms: ``He used the office of a private company for
phone calls and faxes while he worked at Commerce, frequently
corresponding to times when he had just received briefings on
classified material.''
\126\ Celia Mata deposition, 8/1/97, pp. 50, 68.
\127\ Paula Greene and Celia Mata, 7/17/97 Hrg., pp. 24-25.
\128\ Paula Green and Celia Mata, 7/17/97 Hrg., pp. 110-111.
\129\ Celia Mata deposition, 8/1/97, p. 71.
\130\ Celia Mata, 7/17/97 Hrg., pp. 29-30.
\131\ Celia Mata, 7/17/97 Hrg., p. 13.
\132\ Celia Mata, 7/17/97 Hrg., p. 13.
\133\ Celia Mata, 7/17/97 Hrg., pp. 11-13.
\134\ Celia Mata, 7/17/97 Hrg., p. 119.
\135\ Celia Mata, 7/17/97 Hrg., p. 21.
\136\ Celia Mata deposition, 8/1/97, p. 49.
\137\ Celia Mata deposition, 8/1/97, p. 54.
\138\ Celia Mata deposition, 8/1/97, p. 50.
\139\ Paula Greene deposition, 7/2/97, p. 42.
\140\ Paula Greene, 7/17/97, p. 14.
\141\ Paula Greene deposition, 7/2/97, pp. 43-44.
\142\ Paula Greene, 7/17/97 Hrg., pp. 19-20; Paula Greene
deposition, 7/2/97, p. 45.
\143\ Paula Greene, 7/17/97 Hrg., p. 54.
\144\ Paula Greene deposition, 7/2/97, p. 38.
\145\ Paula Greene deposition, 7/2/97, p. 38.
\146\ A Committee of 100 Directory lists Huang as a director as of
September 22, 1995. Moreover, during his tenure at Commerce, Huang
received phone calls from people associated with the Committee of 100.
See DOC 03 AB0017, records of call received by Huang while at the
Department of Commerce.
\147\ Paul Buskirk Deposition, 6/3/97, pp. 80-83.
\148\ Staff interview of Alan Neushatz, 3/13/97.
\149\ Alan Neushatz deposition, 5/22/97, pp. 17-18.
\150\ DOC Document 03AB0022.
\151\ DOC Document 03AB0022. ``As a former Principal Deputy
Assistant Secretary for IEP, Mr. John Huang will help the Assistant
Secretary for International Economic Policy during the transition time
of the Principal Deputy Assistant Secretary's position in IEP. . . .
The time frame for Mr. Huang's consultations on transition will not-to-
exceed 30 days.''
\152\ Alan Neuschatz deposition, 5/22/97, p. 58.
\153\ Staff Interview with Helena Malinowski, 3/13/97.
\154\ Alan Neuschatz deposition, 5/22/97, p. 51.
\155\ Paul Buskirk deposition, 6/3/97, pp. 68-70, 80-83.
\156\ Paul Buskirk deposition, 6/3/97, p. 68.
\157\ Paul Buskirk deposition, 6/3/97, pp. 80-83.
\158\ Staff interview of Alan Neushatz, 3/13/97.
\159\ Staff interview of Alan Neushatz, 3/13/97.
\160\ Staff interview of Alan Neushatz, 3/13/97.
\161\ Alan Neuschatz deposition, 5/22/97, p. 60.
\162\ Alan Neuschatz deposition, 5/22/97, p. 55.
\163\ James Per Lee deposition, 5/2/97, pp. 93-102.
\164\ Los Angeles Times, 8/29/97.
\165\ Senator Durbin, 7/16/97, Hrg., pp. 222-227.
\166\ DNC 1276339-40.
\167\ DNC 1276339.
\168\ David Mercer deposition, 5/27/97, p. 14.
\169\ David Mercer deposition, 5/14/97, p. 230; David Mercer
deposition, 5/27/97, pp. 17-18.
\170\ DNC Public Disclosure Records. See 1995 year end report.
\171\ DNC 1276339.
\172\ DNC 1276339.
\173\ David Mercer deposition, 5/27/97, p. 31.
\174\ David Mercer deposition, 5/27/97, p. 31.
\175\ David Mercer deposition, 5/27/97, p. 31.
\176\ David Mercer deposition, 5/27/97, pp. 31-32.
\177\ DNC 1277722.
\178\ DNC 1277722.
\179\ David Mercer deposition, 5/27/97, pp. 8-9.
\180\ David Mercer deposition, 5/27/97, p. 9.
\181\ Exhibit 170.
\182\ Exhibit 170.
\183\ David Mercer deposition Exhibit 38, 5/14/97.
\184\ David Mercer deposition, 5/14/97, p. 212.
185 DNC 1276337.
186 David Mercer deposition, 5/27/97, p. 33.
187 David Mercer deposition, 5/27/97, p. 33.
188 David Mercer deposition, 5/27/97, p. 33.
189 David Mercer deposition, 5/27/97, pp. 33-34.
190 Staff interview with Arief and Soraya Wiriadinata,
7/13/97.
191 Staff interview with Arief and Soraya Wiriadinata,
7/13/97.
192 Staff interview with Arief and Soraya Wiriadinata,
7/13/97.
193 Staff interview with Arief and Soraya Wiriadinata,
7/13/97.
194 Staff interview with Arief and Soraya Wiriadinata,
7/13/97.
195 Staff interview with Arief and Soraya Wiriadinata,
7/13/97.
196 Richard L. Sullivan deposition, 6/4/97, p. 208.
197 C. Joseph Giroir deposition, 4/30,97, pp. 75-76.
198 Richard L. Sullivan deposition, 6/4/97, pp. 210; C.
Joseph Giroir deposition, 4/30/97, pp. 109-10.
199 Richard L. Sullivan deposition, 6/4/97, p. 219.
200 Richard L. Sullivan deposition, 6/4/97, pp. 210-219.
201 Donald L. Fowler deposition, 5/21/97, p. 170.
202 Donald L. Fowler deposition, 5/21/97, Exhibit 14:
Fowler's schedule listing meeting at the Four Seasons with Giroir,
Sullivan as contact, 9/13/95, DNC 3020731-3027032.
203 Richard L. Sullivan deposition, 6/4/97, p. 241.
204 Donald L. Fowler deposition, 5/21/97, p. 170.
205 C. Joseph Giroir deposition, 4/30/97, pp. 84-86;
Nancy Hernreich deposition, 6/21/97, Exhibit 51: President's schedule,
9/13/95, EOP 02758-02760, the President's 9/13/95 schedule. Huang was
not originally scheduled to meet with the President at this time. Upon
arrival at the White House, Huang had to make special arrangements to
be ``waved'' in for the visit. C. Joseph Giroir deposition, 4/30/97,
pp. 86-87.
206 Bruce Lindsey deposition, 7/1/97, p. 106-114; C.
Joseph Giroir deposition, 4/30/97, p. 87.
207 Joseph Giroir deposition, 4/30/97, p. 87.
208 C. Joseph Giroir deposition, 4/30/97, p. 97. Huang
had indicated his interest in moving to the DNC to Giroir earlier in
the year. C. Joseph Giroir deposition, 4/30/97, p. 75. The Clinton
campaign had not done well with this group in the 1992 election and it
was acknowledged that they should endeavor to do better in the 1996
election. Donald L. Fowler deposition, 5/21/97, p. 190-191.
209 Bruce Lindsey deposition, 7/1/97, p. 115-117.
210 Bruce Lindsey deposition, 7/1/97, pp. 117-118.
211 Bruce Lindsey deposition, 7/1/97, p. 124.
212 C. Joseph Giroir deposition, 4/30/97, pp. 101-104;
Marvin S. Rosen deposition, 5/19/97, pp. 129-133. See also C. Joseph
Giroir deposition, 4/30/97, Exhibit 7/Marvin S. Rosen deposition, 5/19/
97, Exhibit 5: Letter from Giroir to Rosen referencing a meeting of the
previous day, 9/27/97, Middleton was involved because he knew Rosen.
Marvin S. Rosen deposition, 5/19/97, pp. 129-130.
213 C. Joseph Giroir deposition, 4/30/97, pp. 103-104.
214 Bill Kaneko deposition, 4/29/97, p. 119.
215 Harold Ickes deposition, 6/26/97, p. 115.
216 Marvin S. Rosen deposition, 5/19/97, pp. 138-139.
217 Rosen discussed Huang's hiring with Ickes,
Middleton, Fowler, Sullivan and the President in a receiving line
conversation in which the President requested the status of Huang's
hiring. Sullivan received recommendations from Middleton (Richard L.
Sullivan deposition, 6/4/97, pp. 216-217) and Arnold, but did not speak
with anyone in the White House. Richard L. Sullivan deposition, 6/4/97,
p. 249.
218 Richard L. Sullivan deposition, 6/4/97, p. 224-225.
219 Richard L. Sullivan deposition, 6/5/97, p. 12.
220 Richard L. Sullivan deposition, 6/5/97, pp. 12-14.
221 Donald L. Fowler deposition, 5/21/97, p. 171.
222 Richard L. Sullivan deposition, 6/4/97, p. 226.
223 Donald L. Fowler deposition, 5/21/97, p. 191.
224 Donald L. Fowler deposition, 5/21/97, pp. 190-191.
225 Marvin S. Rosen deposition, 5/19/97, pp. 148-150.
226 Joseph E. Sandler deposition, 5/30/97, pp. 93-96.
227 Huang's Department of Commerce salary was $117,927.
DOC document 03CC0226.
228 Richard L. Sullivan deposition, 6/4/97, p. 226.
229 Richard L. Sullivan deposition, 6/4/97, p. 231.
230 Joseph E. Sandler deposition, 5/15/97, p. 58.
231 Neil Paul Reiff deposition, 6/20/97, pp. 55-58.
232 Richard L. Sullivan, 7/9/97 Hrg., pp. 44-46; Richard
L. Sullivan deposition, 6/4/97, pp. 226-230.
233 Samuel Newman deposition, 7/17/97, pp. 142-143;
Joseph E. Sandler, 9/10/97 Hrg., p. 13.
234 Sullivan testified that he told Sandler of this
desire for special attention for Huang. He further testified that
Sandler said that he would ensure that Huang received such a briefing
and that Sandler later told him that they did, indeed, have such a
session shortly after Huang's arrival. Richard L. Sullivan, 7/9/97
Hrg., pp. 142-144; Richard L. Sullivan deposition, 6/5/97, pp. 23-25.
Sandler testified that he did not recall such a request from Sullivan.
Joseph E. Sandler, 9/10/97 Hrg., pp. 12-14; Joseph E. Sandler
deposition, 8/21/97, pp. 13-15.
235 Joseph E. Sandler deposition, 5/30/97, pp. 100-101.
236 Marvin Rosen deposition, 5/19/97, pp. 263-265.
237 Neil Paul Reiff deposition, 6/20,97, Exhibit 9:
Updated Legal Guidelines for Fundraising memorandum for Finance Staff
from Joe Sandler and Neil Reiff, 4/24/95, DNC 1485662-145675 at DNC
145665.
\238\ Joseph E. Sandler deposition, 5/30/97, pp. 100-102.
\239\ Joseph E. Sandler deposition, 8/21/97, p. 17. Sandler
testified that he communicated this level of comfort to either Sullivan
or Pastrick.
\240\ Memorandum from Richard Sullivan for Chairman Fowler re:
Asian American events, 10/21/96, D 0000967.
\241\ Richard L. Sullivan deposition, 6/5/97, p. 86.
\242\ Briefing for the President for Asian Pacific American
Leadership Council dinner at the Hay Adams Hotel in Washington, D.C.,
2/19/96, DNC 0624297-308; briefing for the Vice President for Asian
Pacific American Leadership Council breakfast at the Hay Adams Hotel in
Washington, D.C., 2/20/96, DNC 1208377-388.
\243\ Simeona Fortunata Pasquil deposition, 7/30/97, pp. 17-18.
\244\ Briefing for the President for Asian Pacific American
Leadership Council dinner at the Hay Adams Hotel in Washington, D.C. 2/
19/96, DNC 0624297-308; briefing for the Vice President for Asian
Pacific American Leadership Council breakfast at the Hay Adams Hotel in
Washington, D.C., 2/20/96, DNC 1208377-388.
\245\ Democratic National Committee Asian Pacific American
Leadership Council Summit Participant List, DNC documents B 0001094-
1099.
\246\ Donald L. Fowler deposition, 5/21/97, p. 273.
\247\ DNC Finance Systems Source Detail Report, Asian Dinner, 2/19/
96, DNC documents D 0000968-0000973.
\248\ Democratic National Committee Asian Pacific American
Leadership Council Donor Participant List, DNC 1208901-902.
\249\ Joseph E. Sandler deposition, 8/21/97, pp. 21-25; Sandler
deposition Exhibits # 23-27, 8/21/97.
\250\ Staff Interview with Jessica Elnitiarta, 6/19/97.
\251\ DNC Finance System Source Detail Report, POTUS Asian Dinner,
DNC documents D 0000978-980.
\252\ DNC Finance System Source Detail Report, POTUS Asian Dinner,
DNC documents D 0000978-980.
\253\ DNC check tracking form for Yogesh Gandhi $325,000
contribution to the DNC, 5/28/96, DNC 0829404.
\254\ DNC Press Release, ``DNC Refunds Contributions,'' 6/27/97.
\255\ DNC Contributions Returned Since September, 1996 (as of 11/
22/96), DNC D 0000637.
\256\ See DNC Press Release, ``DNC Refunds Contributions,'' 6/27/
97.
\257\ See DNC Contributions Returned Since September, 1996 (as of
11/22/96), DNC D 0000637; DNC Finance System Source Detail Report,
POTUS Asian Dinner, DNC documents D 0000978-980; DNC Press Release,
``DNC Refunds Contributions,'' 6/27/97.
\258\ Briefing for the President for DNC Asian Pacific American
Leadership Council event at Century Plaza Hotel, Century City,
California, 7/22/97, DNC documents C 0000233-235.
\259\ Los Angeles Times, 12/21/97.
\260\ Man Ho deposition, 8/6/97, pp. 202-204.
\261\ DNC Press Release, ``DNC Refunds Contributions,'' 6/27/97.
\262\ DNC Press Release, ``DNC Refunds Contributions,'' 6/27/97.
\263\ DNC Finance Systems Source Detail Report, L.A. Gala, DNC
documents D 0000981-996.
\264\ Richard L. Sullivan deposition, 6/5/97, pp. 59-61, 66-67.
\265\ USA Today, 2/19/97.
\266\ See discussion of Riady and the Lippo Group, supra.
\267\ POTUS Dinner July 30 Attendees for an event at the Jefferson
Hotel, Washington, D.C., DNC documents D 0000597-598.
\268\ DNC Finance Systems Source Detail Report, POTUS Asian D.C.
Dinner, DNC document D 0000997. DNC National Chairman Donald Fowler
testified that the DNC occasionally requests that donors write their
checks to state Democratic parties who need the financial help,
sometimes in lieu of a contribution to the DNC or in lieu of the DNC
making a donation. Donald L. Fowler deposition, 5/21/97, pp. 352-356.
\269\ DNC Finance Systems Source Detail Report, POTUS Asian D.C.
Dinner, DNC document D 0000997. See Washington Post, 5/13/97.
\270\ DNC Finance Systems Source Detail Report, POTUS Asian D.C.
Dinner, DNC document D 0000997.
\271\ Richard L. Sullivan deposition, 6/5/97, p. 70.
\272\ White House Tape # 8.
\273\ Richard L. Sullivan deposition, 6/5/97, p. 71.
\274\ For more information, see Chapter 21 of the Minority Report.
\275\ For more information on why the DNC considers both types of
events to be important during a campaign, see Chapter 25 of the
Minority Report.
\276\ DNC documents # D 0000974-977.
\277\ Kimberly Tilley deposition, 6/23/97, p. 22-23.
\278\ Kimberly Tilley deposition, 6/23/97, p. 54.
\279\ Kimberly Tilley deposition, 6/23/97, p. 47.
\280\ Kimberly Tilley deposition, 6/23/97, p. 47.
\281\ For example, the April 29, 1996 schedule for the Vice
President included a speech at the National Cable Television
Association conference, a meeting with African American community
leaders, an event at the Hsi Lai Temple, a community policing event in
San Jose and a fundraiser in Los Altos Hills, California. Committee
Exhibit 774, EOP 007195 to 7204.
\282\ Memorandum that included a request for the President and Vice
President to attend a certain number of DNC fundraisers in various
cities, 1/2/96, SCGA-00270 to 291.
\283\ Memorandum, 1/2/96, SCGA-00270 to 291, SCGA-00286.
\284\ The early stages of trip planning were illustrated in a
February 22, 1996, e-mail message to Tilley from Karen Hancox. Hancox
wrote:
The DNC has asked, once we know, to be told what
cities the VP will be in CA March 8/9. They can
probably use him, depending on the cities.
thanks
PS--POTUS is going to do SF when he is in CA
March 8/9--ergo--the DNC is dropping its SF request
for the VP in April--they just need L.A. and San
Jose in April.
Exhibit 767, EOP 047839.
\285\ Exhibit 1004: E-mail message from Lisa Berg to Kimberly
Tilley, 3/12/96, EOP 053290.
\286\ Jacqueline Dycke deposition exhibit #4, 8/8/97.
\287\ Exhibit 771: E-mail message from Vice President Gore to
Timberly Tilley, 3/15/96, EOP 053291.
\288\ The meeting between the Vice President and Hsing was at 1:40
p.m., and the electronic message were exchanged at about 2:20 p.m.
Senator Levin, 9/5/97 Hrg., p. 66-67.
\289\ David Strauss, 9/5/97 Hrg., pp. 29.
\290\ David Strauss, 9/5/97 Hrg., p. 27.
\291\ Exhibit 1006: Vice President Gore's schedule, 3/15/96, EOP
053033-036.
\292\ David Strauss, 9/5/97 Hrg., p. 62.
\293\ Statement of the Venerable Master Hsing Yun presented during
his interview with Committee investigators, 6/17/97.
\294\ EOP 892.
\295\ David Strauss, 9/5/97 Hrg., p. 15.
\296\ Staff Interview with Hsing Yun, 6/17/97.
\297\ Letter from Diana So to FBI Agent Gayle Jacobs, 5/20/97.
\298\ Invitation to DNC Asian Pacific American Leadership Council
event at Harbor Village Restaurant in Monterey Park, California; the
name of the restaurant is crossed out and Hsi Lai Temple is written in:
SEN 00111.
\299\ Exhibit 772: Letter from Maria Hsia to the Vice President, 3/
23/96, SEN 01719.
\300\ Staff interview of Charlie Woo, 5/30/97.
\301\ Staff interview of Charlie Woo, 5/30/97.
\302\ Richard Sullivan deposition, 6/25/97, p. 28.
\303\ Richard Sullivan deposition, 6/25/97, p. 28
\304\ Richard Sullivan deposition, 6/25/97, pp. 21-22.
\305\ Richard Sullivan deposition, 6/25/97, pp. 23.
\306\ Richard Sullivan deposition, 6/25/97, pp. 23-24.
\307\ Richard Sullivan deposition, 6/25/97, pp. 23-24.
\308\ Richard Sullivan deposition, 6/25/97, p. 24.
\309\ Richard Sullivan deposition, 6/25/97, p. 31. Sullivan was
able to determine that he called David Strauss on or about April 3,
1997 to notify him of the changes regarding the Los Angeles fundraiser
and the Hsi Lai Temple event after reviewing an April 11, 1996 memo
written by Huang that reference a phone conversation with Strauss a
week earlier. EOP 000809.
\310\ David M. Strauss deposition, 6/30/97, p. 92.
\311\ Exhibit 1003: Vice President Gore's trip schedule, EOP
056497-499; Exhibit 1009: electronic mail from Dycke to Tilley, et.
al., 4/10/96, EOP 053292; Exhibit 1010: Memorandum from Huang to Tilley
re 6/29/96 [sic] fundraising lunch, 4/11/96, Bates #000809.
\312\ Kimberly Tilley deposition, 6/23/97, p. 124.
\313\ Kimberly Tilley deposition, 6/23/97, pp. 127-128.
\314\ Kimberly Tilley deposition, 6/23/97, pp. 158-159.
\315\ Exhibit 1010: Memo from John Huang to Kim Tilley, 4/11/96.
\316\ Exhibit 1003: Document prepared by Jackie Dycke, 4/11/96, EOP
056497 to 99.
\317\ Jacqueline Dycke deposition, 8/8/97, p. 66.
\318\ David Strauss, 9/5/97 Hrg., pp. 36-37.
\319\ See Exhibits 1011 (EOP 047955), 1012 (EOP document, illegible
Bates stamp), 1013 (EOP 005407), a series of internal notes between and
among the Vice President's foreign policy and national security staff.
These evaluations of the proposed Temple event are dated April 16 and
April 19, 1996.
\320\ Exhibit 1012: Handwritten note from John Norris to Bill Wise,
4/16/96.
\321\ Exhibit 1012: Handwritten note from John Norris to Bill Wise,
4/16/96.
\322\ Exhibit 1013: E-mail from Robert Suettinger to John Norris,
4/19/96, EOP 005407. Suettinger's e-mail message was written in
response to an e-mail from Norris in which he refers to the Hsi Lai
Temple event as a ``fundraising lunch'' and he states that the ``event
would take place at the end of June.'' Mr. Norris's use of the word
`'fundraising lunch'' was due to the fact that he did not know how to
properly characterize DNC events. In response to a question posed by
Senator Collins regarding Mr. Norris's e-mail Mr. Strauss stated:
It's accurate that it's referenced as a
fundraising lunch here, but you have people who have
no background in how to correctly describe DNC
events characterizing events here. And so the
important implications of this are the foreign
policy implications rather than how the event is
described because the person who's describing this
would have no basis for how to correctly describe a
DNC event.
David Strauss, 9/5/97 Hrg., p. 78.
\323\ Kimberly Tilley deposition, 6/23/97, pp. 131-132.
\324\ Staff interview with Robert Suettinger, NSC Director of Asian
Affairs, 6/3/97.
\325\ Manteghi testified that she understood from Tilley and
McManimon that this was an outreach event. Ladan Manteghi deposition,
8/26/97, pp. 31-32, 53-55.
\326\ Ladan Manteghi deposition, 8/26/97, pp. 53-67.
\327\ See letters from all GAC Minority Members to Chairman
Thompson and from Chairman Thompson to Senator Glenn requesting and
refusing, respectively, Ladan Manteghi to appear before the Committee,
9/3/97.
\328\ David Strauss, 9/5/97 Hrg., pp. 30, 37, 57, 64-65.
\329\ David Strauss, 9/5/97 Hrg., pp. 64-65.
\330\ See David Strauss, 9/5/97 Hrg., p. 39 (indicating that the
Vice President would have reviewed the briefing materials ``right
before the event'').
\331\ Exhibit 775: Briefing for Vice President Gore for Asian
Pacific American Leadership Council luncheon honoring Vice President
Gore, Hsi Lai Temple, Hacienda Heights, California, 4/29/96, EOP 000938
to 950.
\332\ David Strauss, 9/5/97 Hrg., p. 40.
\333\ Exhibit 776: Briefing for Vice President Gore for reception
honoring Vice President Gore at the home of George and Judy Marcus, Los
Altos Hills, California, 4/29/96, EOP 06338-40.
\334\ Transcript of Vice President Gore's speech at the Hsi Lai
Temple on 4/29/96.
\335\ See Donald L. Fowler, 9/9/97 Hrg., pp. 27-28; Mona Pasquil
deposition, 7/30/97, pp. 65-66; Man Ho deposition, 8/6/97, p. 181.
Strauss, who attended the event with the Vice President, explained
to the Committee that the Vice President did not give a fundraising
speech at the Hsi Lai Temple event. Strauss testified, ``it was a very
good speech, but it had nothing to do with fundraising.'' David
Struass, 9/5/97 Hrg., p. 42. See David Strauss, 9/5/97 Hrg., pp. 41-42
for further details on the Vice President's speech.
336 Boston Globe, 9/4/97.
337 Boston Globe,, 9/4/97.
338 Statement of the venerable Master Hsing Yun
presented during his interview with Committee investigators, 6/17/97,
p. 3.
339 David Strauss, 9/5/97 Hrg., p. 42.
340 David Strauss, 9/5/97 Hrg., pp. 41-42.
341 David Strauss, 9/5/97 Hrg., pp. 43-44.
342 David Strauss, 9/5/97 Hrg., pp. 43-44.
343 Staff interview of Charlie Woo, 5/30/97.
344 Mona Pasquil deposition, 7/30/97, pp. 59-62.
345 DNC Chairman Fowler testified as follows:
It was not an event, a fund-raising event like
many events are. There was no specifically
designated sum of money required to be admitted.
There was nobody at the door taking up tickets,
nobody at the door receiving checks. Some people
contributed prior to the time they came and some
people contributed after they came. Many people who
came did not contribute at all. It was, in fact,
part of a political outreach that the Democratic
National Committee had with the Asian community. It
was a blended event, if you will, partly political
and partly fund-raising.
The question arises--it arose in my mind--was
this appropriate? And let me say that, as my
deposition indicated, I did have some apprehension
about a fund-raiser in a house of worship, but I
learned that with Buddhists and with people from the
Asian community that a temple like that is as much a
community center as it is a house of worship. And,
frankly, I related that to my own experience in the
'60's in the civil rights movement where much of the
political activity was held in African American
churches and much of what went on stemmed from the
spirit and the motivation received in those
churches. And I considered, when I was going through
that in the '60's, that to be an appropriate
activity. So, that allayed my concerns about the
propriety of the fund-raising.
Donald L. Fowler, 9/9/97 Hrg., pp. 26-28.
. . . [T]here were three people who made
presentations there--myself, the temple master, and
the Vice President. None of the three of us made any
reference to raising money, contributing money,
giving money before or after. So it did not have
that aspect.
Donald L. Fowler, 9/9/97 Hrg., p. 29; see also, pp. 71-
72.
346 Donald L. Fowler, 9/9/97 Hrg., p 29.
347 Man-Ho Shih, 9/4/97 Hrg., p. 83; Man-Ho Shih
deposition, 8/6/97, pp. 136-146.
348 Buddhist nuns, 9/4/97 Hrg., p. 143.
349 Man-Ho Shih deposition, 8/6/97, pp. 134-37.
350 Man-Ho Shih, 9/4/97 Hrg., pp. 137-139.
351 Statement of the Venerable Master Hsing Yun
presented during his interview with Committee investigators, 6/17/97,
p. 3.
352 Man-Ho Shih, 9/4/97 Hrg., pp. 125-126. See, for
example, DNC invitation to the Temple event, 000776.
353 See, e.g., contribution levels for a DNC gala, DNC
document B 0001621; contribution levels for a Democratic Business
Council dinner at the Mayflower Hotel in Washington, D.C. 3/19/96, B
0000867-869.
354 Man-Ho Shih, 9/4/97 Hrg., p. 70.
355 Staff interview of Jessica Elnitiarta, 6/19/97.
356 DNC Finance System Source Detail Report for Gore
L.A. DNC event, DNC documents D 0000974-977; Bates # 000669-671.
357 EOP 000965-969.
358 Ladan Manteghi deposition, 8/26/97, pp. 54-57.
359 David Strauss, 9/5/97 Hrg., pp. 44-45.
360 David Strauss, 9/5/97 Hrg., pp. 44-45.
361 Ladan Manteghi deposition, 8/26/97, p. 66.
362 Ladan Manteghi deposition, 8/26/97, pp. 66-67.
363 See, for example, a memorandum by Jackie Dycke, who
worked on the April 29, 1996 schedule until mid-April, and described
the Temple event for an April 11 scheduling meeting as a ``DNC
Luncheon.'' She testified that she obtained this information for a
proposed event from Maura McManimon who worked on this event with
Huang.
364 Kimberly Tilley deposition, 6/23/97, p. 124.
365 Q: Is it common in your experience with regard to
the Vice President's schedule and how it evolves that an event may be
contemplated, but that over time and indeed on fairly short notice, its
character could change or the event itself could be canceled?
Strauss. That is correct.
Q: Does that happen often?
Strauss. That is correct.
David Strauss, 9/5/97 Hrg., pp. 36-37.
366 Kimberly Tilley deposition, 6/23/97, pp. 127-128. In
addition, Tilley testified:
A: There were traditional fundraisers that were
ticketed events at the door. There were events that
were community outreach like this Asian-Pacific
where it was part of the DNC Finance plan, where in
order for someone to be a member, there was a
certain amount of money they paid to be a part of
that, you know, committee or whatever they called;
and then there were those people to whom they wanted
to reach out to, who they hoped would become donors.
Q: And would you define outreach events as
different than fundraisers?
A: Yes, I would.
Kimberly Tilley deposition, 6/23/97, pp. 158-159.
367 DNC Finance System Source Detail Report for Gore
L.A. DNC event, DNC documents D 0000974-977.
368 Richard L. Sullivan, 7/9/97 Hrg., p. 91.
369 Richard L. Sullivan, 7/9/97 Hrg., pp. 93-94.
370 Man-Ho Shih, 9/4/97 Hrg., pp. 27, 93. Neither Huang
nor Hsia's name was mentioned in connection with this request from the
abbess. Man-Ho Shih, 9/4/97 Hrg., p. 93.
371 Man-Ho Shih, 9/4/97 Hrg., pp. 30-32. These meetings
were covered in more detail at her deposition, see Man-Ho deposition,
8/16/97, pp. 136-155. Man Ho testified that these contacts were for
logistics planning and had nothing to do with whether the event was a
fundraiser. Man-Ho Shih deposition, 8/6/97, pp. 143-145.
372 Man-Ho Shih, 9/4/97 Hrg., p. 31.
373 Man-Ho testified that she did proceed to invite her
friend, Catherine Chen who contributed $2500. Man-Ho Shih, 9/4/97 Hrg.,
pp. 32-33.
374 Man-Ho Shih, 9/4/97 Hrg., pp. 33; Yi Chu, pp. 73-74.
These checks were written out of the Temple's general expense account.
See Chapter 21 of the Minority Report.
375 Man-Ho Shih, 9/4/97 Hrg., p. 38.
376 Man-Ho Shih, 9/4/97 Hrg., p. 41.
377 Man-Ho Shih, 9/4/97, p. 48.
378 Howard Hom deposition, 8/27/97, pp. 23-25.
379 Exchange between Majority Counsel and Man-Ho Shih,
9/4/97 Hrg., pp. 22-24.
380 See, for example., Washington Post, 4/16/97.
381 See, for example, Washington Post, 4/16/97.
382 Cheong Am America, Inc. was incorporated in the
State of California on 2/28/96. See Exhibits 807 and 810.
383 See Richard Sullivan deposition, 6/25/97, pp. 41-59.
384 Michael Mitoma, 9/5/97 Hrg., pp. 126-27. Mitoma was
the elected mayor of Carson, a city of approximately 100,000 persons
located near Long Beach, California. According to Mitoma, the
unemployment rate in Carson approached 12 percent following the closure
of the Long Beach Naval Shipyard and other defense-related downsizings
in the early 1990s. The recruitment of Asian-based manufacturers such
as Nissan. Pioneer, Kenwood and Mikasa had been an important part of
Carson's strategy to decrease this unemployment rate, and Mitoma
visited Lee in Seoul, South Korea, as part of this redevelopment
effort. Michael Mitoma, 9/5/97 Hrg., pp. 144-45.
385 Lucy Ham is an Asian American businesswoman who owns
a Los Angeles legal services plan and had been friends with Mitoma for
some time. Michael Mitoma, 9/5/97 Hrg., p. 170. Lucy and her husband,
Won Ham, were both officers of Cheong Am America, Inc. Michael Mitoma,
9/5/97 Hrg., pp. 125, 146.
386 Michael Mitoma, 9/5/97 Hrg., p. 148.
387 Michael Mitoma, 9/5/97 Hrg., p. 127. Ham's
suggestion that Mitoma call the DNC apparently was based on a
suggestion of a friend of hers in the Los Angeles Asian-American
business community.
388 Michael Mitoma, 9/5/97 Hrg., pp. 128-131. In a 4/1/
96 faxed message to Huang, Mitoma wrote that Lee would accept
attendance at a fundraising dinner, but ``still prefers private meeting
before trip to Korea by the President. Is it possible to have Lee meet
Clinton privately for 30 minutes in Korea when he visits instead of the
private meeting in Washington? If possible let me know how what [sic]
kind of fund raising would be appropriate.'' Faxed message from Mitoma
to Huang, 4/1/96, B 0000754. Mitoma also wrote directly to the White
House requesting a private meeting in Korea with the President. Letter
from Mitoma to the White House, 4/8/96, DNC 0625244. DNC Chairman Don
Fowler informed Huang that such a meeting could not be arranged,
writing on a copy of the Mitoma letter, ``President cannot see these
folks in Korea.'' Letter from Mitoma to the White House, 4/8/96, DNC
0625244. See also David L. Fowler deposition, 5/21/97, pp. 418-21.
389 Michael Mitoma, 9/5/97 Hrg., pp. 128-130.
390 Michael Mitoma, 9/5/97 Hrg., p. 141.
391 Exhibit 805: fax cover sheet and two page document
from John Huang to Richard Sullivan, 4/8/96, B 000747-49.
392 Exhibit 806: memorandum from Sullivan to Sosnik and
Hancox, 4/8/96, DNC 1143204. Sullivan testified that this memorandum
was based upon conversation that he had with Huang, rather than on
Huang's faxed document that he does not recall seeing at any time.
Richard Sullivan deposition, 6/25/97, p. 44.
393 The Huang and Sullivan documents differ in one
important respect: the Sullivan memorandum indicates that three of the
four Cheong Am officials are from Los Angeles, while the Huang document
apparently was meant to convey that that the senior officials were from
Seoul, Korea. This difference may have contributed to a misimpression
at the DNC that Cheong Am America was an ongoing concern in Los Angeles
seeking to open a new operation in Carson, California, rather than a
brand new subsidiary not yet engaged in any U.S. business.
394 Michael Mitoma, 9/5/97 Hrg., p. 134.
395 Michael Mitoma, 9/5/97, Hrg., pp. 132-34. Mitoma
told the Committee that he explicitly informed Huang at the hotel that
Lee had flown in from Korea for the dinner, but never stated whether he
told Huang that Lee had brought the contribution check with him from
Korea. See Michael Mitoma, 9/5.97 Hrg., p. 162. The check itself
provides an address in Los Angeles, and contains no indication of a
foreign origin. See DNC check tracking form, DNC 0564548.
396 Michael Mitoma, 9/5/97 Hrg., p. 137-139.
397 Michael Mitoma, 9/5/97 Hrg., p. 139.
398 Michael Mitoma, 9/5/97 Hrg., p. 138.
399 Michael Mitoma, 9/5/97 Hrg., p. 154.
400 Michael Mitoma, 9/5/97 Hrg., p. 140. Mitoma
testified that after the meeting with the President he was able to
persuade Lee and Chung to have dinner elsewhere. During his testimony,
when asked to review documents he had not seen before, Mitoma
apparently realized that there had actually been two DNC dinners
occurring that evening at the Sheraton Carlton, and that the President
had stopped by in between speeches at each. Michael Mitoma, 9/5/97
Hrg., p. 141.
401 Michael Mitoma, 9/5/97 Hrg., p. 153.
402 Exhibit 851: Memorandum from DNC General Counsel
Joseph Sandler to DNC Finance Director Richard Sullivan, regarding
contributions by U.S. subsidiaries of foreign corporations, 5/11/95,
DNC 1683964-66.
403 Michael Mitoma, 9/5/97 Hrg., pp. 149-150.
404 Exhibit 951: Memorandum from DNC General Counsel
Joseph Sandler to DNC Finance Director Richard Sullivan, regarding
contributions by U.S. Subsidiaries of foreign corporations, 5/11/95,
DNC 1683964-66.
405 See discussion above of steps taken by the DNC to
educate Huang about federal election law requirements, including
regarding contributions by foreign subsidiaries of U.S. corporations.
406 Michael Mitoma, 9/5/97 Hrg., pp. 142, 151.
407 Michael Mitoma, 9/5/97 Hrg., pp. 142 151.
408 Richard Sullivan deposition, 6/5/97, p. 52:9-11.
409 Joseph Sandler deposition, 5/15/97, pp. 82-84, 91.
Sandler indicated that an attorney, who had been contacted by a
journalist about the Cheong Am America contribution called him to let
him know what there might be a problem with the contribution. Joseph
Sandler deposition 5/15/97, p. 77.
410 Memorandum from Jake Siewert and DNC General Counsel
Joe Sandler to David Eicherbaum, with copies to DNC Chairman Fowler and
others, regarding the Cheong Am America contribution, 9/20/96, DNC
3111214. Joseph Sandler deposition, 5/15/97, p. 91.
411 Memorandum from Jake Siewert and DNC General Counsel
Joe Sandler to David Eichenbaum, with copies to DNC Chairman and
others, regarding the Cheong Am America contribution, 9/20/96, DNC
3111214.
412 Memorandum from Jake Siewert and DNC General Counsel
Joe Sandler to David Eichenbaum, with copies to DNC Chairman Fowler and
others, regarding the Cheong Am America contribution, 9/20/96, DNC
3111214.
413 Joseph Sandler deposition, 5/15/97, p. 84.
414 Richard Sullivan deposition, 6/4/97, p. 140. See
Chapter 27, White House Coffees and Overnights.
415 Richard L. Sullivan deposition, 6/4/97, pp. 124-126.
416 See Clarke Wallace deposition, 8/27/97, Exhibit 18:
Ethnic News Watch article written by Asian American Democratic activist
Maeley Tom, describes a dinner party hosted by Kanchanalak and one
other ``major Democratic party supporter'' for 50 people attending the
first APEC Leaders' Forum in Seattle in November, 1993, 12/10/93.
417 Richard L. Sullivan deposition, 6/4/97, p. 124.
Sullivan said ``she was very well-to-do.'' Richard L. Sullivan
deposition, 6/4/97, p. 134.
418 Samuel Newman deposition, 7/17/97, p. 198,
referencing Newman Deposition Exhibit 3: guest list for dinner with the
Vice President at the Mayflower Hotel, 11/2/95.
419 Richard L. Sullivan deposition, 6/4/97, p. 125.
Thereafter, Huang, Sullivan and Rosen discussed ``working with Pauline
to get her to come to the table, to make her contribution, to raise
some money, when she was going to do it.'' Hoping that it would spur
Kanchanalak on, in early 1996 the DNC invited her to a number of White
House events early in 1996, (Richard L. Sullivan deposition, 6/4/97, p.
125) and Kanchanalak visited the White House for a coffee on January
25, a lunch on January 29, and a dinner on February 8. (White House
WAVES records for Pauline Kanchanalak, EOP 002958-59.) According to FEC
records, Kanchanalak and her sister-in-law, Daugnet ``Georgie''
Kronenberg, contributed a total of $15,000 in hard money in February,
$10,000 in soft money in March, and another $10,000 in soft money on
June 6, 1996.
420 Richard L. Sullivan deposition, 6/4/97, p. 126.
421 Richard Sullivan deposition, 6/4/97, pp. 125-130.
422 Richard L. Sullivan deposition, 6/4/97, pp. 127-128.
423 Richard L. Sullivan deposition, 6/4/97, pp. 133-134.
424 Joseph E. Sandler deposition, 8/21/97, pp. 151-153.
425 Karl Jackson, 9/16/97 Hrg., p. 4. Jackson and Quayle
have a continuing relationship. For example, Quayle is affiliated with
the Hudson Institute, a conservative think tank based in Indianapolis
that financed a 1993 trip by Quayle and Dr. Jackson to Japan, China and
Taiwan; Clarke Wallace deposition, 8/27/97, p. 134, referencing
Deposition Exhibit 27: Washington Post, 6/20/93. Dr. Jackson is a
Senior Fellow and an Associate Director of the Competitive Center of
the Hudson Institute. Biography of Karl Jackson, UST 2006. Dr. Jackson
also is a business partner with Dan Quayle in various enterprises,
including FX Strategic Advisors, Inc. and FX Concepts, Inc. Clarke
Wallace deposition, 8/27/97, p. 130, referencing Deposition Exhibit 28:
Financial Times, 9/6/93.
426 Jackson testified that Wallace may have called him
with the invitation. Karl Jackson, 9/16/97 Hrg., p. 5. The CP Group, as
explained by Jackson, ``was Thailand's largest trading group, an
organization that was deeply involved with business in China and
elsewhere around Asia.'' Karl Jackson, 9/16/97 Hrg., p. 6.
427 Karl Jackson, 9/16/97 Hrg., p. 7.
428 Karl Jackson, 9/16/97 Hrg., p. 11.
429 Clarke Wallace, 9/16/97 Hrg., p. 108. Beth Dozoretz,
9/16/97 Hrg., p. 119; Robert Belfer, 9/16/97 Hrg., p. 25; Clarke
Wallace deposition, 8/27/97, p. 106.
430 Clarke Wallace, 9/16/97 Hrg., pp. 110, 128.
431 Clarke Wallace, 9/16/97 Hrg., p. 105.
432 Clarke Wallace, 9/16/97 Hrg., p. 106-107, quoting
Clarke Wallace deposition, 8/27/97, p. 54-55.
433 Clarke Wallace, 8/27/97 deposition, p. 56; Clarke
Wallace, 9/16/97 Hrg., p. 108.
434 Clarke Wallace deposition, 8/27/97, p. 55:9-12.
435 Beth Dozoretz, 9/16/97 Hrg., p. 156; Beth Dozoretz
deposition, 9/2/97, pp. 11-12, 28. Dozoretz is a DNC Trustee and friend
of the President and First Lady. Beth Dozoretz, 9/16/97 Hrg., p. 122;
Beth Dozoretz deposition, 9/2/97, p. 28 Dozoretz and her husband have a
history of being supporters of both Democratic and Republican
candidates and party organizations. In addition to their support of
President Clinton, the Dozoretz's continue to support Republican
candidates including John Warner, Alfonso D'Amato, and Arlen Specter.
Beth Dozoretz deposition, 9/2/97, pp. 162-63.
436 Beth Dozoretz, 9/16/97 Hrg., p. 139.
437 Beth Dozoretz, 9/16/97 Hrg., p. 157.
438 Beth Dozoretz, 9/16/97 Hrg., p. 119; Robert Belfer,
9/16/97 Hrg., p. 25; Clarke Wallace deposition, 8/27/97, p. 106.
439 Beth Dozoretz, 9/16/97 Hrg., p. 120.
440 It was during the coffee itself that Dozoretz formed
the impression that Huang might be a representative from the DNC. Beth
Dozoretz, 9/16/97 Hrg., pp. 118-119.
441 Robert Belfer deposition, 9/16/97, p. 77-78, 82.
Indeed, he characterized the event as follows: ``Let me suggest to you
as someone who is very active in philanthropic circles, much more so
than political, that one can have a multi-step process in which you
engender goodwill at one event, in order to soften people up for
raising money at different points in time. It doesn't necessarily make
the particular event a fundraiser.'' Robert Belfer, 9/16/97 Hrg., p.
176, quoting Robert Belfer deposition, 9/6/97, p. 76.
442 Robert Belfer deposition, 9/6/97, p. 25.
443 List of expected attendees at White House coffee, 6/
18/96, WH A 00097.
444 See, for example, Senator Lieberman, 9/16/97 Hrg.,
p. 187.
445 Rawlein Soberano, 9/16/97 Hrg., p. 198.
446 Rawlein Soberano, 9/16/97 Hrg., pp. 201-202.
447 Rawlein Soberano, 9/16/97 Hrg., p. 203.
448 Rawlein Soberano, 9/16/97 Hrg., p. 203.
449 Rawlein Soberano, 9/16/97 Hrg., p. 223-224.
450 Rawlein Soberano, 9/16/97 Hrg., p. 209; Rawlein
Soberano deposition, 5/13/97, p. 104.
451 Rawlein Soberano deposition, 5/13/97, p. 104.
452 Rawlein Soberano deposition, 5/13/97, pp. 29, 31.
453 Rawlein Soberano, 9/16/97 Hrg., p. 211.
454 Rawlein Soberano deposition, 5/13/97, p. 105.
455 Rawlein Soberano deposition, 5/13/97, pp. 102-103.
456 Rawlein Soberano deposition, 5/13/97, pp. 96, 99-
100.
457 Rawlein Soberano deposition, 5/13/97, pp. 59-60.
458 Rawlein Soberano deposition, 5/13/97, pp. 44-45.
459 Rawlein Soberano deposition, 5/13/97, pp. 33-47.
460 Rawlein Soberano deposition, 5/13/97, p. 33.
461 Richard L. Sullivan deposition, 6/5/97, pp. 62-63.
462 Richard L. Sullivan deposition, 6/5/97, pp. 62-63.
463 Richard L. Sullivan deposition, 6/5/97, pp. 73-77.
464 Richard L. Sullivan deposition, 6/5/97, p. 73.
465 Richard L. Sullivan deposition, 6/5/97, p. 71.
466 Richard L. Sullivan deposition, 6/5/97, pp. 82-83.
467 Richard L. Sullivan deposition, 6/5/97, p. 73.
468 Donald L. Fowler deposition, 5/21/97, p. 273.
469 Marvin S. Rosen deposition 5/19/97, p. 175.
470 Richard L. Sullivan deposition, 6/5/97, p. 85.
PART 1 FOREIGN INFLUENCE
Chapter 5: Charlie Trie
Yah Lin (``Charlie'') Trie is a native of Taiwan who
emigrated to the United States in 1974, when he was 25 years
old. He later became an American citizen and settled in Little
Rock, Arkansas, where he owned a Chinese restaurant patronized
by then-Governor Clinton. A friendship developed between the
two men which continued after Governor Clinton won the 1992
presidential election. Trie subsequently contributed and raised
substantial sums of money for the Democratic National Committee
(``DNC'') and the Presidential Legal Expense Trust (``PLET'').
In April 1996, President Clinton appointed Trie to the
Commission on United States-Pacific Trade and Investment
Policy.
The Committee investigated the source of the substantial
funds raised and contributed by Trie to the DNC and the funds
he raised for the PLET. The Committee was particularly
interested in whether any foreign funds were involved, in light
of Trie's business dealings with Ng Lap Seng (also known as
Wu), a wealthy Macao businessman with ties to businesses in
China. The Committee examined Trie's appointment to the
Commission. The Committee also examined Trie's relationship
with the Chinese government and his attendance with Wang Jun, a
Chinese businessman, at a White House coffee. On January 28,
1998, the Department of Justice indicted Trie for conspiring to
defraud the DNC and Federal Election Commission (``FEC'') by
making and arranging illegal campaign contributions utilizing
foreign funds.
FINDINGS
(1) Charlie Trie contributed and raised substantial sums of
money to benefit the DNC in order to gain access for himself
and his associates to the White House and senior Administration
officials.
(2) Trie and his businesses received substantial sums of
money from abroad and used these funds to pay for some or all
of the $220,000 in contributions that Trie, his family and
businesses made to the DNC. The evidence before the Committee
suggests that some of the contributions may have been illegal,
and, in fact, Trie was recently indicted with respect to some
of these contributions. Trie has pleaded not guilty. The DNC
returned all $220,000.
(3) Trie and Wu used three individuals who were legally
permitted to make political contributions--Keshi Zahn, Yue Chu
and Xiping Wang--as conduits to make contributions to the DNC,
in apparent violation of law.
(4) There is no evidence before the Committee that any DNC
officials were knowingly involved in Trie's misdeeds, but the
DNC did not adequately review the source of Trie's
contributions and did not respond appropriately to warning
signs of his improper activities.
(5) The evidence before the Committee does not establish
that the government of the People's Republic of China provided
money to Trie or directed Trie's actions.
(6) The Presidential Legal Expense Trust, a private trust
not involved in campaigns, acted prudently and responsibly in
its dealings with Trie.
(7) There is no evidence before the Committee that Trie,
Wu, or anyone associated with them had any influence or effect
on U.S. domestic or foreign policy.
BACKGROUND
Charlie Trie, who fled the United States in late 1996 and
remained abroad until February 1998, refused to be interviewed
by or cooperate with the Committee. Much of the information
before the Committee concerning Trie was compiled under the
direction of Jerry Campane, a special agent detailed to the
Committee from the Federal Bureau of Investigation and who
testified before the Committee on July 29, 1997. On January 28,
1998, the Department of Justice indicted Trie for conspiring to
defraud the DNC and FEC by making and arranging illegal
campaign contributions utilizing foreign funds. 1 He
returned to the United States in early February to answer the
charges and surrendered to federal law enforcement agents.
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Footnates at end of chapter.
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Trie was born in Taiwan on August 15, 1949.2 He
emigrated to the United States in 1974 and later became a
United States citizen. He eventually settled in Little Rock,
Arkansas, where his older sister was in the restaurant
business. Trie began as a busboy and eventually became co-owner
with his sister of a popular Chinese restaurant in Little Rock
known as Fu-Lin which was patronized by then-Governor
Clinton.3 A friendship developed between the two men
which continued after Clinton was elected President in November
1992.4
In 1990, Trie and his sister sold Fu-Lin, and Trie began
exploring Asian business opportunities. He engaged in a variety
of trading opportunities involving safe deposit boxes,
chickens, cotton, and other products. Trie apparently was not
successful in these business endeavors.5 Trie also
undertook efforts to facilitate business ventures between firms
in Little Rock and their counterparts in China. He arranged for
a number of delegations of Chinese officials to come to Little
Rock in order to promote business opportunities, and he
escorted Arkansas business people to China.6
One of Trie's attempted business ventures involved
renovating the Camelot hotel in downtown Little Rock. Trie
enlisted two investors in an attempt to win the bid for the
project. One of the investors, a foreign national, was Ng Lap
Seng (Cantonese spelling), also known as Wu Li Sheng (Mandarin
spelling), a Macao 7 real estate tycoon. Although
Trie and his group did not win the bid, Trie developed a
business relationship with Wu that continued beyond that
project.8 In October 1992, Trie incorporated a
company called Daihatsu International Trading, Inc., to pursue
ventures with Asian businesses.9 Trie later opened
branch offices of Daihatsu in Washington, D.C., at the
Watergate complex, as well as offices in Beijing, Taiwan, and
three other Asian cities. According to witnesses interviewed by
the Committee, Trie's move to Washington reflected his hope
that he could capitalize on his long-term friendship with the
President by bringing Daihatsu's business to
Washington.10
The Committee's investigation determined that Daihatsu was
not a profitable enterprise.11 Although Trie claimed
in one media interview to have made $1 million in
1993,12 a Committee review of Daihatsu's corporate
tax returns for 1992 through 1995 found that its gross income
never exceeded $250,000, its net income was negligible, and
Trie was paid a company salary of about $30,000 a year. A
review of other Daihatsu records and Committee interviews with
Charlotte Duncan, Daihatsu's bookkeeper, and Dewey Glasscock,
Trie's accountant, also suggest that Daihatsu had meager, if
any, profits. Moreover, Trie and his wife apparently had little
income from other sources.13 The bank records for
accounts maintained by three additional companies incorporated
by Trie--San Kin Yip (USA), Inc., San Kin Yip International
Trading Corp., and America Asia Trade Center, Inc.--suggest
none had either earnings or ongoing business activity.
The Committee's investigation also found, however, that
from 1994 to 1996, bank records for Trie's personal and
business accounts show a steady stream of wire transfers from
abroad totaling about $1.4 million, including at least $900,000
from accounts maintained by Wu or Wu-controlled
companies.14 The Committee's analysis of these bank
records indicate that Wu wired money from several foreign
sources into three bank accounts maintained by or accessible to
Trie. Trie then transferred the funds among six different
domestic accounts.15 Charlotte Duncan stated that
Maria Mapili, a Daihatsu employee familiar with these wire
transfers, characterized the transfers from Wu to Daihatsu as
``commissions'' or ``loans.'' However, in Duncan's view, Mapili
never properly explained Daihatsu's entitlement to these funds.
When she was interviewed by the Committee, Duncan was unable to
identify the types of business Daihatsu
transacted.16
TRIE'S DNC CONTRIBUTIONS AND FUNDRAISING
From 1994 to 1996, Trie, his family, and his businesses
contributed a total of $220,000 to the DNC.17 During
the 1996 election cycle, Trie also acted as a volunteer
fundraiser for the DNC and was eventually credited with raising
about $500,000 in contributions. To date, the DNC has returned
all of the Trie-related contributions of $220,000 and most of
the $500,000 attributed to him, making Trie--after John Huang--
the source or solicitor of the second largest volume of DNC-
returned contributions.18
Trie's DNC contributions
Trie first began making significant contributions to the
DNC in 1994.19 The records also show that in May and
June 1994, Trie and his wife wrote three checks to the DNC for
a total of$100,000. FEC records show that Trie, his family, and
his businesses contributed a total of $127,500 in 1994, $50,000 in
1995, and $29,500 in 1996.20
On January 28, 1998, the U.S. Department of Justice
indicted Trie and a business associate, Yuan Pei (``Antonio'')
Pan, for conspiring to defraud the DNC and FEC in part by
making improper contributions utilizing foreign
money.21 Pan, a Taiwanese national, worked for both
Trie and Wu.22 According to the indictment, in May
1994, one of the foreign companies Pan was associated with
transferred $100,000 to Trie's personal bank account, which is
the account that Trie used to make several contributions to the
DNC in 1994 and 1995.23 In October 1994, Wu wire-
transferred $100,000 to the account of San Kin Yip
International Trading Co., a company that Trie had just
established and which then made a $15,000 contribution to the
DNC later that month.24 The indictment also cites
several DNC contributions made from the bank account of Trie's
Daihatsu company, but does not cite specific deposits from Wu,
Pan, or related companies into this account.25
The indictment and the evidence before the Committee
indicating that the bulk of money obtained by Trie and his
companies since 1994 came from abroad raise serious questions
about the legality of the $220,000 in Trie-related
contributions to the DNC. The indictment charges Trie with
engaging in a criminal conspiracy to defraud the DNC and FEC in
part ``by contributing . . . to the DNC.'' 26 In
addition to this criminal charge, the Trie-related
contributions may violate the Federal Election Campaign Act
(``FECA''). For example, if Wu or Pan participated, directly or
indirectly, in any of the contribution decisions involving the
$220,000, the resulting contribution might violate FECA's
prohibition against foreign contributions. If, in any instance,
Trie or one of his companies acted as a mere conduit for a
campaign contribution provided by Wu, Pan, or a related
company, the resulting contribution might violate FECA's
prohibition against contributions in the name of another. A
third possible FECA violation involves any corporate
contribution by a U.S. subsidiary of a foreign corporation
utilizing foreign funds. This violation apparently occurred at
least once when, in October 1994, as described above, San Kin
Yip International Trading Corp., a U.S. subsidiary of a foreign
corporation controlled by Wu, contributed $15,000 to the DNC
just ten days after the company's incorporation and prior to
its generating any income in the United States. Wu has
apparently admitted to funding the $15,000 with money from
abroad and a Committee analysis confirms that it appears to be
an illegal foreign contribution.27
Aside from the 1994 San Kin Yip contribution, given the
multiple bank accounts and money transfers among Trie, Wu, Pan,
and related companies, the evidence before the Committee is
insufficient to establish the precise source of funds for many
of the $220,000 Trie-related contributions.28 The
Committee was also unable to obtain specific evidence on the
role that Wu or Pan may have played in particular contribution
decisions.29 However, Campane testified that, in
light of how little income was generated by Trie's business
ventures, it was his opinion that the entire $220,000 was paid
for with foreign funds provided by Wu or others.30
While it is possible that Trie could show that, due to his
status as an American citizen, some portion of the
contributions met the requirements of federal election
law,31 Trie's flight from the United States and
refusal to cooperate with the Committee's investigation cast
doubt on whether that showing will be made.
In light of the troubling facts known at the time, and
rather than contending it may keep a contribution until proven
illegal, the DNC properly returned all of the
$220,000.32
Trie's DNC fundraising
In addition to contributing to the DNC, beginning in 1995,
Trie began to raise substantial funds for the DNC, primarily
from the Asian-American community. Trie often worked with John
Huang, although, unlike Huang, Trie was a voluntary, unpaid
fundraiser for the DNC, rather than a paid
employee.33 Trie's fundraising efforts appear to
have begun around the time of a November 1995 inaugural
fundraiser for the Asian Pacific American Leadership Council
(``APALC''), a newly established DNC organization which, among
other functions, sought to raise funds from the Asian-American
community.34 In 1996, Huang organized several DNC
fundraisers targeting the Asian-American community; Trie was
active in most.
The Trie indictment charges him with conspiring to defraud
the DNC and FEC in part by ``channel[ing] foreign money to the
DNC through the use of straw or conduit contributions'';
``conceal[ing] the source of the money contributed by
reimbursing conduits in cash and using multiple bank
accounts;'' and ``caus[ing] the DNC to file false campaign
finance reports with the FEC.'' 35 Many of the
alleged conduit contributions described in the indictment
appear to be associated with the DNC fundraising efforts that
Trie undertook.
In February 1996, in connection with his first event as a
paid DNC fundraiser, Huang organized and Trie co-chaired an
APALC fundraiser at the Hay Adams Hotel in Washington. This
event, which brought in about $716,000,36 was
described in the press as ``an unqualified financial success''
raising ``much more than the party had ever raised from the
Asian-American community.'' 37 Trie sat next to the
President at the head table. Wu attended the event as Trie's
guest. Included among the contributions attributed in DNC
records to both Trie and Huang in connection with that event
were checks totaling $25,000 from Yue Chu and Xiping Wang.
These contributions are described in more detail below. Another
check attributed jointly to Trie and Huang in connection with
this event was for $12,500 from Keshi Zahn, which appears to be
identified in the indictment as an illegal conduit
contribution.38 While Zahn maintains that she paid
for this contribution with her own money, her association with
Trie and Wu, involvement with the Chu and Wang checks, and bank
records tracing the movement of funds over the course of a week
from Trie to Zahn to the DNC provide convincing evidence that
Trie and Wu supplied the funds for her
contribution.39 The DNC has returned the Chu, Wang,
and Zahn contributions.40
In May 1996, Huang organized and Trie co-chaired a
fundraiser at the Sheraton Carlton Hotel in Washington, an
event which raised about $579,000.41 Trie again sat
next to President Clinton at the head table. Trie and Huang
were jointly credited in DNC records with obtaining the largest
single contribution at the fundraiser, $325,000 from Yogesh K.
Gandhi.42 Gandhi told the Committee in a staff
interview that a friend of his from Houston had alerted him to
the Asian-American fundraiser that would be taking place in
Washington.43 Gandhi said that Trie visited him at
his hotel on the day of the event and suggested a contribution
of $500,000 for Gandhi and an entourage of 25 individuals to
attend the dinner. According to Gandhi, he negotiated with Trie
and ultimately provided a check for $325,000 in exchange for 26
tickets to the event. Since Huang received credit for the
contribution, Trie presumably presented the check to Huang who
passed it on to the DNC.44 This $325,000
contribution accounts for about half of the total DNC
contributions attributed to Trie's fundraising efforts. The DNC
later returned the contribution after published reports that
Gandhi had claimed poverty in a California legal action, and
Gandhi declined DNC requests to explain the source of the
$325,000. The Gandhi check is not addressed in the Trie
indictment.
In July 1996, Trie assisted Huang with a DNC APALC gala
fundraiser at the Century Plaza Hotel in Los
Angeles.45 President Clinton attended, and the event
raised about $368,000.46 James Riady and Ted Sioeng,
businessmen from Indonesia, sat at the head table next to the
President, and a number of other foreign nationals attended as
guests. None of the checks attributed to Trie in connection
with the event has been identified as problematic; none appears
to be addressed in the Trie indictment.
In August 1996, on the day of a Radio City Music Hall
fundraiser in New York City celebrating President Clinton's
50th birthday, Trie delivered to the DNC contribution checks
totaling over $100,000, allegedly to help Huang who had been
asked to raise hard money contributions in connection with this
event.47 Apparently, for each of these checks, DNC
tracking records identified Trie as the ``solicitor'' and Huang
as the ``DNC contact.'' 48 After media reports began
to raise questions about some of the checks, the DNC
investigated and returned several due to unresolved concerns
about the donors.49 Additional questions about the
checks arose when a Committee review of bank records determined
that, less than two weeks earlier, on August 7, 1996, $200,000
had been wire-transferred from a bank account in Macao to a
bank account in Washington, D.C., to which Trie had
access.50 The January 1998 Trie indictment charges
that, on or about August 15, an unidentified co-conspirator
wire-transferred $80,000 from the Trie account in Washington to
a bank account in California, and that on the same day Trie's
business associate, Pan, ``received $80,000 in
cash.''51 The indictment charges that Pan then used
these funds to solicit five conduit contributions to the DNC
totaling $40,000, which Pan reimbursed with cash.52
The indictment charges that Trie also personally solicited two
conduit contributions to the DNC totaling $20,000, which he
reimbursed with cash.53 While the Committee did not
obtain independent evidence on these alleged conduit
contributions or on Pan, the indictment and the evidence before
the Committee regarding other conduit contributions involving
Trie provide reason to believe that Trie was involved in a
number of conduit contributions to the DNC utilizing foreign
funds.
CHU AND WANG CONTRIBUTIONS
The Committee received detailed testimony about $25,000
contributed to the DNC and $3,000 contributed to the Democratic
Senatorial Campaign Committee (``DSCC''), a division of the
DNC. The contributors of record are Yu Chu and Xiping Wang, two
women who were bornin China, are related by marriage, and are
both legal permanent residents of the United States.54 Both
testified before the Committee pursuant to grants of immunity from
criminal prosecution, and their contributions are further discussed in
Chapter 21 of the Minority Report.
An analysis of FEC, DNC, and bank records, together with
testimony from Campane, Chu, and Wang, show that on November
14, 1995, Chu wrote a check for $2,000 to the DSCC and a $1,000
check payable to Keshi Zahn. Chu testified that she provided
the checks at Zahn's request and did not know at the time that
she was making a campaign contribution.55 The next
day, November 15, 1995, Zahn reimbursed Chu with a check for
$3,000 drawn on a joint account at Riggs Bank shared by Wu and
Trie.
On February 19, 1996, again at Zahn's request, Chu wrote a
check for $7,500 and a check for $12,500 payable to the DNC.
Chu was told by her husband, Ming Chen, who is employed by Wu
at a restaurant in Beijing, that Wu wanted to visit the White
House and this money would help him ``buy a ticket.''
56 Chu understood that the cost was $25,000, but
they had sufficient funds to provide only $20,000. They asked
Chen's cousin, Xiping Wang, for the remaining $5,000. Wang made
out a check in that amount to the DNC. All three contributions
were reimbursed by Zahn with checks drawn on the joint account
at Riggs Bank. These three contributions were later attributed
to Trie and Huang in connection with the February 1996 Hay
Adams fundraiser.
The evidence is convincing that Trie and Wu, with
assistance from Zahn, used Chu and Wang as conduits to make
$25,000 in contributions to the DNC as well as $3,000 in
contributions to the DSCC. Their contributions do not appear to
be included in the Trie indictment, presumably due to the
immunity from prosecution granted by the Committee.
The Committee's investigation found no evidence that, at
the time of the contributions, anyone at the DNC or the White
House knew or had reason to know that the women were being used
as conduits.57 Both Chu and Wang are legal permanent
residents who are eligible to make campaign contributions, and
their checks were drawn on local U.S. banks in amounts which
were substantial, but not so large as to trigger special
inquiry. Neither woman had any contact with the DNC or White
House; neither even understood that she was making a campaign
contribution or that federal election law prohibits
contributions in the name of another.58 Neither the
DNC nor the White House had access to or was aware of the bank
records demonstrating the reimbursements.59 The Trie
indictment does not cite any facts suggesting that anyone at
the DNC or the White House was aware of Trie's misconduct with
respect to these or any other conduit
contributions.60
dnc awareness of trie's activities
The evidence before the Committee indicates that the DNC
did not, and had no reason to, suspect that the contributions
made by Trie, his family or his businesses should be
investigated. Trie was an American citizen and eligible to
contribute. He had the appearance of a successful businessman.
He had prospered in the restaurant business in Arkansas and
moved into international business ventures that drew upon his
familiarity with Asian business and culture. He maintained
offices at an expensive location in Washington and several
cities abroad. He was a business associate of Wu, a wealthy
international businessman with successful operations in several
countries. Trie pledged and produced substantial sums to the
DNC. Together, these facts indicate that the DNC could
reasonably have believed his contributions were legitimate and
that there was no reason to investigate them.
Moreover, in late 1995, Trie gave written permission for
the Federal Bureau of Investigation to investigate his
background in connection with his possible nomination to a
commission. The FBI concluded its work, and in February 1996,
the White House legal counsel's office determined that no
problems had been found that would bar his
nomination.61 The successful completion of the FBI
background investigation is an additional indication that, at
the time, there was little or no evidence of misconduct by
Trie. A few months later, as explained below, the Presidential
Legal Expense Trust informed First Lady Hillary Clinton and
White House Deputy Chief of Staff Harold Ickes that Trie had
raised a considerable amount of money for the Trust. In May,
the Trust informed Ickes and others that it had determined that
the contributions had been solicited from American citizens
belonging to a Buddhist religious organization and that it was
planning to return them. None of the White House officials
provided this information to the DNC; Ickes has testified that
he did not realize at the time that Trie was raising funds for
the DNC.62 DNC Chairman Donald Fowler has said that
``[i]f we had known about the problems with Trie earlier, we
could have done something.'' 63
The Committee also heard testimony that Trie probably had
``no particular knowledge of campaign financing laws.''
64 No evidence before the Committee indicates
whether Huang, who worked with Trie at times, had informed Trie
about election law requirements. Trie has told the media that
he was unaware at the time that U.S. companies may not use
funds from abroad to pay for campaign contributions, but must
generate the funds within the United States.65 On
the other hand, Trie's use of conduits for DNC contributions
indicates, not only an awareness of restrictions on
contributions by foreign nationals, but also a willingness to
try to circumvent those restrictions. The Trie indictment
alleges a ``knowing'' conspiracy by him to defraud the DNC; it
does not charge the DNC with any wrongdoing nor does it cite
any facts suggesting that the DNC or anyone at the White House
was aware of Trie's misconduct.66
trie's fundraising for the presidential legal expense trust
The Presidential Legal Expense Trust (``PLET'') was
established on June 28, 1994, in order to collect funds to
defray the costs of President Clinton's private litigation.
Donations to the Trust are not election-related contributions,
and they are not subject to federal election law or
regulations. The Trust is a private entity governed by the
legal requirements that govern private trusts in the District
of Columbia, and by the trust's self-imposed guidelines.
The executive director of the Trust, Michael Cardozo, is an
attorney who works at G. William Miller & Company, a financial
services company in Washington, D.C. He is one of nine trustees
who come from both political parties and share a wealth of
legal, ethical and government experience. The trustees were the
Reverend Theodore M. Hesburgh, Nicholas de B. Katzenbach, John
Brademas, Barbara Jordan, Ronald Olson, Elliot Richardson,
Michael Sovern, John Whitehead, and Michael
Cardozo.67 The establishment of the trust was
challenged in court, and its legality was upheld.68
Furthermore, the Office of Government Ethics, an independent
federal agency that oversees ethics issues for the executive
branch, approved the trust's guidelines. The director of the
Office of Government Ethics concluded on July 22, 1994, that
the establishment of PLET ``does not and will not violate any
of the conflict of interest or gift statutes or the
administrative standards of conduct provisions that are
applicable to the President.'' 69
There are no laws that govern the establishment and
administration of a private presidential trust except for those
laws that concern presidential activity and gifts to the
presidents generally. Despite the absence of federal law
regulating the administration of the Trust, the Trust
voluntarily undertook to impose very strict guidelines
regarding eligible donors and disclosure. It determined that a
donor must be a ``natural person'' to be eligible to give.
Political action committees and corporations could not
contribute, nor could federal employees. The Trust would not
accept donations greater than $1,000. This amount is
significantly lower than the $5,000 limit on expense trust
contributions for members of the House, and the $10,000 limit
for Senators.70
Each quarter the Trustees were required to notify the
President and Mrs. Clinton in writing of the names and
addresses of the contributors. These quarterly contribution
lists were not public.71 The Trustees, however, were
required to disclose publicly the identity of all donors to the
Trust at least semi-annually.
In 1996, Charlie Trie attempted to present the Trust with
at least $530,000 in contributions raised primarily from
members of a religious order.72 These contributions
were controversial, although not illegal, and, as discussed
below, were ultimately rejected by the Trust. None of the
donations presented to the Trust is the subject of charges in
the recent Trie indictment.
Trie's March 21, 1996 meeting with Cardozo
On March 20, 1996, Charlie Trie called Michael Cardozo to
arrange for a meeting.73 Cardozo, who had never
heard of Trie, suggested that they discuss matters over the
telephone. Trie, however, insisted on a meeting,74
and Cardozo agreed to see him the next day.
At the meeting, Trie began by explaining that he was from
Little Rock and was a friend of the President. He gave Cardozo
some personal background about emigrating from Taiwan and how
he came to be in the restaurant business in Little Rock. He
told Cardozo that one of those restaurants was fairly close to
the state capitol and was frequented by then-Governor Clinton,
which explained how Trie had become friendly with
him.75
Trie told Cardozo that he had learned about the President's
growing legal bills and hadheard about the Trust from Susan
Levine, 76 an acquaintance of Cardozo's wife.77
Levine had been an aide to Mack McLarty, the President's Chief of
Staff, and had worked at the DNC.78 After reading about the
President's legal bills, and learning about the Trust, Trie called PLET
and was sent a fact sheet that outlined the Trust's donor
guidelines.79
According to Cardozo, Trie then leaned down and picked up a
manila envelope that was sitting against his chair. He opened
it up, turned it over, and a pile of checks and money orders
spilled out. Trie then said, ``I have brought you about
$460,000 in contributions to the Legal Expense Trust. . . . And
I want to assure you that all of these people are U.S. citizens
and all of them comply with your guidelines. . . . I am
familiar with your guidelines and these meet your
requirements.'' 80 Cardozo testified that Trie
seemed proud that all of these contributions were from
citizens.81
In addition to his comment that all of the donors were U.S.
citizens,82 Trie pointed out that Social Security
numbers were provided on the checks and money
orders.83 Cardozo knew that having a Social Security
number was not evidence of U.S. citizenship. At that point,
however, his concern was less about the citizenship of the
donors, and more about how the funds had been
collected.84
Trie told Cardozo that he was not a contributor himself
because he thought that he might become a federal government
employee.85 Trie also stated that he was not seeking
recognition from the Clintons, but rather was raising money for
the Trust out of his personal affection for them.86
Cardozo telephoned his assistant, Sally Schwartz, who
worked in an office nearby. He wanted a witness to this
discussion and wanted to make sure that Trie understood the
Trust's disclosure process.87 He asked Schwartz to
bring a copy of the last financial report, a list of
contributors, and a contributor guidelines sheet.88
When she came to Cardozo's office, he told her he did not know
Trie, that Trie had called to make an appointment, and had come
to the meeting with these contributions.89
Cardozo was concerned about the contributions because PLET
had received other bundled contributions, but nothing of this
magnitude.90 The money Trie brought in was between a
third and a half of the total contributions to date, and the
average contribution brought in by Trie was about $900 compared
to between $100 and $200 for other contributions.91
Trie left for a lunch meeting, saying that he would return
that afternoon to retrieve any defective checks so that he
could get them corrected.92 Cardozo and Schwartz
then tried to organize a conference call of the trustees and
began to review the checks.93 Cardozo wanted to do
this before Trie's return because ``if somebody brings you an
envelope or a bag with almost half a million dollars in it, you
better advise the people with whom you are associated in a
particular endeavor, meaning your counsel and at least the co-
chairs of the trust.'' 94
Investigation into the contributions
Schwartz began investigating the donations after Trie left
for lunch. She initially went through the contributions and
pulled out those that on their face did not meet the Trust's
donor guidelines.95 She removed some for exceeding
the $1,000 limit. Some of the money orders were pulled because
they did not have names or addresses.96
Cardozo held a conference call with trustee Nicholas deB.
Katzenbach and counsel M. Bernard Aidinoff. They decided that
those checks and money orders that were facially appropriate
should be delivered to the bank for processing. They also
decided that the Trust would follow its normal procedures of
depositing the checks and ``[hold] them in suspension'' until
the contributions were reviewed for acceptability or
rejection.97 They agreed to talk later that day,
when they could reach Father Theodore Hesburgh, one of the
trustees.98
When Trie returned from lunch, those contributions that
appeared to be eligible were put into an envelope addressed to
the Trust's lock box address.99 Sally Schwartz
escorted Trie to the executive banking section at a branch of
NationsBank.100 The Trust returned approximately
$70,000 to Trie that day; about $380,000 in contributions from
about 400 individuals were deposited.101 According
to Cardozo, about 80 percent of the contributions were in the
form of personal checks and that ``15 to 20 percent, at most''
of these contributions were in the form of money orders, some
of which were sequentially numbered.102
There was a second conference call that day with Hesburgh
and Katzenbach 103 and subsequent calls among the
trustees over the next few days.104 The Trustees
agreed that Cardozo should seek an appointment with either the
President or the First Lady to verify what Trie had said about
himself and his relationship with the Clintons.105
On April 4, 1996, Cardozo met with Hillary Clinton and
Harold Ickes, the White House Deputy Chief of Staff, to brief
them on the contributions and to check on Trie's assertion that
he was a friend of the Clintons. At first, Mrs. Clinton did not
recognize Trie's name, but later asked if he was ``the guy that
owns the Chinese restaurant near the [state]Capitol.''
106
Schwartz began contacting the contributors to determine
which of the contributions the Trust could accept. In a
memorandum dated May 9, 1996, summarizing her findings, she
wrote that all of the contributors contacted identified
themselves as U.S. citizens; their responses to her questions
were ``open, unrehearsed, credible''; and most supported the
President as ``a very good man'' and ``a man of peace'' and
wanted ``to help the President.'' 107 She also found
that Trie had not personally solicited the contributions, and
most contributors had heard about the Trust through
``meditation groups of Suma Ching Hai.''
The Trustees hired an investigative firm, the Investigative
Group International (``IGI'), to examine the contributions more
closely.108 Cardozo testified that the purpose was
not to investigate Trie, but rather to determine whether the
contributions were eligible under the Trust's
guidelines.109 He said that the Trustees determined
the focus of the investigation without input from anyone at the
White House. The Trust also opted not to return the checks
immediately because, according to Cardozo, ``the trustees have
a fiduciary responsibility to receive eligible contributions to
the Trust and for the most part, these appeared to be eligible
contributions, at least on the representation of Mr. Trie.''
110
A meeting of the Trustees was scheduled for April 22. A few
days before that meeting Trie brought additional contributions,
allegedly totaling about $179,000, to Cardozo's
office.111 Cardozo told him that the Trust was still
investigating the eligibility of the first group of donations
and therefore could not accept this second group.112
Trie accepted this position.113 At this same
meeting, Trie asked Cardozo if his firm was interested in
helping him market novelty products manufactured in
Asia.114 Cardozo told him that his firm provided
financial services, not marketing, and could not help him in
this venture.115
On May 17, 1996, Trie visited the PLET offices a third time
and asked to meet with Cardozo. Cardozo declined, and Schwartz
met with Trie.116 Trie presented additional checks,
allegedly totaling about $150,000, some or all of which may
have been included in the second set of checks he had presented
the prior month.117 The Trust declined to accept any
of the checks.118
IGI's investigation confirmed that many of the donors were
members of Suma Ching Hai, a Buddhist sect based in Taiwan. The
investigation also determined that the sect is controversial
and that some critics have characterized it as a cult, raising
questions about the voluntariness of the
contributions.119 Of the 27 contributors interviewed
by IGI, many affirmed that their donation was voluntary; some
claimed to have no knowledge of Ching Hai; and one stated that
she had been reimbursed by Ching Hai for her
contribution.120
The Trust's decision to reject the contributions
After receiving the IGI report in May 1996, the Trustees
discussed whether to accept the contributions. Schwartz
testified that usually, the Trustees took ``people at their
word'' regarding the voluntary nature of their
contributions.121 The Trustees decided, however,
that they were confronting a unique situation and that it would
be extremely difficult to determine on an individual basis
which of the many contributions were truly
voluntary.122 Despite the fact that many of the
contributions appeared to meet the Trust's requirements, the
Trustees decided to treat all of the contributions in the same
manner by returning them to the donors.123
As a result, all of the money was returned to the donors in
June 1996.124 Letters were sent to the donors on
June 26, explaining the Trust's decision and informing eligible
donors of the Trust's criteria for contributions.125
The letter included a fact sheet that had been revised to
emphasize the fact that contributions had to be voluntarily
made and with personal funds.126 Some of the
original donors then attempted to donate to the Trust a second
time. The Trustees, however, ultimately chose not to accept
even those donations.
On May 9, 1996, Cardozo, at the direction of the trustees,
went to the White House tobrief representatives of the Clintons
about the contributions.127 Present at the May 9 meeting
were Jack Quinn, Cheryl Mills, and Bruce Lindsay of the White House
Counsel's Office; Margaret Williams, the First Lady's Chief of Staff;
Evelyn Lieberman, a representative from the President's office; and
Harold Ickes, Deputy Chief of Staff. Cardozo informed them about the
involvement of the Ching Hai sect.
Cardozo testified that by the time of this meeting, the
Trustees had already tentatively decided that the Trust would
not accept the funds, and Cardozo advised the people at the
meeting of this decision. He did not ask for their opinion, and
none was expressed. Cardozo testified that ``there was never
any recommendation that the funds be either accepted or
rejected. They respected the independence of the trustees. They
were not interfering in our decision at all.'' 128
Cardozo also testified: ``I would emphasize that we never
sought the agreement or the disagreement [of the White House].
We never sought the concurrence of the White House at all in
any of our decisions.'' 129 When asked if anyone at
the White House sought to interfere or influence the Trustees'
decision-making process in any way, Cardozo answered: ``Not at
any time. They always respected the independence of the
trustees.'' 130 Cardozo also testified that the
First Lady made no attempt ``to direct the trustees in any
way.'' 131
In June 1996, the Trust returned the checks and notified
the White House of its decision to do so. In July, the Trust
began receiving replacement contributions.132 By
November 1996, the replacement contributions totalled nearly
$122,000, or more than one quarter of the original $460,000. On
November 15, 1996, the Trust met with White House staff to
update them on the replacement contributions and inform them
that the Trust was considering returning these contributions as
well.133 Two weeks later, the Trust returned each of
the replacement contributions to the individual donors.
Subsequent to this action, in December 1996, the Trust received
its first media inquiry about the returned
donations.134
The Trust's change in accounting procedures
As the result of a change in accounting methods, the
Trust's 1996 semi-annual report did not reflect the donations
returned to Trie's contributors. Prior to 1996, the semi-annual
report of the Trust stated the total contributions received and
also set out the total contributions received less the
ineligible contributions.135 An accounting change
was made so that the 1996 financial reports only gave the total
amount of contributions accepted.136 Under this
approach, a contribution was not deemed ``accepted'' by the
Trust until the end of the reporting period, when the Trustees
had concluded that the contribution met the Trust's guidelines.
According to Cardozo, the Trustees implemented this accounting
change without input from anyone at the White House. The
Committee had some concern that the accounting change was an
attempt to hide Charlie Trie's connection to the contributions.
Cardozo, in his testimony, denied that this was the reason for
the change:
I would remind you that the trust is a private trust.
It has no obligation, no responsibility to make any
financial information public. What it does make public
is far in excess of what any of the congressional--
House or Senate--legal defense funds make
public.137
Cardozo indicated that the Trustees made this decision to
keep confidential the decision to reject the funds. They felt
confidentiality was needed to protect the privacy interests of
U.S. citizens who had attempted to contribute and to protect
the integrity of the Trust. He testified:
We wanted to avoid sensational press coverage of the
attempt by the Ching Hai contributors to contribute. .
. . Charlie Trie was irrelevant. There were no
discussions with the White House. This was a judgment
that independent trustees made that it was in the best
interest of the trust.138
Indeed, the Trust would have had no reason at this time to keep
Trie's involvement a secret. The decision to change the
reporting format was made in June, but press accounts raising
concerns about Trie did not appear until October.
The Trust, which made its decision on a unanimous,
nonpartisan basis, provided a number of valid reasons for
changing the reporting format. The new presentation gave a more
accurate picture of the Trust's financial condition. In
addition, the Trustees were legitimately worried about
protecting the privacy of those eligible donors whose checks
were returned along with the ineligible donations.
Furthermore, regardless of which accounting format was
used, Trie's name would not have appeared because he was not
personally a donor. Nevertheless, this change had the effect of
obscuring Trie's involvement, which probably would have emerged
upon investigation by the media into the returned
contributions. In retrospect, the accounting change created at
least the appearance of trying to hide Trie's role.
Foreign funds
At the hearing, Cardozo testified that the Trust's
investigation of the donations delivered by Trie found no
evidence that foreign money was used to pay for the donations
and no evidence of any involvement by a foreign
government.139 The Committee also asked about the
role of foreign money when questioning Zhi Hua Dong, a Ching
Hai member who participated in the solicitation of PLET
donations during an event in New York. Dong described a number
of measures taken by the sect to ensure that only U.S. citizens
made donations to PLET, including at the New York event he
attended, by explaining the Trust's requirements, placing red
dots on the name tags of attendees who were U.S. citizens,
using a separate room for discussion of the PLET donations, and
asking only U.S. citizens to enter that room.140
Dong also testified, however, that some Ching Hai members had
provided pre-paid money orders to enable other members to make
donations to PLET while at the event, and when these members
were not repaid for those money orders, funds from the Ching
Hai organization, including funds transferred from abroad, were
used to reimburse them for their expenditures.141 As
explained above, money orders provided only 15 to 20 percent of
the number of PLET donations delivered by Trie, which means
that at least 80 percent of the contributions he delivered were
unaffected by any money order controversy. In addition, the
sect's reimbursement decision appears to have been an after-
the-fact response to inadequate measures taken during Ching
Hai's solicitation process to ensure that persons using pre-
paid money orders had the information needed to pay for the
money orders at a later time. No evidence was found of a
premeditated plan by the sect or its members to use foreign
funds for the PLET donations.142
Analysis
Donations to the Presidential Legal Expense Trust are not
campaign contributions and are not covered by federal election
laws. The Committee found no evidence linking the PLET
donations delivered by Trie to the 1996 federal elections. The
PLET donations are not the subject of any of the charges made
in the recent indictment of Trie.143
The Trustees voluntarily imposed upon themselves very
strict guidelines regarding donor eligibility and
disclosure.144 When confronted with the donations
delivered by Trie, the Trustees spent considerable funds to
hire an investigative firm to examine the eligibility of the
donations. Despite the fact that the Trustees felt confident
that the majority of the donations met their requirements and
despite the Trust's need for donations, the Trustees opted to
return all of the donations associated with the Ching Hai sect,
in order to avoid even an appearance of impropriety. When the
donations were returned to the donors, they were accompanied
with a fact sheet that explained the eligibility guidelines of
the Trust. When some of the original donors again tried to
contribute, the Trustees chose to return those donations as
well. The Trustees are to be commended for having acted with
the utmost prudence and integrity by investigating the
donations and ultimately returning all of them. They are also
to be commended for scrupulously maintaining their independence
from any outside influences in making these decisions.
At the hearing, some Committee members expressed concern
that the investigative firm hired by the Trust did not examine
Trie's role in soliciting the contributions and asked whether
this limit on the scope of the IGI investigation had been
dictated by the White House. Cardozo testified that no one at
the White House had sought to affect the investigation or to
influence the Trustees' decision in any way.145
Cardozo also testified that once the Trustees learned about the
Ching Hai association with the contributions, Trie ``became
irrelevant to our consideration. Our responsibility was, can we
accept these contributions, are they eligible.'' 146
In response to questioning about why the Trust did not
investigate Trie's motivations beyond Trie's representation
that he was a friend of the President, Cardozo stated: ``I had
no conversations with anyone else other than the trustees and
counsel and the Investigative Group about what Mr. Trie's
motivations might have been, but I remind you the trustees'
responsibilities as fiduciaries was to determine whether or not
these were eligible contributions.'' 147 Cardozo
also made the point that the Trustees were trying to limit the
amount of money they were spending on the investigation because
that was money that would otherwise go to reduce the President
and First Lady's legal bills.148 These explanations
offer reasonable justifications for the Trust's actions and the
scope of the IGI investigation.
The decision by the Trustees to change the accounting
procedures, however, raises a concern that its purpose was to
obscure the fact that Trie had brought in a very large sum of
money which had been returned. In so doing, the Trustees
arguably made it appear that the Trust had something to hide.
On the other hand, Cardozo and Schwartz were concerned that the
old reporting system was flawed. Furthermore, the Trustees'
desire to protect the privacy of those eligible donors whose
contributions were returned was understandable given the
likelihood that the media would probably have pursued the
issue. With hindsight, however, given the controversy that now
surrounds Trie (this controversy did not arise until after the
reporting change had been made), it would have been the better
course not to have changed the reporting format.
A final issue concerns the role of foreign funds. The Trust
determined that most of the contributions presented by Trie
were from American citizens who were eligible to contribute,
knew where their money was going, and supported President
Clinton. The Committee's investigation found no evidence that
Trie had attempted to solicit foreign funds; to the contrary,
the facts indicate that Trie had informed Ching Hai of the need
for donors to be U.S. citizens and to use their personal funds
to make voluntary donations. Despite his efforts, evidence was
developed that foreign funds were used to reimburse some Ching
Hai members who provided pre-paid money orders to donors
wishing to contribute to PLET. While the Trust is not a
campaign organization or subject to a legal ban on foreign
funds, its guidelines explicitly reject foreign contributions.
There is no evidence that Trie was aware of the use of foreign
funds to reimburse some of the pre-paid money orders. Moreover,
since the Trust returned all of the contributions presented by
Trie, no actual violation of its guidelines occurred.
trie's access to white house and dnc events
Trie, his family and his companies contributed $220,000 to
the DNC in less than two years. Trie raised an additional
$500,000 for the DNC, working with John Huang. He also raised
at least $530,000 for the Presidential Legal Expense Trust. One
issue repeatedly raised at the Committee hearing was Trie's
motivation for his actions and what, if anything, he received
in return.
Although the Committee was unable to locate Trie to
question him, the evidence before the Committee suggests that
his contributions and fundraising efforts were intended not
only to support President Clinton, but also to further Trie's
private business interests. The evidence shows that, due to his
contributions and fundraising for the DNC, Trie received
unusual access to the White House and senior government
officials and made valuable business contacts that furthered
his private business interests.
In May and June 1994, Trie and his wife contributed
$100,000 to the DNC. On June 30, 1994, the DNC named Trie a DNC
managing trustee. In addition, Trie served as a 1994 vice chair
of the DNC's Business Leadership Forum and was appointed a
member of the DNC's National Finance Board.
Trie's contributions and fundraising also won him unusual
access to the White House, President Clinton, and senior
government officials, although he also drew upon personal
friendships with individuals from Little Rock, particularly
Mark Middleton.149 White House records show that
Trie gained access to the White House on at least 23 occasions
from 1993 to 1996.150 On many of these visits, Trie
attended large social events such as a Christmas party,
attended meetings of Asian-American organizations, or met with
Middleton who was considering business dealings with Trie and
twice traveled with Trie to Taiwan in 1995.151 On
other visits to the White House or DNC fundraising events
attended by President Clinton, however, Trie brought Asian
business acquaintances as his guests.
For example, on June 22, 1994, Trie purchased two tables
at a DNC fundraising dinner at the Mayflower Hotel in
Washington for a contribution of $100,000 to the DNC. He
invited as his guests a number of Chinese and Taiwanese
business people and spouses, including Wu.152
According to press reports, in June 1995, Trie brought Winston
Wang, CEO of Formosa Plastics, a Taiwanese firm, to a White
House coffee and photo session with the
President.153 In September 1995, Trie brought Wu and
a Hong Kong banker to the White House for a tour and lunch. In
November 1995, Trie brought as his guests several Asian
business associates, including Wu, to an African-American
Leadership Forum fundraiser in Washington. President Clinton
attended, and Trie introduced him to his
colleagues.154 On February 6, 1996, as described in
detail below, Trie brought Wang Jun, chairman of China
International Trust and Investment Corporation (``CITIC''), the
chief investment arm of the Chinese government, to a White
House coffee with the President.
Senator Bennett stated at a Committee hearing that, in
Asia, Trie's ability to arrange a White House tour or brief
meeting with the President or another senior government
official was valuable in establishing the credentials of Trie
and Wu as having ``very high-level contacts'' in the United
States. Senator Bennett also stated, ``It can open a lot of
doors in a lot of places in ways that American business people
simply do not understand because we do not do business that way
in the United States.'' 155
One troubling development during the Committee
investigation was the late production by the White House of
records demonstrating that Trie's business associate Wu had
obtained entry to the White House on ten occasions over a two-
year period, from June 1994 until October 1996, primarily
through his associations with Trie and Middleton.156
One of Wu's visits was related to Trie and Wang Jun's
attendance at a White House coffee on February 6, 1996,
discussed below.157 Several took place close in time
to dates on which Trie or one of his companies made
contributions to the DNC.158 Wu's repeated visits is
convincing evidence of Trie's ability to gain White House
access for his business associates. They provide additional
troubling evidence that some portion of Trie's contributions
may have been made at the suggestion of or with funds provided
by Wu.159
Another benefit tied to Trie's support of the President is
his appointment to the Commission on United States-Pacific
Trade and Investment Policy, discussed below.
One question that was raised repeatedly at the Committee
hearings was whether, in addition to obtaining access and
furthering his private business interests, Trie influenced U.S.
domestic or foreign policy. Based upon his investigation,
Committee investigator and FBI detailee Jerry Campane testified
that he found no evidence that Trie, Wu, or anyone associated
with them influenced or affected American policy in any
way.160
The only document indicating an attempt by Trie to affect
U.S. policy is a March 21, 1996, two-page letter which Trie
sent to President Clinton after the President deployed aircraft
carriers in the Taiwan Straits in response to a decision by the
Chinese government to engage in military exercises there. The
letter expresses Trie's concern that China might ``launch a
real war'' in response to the President's action.161
The evidence before the Committee shows that this letter, which
was brought to the White House by Mark Middleton, was routinely
referred to the National Security Council and received a
standard reply a month later.162 There is no
evidence that the letter had any policy impact.163
When asked if there was any evidence of involvement by the
Chinese government, Campane testified there was not--the
evidence instead suggested one of Trie's employees had
encouraged him to send the letter and helped write
it.164
Trie's experience in obtaining access to the White House,
President, and senior government officials in large part due to
his DNC contributions and fundraising is comparable in many
ways to the experience of Michael Kojima under the Bush
Administration.165 Both left the restaurant business
to go into international ventures. With no policy background or
government experience, both caught the attention of White House
officials through large campaign contributions that apparently
utilized foreign funds. Both used their contributor status to
gain access to the President and other government officials to
further private business interests. While some might claim that
Trie's access was superior, as evidenced by a greater number of
White House visits, others might claim that Kojima received
better treatment, as evidenced by the numerous letters written
on his behalf by the Republican Party to U.S. and foreign
officials requesting their assistance.166 The sad
truth is that the link between contributions and government
access is a common story with a long history in both political
parties.
trie's commission appointment
On June 21, 1995, President Clinton, by executive order,
established a 15-member Commission on United States-Pacific
Trade and Investment Policy (``the Commission''). The executive
order described the qualifications for members as follows:
Members shall (1) be chosen from the private sector .
. . and (2) have substantial experience with selling
agricultural products, manufactured goods, or high-
value-added services to Asian and Pacific markets or be
knowledgeable from their personal or professional
experience about the trade barriers or their industry
and government policies and practices, formal and
informal, that have restricted access by U.S.
businesses to Asian and Pacific markets.167
Trie was appointed by President Clinton to serve on this
Commission in April 1996. The timing of Trie's official
appointment was approximately one month after Trie presented
checks to the presidential trust. The White House denies that
Trie's appointment had anything to do with contributions Trie
obtained for the Presidential Legal Expense Trust, and that, in
fact, Trie's appointment was finalized months earlier, in 1995,
and was not connected in any way to the PLET
fundraising.168
Key documentation related to Trie's Commission appointment
indicates that the appointment process did begin in 1995 and
was well underway prior to Trie's first contact with PLET in
1996. For example, a memorandum dated September 21, 1995,
indicates that the White House personnel office was already
seriously considering Trie as a possible Commission
member.169 In a memorandum dated December 15, 1995,
the White House personnel office states that ``President
Clinton has approved'' Trie for appointment to the Commission
and asks the White House legal counsel's office to ``initiate a
preliminary background investigation.'' 170 On
December 31, 1995, Trie signed two documents on White House
stationery. The first states that Trie ``acknowledges and
consents to consideration by the President of the United States
for appointment or nomination to a position within the
Executive Branch.'' The second gives Trie's ``express consent
for the Federal Bureau of Investigation to investigate [his]
background.'' 171 On February 5, 1996, the White
House legal counsel's office notified the White House personnel
office that it had ``completed its clearance review of the
proposed appointments of [Trie] and James C. Morgan to be
Members of the Commission on United States Pacific Trade and
Investment Policy, and such appointments may proceed.''
172 All of these actions took place prior to Trie's
initial contact with PLET on March 20, 1996.
But even if the Trie appointment had been related to his
financial support for the President through PLET, it would
hardly have been an unprecedented event. For example, nine of
the 27 private-sector members appointed by President Bush to
the President's Export Council had been major financial
supporters of the Republican Party. Similarly, after President
Bush nominated Bruce S. Gelb as head of the United States
Information Agency (``USIA''), Gelb acknowledged that his
nomination was due to the $3 million he helped raise for
President Bush's campaign.173 Indeed, then-Commerce
Secretary Robert Mosbacher protested that only 50 percent of
President Bush's top fundraisers had been given plum
appointments as a reward for their fundraising
efforts.174 Financial support of a president is a
well traveled route to a Commission appointment. See Chapter 28
of this Minority Report.
The Commission members who served with Trie offered mixed
assessments of Trie's participation. Kenneth Brody, Commission
chairman, stated:
His role wasn't extensive but he had some
contributions in looking at trade policy from the
standpoint of small- and medium-size companies and I
think he had some participation in understanding some
of the Asian countries. . . . I can't think of anything
that he specifically added that comes out as a report
recommendation. On the other hand, there is some flavor
that he added.175
Clyde Prestowitz, vice chairman of the Commission, told
Committee investigators that Trie eventually became a valued
member.176 Most members said that his participation
was hampered by limited English abilities. Dr. Meredith Woo-
Cummings recalled feeling concern for Trie, because his
educational background and understanding of policy issues were
too limited for the purposes of the Commission. She said that
she tried to engage him in discussions to little
avail.177 However, Jackson Tai, another Commission
member, found Trie to be an active participant, engaged in the
issues being discussed.178 Committee investigator
Campane testified that the Committee's investigative team found
that Trie had no influence on the Commission's policy
recommendations.179
Trie served on the Commission for six months, from April to
October 1996. He served without pay and paid his own expenses
during the Commission's trip to Asia, as all Commission members
were required to do.180
trie and wang jun at the white house
On February 6, 1996, Trie accompanied Wang Jun to a White
House coffee attended by President Clinton. Apparently, neither
spoke during the coffee.181 Wang Jun is a former
officer in the People's Liberation Army and the son of Wang
Zhen, a retired general and former vice premier of
China.182 Wang is also chairman of the China
International Trade and Investment Corporation (``CITIC''), a
major Chinese conglomerate.183
After the coffee, controversy erupted when the news media
discovered that Wang was also chairman of the China Poly Group,
an arms company owned by the Chinese military. 184
After the coffee, a China Poly subsidiary called Poly
Technologies was identified as the source of 2,000 AK-47
assault weapons seized as the result of an investigation of an
arms smuggling operation. The import of such weapons was
forbidden by executive orders and a law championed by President
Clinton to limit the sale of automatic weapons. Poly
Technologies has alleged that the smuggling was performed by
two former employees falsely using the name of a defunct Poly
company.185
Given the tensions with the Chinese government over this
incident as well as arms sales to developing countries,
President Clinton stated in response to media inquiries that
Wang's attendance at the coffee was ``clearly inappropriate''
and that he wished he had been more fully informed of Wang's
background.186
Robert Suettinger, Director of Asian Affairs at the
National Security Council, has stated that, despite Wang's
title as chairman of China Poly, his role at the company is not
clear. Suettinger further stated that Wang is generally
associated with CITIC, and not Poly Technologies.187
CITIC, a $20 billion conglomerate, serves as the chief
investment arm of China's central government with ministry-
level status on the Chinese State Council.188 CITIC
is guided by a 13-member CITIC International Advisory Council,
whose board members include prominent Americans including
former Secretary of State George Shultz and Maurice Greenberg,
chairman of American International Group, a major insurance
firm.189 Senator Glenn noted that former Secretary
Shultz had been quoted as saying that he attended CITIC's
advisory council meeting in 1996 and that he planned to attend
the 1997 meeting as well.190 CITIC companies have
received more than $200 million worth of financing from the
Export-Import Bank of the United States. CITIC has forged
business partnerships with a variety of U.S. firms, including
Westinghouse, Bechtel, and Chase Manhattan. Two months after
appearing at the White House coffee, Wang hosted a dinner in
Beijing attended by former President Bush and Brent Scowcroft,
President Bush's former national security
advisor.191 Wang calls Henry Kissinger ``a good
friend.'' 192 During the hearing, Senator Glenn
observed that Wang was ``a key figure for virtually any U.S.
company interested in major economic involvement in China.''
193
Descriptions of Wang as a ``Chinese arms dealer'' do not
capture his role as an influential figure in determining
American business in China and Chinese investments abroad.
Wang Jun's invitation to the White House coffee
The evidence is conflicting as to how Wang was invited to
attend the White House coffee. Amy Weiss Tobe, a DNC
spokesperson, has said it was done as ``a favor to Charlie''
Trie.194 David Mercer, a DNC fundraiser, has
testified that, in early 1996, Trie asked him if he could bring
Wang to a White House coffee as his guest.195 Mercer
testified that this type of request was not unusual for Trie or
other contributors to make, and that Trie often asked for
guests to be invited to White House events. Mercer said that
Trie did not state why he wanted Wang to be invited, nor did he
say anything to Mercer about making a contribution if the
request was granted.196 Mercer testified that he
agreed to submit Wang's name for consideration.
DNC Finance Director Richard Sullivan testified to the
Committee that he thought the Wang invitation was extended as a
favor to another DNC fundraiser, Ernest Green. Sullivan stated:
``It was something, as I understood it, that was important,
that Ernie had this guy in town doing business. Ernie had been
a longtime supporter and it was purely as a favor to Ernie.''
197 At his deposition, Sullivan had referenced both
Trie and Green, describing information he had received from
Mercer in a way which suggests that Green's connection to Wang
may have been described by Trie rather than Green
himself.198 Mercer has testified that he never
discussed the invitation with Green.199 Green
testified that he did not play any role in obtaining the
invitation.200
Mercer has testified that it was his responsibility, for
guests under consideration to receive a White House invitation
through the DNC, to compile standard information on each
person, including the person's profession and social security
or passport identification number.201 Mercer then
prepared briefing materials which Sullivan or other DNC
officials used to decide who would be invited as
guests.202
In the case of Wang, Mercer testified that he asked Trie to
provide him with Wang's resume.203 Using the resume
he received, he prepared materials describing Wang as a foreign
national and chairman of CITIC. The resume did not include and
Mercer was unaware of and did not include in the briefing
materials any reference to Poly Technologies.204
Faxed information at the top of the resume indicates it was
faxed from Lehman Brothers's Washington office. However, Green
denies that he sent it to the DNC, nor does he know why his
firm sent the resume since, according to Green, neither he nor
his firm played any role in obtaining Wang's invitation to the
coffee.205 Other than the fax number on the
document, no evidence was developed establishing that Green
sent it. One obvious possibility is that Trie called Lehman
Brothers in Green's absence and persuaded a clerical employee
to fax the resume to the DNC. In any event, based on the
materials Mercer provided, Sullivan testified that he discussed
the Wang invitation with DNC finance chair Marvin Rosen and
both agreed to propose it to the White House. Sullivan also
testified that he alerted Karen Hancox at the White House to
Wang's inclusion on the list and asked her to vet him, since he
was a foreign national. Sullivan testified that he assumed
Hancox would run Wang's name by the National Security Council,
but that apparently was not done.206
Role of Ernest Green
Ernest Green came to the Committee's attention, not only
because Sullivan said Green requested the Wang invitation but
also because, on the day of the coffee, Green made a $50,000
contribution to the DNC. Questions were raised as to whether
the two events were linked, and whether Wang or the Chinese
government had supplied the funds for the $50,000 contribution.
Green voluntarily submitted to a lengthy deposition and
produced requested documents.
Green is a managing director of Lehman Brothers, an
international investment banking firm.207 He is
originally from Arkansas and first achieved prominence as one
of the ``Little Rock Seven,'' who integrated Little Rock
Central High School in 1957. Disney later made a movie of his
life entitled ``The Ernie Green Story.'' 208 Green
received his undergraduate and master's degrees from Michigan
State University, which also awarded him an honorary doctorate.
In 1977, President Carter made him an Assistant Secretary of
Labor and later the chairman of the African Development
Foundation.209 Green is a longtime fundraiser for
the Democratic Party.210 Green testified that he and
Trie first met in the fall of 1994 at a breakfast arranged by
Jude Kearney, a Commerce Department official and friend of
Green, and by DNC fundraiser David Mercer who knew both
individuals.211
According to Green, it was Trie who informed him that Wang
was planning a visit to the United States in early 1996, that
would include stops in Washington and New York. Trie acted as a
middleman in setting up meetings between Wang and Lehman
Brothers executives in both cities to discuss possible business
opportunities. Trie worked with Lehman Brothers personnel to
schedule a meeting in Washington on February 6 at 10:30 am, and
another in New York on February 7. Green, Wang, Trie, Wu and
others then met at Lehman's offices on February 6th, in
Washington.212 Green testified that it was at the
end of this meeting, around noon, that Trie informed him Wang
would be attending a coffee at the White House.213
Green denied playing any role in arranging Wang's invitation to
the White House. Wang and CITIC have also denied that Green or
Lehman Brothers played any role in Wang's attending the White
House coffee.214 Although DNC records list Green as
attending the coffee,215 Green did not, in fact,
attend.
Green has also denied any connection between the coffee and
the $50,000 contribution to the DNC that Green made on the same
day. According to Green, this contribution was the result of a
decision made in December 1995 by himself and his wife. He
testified at his deposition that, although he had raised
substantial funds for the Democratic Party, he had never
personally made a large contribution. Green stated that he felt
obligated to make this contribution, because he was constantly
asking for large sums of money from others, some of whom had
asked him about his own donations.216 He testified
that, in late 1995, he and his wife resolved to make a major
financial contribution of their own. Due to cash flow
considerations, he said that he and his wife determined to make
the contribution after he had received his annual bonus check
from Lehman Brothers in January. He said they planned to
contribute $50,000, because that was what Green generally
sought when he solicited contributions and he thought the
amount was appropriate to his status as a DNC managing
trustee.217
Green's bank records show a deposit of $114,961.70 on
February 1,218 representing his annual bonus check
from Lehman Brothers. Five days later, on the morning of
February 6, Green provided a $50,000 check to the DNC. Green
and Mercer agree that he gave the check to Mercer, and both
have testified that they never discussed Wang's invitation to
the coffee.219 Green testified that in the latter
part of February he received an additional bonus check of
$54,000 because of an unrelated business deal he had brought to
his firm.220 He and his firm deny that Green's DNC
contribution was reimbursed by Lehman Brothers or financed in
any way by CITIC. Calling the money-laundering allegations
``outrageous'' and ``preposterous,'' Green's attorney was
quoted in the media saying, ``No one reimbursed him for his
contribution either directly or indirectly. . . . There has
never been a discussion with Wang Jun about a contribution.''
221 No documentary or testimonial evidence before
the Committee establishes reimbursement.
When asked about DNC records crediting Trie with obtaining
the $50,000 contribution in connection with the February 6
coffee, Green testified that he had never seen the records
before and that ``Trie never solicited a $50,000 contribution
from me.'' 222 He testified that his wife had signed
the contribution check and referenced a ``fundraiser'' that
Green himself had organized in November 1995.223
Mercer testified that he probably completed the check tracking
form in relation to Green's donation, but does not recall
whether he included the information linking the contribution to
Trie and the White House coffee.224 Mercer repeated
his testimony that he had not spoken with Green about the Wang
invitation. Green also told the press that he has had no
contact with Wang since February 1996.225
Analysis
The evidence is clear that Wang was invited to the White
House and met President Clinton as a favor to a DNC fundraiser.
Trie spoke with Mercer and actually attended the coffee with
Wang. Green's firm faxed Wang's resume to the DNC, and Sullivan
based his decision at least in part on his knowledge that Green
had dealings with Wang--whether or not it was Green who
imparted that information. The DNC records showing Green in
attendance at the coffee were in error; DNC records crediting
the $50,000 contribution to Trie in connection with the coffee
are also questionable, since there is no reason for Green to
have attributed his contribution to any fundraiser other than
himself or to any event other than the fundraiser that Green
himself had organized a few months earlier. The recent
indictment of Trie makes no reference to the $50,000
contribution by Green.
There is also no evidence that Wang requested the
invitation, that he spoke during the coffee, or that he made
any request of the President or his staff. His attendance
instead appears consistent with the analysis offered by Senator
Bennett during the Committee hearing--it was a demonstration of
access in which Trie showed that he and Wu had the necessary
``high-level contacts'' to get an audience for Wang with the
President of the United States. This demonstration presumably
strengthened Trie and Wu's ability to do business with Wang.
trie and china
One important question that the Committee sought to resolve
was whether Trie had any role in the plan of the Chinese
government to promote its interests in the United States. To
date, the Committee has not obtained any evidence that Trie
acted pursuant to this plan or on behalf of the Chinese
government. In fact, no evidence regarding Trie was uncovered
in the Committee's closed proceedings on the topic.
Considerable evidence was developed regarding Trie's close
ties to China in the Committee's public investigation however.
After leaving the United States in late 1996, he spent time in
China where he gave interviews to the media.226 He
and his wife have a home outside of Beijing and own a
restaurant in the city.227 During the 1990s, Trie
made frequent business trips to China and hosted Chinese
delegations and officials visiting the United States. It was
Trie who accompanied Wang Jun, chairman of CITIC, to the White
House as noted above. At the same time, however, Trie had ties
to Taiwan. He visited Taiwan, did business there, included
Taiwanese business associates at White House and DNC events,
and had a relationship with the Taiwan-based Ching Hai
religious organization. Trie's pursuit of Taiwanese business
ventures and involvement with a Taiwan-based religious
organization run counter to the allegations that he acted in
any way on behalf of the Chinese government. Trie also has
business ties to other Asian countries, such as Indonesia.
Trie's extensive business dealings with Wu and his
association with Wang do not prove that he was acting at the
direction of the Chinese government. According to press reports
that the Committee was unable to confirm, Wu is a member of the
Chinese People's Consultative Congress in the city of
Guangzhou. This organization allegedly provides economic and
business advice to the Communist Party and Chinese
government.228 In addition, Wu has been described as
a ``business friend'' of Wang and as engaged in business
dealings with CITIC.229 Some have said that it was
Wu who introduced Trie and Wang.230 Others point
out, however, that Wu has a Portuguese passport and cannot
fairly be described as a Chinese government official. Senator
Durbin pointed out that many reputable firms have business
dealings with CITIC, including Westinghouse, Chase Manhattan
and J.P. Morgan.231 Senator Glenn also noted that
many prominent Americans, including former President Bush and
former Secretary of State George Schultz, have ongoing business
relationships with Wang. While Trie's association with Wu and
Wang, in addition to his other ties to China raise questions,
the evidence does not show that Trie acted at the direction of
Chinese officials.
Questions were also raised as to whether the money
transfers provided by Wu to Trie could be traced to the Chinese
government. Many of the money transfers came from a Macao
branch of the Bank of China, which is a key financial
institution in China's state banking system. The Committee
heard in July, however, that Wu apparently had sufficient
resources to finance all of the transfers, that he had reasons
for supporting Trie financially, and that no evidence had been
found linking the transfers to the government of
China.232
Another relevant factor is that Trie authorized an FBI
investigation of his background in December 1995, and that
investigation found no problems that would prevent Trie's
nomination to a Presidential commission. An individual seeking
to hide contacts with a foreign government presumably would not
have either subjected himself to such an investigation or
emerged from it unscathed. The January 1998 indictment of Trie
makes no reference to the Chinese government.
The evidence before the Committee to date indicates that,
while the allegation of a connection between Trie and the
Chinese government remains an open question, it also remains
unproven.
footnotes
1 United States v. Yah Lin (``Charlie'') Trie and Yuan
Pei (``Antonio'') Pan , Criminal Case No. 98-0029 (U.S. District Court
for the District of Columbia), 1/28/98 (hereinafter referred to as the
``Trie indictment'').
2 Jerry Campane, 7/29/97 Hrg., p. 6.
3 Jerry Campane, 7/29/97 Hrg., pp. 6-7.
4 Jerry Campane, 7/29/97 Hrg., p. 7.
5 Jerry Campane, 7/29/97 Hrg., pp. 7-8.
6 Jerry Campane, 7/29/97 Hrg., pp. 8, 33.
7 Macao is a Portuguese territory on the coast of
southern China.
8 Jerry Campane, 7/29/97 Hrg., pp. 8-9.
9 Jerry Campane, 7/29/97 Hrg., p. 7; Trie indictment,
paragraph. 2.
10 Jerry Campane, 7/29/97 Hrg., p. 9.
11 Jerry Campane, 7/29/97 Hrg., pp. 11-12.
12 See NBC Nightly News, 6/24/97.
13 Jerry Campane, 7/29/97 Hrg., pp. 11-12.
14 Jerry Campane, 7/29/97 Hrg., p. 12. See also Trie
indictment.
15 Jerry Campane, 7/29/97 Hrg., p. 13.
16 Jerry Campane, 7/29/97 Hrg., p. 13.
17 Jerry Campane, 7/29/97 Hrg., pp. 10, 20.
18 Jerry Campane, 7/29/97 Hrg., p. 5.
19}Jerry Campane, 7/29/97 Hrg., pp. 91-92.
20}Jerry Campane, 7/29/97 Hrg., p. 10.
21 Trie indictment, ``The Conspiracy,'' paragraph 14,
and ``Manner and Means of the Conspiracy,'' paragraph 15.
22 Trie indictment, ``Introductory Allegations,''
paragraph 5. Prior to working for Trie, Pan was employed by the Lippo
Group in China. He also worked for Wu as director of Lucky Port
Investments, Inc. Pan began working for Trie in August 1995, and
eventually became the chief executive officer of Daihatsu and executive
director of America-Asia Trade Center, Inc.
23 Trie indictment, ``Overt Acts,'' paragraphs 2-14, 21,
40.
24 Trie indictment, ``Overt Acts,'' paragraphs 15, 17.
25 See, for example, Trie indictment, ``Overt Acts,''
paragraphs 21, 38.
26 Trie indictment, ``Manner and Means of the
Conspiracy,'' paragraph 15(b).
27 Jerry Campane, 7/29/97 Hrg., pp. 15-16.
28 Jerry Campane, 7/29/97 Hrg., p. 14.
29 Pan was not addressed in the Committee's public
hearings, although he was the subject of an October 9, 1997 hearing
before the House Committee on Government Reform and Oversight.
30 Jerry Campane, 7/29/97 Hrg., pp. 36-39.
31 For example, Trie might be able to show that some of
the foreign funds were his personal work earnings. Personal income
earned abroad by an American citizen may be used for a campaign
contribution, provided that no foreign national participates in the
contribution decision; 2 U.S.C. Sec. 441e.
32 The DNC's position is in sharp contrast to that of
the RNC which, for example, continues to retain $215,000 from a Michael
Kojima contribution that apparently utilized foreign funds. See Kojima
chapter, infra .
33 Washington Post, 12/18/96 (``Trie and Huang worked
together to raise funds for the Democratic Party from the Asian
American community, according to Trie. Huang `often wanted me to help'
with fundraisers, Trie said in an interview.'')
34 Apparently, both Trie and Huang attended the APALC
fundraiser. Six months earlier, in May 1995, Trie and Huang had both
attended an inaugural dinner for the Congressional Asian Pacific
American Caucus Institute, another new organization aimed at the Asian
American community. While not DNC-related, this institute may have
energized Trie to join Huang's efforts to increase the political
involvement of the Asian American community in Democratic politics.
35 Trie indictment, ``Manner and Means of the
Conspiracy,'' paragraph 15 (c), (d), (i).
36 See DNC documents No. D 0000968-0000973.
37 Los Angeles Times, 12/21/97.
38 Trie indictment, ``Overt Acts,'' paragraph 34.
39 Jerry Campane, 7/29/97 Hrg., pp. 17-18 and 71-72. See
also Part 3 discussion of the Zahn, Chu and Wang checks.
40 See Exhibit 62: DNC In-Depth Contribution Review, DNC
0134-145. Other checks from the Hay Adams fundraiser, attributed to
persons other than Trie, were also returned by the DNC. See chapter on
Huang, supra.
41 See Huang DNC event summary, in Minority Report
Chapter 4. See also Los Angeles Times, 12/21/97.
42 See Chapter 21 which discusses the Gandhi
contribution.
43 Staff interview with Yogesh Gandhi, 3/24/97. Gandhi
had originally agreed to provide a deposition, but at the beginning of
the deposition asserted his constitutional rights under the Fifth
Amendment and refused to provide sworn testimony. He reluctantly
consented to an unsworn, untranscribed interview.
44 Gandhi stated during the staff interview that he met
Huang for the first and only time during the fundraiser when Huang
approached him and thanked him for attending. Later during the dinner,
Gandhi obtained a few moments with President Clinton to present him
with an award.
45 Los Angeles Times , 12/21/97; New York Times, 7/2/97.
46 See DNC documents No. D 0000981-0000996.
47 See New York Times , 7/2/97.
48 See, for example, Los Angeles Times , 12/7/97, p. A1.
49 Exhibit 62: DNC In-Depth Contribution Review, DNC
0134-145. For example, the DNC returned a $10,000 check from Kun Cheng
Yeh, after the media reported ``an employee [at the Los Angeles address
on the check] said Mr. Yeh lived in China and had not been to the
United States for several years.'' New York Times , 7/2/97. Not all the
media allegations were proven correct, however; one $3,000 check was
from Michele Lima who was initially identified as deceased, but was
later discovered ``alive and well'' in Queens. Wall Street Journal, 6/
13/97.
50 Jerry Campane, 7/29/97 Hrg., p. 13. See also Trie
indictment, ``Overt Acts,'' paragraph 43.
51 Trie indictment, ``Over Acts,'' paragraphs 46-47.
52 Trie indictment, ``Over Acts,'' paragraph 48-51. See
also Los Angeles Times, 12/7/97, p. A1.
53 Trie indictment, ``Over Acts,'' paragraphs 44-45, 52.
54 Yue Chu, and Xiping Wang, 7/29/97 Hrg, pp.137-140.
55 Yue Chu, 7/29/97 Hrg., p. 132. Chu stated that the
check was made out to the ``DSCC'' and she was unaware that the
initials stood for Democratic Senatorial Campaign Committee.
56 Yue Chu, 7/29/97 Hrg., p. 134.
57 Jerry Campane, 7/29/97 Hrg., pp. 64-65, 93.
58 Yue Chu, 7/29/97 Hrg., pp. 132, 137, 158; Yue Chu
deposition, 7/9/97, p. 63.
59 Jerry Campane, 7/29/97 Hrg., p. 93.
60 Trie indictment, ``The Conspiracy,'' paragraph 14.
61 Exhibits 664-666.
62 Harold Ickes deposition, 6/26/97, p.158.
63 Los Angeles Times , 12/21/97.
64Jerry Campane, 7/29/97 Hrg., p. 91.
65 Washington Post, 12/18/96.
66 Trie indictment, ``The Conspiracy,'' paragraph 14.
67 These trustees have been called ``a blue ribbon group
... whose detachment and probity were assured.'' Washington Post,
editorial, 12/18/96. The trustees are: The Reverend Theodore M.
Hesburgh, C.S.C., President Emeritus of the University of Notre Dame
(Co-Chair); Nicholas deB. Katzenbach, former Attorney General of the
United States (Co-Chair); John Brademas, president emeritus of New York
University and former Democratic Representative from Indiana; Ronald
Olson, partner, Munger, Tolles and Olson of Los Angeles; Elliot
Richardson, former Attorney General, Secretary of Defense, and
Secretary of Health, Education, and Welfare; Michael Sovern, President
Emeritus of Columbia University and former dean and professor of law at
Columbia Law School; John Whitehead, former Deputy Secretary of State
and former co-chair of Goldman, Sachs and Company; Michael H. Cardozo,
managing director, G. William Miller and Co. and former Deputy Counsel
to President Carter (Executive Director); and, until her death, Barbara
Jordan, professor at LBJ School of Public Affairs and former Democratic
Representative from Texas.
68 Judicial Watch Inc. v. Hillary Rodham Clinton, 76
F.3d 1232 (D.C. Cir. 1996).
69 Letter from Stephen D. Potts, Director, Office of
Government Ethics, to Michael Cardozo, 7/22/94.
70 Michael Cordozo, 7/30/97 Hrg., p. 91; PLET Notes to
Financial Statements, 12/31/94, PT06493.
71 Michael Cardozo deposition, 5/8/97, p. 18.
72 As discussed below, Trie initially presented the
Trust with donations totalling about $460,000. The Trust immediately
rejected checks with obvious problems, and deposited $380,000 into a
suspense account pending assessment of the individual checks. On a
second occasion, Trie attempted to present the Trust with checks which
Trie indicated totaled $179,000, but the Trust declined to accept them.
It is unclear whether any of the $70,000 to $80,000 in problematic
checks that had been rejected on the first occasion were included in
the second batch of checks. On a third occasion one month later, Trie
attempted to present the Trust with checks which he indicated totaled
about $150,000, but the Trust again declined to accept them. It is
unclear the extent to which the second and third batches of checks
overlapped; it is possible that the same checks were being offered both
times. Due to the uncertainty involved, the amount of donations that
Trie offered to the Trust is estimated at $530,000 ($380,000 plus
$150,000).
73 Michael Cardozo deposition, 5/7/97, p. 25.
74 Michael Cardozo deposition, 5/7/97, p. 25.
75 Michael Cardozo deposition, 5/7/97, p. 28.
76 Michael Cardozo deposition, 5/7/97, p. 29.
77 Michael Cardozo deposition, 5/7/97, p. 30.
78 Michael Cardozo deposition, 5/7/97, p. 30.
79 Michael Cardozo deposition, 5/7/97, p. 33.
80 Michael Cardozo deposition, 5/7/97, p. 34.
81 Michael Cardozo deposition, 5/7/97, p. 34.
82 Michael Cardozo deposition, 5/7/97, p. 34.
83 Michael Cardozo deposition, 5/7/97, p. 40.
84 Michael Cardozo deposition, 5/7/97, p. 41.
\85\ Michael Cardozo deposition, 5/7/97, p. 42.
\86\ Michael Cardozo deposition, 5/7/97, p. 41.
\87\ Michael Cardozo deposition, 5/7/97, p. 35.
\88\ Sally Schwartz deposition, 5/6/97, pp. 21-22.
\89\ Sally Schwartz deposition, 5/6/97, p. 22.
\90\ Michael Cardozo deposition, 5/7/97, p. 37.
\91\ Sally Schwartz deposition, 5/6/97, p. 29.
\92\ Michael Cardozo deposition, 5/7/97, p. 38.
\93\ Michael Cardozo deposition, 5/7/97, pp. 46-47.
\94\ Michael Cardozo deposition, 5/7/97, p. 51.
\95\ Sally Schwartz deposition, 5/6/97, p. 35.
\96\ Sally Schwartz deposition, 5/6/97, p. 35.
\97\ Michael Cardozo deposition, 5/7/97, p. 48.
\98\ Michael Cardozo deposition, 5/7/97, p. 48.
\99\ Michael Cardozo deposition, 5/7/97, p. 48.
\100\ Michael Cardozo deposition, 5/7/97, p. 49.
\101\ At the hearing, Cardozo stated that the bank reported that
the deposited contributions totaled $380,000 from 409 individuals.
Michael Cardozo, 7/30/97 Hrg., p. 7. See also Sally Schwartz
deposition, 5/6/97, p. 40.
\102\ Michael Cardozo, 7/30/97 Hrg., pp. 9, 79, 87.
\103\ Michael Cardozo deposition, 5/7/97, p. 49.
\104\ Michael Cardozo deposition, 5/7/97, p. 49-50.
\105\ Michael Cardozo deposition, 5/7/97, p. 50.
\106\ Michael Cardozo deposition, 5/7/97, p. 71.
\107\ Memorandum from Schwartz to Cardozo, 5/9/96, 0078.
\108\ Michael Cardozo deposition, 5/7/97, p. 84.
\109\ Michael Cardozo deposition., 5/7/97, p. 53.
\110\ Michael Cardozo deposition, 5/7/97, p. 51.
\111\ Since the donations offered on this occasion were not
accepted, no precise total was presented to the Committee. See, for
example, Michael Cardozo, 7/30/97 Hrg., pp. 36-37.
\112\ Michael Cardozo deposition, 5/7/97, pp. 124-125.
\113\ Michael Cardozo deposition, 5/7/97, p. 125.
\114\ Michael Cardozo deposition, 5/7/97, p. 125.
\115\ Michael Cardozo deposition., 5/7/97, p. 126.
\116\ Michael Cardozo deposition, 5/7/97, pp.188-190.
\117\ Michael Cardozo, 7/30/97 Hrg., p. 43; Michael Cardozo
deposition, 5/7/97, p. 192.
\118\ Michael Cardozo deposition, 5/17/97, pp. 190-191.
\119\ Sally Schwartz deposition, 5/6/97, p. 143. See also IGI
Report re: Interviews with Donors to Presidential Legal Expense Trust,
12/6/96.
\120\ IGI Report re: Interviews with Donors to Presidential Legal
Expense Trust, 12/6/96.
\121\ Sally Schwartz deposition, 5/6/97, p. 144.
\122\ Michael Cardozo, 7/30/97 Hrg., p. 80.
\123\ Michael Cardozo, 7/30/97 Hrg., p. 80; see also Sally Schwartz
deposition, 5/6/97, p. 144.
\124\ Michael Cardozo deposition, 5/7/97, p. 220.
\125\ Michael Cardozo deposition, 5/7/97, pp. 214, 220.
\126\ Michael Cardozo deposition, 5/7/97, p. 214.
\127\ Michael Cardozo, 7/30/97 Hrg., pp. 37-38.
\128\ Michael Cardozo, 7/30/97 Hrg., pp. 39-41.
\129\ Michael Cardozo, 7/30/97 Hrg., p. 52.
\130\ Michael Cardozo, 7/30/97 Hrg., p. 53.
\131\ Michael Cardozo, 7/30/97 Hrg., p. 61.
\132\ Michael Cardozo, 7/30/97 Hrg., pp. 65-66.
\133\ Sally Schwartz deposition, 5/6/97, pp. 336-337.
\134\ Sally Schwartz deposition, 5/6/97, p. 326.
\135\ Michael Cardozo deposition, 5/7/97, p. 78.
\136\ Michael Cardozo deposition, 5/7/97, p. 231.
\137\ Michael Cardozo, 7/30/97 Hrg., p. 48.
\138\ Michael Cardozo, 7/30/97 Hrg., pp. 48, 85.
\139\ See, for example, Michael Cardozo, 7/30/97 Hrg., p. 67.
\140\ Zhi Hua Dong, 7/31/97 Hrg., pp. 154-57; 177-78.
\141\ Zhi Hua Dong, 7/31/97 Hrg., pp. 180-81.
\142\ This conduct is in direct contrast to conduct by other tax-
exempt groups associated with elected federal officials such as The
Jesse Helms Center which hired a fundraiser ``to undertake fundraising
for the Center from non-U.S. citizens, foundations and corporations.''
Memorandum dated 3/9/92, from Howard Segermark to Clark Goodwin, p. 1,
included in the publicly available court file associated with Segermark
v. The Jesse Helms Center Foundation, Inc., Civil Action No. 0010857-94
(Superior Court of the District of Columbia).
\143\ See Trie indictment.
\144\ Washington Post, 12/31/97.
\145\ Michael Cardozo, 7/30/97 Hrg., pp. 61; 64.
\146\ Michael Cardozo, 7/30/97 Hrg., p. 115.
\147\ Michael Cardozo, 7/30/97 Hrg., p. 119.
\148\ Michael Cardozo, 7/30/97 Hrg., p. 117.
\149\ Jerry Campane, 7/29/97 Hrg., p. 90.
\150\ Jerry Campane, 7/29/97, Hrg., p. 10.
\151\ Jerry Campane, 7/29/97 Hrg., p. 90.
\152\ Jerry Campane, 7/29/97 Hrg., p. 10.
\153\ Jerry Campane, 7/29/97 Hrg., p. 10.
\154\ Los Angeles Times, 12/21/97. White House videotapes of the
event show Commerce Secretary Brown gesturing to Trie and his
associates and telling the President, ``This is part of the Trie
team.''
\155\ Senator Bennett, 7/29/97 Hrg., p. 88. See also, Trie
indictment, ``Manner and Means of the Conspiracy,'' paragraph 15(g),
alleging that Trie used his ``membership in the DNC committees . . . to
promote [his] private business activities.''
\156\ See WAVES records, EOP 056850-056862.
\157\ See WAVES records for 2/6/96, EOP 056856, 056861-056862.
\158\ See Associated Press, 7/31/97; New York Times, 7/31/97.
\159\ Apparently, Antonio Pan, business associate of both Trie and
Wu, gained entry to the White House on eight occasions between 8/95 and
10/96. See Los Angeles Times, 12/7/97, p. A1.
\160\ Jerry Campane, 7/29/97 Hrg., pp. 58, 95. See, for example, at
page 95: ``Chairman Thompson. [T]here is no indication, I guess I
should say, that Mr. Trie had any impact on White House policy; is that
correct? Campane. That is correct.''
\161\ Letter from Trie to the President, 3/21/96, EOP 005325.
\162\ See letter from the President to Trie, 4/26/97, EOP 029282;
staff interview of Robert Suettinger, director, Asian affairs, National
Security Council, 6/3/97; and staff interview of Nancy Soderberg,
National Security Council, 5/30/97. Suettinger indicated that he
prepared the response to Trie's letter and used standard language
developed to respond to the many letters the White House received on
this topic. He indicated the letter had no impact on U.S. policy.
\163\ See staff interview with Robert Suettinger, director, Asian
affairs, National Security Council, 6/3/97; and staff interview of
Nancy Soderberg, National Security Council, 5/30/97.
\164\ Jerry Campane, 7/29/97 Hrg., pp. 77-78.
\165\ See Chapter 6.
\166\ See Chapter 6. The Republican Party wrote numerous letters to
further Kojima's private business efforts; the Committee investigation
found no comparable letters written by the Democratic Party to further
Trie's private business efforts.
\167\ Executive Order 12964 of 6/21/95, as listed in Federal
Register. 6/28/95, Vol. 60.
\168\ USA Today, 7/30/97.
\169\ Memorandum from Phyllis Jones to Jennifer Hillman and others
regarding expanding the Commission and adding 3 new members, 9/21/95,
EOP 056804.
\170\ Exhibit 664, Memorandum from Winston Allen to Marvin Krislov
regarding Trie's addition as a member of the commission, 12/15/95, EOP
002098.
\171\ Exhibit 666.
\172\ Exhibit 665, Security Clearences as of 2/14/96, EOP 015131;
see also, Robert Nash deposition, 6/25/97, p. 221 (memorandum signified
FBI background investigation had been completed without any outstanding
issues). Nash was director of the White House personnel office.
\173\ New York Times, 2/20/89.
\174\ New York Times, 2/20/89.
\175\ Los Angeles Times, 4/29/97.
\176\ Staff interview with Clyde Prestowitz, 6/13/97.
\177\ Staff interview with Dr. Meredith Woo-Cummings, 6/25/97.
\178\ Staff interview with Jackson Tai, 6/17/97.
\179\ Jerry Campane, 7/29/97 Hrg., pp. 52-53, 58.
\180\ See Exhibits 670: executive order establishing the
commission; Exhibit 678: letter from Nancy Adams, commission executive
director, to Trie, with information on trip expenses, 2/97; and Exhibit
679: a final talley of trip expenses.
\181\ See, for example, Washington Post, 3/16/97.
\182\ Senator Specter, 7/9/97 Hrg., p. 119; Washington Post, 3/16/
97.
\183\ Washington Post, 12/20/97.
\184\ The Los Angeles Times, 3/16/97.
\185\ Washington Post, 3/16/97.
\186\ Press conference held by President Clinton on 12/7/96; see
also Los Angeles Times, 12/21/97; Washington Post, 12/20/97.
\187\ Staff interview with Robert Suettinger, 6/3/97.
\188\ Austin-American Statesman, 3/30/97.
\189\ Austin-American Statesman, 3/30/97.
\190\ Senator Glenn, 7/9/97 Hrg., p. 155
\191\ Austin-American Statesman, 3/30/97.
\192\ Washington Post, 3/16/97.
\193\ Senator Glenn, 7/9/97 Hrg., p. 154.
\194\ New York Times, 1/4/97.
\195\ David Mercer deposition, 5/27/97, p. 139.
\196\ David Mercer deposition, 5/27/97, pp. 139-142.
\197\ Richard Sullivan, 7/9/97 Hrg., p. 124.
\198\ Richard Sullivan deposition, 6/4/97, pp. 103-104.
\199\ David Mercer deposition, 5/27/97, p. 140; and 6/11/97. p. 23.
\200\ See, for example, Ernest Green deposition, 6/18/97, pp. 154-
55.
\201\ David Mercer deposition, 5/27/97, pp. 144.
\202\ David Mercer deposition, 5/27/97, pp. 139, 144-49.
\203\ David Mercer deposition, 5/27/97, pp. 139, 144.
\204\ David Mercer deposition, 5/27/97, pp. 147-48.
\205\ Ernest Green deposition, 6/18/97, pp. 169-170; 176. Green
also, at first, denied having a copy of Wang's resume but was later
shown documents indicating that he had faxed the resume to the Lehman
Brothers' New York office and acknowledged he must have had the
document.
\206\ Richard Sullivan deposition, 6/4/97, pp. 105-106.
\207\ Ernest Green deposition, 6/18/97, pp. 14, 271.
\208\ Sara Fritz, The Los Angeles Times, reprinted in The
Commercial Appeal, 3/9/97.
\209\ Arkansas Democrat-Gazette, 9/25/97.
\210\ Ernest Green deposition, 6/18/97, p. 281.
\211\ Ernest Green deposition, 6/18/97, pp. 11-14.
\212\ Los Angeles Times, 3/26/97.
\213\ Ernest Green deposition, 6/18/97, p. 145.
\214\ Ernest Green deposition, 6/18/97, pp. 154-55, 176-77.
\215\ DNC Finance Executive Summary, 10/17/96, DNC 3081454.
\216\ Ernest Green deposition, 6/18/97, pp. 194-95.
\217\ Ernest Green deposition, 6/18/97, pp. 155-160.
\218\ G 0017.
\219\ Ernest Green deposition, 6/18/97, pp. 181-82; David Mercer
deposition, 5/27/96, p. 140 and 6/11/97, pp. 22-23.
\220\ Ernest Green deposition, 6/18/97, p. 165.
\221\ Los Angeles Times, 3/26/97.
\222\ Ernest Green deposition, 6/18/97, pp. 180-81, 281-82.
\223\ Ernest Green deposition, 6/18/97, pp. 155-58, 163.
\224\ David Mercer deposition, 6/11/97, pp. 22, 32.
\225\ Los Angeles Times, 3/26/97.
\226\ Jerry Campane, 7/29/97 Hrg., p. 85.
\227\ Jerry Campane, 7/29/97 Hrg., p. 11; Washington Post, 12/18/
96.
\228\ Jerry Campane, 7/29/97 Hrg., p. 11; Washington Post, 12/18/
96. See also Jerry Campane, 7/29/97 Hrg., p. 21.
\229\ Jerry Campane, 7/29/97 Hrg., p. 21; Senator Specter, 7/29/97
Hrg., p. 42.
\230\ Jerry Campane, 7/29/97 Hrg., p. 22.
\231\ Senator Durbin, 7/29/97 Hrg., p. 103.
\232\ Jerry Campane, 7/29/97 Hrg., pp. 27-29, 63-64, 95. Campane
also described the difficulty involved in tracing money transfers
beyond the borders of the United States.
PART 1 FOREIGN INFLUENCE
Chapter 6: Michael Kojima
Michael Kojima first gained public notice as a ``deadbeat
dad'' who failed to pay child support but gave $500,000 to the
Republican Party to sit with President Bush at a fundraising
dinner. His story has since gained importance as an example of
a little known contributor whose large contribution should have
been investigated before being accepted and should be returned
now. His dealings with the Republican Party and Bush White
House contradict claims that accepting foreign contributions,
providing access to large contributors, and using the White
House for fundraising purposes are unprecedented practices
confined to one party.
findings
(1) Michael Kojima contributed substantial sums to the
Republican Party in order to gain access for himself and his
associates to President Bush and Bush Administration officials
and the help of U.S. embassies abroad. With the help of a
Republican fundraising organization, the Presidential
Roundtable, and because of his status as a contributor, Kojima
obtained access to U.S. embassy and foreign officials to
advance his private business interests.
(2) Kojima's $500,000 contribution to the Republican Party
appears to have been derived from foreign funds. As a result of
his substantial contributions, Kojima was able to bring ten
Japanese nationals with him to a 1992 dinner with President
Bush. According to some of those foreign nationals, they
provided Kojima with significant sums of money for the express
purpose of facilitating their attendance at the dinner.
(3) The RNC has improperly retained $215,000 in apparent
foreign funds contributed by Kojima.
(4) The Republican Party failed to conduct an adequate
investigation of Kojima even when it had information that the
source of the funds was questionable.
Michael Kojima is a Japanese-born, naturalized U.S.
citizen. After immigrating to the United States in or around
1970, he worked as a chef in the Los Angeles area and
eventually became president of a partnership called 2M
Management Co., Ltd., which owned and operated several Chinese
restaurants.1 In 1987, 2M Management obtained three
loans totaling $655,000 from the Bank of Trade, a financial
institution later purchased by the Lippo Group.2 In
1989, 2M Management defaulted, and the bank was unable to
collect the amounts owed.3
---------------------------------------------------------------------------
Footnotes at end of chapter.
---------------------------------------------------------------------------
In 1990, Kojima formed a California corporation called
International Marketing Bureau, Ltd. (``IMB'').4 He
was the president, his wife was the treasurer, and his
attorney, T.J. Pantaleo, was company secretary.5 IMB
apparently never opened its own office or hired
employees.6 Documents requiring a business address
used the address of Kojima's attorney's office or his wife's
business, the Association for Refining Cross-Culture, a
nonprofit student-exchange program.7
Kojima first gained public notice when he appeared on
television seated with President George Bush at the 1992
President's Dinner, a fundraising event which raised $9 million
for Republican Senate and House candidates. Kojima was publicly
identified as the event's largest contributor.
Kojima's $500,000 contribution provoked immediate
controversy 8 due to a history of nonpayment of
child support, over $1 million in unpaid court judgments owed
to former wives and creditors, and his apparent lack of assets.
The Los Angeles Times reported that one ex-wife had been
searching for Kojima for five years to pay $700 per month in
child support, while another had ``given up searching for the
purportedly poverty-stricken Kojima--until he showed up with
the President.'' 9 A month after learning of the
$500,000 donation, the Los Angeles County District Attorney's
Office issued an arrest warrant for Kojima for nonpayment of
child support, describing him as ``America's most wanted
deadbeat dad.'' 10
The Washington Post reported that, aside from unpaid child
support, Kojima had ``a string of bad debt claims totaling more
than $1 million from previous business ventures.''
11 The New York Times reported that one creditor's
attorney ``thought Mr. Kojima had no assets,'' while another
creditor's attorney, after learning of the Kojima contribution,
felt his ```blood began to boil''. . . since Mr. Kojima had
declared bankruptcy to avoid paying his debts.'' 12
Kojima was repeatedly described as an unknown figure in
political, business, and Japanese-American circles.
The Republican Party was unable to answer questions raised
about Kojima. One newspaper reported:
When the flurry of questions arose last week, even a
Republican spokesman [Rich Galen] could shed little
light on Kojima's identity. . . . ``One could say you
should require some further proof of where the money
comes from'' before taking a check as large as
Kojima's, he said, ``but that's not the way life is.''
``It's a little difficult to cross-examine a man who's
a major donor,'' Galen said.13
After lawsuits were filed by Kojima's creditors and two
former wives to take possession of the $500,000, the Republican
Senate-House Dinner Committee, which formally sponsored the
dinner and accepted the Kojima contribution, deposited the
$500,000 into an escrow account and consolidated the cases
before a federal court in the District of
Columbia.14 After two years of litigation and an
unfavorable court ruling, 15 the Republican Dinner
Committee settled out of court.16 Under the 1994
settlement, Kojima's creditors and a former wife received
$285,000 plus accumulated interest, while the Republican Dinner
Committee retained $215,000, which was paid into a newly
created ``President's Dinner 1992 Trust & Building Fund.''
17
Kojima did not participate in the litigation. In October
1992, he was briefly arrested for nonpayment of child support,
but released from jail after agreeing to pay more than $120,000
in fines and payments to two former wives.18 He then
virtually disappeared from public view. Attempts by the
Committee to locate him proved unsuccessful.
CONTRIBUTION HISTORY
Prior to the 1992 election cycle, Federal Election
Commission (``FEC'') records indicate that Kojima, his family,
and businesses made occasional contributions to the Republican
Party, with the largest in 1988 in the amount of $4,000 to the
National Republican Senatorial Committee (``NRSC'). FEC records
then show a sudden increase in the number and size of
contributions during the 1992 election cycle. By the
President's Dinner in April, Kojima-related contributions
totaled over $600,000. After the President's Dinner and
resulting controversy, FEC records show no further
contributions. FEC records show no Kojima-related contributions
to the Democratic Party or Democratic candidates.
The specific contributions listed in Federal Election
Commission records during the 1992 election cycle are as
follows:
$5,000 contributed by IMB to the NRSC on
February 19, 1991;
$90,000 contributed by IMB to the 1991
President's Dinner, made in two payments with the first
for $15,000 on April 12, 1991, and the second for
$75,000 on May 24, 1991;
$3,000 contributed by Mr. and Mrs. Kojima to
the campaign committee of Senator Frank Murkowski of
Alaska on October 24, 1991;
$30,000 contributed by IMB to the NRSC on
March 6, 1992, later recorded as returned on April 1,
1992 due to insufficient funds;
$8,770 in the form of an in-kind contribution
by IMB to the NRSC on April 1, 1992, for a National
Museum for Women in the Arts dinner in connection with
the NRSC's Presidential Roundtable Spring Forum;
$500,000 contributed to the 1992 President's
Dinner made in three payments, with the first for
$200,000 on March 6, 1992, the second for $200,000 on
March 16, 1992, and the third for $100,000 on April 22,
1992.19
KOJIMA'S ACCESS TO THE WHITE HOUSE AND OTHER PERKS
Although the Committee was unable to locate Kojima to
question him, documents,20 interviews conducted by
Committee investigators,21 and sworn depositions
from the 1992 court case 22 provide detailed
information about Kojima's contributions and dealings with the
GOP. These materials paint a revealing picture of GOP
fundraising practices during the Bush Administration and are
attached as exhibits to this chapter.
The documents indicate that Kojima's primary association
with the Republican Party was through the Republican
Presidential Roundtable. The Roundtable is a Republican
fundraising organization which requires an annual contribution
of $5,000.23 A 1992 brochure for prospective members
states:
Designed especially to promote one-on-one personal
relationships, the Presidential Roundtable allows
members to participate in the development of policy as
well as help forge close friendships with Washington's
top decisionmakers. . . . [G]atherings often include
receptions with the President or Vice President and
always include meetings with Republican Senators,
Cabinet Officers, senior White House officials and
select leaders of our national and international
political and business communities.24
Member benefits included two Washington policy fora each year
in which, the brochure states, members can discuss issues
``directly with U.S. Senators, Administration officials and
major business leaders,'' and attend ``receptions and private
dinners held in premier restaurants, exclusive clubs, historic
locations and even in Senators' homes.'' 25 Also
provided were ``Ambassador Club'' trips abroad ``to bring top
American businessmen and women together with their counterparts
in Europe and Asia.'' The brochure states that, during a 1991
trip to England, Roundtable members met with ``Members of the
British Cabinet, Members of Parliament, the American Ambassador
to Great Britain and various lords and ladies who hosted
private dinners at their estates.''
During the 1992 election cycle, the director of the
Roundtable was Lisa DeGrandi, an experienced Republican
fundraiser who previously worked in the Reagan White House and
for the RNC. 26 Her immediate supervisor was the
finance director of the National Republican Senatorial
Committee, Albert Mitchler.27
When interviewed by Committee staff, DeGrandi recalled that
Kojima was already a Roundtable member when she was hired in
1989. She remembered his requesting and her providing a number
of letters to assist him with his private business dealings.
She told Committee investigators that, ``because Kojima had
given a great deal of money to the [Republican Presidential
Roundtable], it was important for her to do what she could ``to
keep him happy'' in order to maintain his membership.'' She
indicated that ``it was not uncommon for many of the individual
[Roundtable] members to use their memberships to market
themselves and/or their businesses.'' 28
DeGrandi confirmed that she signed letters of support from
the Republican Presidential Roundtable on behalf of Kojima
addressed to U.S. embassy officials, foreign officials, and
even heads of state. She estimated sending ``15-20'' such
letters, 29 of which the Committee has obtained
copies of over a dozen, including: two letters from DeGrandi to
the U.S. ambassador to Japan dated June 7, 1991 and March 6,
1992; three letters to officials at the U.S. Embassy in Tokyo
dated June 7, 18, and 20, 1991; a letter to the chief secretary
of Hong Kong dated August 8, 1991; a letter to the Hong Kong
chief secretary dated August 8, 1991; a general letter of
support with no specific addressee dated August 12, 1991; a
letter to a member of the Japanese Parliament dated October 15,
1991; a letter to the U.S. consul general in Hong Kong dated
October 15, 1991; a letter to the U.S. Consulate in Hong Kong
in the fall of 1991; a letter to the prime minister of Japan
dated March 9, 1992, and a letter to Deng Xiaoping, leader of
the People's Republic of China, dated March 9, 1992.
The letters use stationery containing a circular logo at
the top resembling the presidential seal and an italicized
heading on the left naming Presidents Bush, Reagan, and Ford as
``honorary members.'' The text generally begins with the
statement, ``I am writing on behalf of Mr. Michael Kojima,
President of International Marketing Bureau,'' and describes
him as ``one of the executive members of the Presidential
Roundtable, a business advisory group to President George Bush
and the administration.'' Many of the letters describe a
specific business venture, such as a Hong Kong airport project,
that Kojima was pursuing. The letters then ask for a meeting or
alert the recipient that Kojima would be contacting them. Many
invoke President Bush by name, stating that Kojima has met or
would be meeting with the President or indicating that a copy
of the letter was being forwarded to the President. In the two
March 9 letters addressed to foreign leaders, DeGrandi wrote
that Kojima will be carrying a ``message from the President of
the United States that he will share with you upon your meeting
him.''
Other documents indicate that DeGrandi's efforts played a
key role in Kojima's obtaining meetings with top U.S.
officials. An internal State Department cable dated June 15,
1991, for example, from the State Department in Washington to
the U.S. Embassy in Tokyo regarding Kojima cites his GOP
connections:
Lisa DeGrandi of the Republican National Committee
asked for followup on her fax to you dated June 7. . .
. The Committee is eager to assist Mr. Kojima in
getting an appointment with Ambassador Armacost (Ms.
DeGrandi sent a letter directly to the Ambassador as
well.).
A meeting took place at the embassy on June 24, attended by
Kojima, his business associate, and two senior embassy
officials. A memorandum drafted by Embassy personnel
summarizing the meeting begins: ``This appointment was set up
by Ms. Lisa DeGrandi, Director of the Presidential Roundtable
(see attached correspondence). We met first with Mr. Kojima
alone at his request. He explained his close ties with the
Republican Party and the importance of this project to
Republican Party campaign financing.'' A memorandum drafted by
Embassy personnel summarizing a March 19, 1992, meeting
attended by Kojima, his business associates, and U.S.
Ambassador to Japan Michael Armacost, begins the same way:
``This appointment was set up by Ms. Lisa Degrandi, Director of
the Presidential Roundtable (see attached correspondence).''
DeGrandi herself has been quoted as saying, ``If I hadn't
helped him, [Kojima] wouldn't have gotten his calls returned.''
30
The documents identify nine meetings between Kojima and
U.S. officials facilitated by DeGrandi. Six were at the U.S.
Embassy in Tokyo on June 24 and 26, July, September 30, and
October 4, 1991, and March 19, 1992. One was at the U.S.
Consulate in Hong Kong in the fall of 1991; another with the
U.S. ambassador to the United Kingdom at the ambassador's
residence in London on September 25, 1991; and one with U.S.
Treasury officials in Washington, D.C., in March 1992. An
Associated Press article by Michael Hirsh and Yuri Kageyama on
May 15, 1992, describing Kojima's foreign business dealings and
contributions to the Republican Party, includes this statement
from a U.S. official in Hong Kong:
When President Bush's people say give this guy the
time of day, we give him the time of day. We did our
best and got him the meetings he wanted. . . . We
called and set up appointments for him and for the
group. He probably couldn't have gotten through the
door without the consulate.31
The letters, faxes, and telephone calls provided by the
Republican Presidential Roundtable on behalf of Kojima to
further his private business interests have no logical
explanation other than Kojima's contributor
status.32 The fact that the Roundtable wrote letters
to two foreign leaders and invoked President Bush's name to
encourage a private meeting with Kojima illustrates the lengths
to which GOP fundraisers went in 1992 to assist large
contributors.
THE BUSH WHITE HOUSE AND FUNDRAISING
The documents also illustrate the GOP's use of the White
House and access to the president and other senior government
officials for fundraising purposes.
Kojima's $500,000 contribution to the 1992 President's
Dinner, five times larger than any previous contribution he had
made, is one of the largest contributions to a political party
by an individual ever recorded by the FEC. Documents related to
the making of this contribution demonstrate GOP fundraising
practices at the time.
A sworn deposition provided by the executive director of
the 1992 President's Dinner, Elizabeth Ekonomou, 33
describes her interactions with Kojima. Ekonomou testified that
she was first introduced to him by DeGrandi at an October 1991
lunch at the Watergate Hotel. She said that she met Kojima, his
wife, and two associates who did not appear to speak English.
She testified that Kojima indicated at that lunch that he was
interested in contributing to the 1992 Dinner and ``talked
about his participation in the neighborhood of $300,000.''
34 Apparently because of the size of his pledge,
35 Kojima was made a ``co-chairman'' of the 1992
Dinner, one of about two dozen persons given that title by the
Dinner Committee.
On February 1, 1992, invitations to the 1992 President'
Dinner went out in a mass mailing over President Bush's
signature. The cover letter, signed by President Bush, states
in part:
Together, we will join with Vice President and Mrs.
Quayle, Republican dignitaries, and key supporters,
like you, to raise the funds necessary to elect more
Republicans to the U.S. House of Representatives and to
the United States Senate. . . . Barbara and I look
forward to seeing you. . . .
The invitation included a separate sheet listing ticket prices.
It indicates that individuals may purchase a dinner ticket for
$1,500 or tickets for a ten-person table for $15,000, while
corporations were required to pay $2,000 for a single ticket
and $20,000 for a table.
The invitation also included a document entitled ``Benefits
for Tablebuyers.'' This document states that a tablebuyer is
entitled to attend a ``Private Reception hosted by President
and Mrs. Bush at The White House'' or a ``Reception hosted by
The President's Cabinet.'' In addition, a tablebuyer is
entitled to attend a ``Luncheon hosted by Vice President and
Mrs. Quayle'' and a ``Senate-House Leadership Breakfast hosted
by Senator Bob Dole and Congressman Bob Michel.'' The
tablebuyer also has an ``Option to request a Member of the
House of Representatives to complete the table of ten. With
purchase of a second table, option to request one Senator or
one Senior Administration Official.''
A similar document entitled ``Benefits for Tablebuyers and
Fundraisers,'' was sent by the dinner committee to the co-
chairmen of the dinner. It lists a range of benefits for the
most successful fundraisers. Fundraisers who sell ``two
tables'' receive the same benefits as tablebuyers plus
attendance at a ``Reception with Senator Bob Dole at U.S.
Capitol.'' Fundraisers who raise ``$92,000 and above'' receive
a ``Photo Opportunity with President Bush.'' ``Top
Fundraisers'' are promised all of the listed benefits plus the
``Opportunity to be seated at a head table with The President
or Vice President based on ticket sales.'' The document warns,
``Note: Attendance at all events is limited. Benefits based on
receipts.''
Of all the documents examined by the Committee, this
document contains perhaps the most explicit offers of access in
exchange for large contributions. It states outright that
fundraisers receive ``[b]enefits based upon receipts.'' It
states explicitly that seating with the President will be
``based on ticket sales.'' It offers GOP fundraising receptions
at government facilities including the White House, the Vice
President's Residence, and the U.S. Capitol. It promises
fundraisers access to the most senior Republican officials
including the President, Vice President, cabinet officers, and
the Senate and House minority leaders. ``Tablebuyers'' are
given the option of requesting a Member of Congress or ``Senior
Administration Official'' to sit at their tables. The offer of
access to important government officials in exchange for
contributions could hardly be more blatant.
The documents also demonstrate how these fundraising
strategies were employed by the Republican Party to encourage
large contributions. On February 5, 1992, a memorandum to
Kojima from the dinner chairman, former Senator Howard Baker of
Tennessee, promised a meeting with the President for attending
an event devoted to making fundraising calls for the dinner:
The White House has just confirmed Monday, March 9th
on The President's schedule for a special meeting with
The 1992 Dinner Deputy and Co-Chairmen. As in past
years, we will gather for a Strategy Session in which
we will make some recruiting calls and hear updates
from the House and Senate. It would be very helpful if,
in preparation for this meeting, you would put together
a list of individuals you would like to contact that
day . . . [P]lease clear your calendar for this unique
opportunity to work together to reach our goals. I look
forward to seeing you on March 9th.
A similar memorandum, dated February 5, from Senator Baker
to another dinner co-chairman, James R. Elliott, is even more
explicit: ``I would like to invite you to join the [dinner co-
chairmen] for this meeting with The President.'' 36
A followup letter dated February 19, 1992, from Senator
Baker to Kojima, expresses thanks for ``agreeing to serve as a
Co-Chairman by pledging $300,000 to The 1992 President's
Dinner. I look forward to seeing you on March 9.'' A similar
letter dated February 19, was sent to Elliott.
On February 21, the Dinner Committee sent the first in a
series of weekly memoranda from Senator Baker to the dinner co-
chairmen reporting on fundraising and urging additional
contributions. Entitled ``Finance Report,'' the February 21
memorandum states:
With just 67 days until April 28th [the date of the
dinner], we have reached a critical point in our
fundraising efforts. It is essential that you make your
recruiting calls now so there is time for the
commitments to be fulfilled. . . . I hope I'll be
seeing you in Washington on March 9th. . . .
A February 28 ``Finance Report'' from Senator Baker to the
dinner co-chairmen states: ``There are only 60 days until April
28th! . . . I would like to see all Co-Chairmen on board before
the March 9th Strategy Session so they will be able to attend
the meeting. This is an opportunity to show strong support for
President Bush when we report our progress to him at the end of
the day of calls.''
Kojima made his first contribution to the Dinner on March
6, three days before the White House meeting. The check from
his company, IMB, is for $200,000. March 6 is also the date of
a letter from DeGrandi of the Republican Presidential
Roundtable to the U.S. ambassador to Japan requesting a meeting
for Kojima. The letter states, ``As also a Co-Chairman of the
President's Dinner, Mr. Kojima met with the President regarding
a balance between the United States and Japan and working to a
new world order. Mr. Kojima will be meeting with the Prime
Minister while in Japan and at that time he has requested to
meet with you.'' This letter has a handwritten notation on it,
``Has he called?'' The requested meeting between the ambassador
and Kojima took place two weeks later, on March
19.37
President Bush's public schedule confirms that on March 9,
he met ``in the Roosevelt Room with members of the National
Republican Senatorial and Congressional Committee[s] to discuss
the President's Dinner.'' 38 A ``Tentative Agenda''
for the March 9th Strategy Session also cites this White House
meeting:
10:30 a.m. ``Briefing and Strategy Session'' with
Dinner Chairman Senator Baker at the Hay Adams Hotel
12:30 p.m. ``Lunch with the Vice President and
Cabinet Members'' at the hotel
2:30 p.m. ``Strategy Session (Part II)'' at the hotel
3:30 p.m. ``Depart for the White House''
4:00 p.m. ``Meeting with the President'' at ``The
White House''
Clearly, the dinner committee used the promise of a White House
meeting with the President, as well as a luncheon with the Vice
President and Cabinet members, to convince the individuals
serving as its co-chairmen to fly to Washington and spend
several hours making telephone fundraising calls to potential
contributors.
Kojima apparently not only attended the March 9 strategy
session and White House meeting with the President, he also
visited DeGrandi at the Republican Presidential Roundtable and
obtained letters on his behalf to the leaders of Japan and
China. The two letters, each dated March 9, contain the
identical sentence: ``I met with Mr. Kojima while he was here
in Washington, D.C. before he met with President Bush at the
White House.'' Both also state that Kojima has a ``message from
the President of the United States that he will share with you
upon your meeting him.''
On March 13, the dinner committee sent another ``Finance
Report'' to its co-chairmen. The memorandum states: ``One
hundred tables were sold last Monday at the Strategy Session,
making it the most successful ever. . . . In order to insure
reaching our goals, it is still necessary to keep recruiting.
However, it is also time to start turning pledges into
receipts.''
On March 16, Kojima signed a second IMB check contributing
$200,000 to the dinner. His wife, Chiey Nomura Kojima, sent the
check to the dinner's executive director, Ekonomou, with a
cover letter stating that ``we have provided a check in the
amount of $200,000 to support Bush administration for re-
election,'' even though dinner contributions were supposed to
be used to elect Republican Members of Congress rather than to
re-elect President Bush.
On March 20, the dinner committee issued its weekly Finance
Report to the co-chairmen. The memorandum states: ``I want to
remind you that the individual who raises the most money in
actual receipts by Friday, April 24 will have the honor of
saluting President Bush with a special toast during The Dinner.
As of today, the following are in contention for the toast to
The President: ``1. Mike Kojima--Receipts $400,000 . . . .''
[Original emphasis.]'' The memorandum lists six other
individuals as well, but none has ``receipts'' approaching
$400,000.
The March 27 Finance Report states: ``32 DAYS AND COUNTING!
We are at $5.7 million in pledges and receipts. Keep on
working. Remember that the top fundraisers and their spouse or
guest will be invited to sit at the head tables.''
On April 1, 1992, FEC records indicate that IMB made an in-
kind contribution of $8,770 to the NRSC for a National Museum
for Women in the Arts dinner in connection with a Presidential
Roundtable Spring Forum.39 A February 27 letter
offering tickets to the Spring Forum for $265 per person or
$530 per couple states: ``The day concludes with our reception
and dinner with President Bush at the historical National
Museum for Women in the Arts.'' President Bush's public
schedule confirms that he and his wife attended.40
DeGrandi recalled that Kojima sponsored the event by paying for
the museum rental,41 and a handwritten note from
Kojima's wife states that she and her husband ``sponsored and
hosted it.'' 42 The documents do not indicate
whether Kojima sat at the head table with the President or
offered a toast.
On April 3, the dinner committee sent its weekly Finance
Report to the co-chairmen. The memorandum states: ``With only
25 days until The Dinner, now is the critical time for us to
focus on turning pledges into receipts. The toast and headtable
standings are shaping up as follows:
------------------------------------------------------------------------
Pledges/
Receipts Receipts
------------------------------------------------------------------------
1. Mike Kojima.......................... $400,000 $450,000
2. Bill Schreyer........................ 258,000 877,500
3. Carl Lindner......................... 250,000 250,000
------------------------------------------------------------------------
The memorandum lists 11 names in all.
The next two Finance Reports, dated April 10 and 17, also
provide prospective ``Headtable seating arrangements'' based
upon actual receipts. The April 10 report lists Kojima, with
$400,000 in receipts, as the fourth and final fundraiser to be
seated with the President. However, the April 17 report--the
final report before the dinner--shows Kojima as having dropped
in the ``standings'' and lists him as being seated at the Vice
President's table.
A fax and memorandum dated April 20, 1992, from Ekonomou to
Kojima, also place him at the Vice President's table. Entitled,
``Dinner and Special Events Attendees,'' the memorandum states:
``Thank you for the list of individuals planning to attend The
Dinner and the Special Events that day. Because of their
intimate nature, the two receptions where it is not appropriate
for your photographer to accompany you are the Oval Office
Reception and the Headtable Reception. As of today, it looks as
if you and your wife will be seated at The Vice President's
Headtable. This leaves 23 guests . . . to be seated at your 3
tables. We have placed Senator and Mrs. Murkowski at table #1
and Senator and Mrs. Seymour at table #2, which brings your
total attendees to 27. If you would like a VIP at your 3rd
table, please let us know.''
On April 22, 1992, Kojima signed a third check for $100,000
made out to the President's Dinner. Unlike the first two
checks, this contribution was not from an IMB account, but from
Kojima's personal account. His total contribution of $500,000
was the largest from any individual at the dinner; his
competing fundraisers had raised their sums from more than one
source.
As a result of his last-minute contribution, Kojima and his
wife were seated at the head table with President
Bush.43 Kojima was listed in the dinner program as
one of 24 deputy chairmen and co-chairmen of the event. The
program describes the dinner as ``the single largest
fundraising event in history for Republican House and Senate
candidates.'' Television coverage showed the President greeting
Mrs. Kojima with a kiss on the cheek when joining the
table.44 Kojima's contribution was also widely
reported, leading to the lawsuits filed by his past wives and
creditors.
The facts surrounding the 1992 Republican President's
Dinner provide important information about GOP use of the White
House to encourage fundraising. The Dinner invitations
explicitly promise a White House reception with the President
and First Lady in exchange for contributions. Dinner co-
chairmen who made fundraising calls for the dinner met with the
President in the White House's Roosevelt Room and lunched with
the Vice President and Cabinet members. Top fundraisers
attended a special, exclusive reception in the Oval Office.
Videotapes of the March 9 meeting in the Roosevelt Room and
the April 28 Oval Office reception likely exist, and the
Minority made requests to view the videotapes. The Majority,
however, refused to support these requests on the ground that
such events were outside the scope of an investigation into the
1996 elections. But evidence documenting the Bush
Administration's use of the White House to facilitate
fundraising is critical to evaluating whether the Clinton
Administration's use of the White House was in line with
precedent.45
gop claimed no duty to investigate
One issue examined by the Committee during its hearings is
to what extent parties have an obligation to investigate
persons offering large contributions. The Republican Party
provided its views when Kojima's $500,000 contribution became
public and questions arose regarding his status as a debtor and
``deadbeat dad'' who may have lacked the financial resources
for such a large donation. The Republican Party responded that
it had no duty to investigate or verify his contribution.
Rich Galen, spokesman for the Republican President's
Dinner, told the press at the time, ``There's no requirement in
practice or in law that a political organization or charitable
organization get any kind of statement from a donor as to the
origins of the money.'' 46
Deposition testimony provided a year later by Ekonomou, an
experienced Republican fundraiser and the Dinner's executive
director, establishes that GOP fundraisers believed they had no
obligation to investigate any contributor or contribution.
Ekonomou stated under oath:
Q. Did the Dinner Committee do any kind of background
search or verification regarding its top fundraisers?
A. No.
Q. Do you believe that the Dinner Committee has
responsibility to do any kind of background
verification or search about its fundraisers or top
fundraisers?
A. No.
Q. In light of your experience and the concern that
was raised in you after revelations of Mr. Kojima's
outside activities, you continue to have no belief that
the Dinner Committee has any kind of obligation to do
any verification of the background of its top
fundraisers?
A. I do not believe that the President's Dinner has
any obligation to get background information on its top
fundraisers.47
Jan Baran, legal counsel for the dinner committee and also
long-time legal counsel to the RNC and other Republican Party
organizations, put it even more forcefully in 1993 legal
pleadings filed with the U.S. District Court for the District
of Columbia:
[P]olitical organizations such as the [Republican
Dinner] Committee must be able to receive and use
contributions. If they were required to investigate all
contributors and establish a pedigree for all
contributions, their First Amendment protected
activities would be seriously handicapped. . . . The
Federal Election Campaign Act of 1971, as amended,
imposes no burden upon political organizations to
investigate the solvency of contributors.48
The unequivocal position of the dinner's legal counsel,
executive director, and spokesman is powerful evidence that, in
the years prior to the start of the 1996 election cycle, GOP
fundraisers believed they had no legal obligation to
investigate either contributors or suspect contributions. This
position is clearly relevant to understanding the actions of
fundraisers during the 1996 cycle who also failed to
investigate particular contributions and to evaluating the
propriety of those actions.
The documents do show, however, that as media inquiries
about Kojima intensified in the period before the April 28
dinner, the dinner committee made one attempt to obtain more
information about Kojima and the source of his funds. A
memorandum dated April 24, 1992, to Senator Baker from Ekonomou
and Galen provides this account:
Chuck Babcock of the Washington Post has called
numerous times, over the past two days, regarding the
donations of Mr. Kojima. Mr. Kojima is listed as one of
the largest donors to The Dinner in the FEC report
which was filed on April 15. . . .
Babcock has been unable to find out any information
regarding Mr. Kojima which raised his interest. . . .
He had the Post's Los Angeles bureau check Secretary
of State documents in California and found the only
reference to a ``Michael Kojima'' one who was a chef
and owned, at one time, a series of restaurants.
His further research indicated that the address
listed as the headquarters of International Marketing
Bureau was also the address of one of the restaurants
owned by the Michael Kojima he could find. . . .
His specific concerns . . . ``How do you know whether
these checks come from the assets of his corporation or
whether they are the result of laundered money?'
This question raised our concerns to the point where
we placed a call to Mr. Kojima and asked him about his
business.
Mr. Kojima, in a phone conversation with Rich and
Betsy said:
(1) His business is ``international marketing'';
(2) He has clients in ``various countries''
including: The USA, Japan, Hong Kong and Israel;
(3) He is involved in ``organizing consortiums'' for
``national projects'' such as airports and
telecommunications systems. . . .
(4) We specifically asked him the source of funds
which are represented by the checks he has sent. He was
asked if they were from corporate proceeds or ``from
individuals who had chosen to donate to The Dinner.''
His specific answer was that the checks were
``corporate assets, my own corporation assets.''
We feel much more comfortable now, having spoken to
Mr. Kojima:
--That we have taken reasonable steps to ensure the
funds he has sent to The Dinner are from a legitimate
source;
--That he understood the nature of our concerns; and,
--That he answered our questions with no hint of
evasion.49
This memorandum indicates that, prior to the dinner, the
Republican dinner committee knew that Kojima was engaged in
international business, that the business address he had
provided for IMB was the address of a California restaurant,
and that the lack of ready information about him and his
business had raised concerns that he lacked the funds to make a
$500,000 contribution and might be ``laundering'' money for
someone else.
When the press raised these red flags, the dinner
committee's senior personnel telephoned Kojima to ask him about
the funds used for his contribution. He responded that he was
using corporate funds, yet the day before the committee had
received his personal check for $100,000. They also failed to
ask him whether he or his company, whose business was
international marketing, was utilizing foreign funds. In
addition, despite having a list of 23 persons that Kojima was
inviting to the dinner as his guests, including at least ten
foreign nationals, the dinner committee never asked Kojima if
he was using funds supplied by his guests to finance the
$500,000.
foreign funds
If the Republican Dinner Committee had asked, it might have
discovered the evidence that emerged in early 1997 indicating
that the Kojima contribution was being financed, in whole or in
part, with foreign money.
Kojima brought 23 guests to the 1992 President's
Dinner.50 In a July 7, 1997, broadcast and
subsequent materials posted on its website, CBS News revealed
that these guests included ten Japanese citizens who flew in
from Tokyo for the dinner.51 Five were Japanese
businessmen, three of whom stated, according to CBS News, that
they had paid Kojima significant sums of money to attend the
President's Dinner. For example, Shuuichi Nakagawa told CBS
said that he attended the dinner as a Kojima guest and that
Kojima asked him for hundreds of thousands of dollars. Takashi
Kimoto, a real estate company owner, reportedly stated that he
``KNOWS his money went to the GOP.'' 52 [Original
emphasis.]
CBS News also released a document apparently provided by
one or more of the Japanese businessmen. Printed in English and
Japanese, the English version appears on IMB letterhead, is
entitled ``Receipt,'' and is addressed to Tsunekasu Teramoto, a
person known to work with Kojima and IMB.53 The next
line of the document is the word ``Participant:'' followed by a
blank line. The text states: ``Your Participation for 1992
President's Dinner will be the minimum requirement of donation
at one Hundred Seventy-Five Thousand (US $175,000) U.S.
Dollars.'' The document instructs the money to be remitted to
IMB, providing the location and number of a specific bank
account, which is the same bank account number that appears on
the two IMB checks providing $400,000 to the Republican Dinner
Committee. Below the remittance instructions is a blank
signature line over: ``Michael Kojima, Co-Chairman.'' If
authentic, the document suggests that Kojima was using his
status as a co-chairman of the President's Dinner to obtain
huge sums of money from foreign sources in exchange for
arranging attendance at the dinner.
Given Kojima's apparent lack of assets, the explanation
offered by the Japanese businessmen for the source of Kojima's
$500,000 contribution, their attendance at the President's
Dinner, and the English/Japanese receipt bearing IMB's specific
bank account number are, together, strong evidence that the
Kojima contribution utilized illegal foreign funds. Yet,
despite requests from the Minority, the Majority refused to
allow Committee investigators to interview any of the Japanese
businessmen or investigate their allegations.
The Majority also refused to issue a subpoena for bank
records associated with IMB or Kojima bank accounts, which
might have established the deposit of foreign funds into these
accounts. Some of these bank records were produced in
connection with the 1992 court case. The signature card for the
IMB account at Sumitomo Bank of California, for example, shows
that the account was opened in November 1990, with three
authorized signatories: Kojima, his wife, and his attorney. But
no monthly bank statements for the IMB account were produced in
connection with that case.
Other records were produced in connection with Kojima's
personal account at the Bank of California, which was the
account used to write the third check to the President's Dinner
for $100,000. These records show that the account was opened on
February 20, 1992, that Mr. and Mrs. Kojima were the only
authorized signatories, and that an initial deposit was made of
$1,000. Monthly bank statements show that no further activity
took place in the account until April 1992, when three deposits
were made in a four-day period. The first was for $24,381 on
April 20; the second was a wire transfer of $200,000 on April
23; and the third was a wire transfer of $164,631.90 on April
24.
Four checks were then written over a three-week period in
April and May 1992. The first, for $8,100, paid on April 24,
may have been for the museum rental bill associated with the
Spring Forum dinner. The next, for $100,000, was the
contribution to the President's Dinner. The third check, also
for $100,000, represented a contribution to Harvard
University.54 The fourth check, for $175,000,
withdrew the bulk of funds from the account on May 11, 1992. No
further activity took place until the account was closed in
July, five months after it was opened. None of the documents
from the 1992 court case indicate where the two April wire
transfers originated. A Committee subpoena might have
established whether those wire transfers deposited foreign
money into the Kojima account, but the Majority denied Minority
requests for subpoenas to obtain the necessary bank records.
The Majority's justification--that the 1992 Kojima
contribution was too old for Committee investigation--is
contradicted by the fact that the Majority not only
investigated but held hearings on a $50,000 contribution to the
Democratic Party by Hip Hing Holdings that was made in August
1992, and for which Hip Hing Holdings later sought
reimbursement from sources in Indonesia.55 The
Kojima contribution is from the same year and ten times
larger--potentially the second largest single infusion of
foreign funds into either party, exceeded only by the loan
transaction involving the National Policy Forum, RNC and Hong
Kong funding, described in an earlier chapter. It is also
relevant that, while the Democratic Party returned the $50,000
Hip Hing Holdings contribution, the Republican Party has
continued to retain $215,000 from Kojima. Its retention of
these funds means that the Republican Party is holding almost a
quarter of a million dollars in likely foreign funds.
One other set of facts raises questions about the dinner
committee's own suspicions regarding the Kojima funds. Kojima
originally contributed $500,000 to the Republican Senate-House
Dinner Committee to elect Senate and House candidates in 1992.
The 1994 settlement agreement, however, re-directed the funds,
depositing them into a new dinner committee account called a
``Trust & Building Fund.'' Section 441e of the Federal Election
Campaign Act prohibits foreign contributions to local, state,
or federal candidates, but is silent on whether foreign funds
may be contributed to parties to conduct non-candidate-related
activities, such as constructing office facilities. Did the
Republican Party re-direct the Kojima funds from a candidate to
a non-candidate account in order to better its chances for
retaining the funds in case they were later deemed foreign? How
else can the complex 1994 transaction creating a new account
solely for the Kojima funds be explained?
failure to conduct a federal investigation
On June 9, 1992, Common Cause asked Attorney General
William Barr to request appointment of an independent counsel
to investigate ``whether criminal violations of federal law
[had] occurred in connection with The President's Dinner.''
Common Cause raised two sets of possible violations, each
involving a co-chair of the dinner. With respect to Kojima,
Common Cause stated:
Published reports indicate that Kojima was heavily in
debt, that [IMB] may not have had $500,000 to
contribute and therefore that the $500,000 may in fact
have come from unidentified contributors. The published
reports . . . raise serious questions of violations of
2 U.S.C. 441(f) (prohibiting contributions made in the
name of another) and 2 U.S.C. 434 (requiring disclosure
of the source of contributions).
Two weeks later, on June 24, 1992, John C. Keeney, deputy
assistant attorney general for the criminal division, sent a
one-page letter to Common Cause. He stated without further
explanation:
We have determined that there is no basis to seek
appointment of an Independent Counsel. . . . Moreover,
we find no personal or Department of Justice conflict
of interest which requires the appointment of an
Independent Counsel.
As far as the Minority has been able to determine, no criminal
investigation of the Kojima contribution took place outside of
this two-week period.
The Minority is also unaware of any FEC investigation of
the Kojima contribution, although it is possible an
investigation was initiated without any public notice and is
still underway.56
The absence of any significant civil or criminal federal
investigation of the Kojima contribution may have sent the
message that even a contributor with a questionable background
may contribute hundreds of thousands of dollars to a political
party, and no federal inquiry will follow. The FEC and Justice
Department's apparent inaction in the Kojima matter may have
been perceived as giving a green light to the no-questions-
asked fundraising that followed in the 1996 election cycle.
conclusion
At the start of the Committee's investigation, the Majority
supported efforts to investigate the Kojima contribution,
issuing document requests to the State Department and
Lippobank, among others. But the Majority later reversed
course, refusing to support obtaining additional documents,
interviews, or public testimony about Kojima.
Yet the facts and documents surrounding Kojima's $500,000
contribution provide information of great relevance to the
Committee's investigation into the 1996 elections. This
contribution is potentially one of the largest foreign-funded
contributions to either party. The Kojima case establishes
clear precedent for a political party using the White House and
access to senior government officials to encourage fundraising.
In a two-year period, due to his contributor status, Kojima met
President Bush on five occasions, including at an Oval Office
reception; met with Vice President Quayle twice; met Cabinet
members at an intimate lunch; and met multiple times with U.S.
ambassadors and senior embassy personnel. The Kojima case is a
precedent for large contributors bringing foreign nationals as
their guests to fundraising events attended by the President.
The Kojima case also demonstrates the lengths to which GOP
fundraisers went to assist large contributors in furthering
their private business interests--even attempting meetings with
foreign leaders. The Kojima case demonstrates the belief in the
fundraising community that the law imposed no legal obligation
on them to investigate any contributor or contribution, even
when questions were raised. The Kojima case also demonstrates
the Republican Party's continuing belief that it has no
obligation to return suspect funds.
In short, the Kojima case offers proof that campaign
finance abuses are a bipartisan problem with a long history.
footnotes
\1\ Kojima's employment history is described in documents contained
in files associated with 1992 Republican Senate-House Dinner Committee
v. Carolina's Pride Seafood, Inc. Civil Action No. 92-1141 (D.D.C), and
Bank of Trade v. 2M Management Co., Ltd., No. C697606 (California
Superior Court, Los Angeles County).
\2\ The first loan was made on 3/3/87 for $80,000 to finance new
restaurant franchises; the second loan was on 4/14/87 for $250,000 to
finance interior construction of a new restaurant at a shopping mall;
and the third was on 4/14/87 for $325,000 to buy out other shareholders
in certain restaurants. Kojima personally guaranteed repayment along
with his partner and the founder of 2M Management, Margaret Wong.
\3\ Bank of Trade v. 2M Management Co., Ltd., No. C697606
(California Superior Court, Los Angeles County); 1992 Republican
Senate-House Dinner Committee v. Carolina's Pride Seafood, Inc., 858 F.
Supp. 243, 246 (D.D.C. 1994) (The bank obtained creditor's judgment
against Kojima for $586,000 on 12/31/90.)
\4\ Certified statement by California Secretary of State, 5/20/97.
The certification states that IMB was incorporated on 6/27/90,
suspended for nonpayment of taxes from 8/3/92 until 5/24/93 and from 4/
1/94 until 4/18/94, and listed on 5/20/97 as an active California
corporation.
\5\ IMB's Statement By Domestic Stock Corporation, 6/17/91;
signature card for IMB bank account at Sumitomo Bank of California, 11/
90.
\6\ Committee investigators were unable to locate any IMB office.
See also Washington Post, 5/8/92 (IMB ``operates out of his lawyer's
office, and phone messages are taken by an answering service.'') and
Los Angeles Times, 5/8/92 (IMB ``is run out of the office of his wife's
student exchange program. . . . Nowhere in the two-room office is there
any evidence of a marketing company.'').
\7\ See, for example, IMB incorporation documents (attorney's
office and wife's office address used), IMB checks and bank records at
Sumitomo Bank of California (wife's office address used), and FEC
contribution records (attorney's office address used).
\8\ See, for example, Associated Press, 4/29/92; Los Angeles Times,
4/29/92; Chicago Tribune, 4/30/92; Orlando Sentinel Tribune, 5/7/92;
Washington Post, 5/8/92; and St. Louis Post-Dispatch, 5/9/92.
\9\ Los Angeles Times, 5/9/92.
\10\ New York Times, 10/11/92; Los Angeles Times, 10/11/92; New
York Times, 10/18/92; and Daily News, 10/15/96.
\11\ Washington Post, 5/8/92.
\12\ New York Times, 5/9/92.
\13\ Los Angeles Times, 5/8/92.
\14\ The 1992 Republican Senate-House Dinner Committee v.
Carolina's Pride Seafood, Inc., (D.D.C.), Civil Action No. 92-1141.
\15\ 858 F. Supp. 243 (D.D.C. 1994).
\16\ Judgment by Consent, Civil Action 92-1141 (9/6/94).
\17\ Judgment by Consent, Civil Action 92-1141 (9/6/94). FEC
records show that the Fund was established on 9/20/94 as a new non-
federal account of the Dinner Committee. Statement of Organization, FEC
ID No. C00261719; and 1992 President's Dinner, Report of Receipts and
Disbursements, Schedule B, Itemized Disbursements, 10/94, p. 1.
\18\ People v. Kojima, Los Angeles Municipal Court, Case Nos.
92R25264 and 92R00618, Reporter's Transcript of Proceedings on 10/15/
93. See also Dallas Morning News, 10/11/92 (``Kojima, 51, . . . was
arrested in the Salt Lake City Airport as he prepared to board a plane.
. . . He had eluded investigators for four months, moving frequently
and living under assumed names, officials said.'') and Los Angeles
Times, 10/11/92.
\19\ Although FEC records indicate that all three contributions to
the 1992 President's Dinner were made by IMB, the final payment of
$100,000 was drawn on Kojima's personal bank account, and was held in
the 1992 court case to be a personal expenditure. 858 F. Supp. 243,
249.
\20\ Documents analyzed by the Minority include records from the
1992 court case; FEC contribution and enforcement records; records
collected by Common Cause regarding the 1992 President's Dinner;
records provided by the State Department and Lippobank in response to
Committee document requests; documents provided in connection with
Committee interviews; and other materials.
\21\ Committee investigators conducted a number of interviews,
prepared eight formal interview reports, and summarized several
investigative efforts. In several instances, interviewed persons
voluntarily provided documents.
\22\ Depositions in the 1992 court case were provided by the
Republican Dinner Committee's executive director Elizabeth Ekonomou,
comptroller Christopher Ward, and assistant treasurer Trudy Matthes
Barksdale.
\23\ 1992 Presidential Roundtable brochure.
\24\ A letter dated 6/22/90, from Presidential Roundtable co-
chairman Senator Don Nickles to prospective members, describes it this
way: ``Working with the Republican members of the United States Senate,
the Presidential Roundtable operates much like a private club--a club
whose members meet, talk, and dine with some of the most important
people in the world. . . . It is an exclusive political organization, a
unique business forum, and a special social club combined.''
\25\ The brochure also lists benefits related to the 1992
Republican National Convention in Houston, including a ``private tour''
of the NASA Space Center ``hosted by Senators from the Committee on
Commerce, Science and Transportation.'' A brochure photograph is
captioned: ``Secretary Richard Cheney briefs the Roundtable Members on
Defense issues at the Pentagon.'' Both are examples of U.S. government
facilities being used to encourage GOP fundraising.
\26\ Committee investigators interviewed DeGrandi at length and
prepared two interview reports dated 6/4/97 and 7/3/97.
\27\ Staff interview with DeGrandi, 6/4/97, p. 1.
\28\ Staff interview with DeGrandi, 6/4/97, p. 4.
\29\ Staff interview with DeGrandi, 6/4/97, p. 4.
\30\ DeGrandi, Lisa. ``A Staffer's Own Story,''
www.eveningnews.com/lisadegrandi.html, p.3.
\31\ See also Los Angeles Times, 5/18/92: ``In October, theForeign
Commercial Service at the U.S. Consulate in Hong Kong did get a letter
from the Presidential Roundtable introducing Kojima, a consulate
spokesman said Sunday. . . . A week later, Kojima asked the consulate
to set up appointments with the Hong Kong airport authorities. The
consulate obliged, and Kojima met with airport officials, but did not
land a contract, the spokesman said.''
\32\ A 10/1/91 memorandum prepared by an Embassy official, for
example, summarizing a 45-minute meeting with Kojima, states the
following: ``Mr. Kojima explained that he is trying to assemble a
consortium for the Hong Kong Airport project and needs introductions to
Japanese banks to secure funding. We explained that [the commercial
office of the U.S. Embassy in Japan] is primarily concerned with
promoting exports of U.S. goods and services, and is not positioned to
make introductions to Japanese banks. We also indicated that Mr.
Kojima's list of consortium members showed little participation by U.S.
firms.'' In other words, the embassy was being asked to further
Kojima's private business interests even when they involved obtaining
business for foreign, not American, firms.
\33\ This deposition was provided on 4/8/93 in connection with the
1992 court case.
\34\ Elizabeth Ekonomou deposition, 4/8/93, pp. 35-36.
\35\ See letter from Dinner Chairman Howard Baker to Kojima,
thanking him for ``agreeing to serve as a Co-Chairman by pledging
$300,000,'' 2/19/92.
\36\ This memorandum, as well as other internal documents related
to the President's Dinner became publicly available in connection with
an FEC enforcement action against Elliott. See In re Cherry
Communications Inc., MUR No. 3672.
\37\ FEC records also indicate that on March 6, IMB contributed
$30,000 to the NRSC, but one month later this contribution was returned
due to insufficient funds.
\38\ 28 Weekly Comp. Pres. Doc. 477 (3/13/92).
\39\ NRSC/Nonfederal Schedule A for Itemized Receipts, p. 16.
\40\ 28 Weekly Comp. Pres. Doc. 584 (4/3/92).
\41\ DeGrandi interview report, 6/4/97, p. 6.
\42\ Letter from Chiey N. Kojima to Dr. Hausman of the John F.
Kennedy School of Government, enclosing a copy of the dinner menu with
a thank you to the Kojimas printed at the bottom, 4/4/92.
\43\ The Court in the 1992 court case describes the sequence of
events this way: ``The flurry of notices to contributors like Michael
Kojima exhorted them to increase donations. Kojima, apparently taking
the notices to heart, contributed another $100,000 to the 1992
Committee via a personal check . . . Kojima then qualified to sit at
the President's table.'' 858 F. Supp. 244.
\44\ CBS Evening News footage re-broadcast on July 7, 1997.
\45\ In October, Committee Chairman Thompson was reported by the
press as disagreeing with ``the notion that possible [campaign-finance]
misdeeds by President Clinton and his aides are no worse than those of
the Reagan and Bush administrations. . . . ``We have a scandal going on
in Washington, D.C., now that is not like anything we've seen before,''
he said. ``We have seen unprecedented amounts of money flow into the
White House.''' Associated Press, 10/18/97.
\46\ Column by Lars-Erik Nelson in San Diego Union-Tribune, 5/14/
92.
\47\ Elizabeth Ekonomou deposition, 4/8/92, pp. 102-103.
\48\ Pleading filed by Baran on July 22, 1993, on behalf of the
Republican Senate-House Dinner Committee. The Court subsequently
disagreed, found Kojima insolvent, ordered a portion of his $500,000
contribution paid to his creditors, and authorized additional discovery
into IMB's solvency. 858 F. Supp. at 249. The Republican Committee then
settled the lawsuit, keeping $215,000 and releasing $285,000 plus
interest to Kojima's creditors. Judgment by Consent, Civil Action 92-
1141 (9/6/94). The Republican Committee also moved and the court agreed
to vacate its published decision, so that no precedent would be set
requiring political committees to surrender contributions from
insolvent contributors. Motion filed by Republican Committee 8/30/94;
court order filed 11/8/94.
\49\ This memorandum is referenced in the Court decision, 858
F.Supp. at 245, n. 5, and is available in the public file associated
with the 1992 court case.
\50\ See 4/20/92 fax and memorandum to Kojima from Ekonomou,
described acknowledging receipt of a list of 23 guests.
Ekonomou had this guest list prior to calling Kojima on April 24.
\51\ CBS News has reprinted several photographs of Kojima's
Japanese guests at the President's Dinner on its website at
www.eveningnews.com/moneytrail2.html.
\52\ While Kojima's guest list for the dinner has not been produced
to the Committee, Kimoto's name does appear in a State Department
document summarizing a 3/6/92 meeting between Kojima and the U.S.
ambassador to Japan. The document lists Kimoto as a participant at the
invitation of Kojima, thereby providing evidence that the two were
engaged in business dealings in the month before the President's
dinner.
\53\ Teramoto, for example, attended meetings with Kojima and U.S.
embassy personnel, and is listed on embassy documents summarizing the
meetings. His name also appears in correspondence between Mr. and Mrs.
Kojima and Harvard University, including a 3/10/92 letter from Mrs.
Kojima which describes Teramoto as Kojima's ``Japan agent.'
\54\ In the spring of 1992, in addition to contributing $500,000 to
the President's Dinner, Kojima made three contributions to Harvard
University totalling $205,000. Committee investigators conducted
interviews and obtained documents in connection with this matter,
including copies of the checks used to make the contributions. Two of
the checks, both dated March 5, 1992, are written on IMB's account at
Sumitomo Bank of California. One gave $100,000 to the Institute for
Social and Economic Policy in the Middle East at the John F. Kennedy
School of Government; the other contributed $5,000 to the University's
general fund. The third check, dated May 1, 1997, was drawn on Kojima's
personal account at the Bank of California and contributed another
$100,000 to the Institute.
The documents and staff interview reports dated 5/29/97 and 6/3/97
with Institute Director Leonard Hausman indicate that Kojima invoked
his status as co-chairman of the President's Dinner to establish his
credentials with Harvard. The 5/29 report states that the director
called a person from the ``Republican party in Washington, D.C.'' who
confirmed ``that Kojima was a significant contributor to the Dinner,
that he was a Dinner co-chairman and that he was indeed going to sit at
the head table with the President and Mrs. Bush. [The director]
concluded that if the G.O.P. thought enough of Kojima . . . [to] sit
him with the President, then Harvard could accept Kojima's money as
well.'' The director indicated that ``[i]n return'' for his
contribution, Kojima ``desired to be appointed to the Board of
Directors for the Institute.'' He recalled receiving letters of
recommendation ``from Japanese legislators or officials urging [him] to
appoint Kojima to the Board of Directors,'' but did not do so. Harvard
University did, however, arrange for Kojima to meet with senior
university personnel and invited him to participate in a Harvard
symposium. Kojima, in turn, invited the director to the President's
Dinner, and he attended as one of Kojima's 23 guests. These incidents
demonstrate Kojima's use of his status as a dinner co-chairman to win
entry into other circles and the Republican Party's ready assistance to
further his personal interests.
\55\ See, for example, Juliana Utomo, 7/15/97 Hrg., pp. 9-12.
\56\ The FEC did initiate, in October 1992, a civil investigation
of the other dinner co-chair named in Common Cause's request for an
independent counsel, James R. Elliott. That investigation, MUR 3672,
concluded in 1996 when the FEC released a conciliation agreement in
which Elliott and his company, Cherry Communications, Inc., agreed to
pay a $150,000 civil penalty for violating 2 USC 441b(a)'s prohibition
against corporate contributions.
PART 1 FOREIGN INFLUENCE
Chapter 7: Ted Sioeng
Ted Sioeng, an Indonesian-born businessman who is not a
U.S. citizen or a legal resident, and other members of the
Sioeng family, who are U.S. legal permanent residents,
contributed to both Republican and Democratic organizations
during the 1990s. Sioeng has longstanding relationships with
business interests in the People's Republic of China (``PRC'')
and owns a pro-PRC newspaper in California. The circumstances
surrounding the Sioeng family's donations paint a disturbing
picture of fundraisers from both political parties assiduously
courting an individual (Sioeng) who, because of his status as a
foreign national, has no ability to make or direct legal
contributions under U.S. election laws.
Ted Sioeng and his family vigorously deny acting on behalf
of the Chinese government or pursuant to any plan to illegally
influence U.S. elections. Sioeng initially agreed to cooperate
with the Committee's investigation of the allegations involving
him and his family, and his daughter Jessica Elnitiarta--a
legal permanent resident of the U.S.--provided a voluntary
interview. After apparent leaks to the press of information
provided in this interview, however, Sioeng's attorney advised
against additional voluntary interviews. When the Committee
issued a subpoena for the deposition testimony of Jessica
Elnitiarta, her counsel refused to comply, invoking her Fifth
Amendment right not to offer self-incriminating testimony. As a
result, much of the following information was pieced together
from sources other than Sioeng or his family.
Based on the evidence before the Committee, we make the
following findings with respect to political contributions from
Sioeng and related persons:
findings
(1) The evidence before the Committee strongly suggests
that Ted Sioeng, a foreign national, was directly or indirectly
involved in a number of contributions to Democrats and
Republicans.
(2) Matt Fong, California State Treasurer, did not exercise
appropriate diligence in personally soliciting and receiving
$100,000 in contributions from Sioeng and a $50,000
contribution to NPF from a Sioeng-owned company. Fong has since
returned the $100,000 he received; NPF has reportedly returned
the $50,000 it received.
(3) The evidence before the Committee does not allow for
any conclusion as to whether Sioeng served as a conduit for
contributions from any foreign government, including the
Government of China.
(4) Sioeng's contributions enabled Sioeng and his
associates to gain access to senior figures in both the
Democratic and Republican parties, including President Clinton,
Vice President Gore, and House Speaker Gingrich.
ted sioeng's background
News accounts of the development of Ted Sioeng's far-flung
business empire portray him as an entrepreneur who has relied
heavily on partnerships with Chinese government-sponsored
enterprises and licensure agreements. According to several
accounts, Sioeng's first business ventures in the 1960s
involved the production of foam rubber in
Indonesia.1 In the early 1970s, as China began to
open to outside investment, Sioeng began selling used
cigarette-making equipment to tobacco companies in China's
Yunnan Province.2 Later, Sioeng also sold to China
medical, toy, and other manufacturing equipment acquired in the
U.S. and Canada.3 In the early 1980s, a Chinese
provincial government granted him a license to sell a cigarette
brand popular in China, Hongtashan (Red Pagoda), in non-Chinese
markets.4 Sioeng manufactured the cigarettes in
Indonesia and distributed them in Asia and, later, the United
States.5 Sioeng has also established a joint venture
with the Chinese government in Singapore.6
---------------------------------------------------------------------------
Footnotes at end of chapter.
---------------------------------------------------------------------------
In 1987, Sioeng's wife, Sundari Elnitiarta, acquired an
immigration visa and moved to Los Angeles with their five
children.7 One of their daughters, Jessica
Elnitiarta, is particularly active in Sioeng's business affairs
and is a legal permanent resident of the U.S. Sioeng himself
never acquired permanent resident status, although he appears
to have spent a substantial amount of time in the United
States.8 During the 1990s, the Sioeng family created
or acquired numerous businesses in the United States, including
a part ownership of Grand National Bank in Santa Ana,
California, and a real-estate development company, Panda Estate
Investments, which owns numerous properties in the Los Angeles
area.9 In almost all cases, Sioeng has provided his
adult children and/or their spouses with the money to purchase
these businesses.10
sioeng's connections to china
Although not an ethnic Chinese, Ted Sioeng was raised in
Indonesia by ethnic Chinese parents and is strongly attached to
China. ``His appearance is not Chinese, but he speaks Chinese,
he practices Chinese culture and he most certainly has a
Chinese heart,'' reports Daniel Gu, president of UCLA's 1,000-
member Chinese Students and Scholars Association.11
Sioeng readily agrees with this assessment and has been quoted
as saying, ``I don't have a drop of Chinese blood in me, but I
have a Chinese heart.'' 12
As Sioeng cultivated his business interests in China during
the 1970s and 1980s, he made gifts to Chinese government
officials and helped to finance community projects, such as
schools.13 Many observers have noted that the
Chinese government cultivates allies by awarding them lucrative
concessions. ``China is very good at using people,'' says one
prominent Chinatown businessman in Los Angeles. ``They give
businessmen some kind of special privilege or business
advantage so that these people work for China.'' 14
Even joint ventures with putatively ``private'' enterprises in
China raise the specter of government involvement. ``You have a
situation where public and private investment are not all that
clear,'' says Benjamin Ellman, professor of Chinese history at
UCLA. ``There are very, very few purely private enterprises.''
15 Or as another longtime chronicler of the Chinese-
American community put it, ``Right now it is very hard to say
which money is from the government and which money is
private.'' 16
Capitalizing on his reputation as ``a spokesperson for
state-enterprise entities from the mainland,'' Sioeng has
cultivated numerous business partners who have benefited from
their relationship with him and his relationship with the
People's Republic of China.17
Since he began investing in the United States in the late
1980s, Sioeng has emerged as a leader of the Chinese-American
community in Los Angeles. He has provided generous financial
assistance to the numerous mutual-aid associations that have
formed in Los Angeles to assist new Chinese immigrants from the
mainland, including the Southern California Cantonese
Association, the Southwest China Association of Southern
California, and the Southern California Teo-Chew
Association.18 In October 1996, he held a festival
in honor of China's National Day.19 Sioeng also
chaired a made-for-TV event called ``Welcome Home Hong Kong
Spectacular ``97,'' which was to be broadcast as part of the
official handover ceremonies on Hong Kong. To that end, the
event was filmed by camera crews from the state-controlled
China Central TV.20
In 1995, Sioeng's daughter, Jessica Elnitiarta, purchased
the Monterey Park-based Chinese-language newspaper, the
International Daily News. The paper's ultimate parent company
is Sioeng's Group, a holding company owned by Sioeng's daughter
Jessica Elnitiarta, her four siblings, and their mother, with
Elnitiarta holding the largest share.21 Elnitiarta
is also the sole director and officer of Sioeng's Group, as
well as the sole director of the company that directly owns the
paper, Chen International Publications.22 Elnitiarta
admits, however, that her father was the one who approached her
with the idea of purchasing the newspaper and, as with many of
the other businesses owned by the Sioeng family, he transferred
the monies used for the purchase from overseas.23 In
addition, Sioeng continues to pour money into the paper to
subsidize its unprofitable operations.24
Prior to the purchase by Sioeng's family, the IDN had
offered intermittent support for Taiwan.25 After
numerous complaints during the ensuing year from the Chinese
Consul General in Los Angeles, Feng Shusen, Sioeng installed a
new editor from New York and the paper is now ``breathlessly
pro-Beijing'' with respect to issues like Taiwan and human
rights.26 The paper runs releases issued by
Beijing's state-controlled news media and offered ``lavish''
praise for former Chinese leader Deng Xiaopeng upon his death,
including the banner headlines: ``HEAVEN, EARTH AND MAN GRIEVED
TOGETHER'' 27 and ``THE SUCCESS DENG MADE IN CHINA
SHOULD BE THE MODEL FOR ALL MANKIND.'' 28 David Ma,
a noted pro-democracy activist in the Los Angeles area, relates
that International Daily News reporters were provided with the
names of persons to contact for quotes after Deng's death, and
that Ma's name was left off that list because of his criticisms
of the Chinese government.29 The paper has also
played up events such as the visit of Chinese Navy vessels to
Los Angeles in 1996. Sioeng's lawyer argues that the switch in
editorial philosophy to a more pro-Chinese bent is actually
just good business sense designed to appeal to a growing
immigrant Chinese population, but the paper continues to lose
substantial sums of money each year.30 Moreover,
Sioeng sells only 500-600 cases of cigarettes a year in the
United States despite having been one of the International
Daily News's biggest advertisers for a number of
years.31 It seems untenable, therefore, to claim
that Sioeng's expenditure of $3 million to purchase a money-
losing newspaper was solely motivated by a desire to facilitate
cigarette advertisements.
the ``china plan'' and ted sioeng
During its investigation, the Committee received non-public
information regarding a Chinese Government plan to promote the
Chinese Government's interest in the United States during the
1996 election cycle.
The China Plan followed China's concerns about signs of
Taiwan's successful lobbying of Washington, expressed most
visibly in the period when the United States granted permission
in June 1995 for the Taiwanese president to enter the country
for an informal visit to Cornell University, his alma mater. In
response, Chinese officials hoped to advance Chinese interests
in in the United States by lobbying Congress and increasing
contacts with American lawmakers, the media and ethnic Chinese
Americans. One aspect of the China Plan included increasing
contacts with both Congress and state legislators. Although
there was insufficient evidence that the China Plan was
implemented by illegal means, some of the non-public
information received by the Committee related to Sioeng's
activities in the United States. See Chapter 2 of this Minority
Report.
According to public information derived from a news
article, in late 1994 or early 1995, funds from China were
wired to an Asian-owned bank in Los Angeles where the Chinese
consulate has its accounts.32 Shortly thereafter,
some money was transferred to another tiny Asian-American bank
in California, Grand National Bank, where it was deposited into
the account of the Hollywood Metropolitan Hotel.33
The Sioeng family is a part-owner of Grand National Bank and
the owner of the hotel.34 These published reports
invited intensive scrutiny of the circumstances surrounding the
Sioeng family's political contributions.
the sioeng family's contributions to matt fong in april 1995
Matt Fong, a Republican, is California's State Treasurer
and has announced his candidacy for the United States Senate.
He voluntarily agreed to be deposed by the Committee concerning
contributions he received from the Sioeng family in 1995. Fong
first met Sioeng in1988 at a rally for Julia Wu, the Republican
candidate for the Los Angeles Community College's governing body.
35 Fong understood Sioeng to be a supporter of Wu and was
introduced to Sioeng by Wu herself.36 Over the next few
years, Fong encountered Sioeng regularly at various community
fundraisers for cultural centers that helped first-generation
immigrants.37 According to Fong, Sioeng and his family were
generous contributors to these organizations and Sioeng frequently
served as a co-chair or host of these events.38 At these
events, Fong also met other members of the Sioeng family, including his
sons, daughters, son-in-laws and his wife.39 However, Fong
could not recall any names of the Sioeng family besides that of Jessica
Elnitiarta, one of Sioeng's daughters.40 In 1994, during his
campaign for state treasurer, Fong held a $1,000-per-ticket fundraising
event at the Biltmore Hotel in Los Angeles. Jessica Elnitiarta attended
the event and donated $2,000.41
After Fong's election as state treasurer in the fall of
1994, his campaign had a deficit of approximately
$200,000.42 During the last quarter of 1994, Fong
received a $100,000 contribution from the owner of the San
Diego Chargers, Alex Spanos, accompanied by a request that Fong
use the contribution to ``challenge'' the Chinese-American
community to match it.43 Fong presented this
``challenge'' directly to Sioeng, among many others, during an
event in late 1994 or early 1995.44 Significantly,
Fong has no recollection of Jessica Elnitiarta being present at
the time that this challenge was presented to
Sioeng.45 In response, Sioeng indicated a
willingness to help, but did not commit to any specific dollar
amount.46
Fong saw Sioeng again during one of the numerous Chinese
New Year events in the first quarter of 1995 and reminded him
of his previously stated willingness to help. Sioeng again
offered a non-specific promise of assistance.47
Numerous follow-up phone calls from Fong and Steve Kinney,
Fong's ``fundraising strategist,'' secured Sioeng's agreement
to make a donation.48 Fong made arrangements with
Sioeng to visit Sioeng's offices and pick up the
check.49 Fong testified that Sioeng asked him during
this meeting about the legal restrictions on campaign
contributions.50 Fong informed Sioeng that, under
California state law, the contribution had to be from a U.S.
citizen, a green-card holder, or a U.S. company with assets
generated in the United States.51 (Fong related that
Sioeng or his daughter, Jessica Elnitiarta, had raised these
same issues about restrictions on campaign contributions on
previous occasions.) 52 Sioeng then went into
another part of his office and returned with a check for
$20,000 in an envelope.53 Sioeng promised Fong at
that meeting that ``more help will come'' and, indeed, a
separate check for $30,000 arrived about a week
later.54 Contrary to Fong's account, however, recent
press reports allege that Sioeng wrote both checks in front of
Fong and simply postdated the second check so that he could
replenish his account to cover the amount.55
Both of these checks, totaling $50,000, were written from
the account of ``San Wong Sioeng,'' 56 which is Ted
Sioeng's Chinese name. Fong claims that he did not believe that
these two contributions came from Ted Sioeng himself, but that
they came from either one of his sons or son-in-
laws.57 Fong explained that in the context of
earlier discussions about the rules for raising funds, Sioeng
indicated that his daughters and sons owned independent
businesses.58 When Fong was actually soliciting
support from Sioeng, Sioeng remarked that his children ``all
have companies here and we're all very successful.''
59 Fong also indicated that Sioeng was generally
very supportive of his children getting involved in the
political arena and making financial
contributions.60 Based on these statements from
Sioeng, Fong claimed it was ``always my understanding that the
support I was going to be getting was from his family.''
61
Fong's attempts to disavow knowledge that Ted Sioeng
personally contributed $50,000 to him is unpersuasive. Fong
personally solicited Ted Sioeng and challenged him--not his
children, only one of whom he could even name--to match the
$100,000 donation by Spanos. Pursuant to that challenge, Ted
Sioeng--not his children--promised to assist Fong. Fong admits
that Sioeng himself was the subject of follow-up contacts to
secure the contribution.62 Fong went to Sioeng's
offices and was personally handed a check by Sioeng along with
a promise that ``more help will be coming.'' The check named
only Sioeng as the account holder. In addition, the thank-you
letter from Fong's campaign was sent to Ted
Sioeng.63 Jessica Elnitiarta told the Committee in
her interview that she had no knowledge of either the $20,000
or $30,000 contribution at the time they were
made.64 Indeed, the circumstances so clearly point
to Ted Sioeng as the source of these contributions that if, as
Fong claims to have believed, the checks were actually from the
account of a family member, a reasonable person would question
whether Sioeng was directing a family member to make
contributions--a practice prohibited by law.65
The $50,000 in contributions made in April 1995 were, in
fact, drawn from the personal account of Ted Sioeng, a non-U.S.
citizen who did not have permanent residence status and was,
therefore, ineligible to contribute. Again, it is the
Minority's view that Fong had every reason to suspect that this
was a contribution from an individual not eligible to
contribute to his campaign.
the source of sioeng's april 1995 contributions to fong
The public evidence examined by the Committee including
Sioeng's banking records, presents evidence that these
contributions may have been funneled through Sioeng by persons
unknown. On April 28, a check was written from Sioeng's account
for $30,000 payable to Matt Fong.66 That same day, a
check for $30,000 from the Grand National Bank account of an
individual named Glenville A. Stuart was deposited into
Sioeng's account.67 A check of publicly available
databases indicates that Stuart is the proprietor and sole
employee of a small grocery store, Sunset Market and Liquor, in
Long Beach, California.68 The Committee was unable
to uncover additional information concerning Stuart. These
circumstances raise concerns about the true source of at least
$30,000 of the $50,000 donated to Fong by Sioeng.
fong arranges for sioeng to meet speaker gingrich
Approximately two months after the April 1995 donations,
Fong met Sioeng at another community event.69 Fong
was scheduled to travel to Washington in mid-July on state
treasurer business and asked Sioeng if he would like to meet
House Speaker Newt Gingrich.70 In response, Sioeng
asked Fong: ``Who is Speaker Gingrich?'' 71 When
Fong explained that he was the speaker of the Congress, Sioeng
asked: ``What's the Congress?'' 72 Notwithstanding
Sioeng's apparent lack of knowledge about U.S. politics, Fong
reminded Sioeng of his previously stated desires to increase
the political involvement of himself and his family and that
the Republican Party was trying to reach out to the Asian-
American community.73
According to Fong, Sioeng said that he was scheduled to be
in New York at around the same time and asked if his son-in-
law, who would be traveling with him, could also meet Speaker
Gingrich.74 Fong then asked Steve Kinney, his
campaign pollster in 1994, to contact Gingrich's office to
arrange a meeting.75 Kinney had long been Gingrich's
top advance person for California and, because of these ties,
he served as the primary liaison between Fong and the Speaker's
office.76 Fong credits Kinney for having him serve
on Newt Gingrich's National Strategies Group,77 a
panel that advises Representative Gingrich on domestic
policy.78
As described by Fong, the resulting meeting in
Representative Gingrich's office on July 12 was brief and
inconsequential. Fong and Sioeng were given a tour of the
office and Representative Gingrich spoke generally to Sioeng
``about empowerment and about getting involved in the community
and being Republicans.'' 79 The Speaker also posed
for photographs with Sioeng.80
the sioeng family's contribution to the national policy forum
According to Fong's deposition testimony, shortly after the
Gingrich meeting in July 1996, Steve Kinney asked Fong whether
the Sioeng family would be interested in supporting any of the
Speaker's activities.81 Fong advised Kinney to go
ahead and ask.82 Some time later, Fong recalls that
Sioeng or Jessica Elnitiarta, he cannot recall which, asked his
advice about whether they should support the
speaker.83 Fong responded, ``The speaker is a
friend, and supporting the speaker on my behalf is a good
idea.'' 84 During her interview with the Committee,
Jessica Elnitiarta interpreted this conversation as an actual
solicitation by Fong on behalf of the National Policy Forum
(``NPF''), a Republican Party think tank. She acknowledged that
the suggestion to give to NPF may have come from
Kinney.85 Fong testified that he did not know until
after 1995 that the Sioeng family contributed $50,000 to the
NPF when he read about it in news accounts.86
According to later news reports, however, Fong's wife received
a 10 percent commission from NPF on the contribution from the
Sioeng family, which Fong reported on his 1995 statement of
economic interest.87 When questioned about NPF,
Elnitiarta stated that she didn't care to what ``department''
the check went, indicating that she viewed it as a donation to
the Republican Party.88
Also in July 1996, Kinney was organizing a fundraising trip
to California by Speaker Gingrich, including a non-fundraising
``outreach event'' for Asian-Americans at the Beverly Hills
Peninsula Hotel.89 At Kinney's request, Fong
provided a suggested list of ``political Asian Republican
leaders that should be invited from the community'' that
included the Sioeng family.90 Kinney invited Jessica
Elnitiarta ``and [her] family.'' 91 The event was
attended by Ted Sioeng, Jessica Elnitiarta, and one of
Jessica's sisters.92 On July 18, having secured an
agreement from Jessica Elnitiarta to contribute to the NPF,
Kinney stopped by the HollywoodMetropolitan Hotel (owned by the
Sioeng family) to pick up the check, which is dated July
18.93 Elnitiarta provided Kinney with a $50,000 check from
the account of Panda Industries, an export-import
business.94 Elnitiarta serves as the president of the
company, but Ted Sioeng is the sole owner.95 The day after
this $50,000 contribution to the NPF, at the ``non-fundraising'' event
organized by Kinney, Sioeng sat next to Gingrich at the Beverly Hills
event.96 Sioeng's meeting with Speaker Gingrich was
described in a story on page one of the China Press, a Chinese language
newspaper in Alhambra, California. The story included two photos of the
luncheon, including one showing Sioeng seated next to the Speaker, and
related Sioeng's comments at the meeting that ``he was very honored to
have the opportunity to introduce his family members, as well as other
business friends to Gingrich.'' 97 Sioeng, whom the China
Press article identified as a ``consultant'' to the Chinese provinces
of Jilin and Yunan, also reportedly invited Representative Gingrich to
visit those two provinces.98
An examination of the bank records underlying the $50,000
contribution to the NPF raises troubling questions about the
actual source of the funds. The day before Jessica Elnitiarta
donated $50,000 to the NPF, the Panda Industries account had a
balance of only $1,300. That same day, Ted Sioeng wrote a check
for $50,000 from his personal account into the account of Panda
Industries.99 These transfers raise the fair
inference that Sioeng both directed and was the real source of
the NPF donation.
NPF President John Bolton testified at his deposition that
Joseph Gaylord, a fundraiser for Speaker Gingrich who had
accompanied him on the California trip, directed that $5,000 be
subtracted from the $50,000 contribution and paid as a
commission to another person whose name Bolton could not
recall.100 Steve Kinney testified that he received a
10 percent commission for the monies he raised for NPF
101 and Joseph Gaylord also recalled that Kinney had
called him during this time to specifically inquire whether he
would receive a 10% commission on contributions he solicited
for the NPF.102 Subsequent press reports, however,
indicate that Fong's wife, Paula Fong, also received a 10
percent commission on Elnitiarta's NPF
contribution.103 Bolton testified that he also asked
an NPF employee to question Gaylord about Panda Industries, and
that Gaylord responded by describing it as a ``Hollywood
entertainment company.'' 104 When asked about this
testimony, Gaylord testified that he had no understanding about
the nature of Panda Industries and that he had no recollection
of being asked by anyone to supply such
information.105 Kinney emphatically denied that
Gaylord had ever questioned him about the nature of Panda
Industries.106 These conflicting accounts raise
serious questions about the adequacy of NPF's vetting
procedures, at the least. Although Kinney testified that he had
solicited Elnitiarta for additional contributions besides the
one to NPF, his counsel instructed him not to discuss these
additional solicitations.107
The sioeng family's contribution to matt fong in december 1995
During the remainder of 1995, Fong continued to solicit the
Sioeng family whenever he encountered them at community events.
Specifically, Fong recalls soliciting both Ted Sioeng and
Jessica Elnitiarta at a reception in Pasadena,
California.108 Shortly before a badminton tournament
co-sponsored by the Sioeng family, Jessica Elnitiarta contacted
Fong and requested a congratulatory letter from Speaker
Gingrich.109 Fong contacted Kinney, who was able to
secure the requested congratulatory letter from the speaker
within a tight deadline.110 Fong attended the
tournament, saw the Sioeng family there and again solicited
them for additional contributions.111 Subsequently,
Fong received a check for $50,000, dated December 14, 1995,
from the account of Panda Estates Investment, Inc., a real
estate development company owned by the Sioeng
family.112 Fong denies any connection between the
congratulatory letter and the subsequent donation from the
Sioeng family,113 but Jessica Elnitiarta told
Committee staff that she gave the $50,000 ``in appreciation''
for the letter.114
Again, the bank records underlying this donation raise
troubling questions. On the day that Elnitiarta wrote this
$50,000 check to Matt Fong, there was only $14,000 in the Panda
Estates Investments bank account.115 Four days later
the December 14 check cleared, presumably producing an
overdraft in the account.116 The following day,
December 19, Elnitiarta's aunt, Yanti Ardi, made a telephone
transfer of $50,000 from her personal account into the Panda
Estate Investments account.117 For her part, Yanti
Ardi, a non-citizen living in the Los Angeles area, would not
have had sufficient funds to transfer the $50,000 to the Panda
Estate Investments account but for a December 11 wire transfer
from Pristine Investments Ltd of Hong Kong, a wholesale
clothing company with uncertain ties to Sioeng's business
empire.118 Between September 5, 1995 and January 6,
1996, Yanti Ardi received approximately $2.6 million in wire
transfers from Pristine Investments.119 Sioeng's
attorneys refused to answer questions about Pristine or other
companies in Asia that made large transfers to Sioeng-related
accounts.120
In April 1997, articles appeared in Newsweek and the Los
Angeles Times that raised questions about the source of the
Sioeng family contributions to Fong. In response to these
articles, Fong's campaign organization wrote letters addressed
to Sioeng and ``San Wong Sioeng'' insisting on verification
within 24 hours ``of the fact that these contributions were
made with your personal funds and not those of any other person
or entity.'' 121 Upon receiving no reply to these
letters within the prescribed time period, Fong returned a
total of $100,000 in contributions from the Sioeng family. At
no time since has Fong received any information from any member
of the Sioeng family concerning the source of those
contributions.122
Jessica elnitiarta's contributions to the DNC
In 1996, Jessica Elnitiarta contributed a total of $250,000
to the Democratic National Committee and attended several DNC-
sponsored events. These contributions appear to have been
arranged by John Huang, who first met Sioeng and Elnitiarta in
1995 at a Chinese community event.123 The available
information concerning these donations is sketchy and further
investigation by other entities may be appropriate.
The Hay Adams fundraiser
According to Elnitiarta, Huang telephoned her in January
1996 regarding a Chinese New Year event, the Asia-Pacific
American Leadership Council Dinner, being sponsored by the DNC
in Washington, D.C., at the Hay Adams Hotel. Elnitiarta invited
her father, Sioeng, on her own and is not aware of any
conversations between Huang and Sioeng regarding this
event.124 On February 10, 1996, Elnitiarta wrote a
check for $100,000 from her personal account to the DNC in
order to secure eight seats at the event, which were priced at
$12,500 each.125 At that time, Elnitiarta's account
had a balance of approximately $10,000. On February 22,
$200,000 was transferred into Elnitiarta's account from Yanti
Ardi's account.126 Ardi's account, in turn, had
received a wire transfer of over $500,000 from the Hong Kong
bank account of Pristine Investments Ltd. on February 12,
1996.127 Prior to that transfer, Ardi's account held
only approximately $3,000.128 Unlike the $30,000
donation to Matt Fong and the $50,000 donation to the NPF,
however, these transfers are not in the same amount of the
contributions, do not occur as closely in time to the
contribution, and Elnitiarta herself (who holds a power of
attorney over Ardi's account) most probably effectuated the
transfer from Ardi's account to her own. These transfers,
therefore, are not as strongly suggestive of contributions in
the name of another. Elnitiarta invited her father, her sister
Sandra Elnitiarta, Sandra's husband, Didi Kurniawan; her
brother, Yopi Gatot Elnitiarta; and two of Sioeng's business
associates.129 Elnitiarta and her husband were also
planning to attend, but did not due to their son's unexpected
illness.130
Hsi Lai Buddhist Temple event
Huang invited Elnitiarta to the Hsi Lai Buddhist Temple
event held in Hacienda Heights, California, on April 29, 1996.
(See Chapter 21.) Elnitiarta claims he invited her because she
had missed the Hay Adams event due to her son's
illness.131 Elnitiarta explained to Committee staff
that one of her sisters, Laureen Elnitiarta, is a Buddhist and
wanted to attend the event for that reason.132
Elnitiarta attended the event with her sister, Laureen, Sioeng
and his wife, and another family member, Sioeng Fei
Man.133 Sioeng sat with Vice President Gore during
the event.134 The Sioengs were not solicited for a
contribution in connection with this event and did not make
one.135
Sheraton Carlton Hotel event
Elnitiarta was contacted again by Huang and invited to
attend an event in May 1996 at the Sheraton Carlton Hotel in
Washington, D.C.136 She, in turn, invited her father
and five others to the event.137 In a fax to ``Uncle
Huang,'' Elnitiarta informed John Huang that in addition to her
father, six other Chinese executives would come to the dinner.
One was Guo Zhong Jian, an officer of the China Construction
Bank. One of four major banks run by Beijing, China
Construction last September became the first Chinese bank since
the laws were tightened after the BCCI scandal in 1991 to win a
federal license to do business in the U.S.138
Elnitiarta made no contributions at the event, but Huang
told her that he would collect a contribution check from her
the next time he was in Los Angeles.139 On July 12,
Elnitiarta wrote a $100,000 check to the DNC from the account
of her real estate company, Panda EstatesInvestment,
Inc.140 This is the same account used by Elnitiarta for her
December 1995 contribution of $50,000 to Matt Fong.141 At
the time the check was cashed, the Panda Estates Investment account had
a small negative balance.142 The monies used to cover this
check came from Panda Estates domestic rental income and Elnitiarta's
transfer of $60,000 from Ardi's account on July 26, 1996.143
Ardi's account, in turn, could not have financed the $60,000 transfer
without the benefit of a deposit of approximately $1.6 million from the
Hong Kong account of R.T. Enterprises, Ltd.--another business with ties
to Sioeng. In addition, Panda Estates Investment, Inc. appears to have
generated sufficient domestic revenues to cover the political
contributions drawn from that account. The Minority's examination of
the bank records of Panda Estates Investment, Inc., shows that the
company enjoyed a rental income of over $900,000 from approximately
mid-1995 through 1996. Nevertheless, the Committee was unable to
satisfactorily resolve the ultimate question of what role, if any, was
played by Sioeng himself in directing the contribution.
Century City event and subsequent $50,000 contribution
As with the previous fundraisers, Elnitiarta was contacted
by Huang about attending a DNC dinner to be held in the Century
City area of Los Angeles on July 22.144 Elnitiarta
brought her father, and Sioeng brought a business partner from
Hong Kong, Lam Kwok Man.145 Sioeng was seated at the
head table next to President Clinton at the
event.146 At Huang's urging, Elnitiarta also agreed
to be responsible for filling an additional five to six
tables.147 These additional invitees did not pay for
their seats.148 According to Elnitiarta, Huang did
not press her for a contribution at the time of the
event.149 On July 29, Elnitiarta wrote a check to
the DNC for $50,000 from the same Panda Estates Investment
account that had funded her July 12 DNC
contribution.150 At this time, the Panda Estates
Investment account did not contain sufficient funds to cover
the contribution.151 However, on August 1 and August
6, Elnitiarta made transfers totaling $47,000 from a different
account maintained by Panda Estate Investment, indicating that
Panda Estates Investment had sufficient funds to cover the
contribution.152 The FBI agent assigned to analyze
the Sioeng bank records concluded that all of the transfers
from Panda Estates Investment's other account was ``supported
by normal account activity'' except for the $60,000 transfer
from Yanti Ardi's account discussed above.153
Huang's internal documents link this $50,000 donation from
Panda Estates to a small fundraiser held on July 30, 1996, at
the Jefferson Hotel in Washington, D.C. that featured President
Clinton and was attended by the following individuals: James
Riady; Taiwanese businessman Eugene T.C. Wu, chairman of the
Shin Kong Group, a conglomerate that includes Taiwan's second-
largest life insurance company; James J.S. Lin, a Taiwan
businessman and associate of Wu's; and Sen Jong (``Ken'') Hsui,
the president of Prince Motors Co. in Taipei and a U.S.
citizen.154 Each of these attendees also brought
their wives and children.155 DNC officials projected
that the dinner would raise $500,000, but of the attendees,
only Hsui was legally permitted to make
donations.156 According to Huang's records, Hsui
contributed only $150,000 and the remaining amount was credited
to individuals who had not attended the event, including
Elnitiarta's $50,000 donation from the Panda Estates account
and an August 2 donation of $131,000 from Laurie M. Jonsson,
the president of a Seattle shipping company.157 When
interviewed, Jonsson disavowed any knowledge of Huang or the
Jefferson Hotel dinner and said she gave $100,000 to become a
designated trustee of the DNC's Women's Leadership Forum and
the other $31,000 for general purposes.158
Elnitiarta also stated that she had no knowledge of the
Jefferson Hotel event.159 It appears to the Minority
that, for reasons unknown, Huang was crediting unrelated
contributions from some donors to the Jefferson Hotel event.
Conclusion
The Committee found clear evidence that Sioeng, a foreign
national, contributed to Republican California State Treasurer
Matt Fong, who returned the contributions two years later. The
Committee also found evidence that suggests that Sioeng may
have participated in directing political contributions made by
his daughter Elnitiarta to both the National Policy Forum and
the Democratic National Committee, although it was unable to
reach any definitive conclusions on this issue. In addition,
our examination of the bank records surrounding the
contributions to both Fong and the NPF has raised serious
questions about the ultimate source of the contributions made
in those instances. The Minority believes that further
investigation by law enforcement authorities into these issues
is clearly warranted.
Regardless of the source of the contributions, the
contributions by the Sioeng family present a stark picture of
how quickly substantial contributions can be translated into
personal access to elected policy makers. The Committee found
no evidence, however, that any member of the Sioeng family
sought to exploit the access they were afforded to lobby on any
particular issue or to receive any favor other than pro forma
letters of support or congratulations.
footnotes
1 Business Week, 8/11/97.
2 Business Week, 8/11/97.
3 Business Week, 8/11/97.
4 Los Angeles Times, 5/18/97.
5 Los Angeles Times, 5/18/97.
6 Los Angeles Times, 5/18/97.
7 Business Week, 8/11/97.
8 INS records.
9 Business Week, 8/11/97.
10 Staff interview with Jessica Elnitiarta, 6/19/97.
11 Los Angeles Times, 5/18/97.
12 Los Angeles Times, 5/18/97.
13 Los Angeles Times, 5/18/97.
14 LA Weekly, 7/4/97.
15 LA Weekly, 7/4/97.
16 LA Weekly, 7/4/97.
17 LA Weekly, 7/4/97 (quoting Anthony Chieng, a
``prominent Chinese-American attorney.')
18 LA Weekly, 7/4/97.
19 Newsweek, 4/28/97.
20 Newsweek, 4/28/97.
21 Staff interview with Jessica Elnitiarta, 6/19/97.
22 Letter from Thomas P. McLish, counsel for Elnitiarta,
to Majority counsel-Special Investigation, 6/18/97
23 Staff interview with Jessica Elnitiarta, 6/19/97;
Letter from Thomas P. McLish, counsel for Elnitiarta, to Majority
counsel-Special Investigation, 6/18/97.
24 Letter from Thomas P. McLish, counsel for Elnitiarta,
to Majority counsel-Special Investigation, 6/18/97.
25 Los Angeles Times, 5/18/97.
26 LA Weekly, 7/4/97; Newsweek, 4/28/97; Newsweek, 6/9/
97.
27 Business Week, 8/11/97; Newsweek, 3/10/97.
28 Newsweek, 4/28/97.
29 Interview with David Ma, 8/24/97.
30 Los Angeles Times, 5/18/97.
31 Interview by FBI detailee with Nancy La, 5/25/97;
letter from Thomas P. McLish, counsel for Elnitiarta, to Majority
counsel-Special Investigation, 6/18/97.
32 Newsweek, 4/28/97.
33 Newsweek, 4/28/97.
34 Newsweek, 4/28/97.
35 Matt Fong deposition, 9/19/97, pp. 7-8.
36 Matt Fong deposition, 9/19/97, p. 8.
37 Matt Fong deposition, 9/19/97, pp. 8-9.
38 Matt Fong deposition, 9/19/97, pp. 8-9.
39 Matt Fong deposition, 9/19/97, p. 9.
40 Matt Fong deposition, 9/19/97, p. 10.
41 Matt Fong deposition, 9/19/97, pp. 14-15.
42 Matt Fong deposition, 9/19/97, p. 25.
43 Matt Fong deposition, 9/19/97, p. 29.
44 Matt Fong deposition, 9/19/97, p. 29.
45 Matt Fong deposition, 9/19/97, p. 36.
46 Matt Fong deposition, 9/19/97, p. 30.
47 Matt Fong deposition, 9/19/97, pp. 30-31.
48 Matt Fong deposition, 9/19/97, p. 54.
49 Matt Fong deposition, 9/19/97, p. 33.
50 Matt Fong deposition, 9/19/97, pp. 34-35.
51 Matt Fong deposition, 9/19/97, p. 34.
52 Matt Fong deposition, 9/19/97, p. 53.
53 Matt Fong deposition, 9/19/97, p. 36.
54 Matt Fong deposition, 9/19/97, pp. 35-37.
55 Los Angeles Times, 2/26/98.
56 Letter from William R. Turner, Treasurer, Matt Fong
for State Treasurer, to Mr. Ted Sioeng, Mr. San Wong Sioeng, requesting
information on legality of contributions, 4/21/97 (copies of
contribution checks dated 4/20/95 and 4/28/95 attached); Letter from
William R. Turner, Treasurer, Matt Fong for State Treasurer, to Mr. Ted
Sioeng, Panda Estates Investment, Inc., requesting information on
legality of contributions, 4/21/97 (copy of contribution check dated
12/14/95 attached).
57 Matt Fong deposition, 9/19/97, p. 23.
58 Matt Fong deposition, 9/19/97, pp. 38-39.
59 Matt Fong deposition, 9/19/97, p. 39.
60 Matt Fong deposition, 9/19/97, p. 39.
61 Matt Fong deposition, 9/19/97, p. 39.
62 Matt Fong deposition, 9/19/97, p. 33.
63 Matt Fong deposition, 9/19/97, p. 23.
64 Staff interview with Jessica Elnitiarta, 6/19/97.
65 2 U.S.C. Sec. 441(e) (prohibiting a foreign national
from participating directly or indirectly in a contribution decision).
\66\ Letter from William R. Turner, Treasurer, Matt Fong for State
Treasurer, to Mr. Ted Sioeng, Mr. San Wong Sioeng, requesting
information on legality of contributions, 4/21/97 (copies of
contribution checks dated 4/20/95 and 4/28/95 attached).
\67\ Check from Glenville A. Stuart to Sioeng San Wong for $30,000,
4/28/95, and Grand National Bank miscellaneous credit slip
acknowledging deposit. [GNB 1280500063]
\68\ Report from Dun's Market Identifiers on ``Sunset Market and
Liquor.''
\69\ Matt Fong deposition, 9/19/97, p. 44.
\70\ Matt Fong deposition, 9/19/97, pp. 44-45.
\71\ Matt Fong deposition, 9/19/97, p. 45.
\72\ Matt Fong deposition, 9/19/97, p. 45.
\73\ Matt Fong deposition, 9/19/97, p. 45.
\74\ Matt Fong deposition, 9/19/97, p. 45.
\75\ Matt Fong deposition, 9/19/97, p. 49.
\76\ Matt Fong deposition, 9/19/97, p. 47.
\77\ Matt Fong deposition, 9/19/97, p. 47.
\78\ Los Angeles Times, 4/22/97.
\79\ Matt Fong deposition, 9/19/97, p. 48.
\80\ Matt Fong deposition, 9/19/97, p. 48.
\81\ Matt Fong deposition, 9/19/97, p. 50.
\82\ Matt Fong deposition, 9/19/97, p. 50.
\83\ Matt Fong deposition, 9/19/97, p. 55.
\84\ Matt Fong deposition, 9/19/97, p. 55.
\85\ Staff interview with Jessica Elnitiarta, 6/19/97.
\86\ Matt Fong deposition, 9/19/97, pp. 49, 54-55.
\87\ Los Angeles Times, 2/25/98.
\88\ Staff interview with Jessica Elnitiarta, 6/19/97.
\89\ Matt Fong deposition, 9/19/97, p. 50; Steve Kinney deposition,
9/23/97, p. 11.
\90\ Matt Fong deposition, 9/19/97, p. 51.
\91\ Steve Kinney deposition, 9/23/97, p. 19.
\92\ Steve Kinney deposition, 9/23/97, p. 19.
\93\ Los Angeles Times , 7/4/97.
\94\ Staff interview with Jessica Elnitiarta, 6/19/97; letter from
Thomas P. McLish, counsel for Elnitiarta, to Majority counsel-Special
Investigation, 6/18/97.
\95\ Staff interview with Jessica Elnitiarta, 6/19/97; letter from
Thomas P. McLish, counsel for Elnitiarta, to Majority counsel-Special
Investigation, 6/18/97.
\96\ Memorandum from Steven E. Hendershot, FBI agent, to Senate
Investigating Team re: ``China Press newspaper article of 7/22/95,''
7/23/97.
\97\ Memorandum from Steven E. Hendershot, FBI agent, to Senate
Investigating Team re: ``China Press newspaper article of 7/22/95,''
7/23/97.
\98\ Memorandum from Steven E. Hendershot, FBI agent, to Senate
Investigating Team re: ``China Press newspaper article of 7/22/95,''
7/23/97.
\99\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\100\ John Bolton deposition, 7/10/97, pp. 66-67.
\101\ Stephen M. Kinney deposition, 9/23/97, pp. 22-23.
\102\ Joseph Robert Gaylord deposition, 9/16/97, p. 35.
\103\ Los Angeles Times, 2/25/98.
\104\ John Bolton deposition, 7/10/97, pp. 67-68.
\105\ Joseph Robert Gaylord deposition, 9/16/97, pp. 42-44.
\106\ Stephen M. Kinney deposition, 9/23/97, p. 23.
\107\ Stephen M. Kinney deposition, 9/23/97, p. 26.
\108\ Matt Fong deposition, 9/19/97, pp. 60-61.
\109\ Matt Fong deposition, 9/19/97, p. 62.
\110\ Matt Fong deposition, 9/19/97, pp. 62-63.
\111\ Matt Fong deposition, 9/19/97, pp. 61-62.
\112\ Letter from William R. Turner, Treasurer, Matt Fong for State
Treasurer, to Mr. Ted Sioeng, Mr. San Wong Sioeng, requesting
information on legality of contributions, 4/21/97 (copies of
contribution checks dated 4/20/95 and 4/28/95 attached); Letter from
William R. Turner, Treasurer, Matt Fong for State Treasurer, to Mr. Ted
Sioeng, Panda Estates Investment, Inc., requesting information on
legality of contributions, 4/21/97 (copy of contribution check dated
12/14/95 attached).
\113\ Matt Fong deposition, 9/19/97, p. 63.
\114\ Staff interview with Jessica Elnitiarta, 6/19/97.
\115\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\116\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\117\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\118\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\119\ Wire of $1 million to Yanti Ardi GNB account no. 240417614
from Pristine Investments Ltd., 9/5/95 [GNB 002970-2972]; Wire of
$928,432.17 to Yanti Ardi's GNB acct no. 240417614 from Pristine
Investments Ltd. [GNB 003000]; Wire of $150,000 to Yanti Ardi's GNB
acct no. 240979814, 12/11/95 [GNB 002888 & 002890]; Wire of $595,283.35
to Yanti Ardi's GNB acct no. 240417614, 1/3/96 [GNB 003030].
\120\ In addition to the monies received from the Sioeng family,
published reports indicate that Fong received at least $24,000 from
sources suspected of channeling contributions to the DNC. Los Angeles
Times, 4/22/97. In 1995, for example, records show that Fong received
$4,000 from two officers of the Lippo Group that were arranged by John
Huang. Los Angeles Times, 4/22/97. Fong acknowledges asking Huang for
help during his campaigns for treasurer and for controller and while he
served on the Board of Equalization, but denies that he asked Huang for
any assistance since the 1994 election cycle. Matt Fong deposition, 9/
19/97, p. 68.
\121\ Letter from William R. Turner, Treasurer, Matt Fong for State
Treasurer, to Mr. Ted Sioeng, Mr. San Wong Sioeng, requesting
information on legality of contributions, 4/21/97 (copies of
contribution checks dated 4/20/95 and 4/28/95 attached); Letter from
William R. Turner, Treasurer, Matt Fong for State Treasurer, to Mr. Ted
Sioeng, Panda Estates Investment, Inc., requesting information on
legality of contributions, 4/21/97 (copy of contribution check dated
12/14/95 attached).
\122\ Matt Fong deposition, 9/19/97, pp. 66-67.
\123\ Staff interview with Jessica Elnitiarta, 6/19/97.
\124\ Staff interview with Jessica Elnitiarta, 6/19/97.
\125\ Staff interview with Jessica Elnitiarta, 6/19/97; Memorandum
from Steven E. Hendershot, FBI agent, to Minority Counsel, re:
``Jessica Elnitiarta Record Review,'' 8/22/97.
\126\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\127\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\128\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\129\ Staff interview with Jessica Elnitiarta, 6/19/97.
\130\ Staff interview with Jessica Elnitiarta, 6/19/97.
\131\ Staff interview with Jessica Elnitiarta, 6/19/97.
\132\ Staff interview with Jessica Elnitiarta, 6/19/97.
\133\ Staff interview with Jessica Elnitiarta, 6/19/97.
\134\ Staff interview with Jessica Elnitiarta, 6/19/97.
\135\ Staff interview with Jessica Elnitiarta, 6/19/97.
\136\ Staff interview with Jessica Elnitiarta, 6/19/97.
\137\ Staff interview with Jessica Elnitiarta, 6/19/97; Los Angeles
Times, 7/4/97.
\138\ Newsweek, 3/10/97.
\139\ Staff interview with Jessica Elnitiarta, 6/19/97.
\140\ Staff interview with Jessica Elnitiarta, 6/19/97.
\141\ Staff interview with Jessica Elnitiarta, 6/19/97.
\142\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\143\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\144\ Staff interview with Jessica Elnitiarta, 6/19/97.
\145\ Staff interview with Jessica Elnitiarta, 6/19/97.
\146\ Los Angeles Times, 7/4/97.
\147\ Staff interview with Jessica Elnitiarta, 6/19/97.
\148\ Staff interview with Jessica Elnitiarta, 6/19/97.
\149\ Staff interview with Jessica Elnitiarta, 6/19/97.
\150\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\151\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\152\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\153\ Memorandum from Steven E. Hendershot, FBI agent, to Minority
Counsel, re: ``Jessica Elnitiarta Record Review,'' 8/22/97.
\154\ POTUS Dinner July 30 Attendees [DNC 000597]; Los Angeles
Times, 2/7/97.
\155\ POTUS Dinner July 30 Attendees [DNC 000597]; Los Angeles
Times, 2/7/97.
\156\ Los Angeles Times, 2/7/97.
\157\ Los Angeles Times, 2/7/97.
\158\ Los Angeles Times, 2/7/97.
\159\ Staff interview with Jessica Elnitiarta, 6/19/97.
PART 1 FOREIGN INFLUENCE
Chapter 8: Jay Kim
In July 1997, Representative Jay Kim (R-Ca.) and his wife,
June Kim, pled guilty to numerous violations of federal
campaign finance laws arising out of his 1992 and 1994
campaigns. The violations were part of a scheme which funneled
over $230,000 in illegal corporate funds, some of which were
directed by foreign nationals, into Representative Kim's
campaigns--the largest amount of criminal campaign violations
ever committed by a member of Congress.1 Five
corporations pled guilty to making the illegal contributions,
and Representative Kim's campaign treasurer, Seokuk Ma, was
convicted of soliciting and accepting illegal contributions.
Some of these violations occurred well after the Kims became
aware that they were targets of a federal investigation.
Federal prosecutors have reportedly argued that Representative
Kim should receive jail time for conduct that was
``substantial, prolonged, deceptive and serious.'' 2
---------------------------------------------------------------------------
Footnotes at end of chapter.
---------------------------------------------------------------------------
Based on the evidence before the Committee, we make the
following findings regarding this matter:
FINDINGS
(1) The Kims appear to have continued some of the same
troubling practices during the 1996 election cycle that laid
the foundation for the criminal misconduct in the prior two
election cycles, including using a campaign treasurer with no
knowledge of federal election law and instructing the treasurer
to sign blank checks and blank Federal Election Commission
forms.
(2) The evidence before the Committee suggests that June
Kim's recently-disclosed book deal with a South Korean
publishing company may be an attempt to inappropriately channel
foreign money to the Kims.
THE KOREA TRADERS CLUB
In July 1992, the Korean-American community of Los Angeles
was reeling from the effects of the riots that had devastated
many neighborhoods in the city earlier that year. In many
instances, angry mobs of looters had targeted Korean-owned
businesses and many of the victims felt that they had not
received adequate protection or attention from the city.
Against this backdrop, an association of businesspeople called
the Korea Traders Club of Los Angeles met on July 16, 1992, to
discuss the recently-announced candidacy of Jay Kim, a
prominent Southern California businessman and member of the
Korean-American community.3 Kim attended the meeting
and was the featured speaker.4 Although many of the
attendees supported his candidacy, the foreign nationals in the
group could not legally direct contributions to his campaign
and corporate funds could not be used under any circumstances
to make direct contributions. Faced with these obstacles, the
members of the club devised a scheme to make illegal campaign
contributions ``in a manner that would prevent them from being
detected by the U.S. Government.'' 5 Following the
meeting, club Chairman Byung Joon Lee, who had presided at the
meeting, sent a letter to members of the club summarizing and
confirming the plan devised at the meeting.6 The
plan provided for the member companies to make their
contributions to the Kim campaign under the names of individual
employees who were United States citizens or permanent
residents.7 These employee ``conduits'' would then
be reimbursed for their contributions.
Five U.S. subsidiaries of corporations headquartered in
Seoul, South Korea, eventually pled guilty to making
contributions pursuant to this scheme and paid fines totaling
$1.6 million. 8 In early September 1992, for
example, three top managers of the Daewoo Corporation,
including the vice-president/general manager, received a total
of $5,000 from the Daewoo Corporation and immediately made
campaign contributions in the same amount to the Kim campaign
committee. 9 Collectively, these five corporations
and their foreign national employees made over $27,000 in
illegal campaign contributions to Representative Kim's 1992
election campaign.
KIM'S CONTRIBUTIONS FROM HIS OWN BUSINESS IN 1992
In addition to the $27,000 in illegal corporate/foreign
national contributions, Representative Kim also funneled at
least $83,000 worth of goods and services from his company, Jay
Kim Associates, into his campaign from March 1992 through July
1993.10 According to press reports, these illegal
contributions included company payments for numerous mailing,
printing, telephone, photocopying, entertainment, and travel
costs of the campaign.11 In addition, the campaign
reportedly received free office space in the company's
headquarters, and benefitted from the services of several
company employees who worked half-time for the campaign while
being paid entirely from company funds.12 Questions
were also raised about Representative Kim's continuing receipt
of a full-time salary from the company even after he was
elected.13
When first confronted with these specific allegations,
Representative Kim blamed any improper campaign expenditures on
the company's financial chief, Fred Schultz, who also served
briefly as campaign treasurer.14 ``If I've done
anything wrong, I believe it's his fault,'' Representative Kim
said. ``It's his job to make sure I don't make a mistake.''
15 Four years after this statement, as discussed in
more detail later in this chapter, Representative Kim has
failed to ensure that his campaign is served by qualified
campaign treasurers. This lapse invites serious skepticism
about whether his future campaign finances will be conducted in
accordance with the law.
THE KIMS' ACCEPTANCE OF CORPORATE FUNDS
Both Representative Kim and his wife, June Kim, have
acknowledged that they knowingly accepted illegal corporate
contributions during the 1992 campaign and concealedthe nature
of those contributions in the election reports they filed with the
Federal Election Commission (``FEC').16 Misreporting was
sometimes accomplished simply by omitting a donor's corporate
designation, such as. ``inc.'' from the names of contributors reported
to the FEC.17 In addition, the Kims pled guilty to knowingly
accepting illegal contributions from Korean Air Travel ($1,000), Daewoo
Electronics ($5,000), Rocket Electric Company, Inc. ($1,000), Pusan
Pipe America, Inc. ($3,000), and Samsung America, Inc.
($10,000).18
June Kim also accepted a $12,000 check that she knew to be
from a corporate account. Although the writer of the check,
David Chang of Nikko Enterprises, had intended to donate $5,000
to President Bush, $5,000 to Sen. Alphonse D'Amato (R-NY), and
only $2,000 to Representative Kim, June Kim filled in her own
name as the payee and deposited the entire amount into her
personal account.19 Representative Kim began listing
the money from Chang as a ``personal loan'' on his financial
disclosure reports in 1994 after FBI agents visited Chang's
office.20 However, when David Chang contacted
Representative Kim to determine why he had not received a
thank-you letter for his contribution, Representative Kim
denied receiving any contribution from Chang.21
After Representative Kim learned that FBI agents had questioned
Chang about the contribution, he encouraged Chang to describe
it as a loan.22 The ``personal loan'' from Chang
does not appear on Representative Kim's latest financial
disclosure statement.23 Representative Kim has
admitted knowing that this was an illegal corporate
contribution. 24 The Kims'' admissions as to the
illegal nature of the corporate contributions made by Pusan,
Rocket Electric, and Nikko brought to $43,000 the total amount
of illegal corporate contributions made during the 1992
campaign.
ACCEPTANCE OF FUNDS FROM FOREIGN NATIONALS
Representative Kim also admitted accepting a $50,000 loan
from a Taiwanese national named Song Nien Yeh in May 1992, and
depositing the loan proceeds into his personal bank account.
Four days later, Kim wrote a $50,000 personal check from that
same account to his campaign committee.25 The next
month, following the same pattern, he arranged for a $30,000
loan from another Taiwanese national. Kim's wife deposited
these funds into their personal joint checking
account.26 Four days later, June Kim wrote a
personal check from that same account for $25,000 to Kim's
campaign committee.27
June Kim also personally laundered two illegal
contributions, each in the amount of approximately $9,000 (in
excess of contribution limits) from Jaycee Kim, a businessman
and father-in-law of Kim's son.28 From September 15,
1992 and continuing to on or about January 24, 1997, at least
one (and sometimes all) of these illegal loans, totaling
$84,000, were misreported by the campaign committee as personal
loans from Jay Kim to the campaign.29
To put these amounts of illegal contributions into
perspective, Representative Kim received $346,218 in
contributions for his initial 1992 primary race, which he won
by 898 votes, or two percent of the total votes
cast.30 Of that total, $146,010 of the contributions
were illegal.31 These illegal contributions
constituted the approximate difference between Representative
Kim's fundraising and that of his two closest
rivals.32 In recommending that Representative Kim
serve time in prison for these violations, the prosecutor
argued that ``[t]he election results might have been different
if defendant Jay Kim had not had the illegal and unfair
advantage of these campaign contributions.'' 33
ALLEGED VIOLATIONS DURING THE FEDERAL INVESTIGATION
Remarkably, the illegal activities of the Kims continued
even after they knew they were under investigation for possible
election law violations, and after the FBI had seized records
from Jay Kim Engineering as part of the inquiry. For example,
in October 1993, June Kim has admitted that she knowingly
accepted a total of $14,000 from Amko Advertising Inc. had
first been deposited with Samas Telecom, the business owned by
Representative Kim's campaign treasurer, and then used by June
Kim to reimburse various individuals for making seemingly legal
campaign contributions.34 In January 1994, June Kim
knowingly accepted illegal corporate contributions totaling
$5,450 from the following seven corporations: Haitai America,
Inc. ($1,000), Bacco, Inc. ($500), Korean Federation of Los
Angeles, Inc. ($500), Sun Princess Cosmetics, Inc. ($2,500),
Dong-A America Corp. ($150), Universal Market Supply Corp.
($600), and Tiger Contract Services, Inc. ($200).35
THE CONVICTION OF KIM'S FORMER CAMPAIGN TREASURER
In his trial in early 1997, Seokuk Ma, Representative Kim's
campaign treasurer during 1994 and 1995, candidly admitted that
he had violated several election laws, but claimed that he did
not do so knowingly because he had received no training or
instruction on how to discharge the responsibilities of a
campaign treasurer. Although the culpability of Representative
Kim in appointing Ma to the position of campaign treasurer was
not addressed during Ma's trial, the record of that proceeding
produced ample evidence that Representative Kim adopted an
attitude of reckless disregard for the legal problems that
political fundraising activities inevitably present.
Ma's trial testimony paints a picture of a moderately
successful businessman who emigrated to this country in 1971
and was very active in the affairs of the Korean-American
community in Southern California.36 Ma became
involved in numerous charitable fundraising activities, but had
never participated in political fundraising until a friend
asked for his assistance in staging an October fundraiser for
Representative Kim's 1992 campaign.37 Ma met
Representative Kim for the first time at that fundraiser, which
surpassed expectations, and was later asked to serve as a
volunteer fundraiser.38 Ma testified that he was
unwilling to say no to such a prominent member of the Korean-
American community, acceded to Representative Kim's request and
assisted in organizing two or three additional fundraising
events over the next year.39 During this entire
time, Ma had no familiarity with U.S. election laws and turned
all proceeds from such fundraisers over to June Kim, whom Ma
understood to be ``the person in charge of financial matters
for the Kim campaign.'' 40
In April 1994, as Representative Kim was preparing to make
his first run for reelection, his campaign office presented Ma
with an FEC document designating him as campaign treasurer and
asked him to sign it. As Ma describes it, this was not a
momentous occasion for him: ``[T]hey bring this one sheet of
paper with a blank. They want me to sign, so I sign it.''
41 Ma received no special training or instruction of
any kind with respect to FEC regulations or federal election
law.42 Correspondence from the FEC addressed to the
campaign treasurer, including guides explaining federal
campaign laws, was never forwarded to Ma.43 During
this time, June Kim presented at least two totally blank FEC
disclosure forms to Ma for his signature. These FEC disclosure
forms were filled in by campaign staff and later filed as the
April 15, 1994, and December 2, 1994, reports from the Kim
campaign.44 When asked why he had signed these forms
in blank when his signature constituted a verification that the
contents of the document were accurate, Ma explained: ``I
respecting congressman very much. He's a very successful man.
And also Mrs. Kim is Congressman Kim's wife. They asking me do
something like that, I cannot refuse because I trusted them.
Our culture is very different to explain, but . . . if I say
no, it's kind of insult to them . . .'' 45 Ma also
explained that, although he technically had authority over
Representative Kim's campaign account, June Kim invariably only
presented him with blank checks to sign.46 As Ma
testified, ``always a blank check, 20 stack of blank check they
gave to me, want me to sign it, I sign it.'' 47
Ma also testified that he had used $14,000 from his own
business to reimburse individuals whom he had asked to make
contributions to Representative Kim.48 Based partly
on Ma's testimony, June Kim pled guilty to knowingly accepting
these same illegal contributions, as well as illegal
contributions from other sources.49 Although both
individuals sought to evade U.S. election law, the outcomes
were not the same. As Ma noted in his deposition, ``I tell the
truth, that's what happened. So I got that count also. My case
that's the felony; her case that's the misdemeanor.''
50
POSSIBLE ELECTION LAW VIOLATIONS DURING THE 1996 CYCLE
Ma testified during his trial that he violated election
laws as recently as 1996 by reimbursing his secretary and her
husband for contributions to the Kim campaign.51
When asked about these revelations of recent election law
violations, Ma explained that the pressure for money continued
even after he was replaced as the campaign treasurer in 1995.
``I heard a lot of times every time campaign fund is not
enough, campaign fund is not enough, all the time I hear from
both Jay Kim and June Kim. I feel like--feel guilty, I trying
to help them. So I had $1,000 donation 1996 election, so my
limit, my limit is $1,000, so I trying to help the last time,
so I used my secretary name and her husband.'' 52
This account of the unrelenting pressure being placed on Ma to
come up with additional contributions is especially damning
when one considers that June Kim knowingly accepted at least
$14,000 in illegal contributions from Ma in 1994.
June Kim had removed Ma as campaign treasurer when she
learned that he was being investigated by the FBI with respect
to election law violations.53 Then, in 1996, with a
federal investigation ongoing, both she and her husband
continued to pressure this sameindividual to arrange additional
contributions. Ma conceded that June Kim had personally received the
checks in question and that she knew Ma's secretary, but he claimed
that June Kim would not know that they would be unlikely to be able to
afford such contributions.54 Nevertheless, his testimony in
this regard is perhaps even more revealing than any attribution of
direct knowledge. Ma testified that ``[O]h, she knows my secretary, but
like she has ability contributing that $500 or not, June Kim don't
know. Actually, she don't care.'' 55 Ultimately, the jury
rejected Ma's defense and required him to accept responsibility for his
actions in violating federal election laws. Although, as detailed
above, the Kims pled guilty to certain misdemeanor violations, it
appears to the Minority that they have yet to accept responsibility for
the role they played in fostering an atmosphere in which so many
violations could occur.
kim's commitment to compliance WITH U.S. ELECTION LAWS
According to one press report, Representative Kim once
characterized U.S. election laws as ``stupid'' and compared
violations to ``jaywalking.'' 56 Later, in a brief,
written statement released to the press upon the announcement
of his guilty plea last August, Representative Kim remarked
that ``[w]ith many lessons learned, it is time to move
forward.'' 57 Based on the depositions of his
current campaign staff conducted by the Committee, it appears
that few lessons have, in fact, been learned. Most notably, the
Committee deposed his current campaign treasurer, Moon Jae Lee.
Lee is a grocery store operator and a friend of Seokuk Ma who
has served as Representative Kim's treasurer since
approximately February 1995.58 When June Kim
indicated to Ma that she wished to replace him as campaign
treasurer because of the FBI investigation, Ma testified that
she asked him, ``You have any friends, anybody, maybe can sign,
just like [you]?'' 59
June Kim's search for someone who would ``sign just like''
Ma appears to have been successful. Moon, who agreed to assume
the non-paying title as a favor to both Ma and
Kim,60 candidly related that his only duties as
Representative Kim's campaign treasurer are to sign batches of
blank checks from the campaign account presented to him by
either Mrs. Kim or the campaign's sole staffer at the present
time, assistant treasurer Inyoung Brazil.61 Moon
does not receive or review the bank statements for the campaign
account and has only visited the campaign office twice during
his tenure as campaign treasurer.62 All of the
campaign's financial records and finance reports are the
responsibility of Brazil, a campaign staffer who works only
part-time during non-election years.63 Neither Lee
nor Brazil could offer any explanation of why the
responsibilities of the campaign treasurer were so narrowly
defined.64 Lee does not sign FEC disclosure reports
for the campaign,65 but Ma testified that Lee had
told him that June Kim had asked Lee to sign a blank FEC
disclosure report.66 According to Ma, Lee refused
this request.67 Lee, for his part, denied that June
Kim had ever made this request of him.68
Minimal as they are, Lee testified that he has grown tired
of his duties as campaign treasurer (he appeared before grand
juries both in 1995 and early 1997) and that he has indicated
to both June Kim and Representative Kim since early 1997 that
he would like to resign from the position.69
According to Lee, his meeting with Representative Kim in the
spring of 1997 expressed his desire to resign was the first and
only time he had met Representative Kim during the more than
two years as his campaign treasurer.70 A replacement
could not be found and Lee was asked to continue as treasurer
while the search continues.71 The Kims' insistence
on giving campaign treasurers the authority to sign campaign
checks without providing them with any real responsibility to
ensure that such authority is properly exercised is extremely
disturbing given the long history of election law violations
and the imminence of the 1998 elections.
the kims' book deal
Although questions of inappropriate remuneration from book
deals generally raise questions of ethical violations rather
than election law violations, circumstances surrounding the
Kims' consecutive book deals with South Korean publishing
houses raise troubling questions about whether foreign business
or governmental interests are seeking to funnel money to
support Representative Kim personally. These concerns are
heightened by the testimony of Jane Chong, a former Kim
campaign treasurer, that Representative Kim had planned a trip
to Korea in 1993 during which he intended to raise substantial
amounts of money.72 Chong testified that the trip
was canceled only after a Los Angeles Times series reporting on
Representative Kim's 1992 election law violations was published
in July 1993.73
The year after the cancellation of the South Korean
fundraising trip, Representative Kim secured a lucrative
contract for his book I'm Conservative.74 The
Congressman's book was written in Korean and published by a
small, Seoul-based publishing company.75 In August
1995, Representative Kim filed a financial disclosure form that
revealed that he had been required to refund $132,298 in book
``proceeds'' pursuant to a May 15 Ethics Committee
decision.76 Although the House ethics decision in
question is not public, the House ethics manual specifies that
for income to be valid ``a book must be published by an
established publisher pursuant to a usual and customary royalty
agreement.'' 77 According to a Korean specialist at
the Library of Congress, the amount of ``proceeds'' reported by
Representative Kim would suggest that his book was extremely
successful in South Korea, which has a relatively small book
market by American standards.78
Later in 1995, June Kim's own memoirs, There Is An
Opportunity, were published in Korea by Hantutt Publishing Co.,
another small, Seoul-based company that is listed in a
publishing directory as specializing in finance and technical
books.79 Representative Kim's financial disclosures
reveal that his wife has earned between $125,000 and $1.05
million from this book deal. Seokuk Ma, however, stated in his
deposition that he had heard only negative reactions to June
Kim's book from inside Korea.80 Since the ethics
restrictions are less onerous with respect to books published
by the spouse of a member, these circumstances raise troubling
questions about whether this second, lucrative book, published
by a relatively unknown Korean company, without apparent
experience in marketing political memoirs is actually a second
attempt to channel funds inappropriately to the Kims. Such
actions may represent a criminal attempt to circumvent U.S.
laws which prohibit foreign political contributions. Given the
potential seriousness of the alleged wrongdoing, investigation
of these issues by the House Ethics Committee, the Department
of Justice and the Federal Elections Commission is also
merited.
conclusion
The Minority's investigation of Representative Kim was
conducted by Minority staff and uncovered evidence of foreign
contributions and systemic inadequacies in complying with
federal election laws--both of which are issues that were
highly relevant to the Committee's investigation. It is
revealing that the Committee confined its investigation of
foreign money to allegations concerning the Democratic
administration.
footnotes
\1\ Washington Post, 2/7/98.
\2\ Washington Post, 2/7/98.
\3\ Plea and Sentencing Agreement, p. 5, United States v. Daewoo
International (America) Corporation, No. CR 96-340, 3/26/96.
\4\ Plea and Sentencing Agreement, p. 5, United States v. Daewoo
International (America) Corporation, No. CR 96-340, 3/26/96.
\5\ Plea and Sentencing Agreement, p. 5, United States v. Daewoo
International (America) Corporation, No. CR 96-340, 3/26/96.
\6\ Plea and Sentencing Agreement, p. 5, United States v. Daewoo
International (America) Corporation, No. CR 96-340, 3/26/96.
\7\ Plea and Sentencing Agreement, p. 5, United States v. Daewoo
International (America) Corporation, No. CR 96-340, 3/26/96.
\8\ Associated Press, 8/1/97.
\9\ United States v. Daewoo International (America) Corporation,
No. CR 96-340 (C.D. Ca.), Plea and Sentencing Agreement, p. 6, 4/12/96.
\10\ United States v. Jay C. Kim, et al., Plea Agreement, p. 8, 7/
31/97.
\11\ Los Angeles Times, 7/14/93.
\12\ Los Angeles Times, 7/14/93.
\13\ Los Angeles Times, 7/14/93.
\14\ Los Angeles Times, 7/14/93.
\15\ Los Angeles Times, 7/14/93.
\16\ United States v. Jay C. Kim, et al., Plea Agreement, p. 9, 7/
31/97.
\17\ United States v. Jay C. Kim, et al., Plea Agreement, p. 9, 7/
31/97.
\18\ United States v. Jay C. Kim, et al., Plea Agreement, p. 11, 7/
31/97.
\19\ United States v. Jay C. Kim, et al., Plea Agreement, p. 9, 7/
31/97; Los Angeles Times, 8/19/97.
\20\ Los Angeles Times, 8/19/97.
\21\ Los Angeles Times, 8/19/97.
\22\ Washington Post, 2/7/98.
\23\ Los Angeles Time, 8/19/97.
\24\ United States v. Jay C. Kim, et al., Plea Agreement, p. 9, 7/
31/97.
\25\ United States v. Jay C. Kim, et al., Plea Agreement, p. 10, 7/
31/97.
\26\ United States v. Jay C. Kim, et al., Plea Agreement, p. 10, 7/
31/97.
\27\ United States v. Jay C. Kim, et al., Plea Agreement, p. 10, 7/
31/97.
\28\ United States v. Jay C. Kim, et al., Plea Agreement, p. 10, 7/
31/97.
\29\ United States v. Jay C. Kim, et al., Plea Agreement, p. 10, 7/
31/97.
\30\ Washington Post, 2/7/98.
\31\ Washington Post, 2/7/98.
\32\ Washington Post, 2/7/98.
\33\ Washington Post, 2/7/98.
\34\ United States v. Jay C. Kim, et al., Plea Agreement, p. 11, 7/
31/97.
\35\ United States v. Jay C. Kim, et al., Plea Agreement, p. 11, 7/
31/97.
\36\ Trial transcript (Direct of Seokuk Ma), pp. 8-11, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\37\ Trial transcript (Direct of Seokuk Ma), pp. 8-11, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\38\ Trial transcript (Direct of Seokuk Ma), pp. 12-16, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\39\ Trial transcript (Direct of Seokuk Ma), pp. 17-20, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\40\ Trial transcript (Direct of Seokuk Ma), pp. 23-24, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\41\ Trial transcript (Direct of Seokuk Ma), pp. 57-58, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\42\ Trial transcript (Direct of Seokuk Ma), pp. 58, United States
v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\43\ Trial transcript (Direct of Seokuk Ma), p. 59, United States
v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97; Los Angeles Times, 4/10/
97.
\44\ Trial transcript (Direct of Seokuk Ma), p. 58, United States
v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97; Los Angeles Times, 4/10/
97.
\45\ Trial transcript (Direct of Seokuk Ma), pp. 62-63, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\46\ Seokuk Ma deposition, 9/19/97, p. 10: ``June Kim called me,
sign the check, blank check, campaign check, without any contents. I
just sign it. She bring 20 sometimes or 40. I sign it.''
\47\ Trial transcript (Direct of Seokuk Ma), p. 58, United States
v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\48\ Trial Transcript (Cross/Redirect of Seokuk Ma), p. 13, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\49\ United States v. Jay C. Kim, et al., Plea Agreement, p. 9, 7/
31/97; Seokuk Ma deposition, 9/19/97, p. 43: ``That's why I tell the
truth; that's why she got that guilty.''
\50\ Seokuk Ma deposition, 9/19/97, p. 43.
\51\ Trial transcript (Cross/Redirect of Seokuk Ma), p. 14, United
States v. Seokuk Ma, No. CR 96-1141(B) -R, 4/11/97.
\52\ Seokuk Ma deposition, 9/19/97, p. 25-26.
\53\ Seokuk Ma deposition, 9/19/97, p. 13: ``[T]he reason for June
Kim change me, title as treasurer, because at that time I investigated
by the FBI. He asking me questions. So I talk to June Kim, `Oh, yes, I
talk with the FBI.' and then since that time, she--in her mind, she's
going to change me.''
\54\ Seokuk Ma deposition, 9/19/97, p. 30.
\55\ Seokuk Ma deposition, 9/19/97, p. 30.
\56\ Los Angeles Times, 2/7/98.
\57\ Los Angeles Times, 8/1/97.
\58\ Moon Lee deposition, 10/1/97, pp. 7-9.
\59\ Seokuk Ma deposition, 9/19/97, p. 13.
\60\ Moon Lee deposition, 10/1/97, p. 29.
\61\ Moon Lee deposition, 10/1/97, pp. 11-12.
\62\ Moon Lee deposition, 10/1/97, pp. 12-14 & 30.
\63\ Inyoung Brazil deposition, 10/1/97, pp. 8-15.
\64\ Inyoung Brazil deposition, 10/1/97, pp. 19-20.
\65\ Inyoung Brazil deposition, 10/1/97, p. 17.
\66\ Seokuk Ma deposition, 9/19/97, p. 19.
\67\ Seokuk Ma deposition, 9/19/97, p. 19.
\68\ Moon Lee deposition, 10/1/97, pp. 14-16.
\69\ Moon Lee deposition, 10/1/97, pp. 23-25.
\70\ Moon Lee deposition, 10/1/97, pp. 23-26.
\71\ Moon Lee deposition, 10/1/97, p. 25.
\72\ City News Service of Los Angeles, 4/10/97.
\73\ City News Service of Los Angeles, 4/10/97.
\74\ The Hill, 8/6/97.
\75\ The Hill, 8/6/97.
\76\ The Hill, 8/6/97.
\77\ The Hill, 8/6/97.
\78\ The Hill, 8/6/97.
\79\ The Hill, 8/6/97.
\80\ Seokuk Ma deposition, 9/19/97, p. 32.
PART 2 INDEPENDENT GROUPS
Chapter 9: Overview and Legal Analysis
FINDINGS
(1) Independent groups, including tax-exempt organizations,
corporations and unions, spent large sums of money to influence
the public's perception of federal candidates and campaigns and
the outcome of certain elections in 1996.
(2) During the 1996 election cycle, tax-exempt
organizations spent tens of millions of dollars on behalf of
Republican and Democratic candidates under the guise of issue
advocacy, in violation of the spirit and possibly the letter of
the tax code and election laws. Despite their election-related
activity, none of these organizations registered with or
disclosed their activities to the FEC. Moreover, because of
restrictions in the tax code with respect to such tax-exempt
organizations, these organizations may have violated their tax
status.
(3) Although many groups conduct activities that influence
the public's perception of federal candidates and campaigns,
they either are not required, or do not, register with or
disclose their activities with the FEC.
OVERVIEW OF FOLLOWING CHAPTERS
One of the striking differences between the 1996 elections
and prior elections was the prominent role played by groups
that never registered with the Federal Election Commission
(FEC) as campaign organizations.\1\ These groups included tax-
exempt charities, social welfare organizations, labor unions
and corporations. Some groups ran television ads attacking
candidates, conducted direct mail and telephone bank operations
targeting voters, distributed voter guides, increased voter
turnout, advised campaigns, and attended weekly meetings
discussing candidates and campaign strategy. These groups spent
millions of dollars on activities designed to affect the
outcome of federal elections in 1996, yet none disclosed their
contributions or expenditures to the public or acknowledged
that federal campaign laws applied to their operations.
---------------------------------------------------------------------------
Footnotes at end of chapter.
---------------------------------------------------------------------------
The Committee hearings provided an invaluable opportunity
to examine the role of these groups during the 1996 election
cycle. The hearings could have examined, in a systematic way,
whether national political parties used these groups to
circumvent federal contribution limits and disclosure
requirements; whether the persons directing the organizations
deliberately evaded federal election law requirements or abused
an organization's tax-exempt status; and whether the relevant
federal election or tax laws require strengthening. Instead,
the Majority failed to conduct a vigorous investigation,
rejected Minority requests to hold hearings on specific
groups,and left the legislative issues largely unexamined.
One key difficulty was the refusal of many groups to
cooperate with the Committee's investigation. 2 Some
simply asserted that they had never engaged in election-related
activity and were outside the scope of the Committee's
investigation. Others claimed that the First Amendment
protected them from inquiry. The vast majority of subpoenaed
groups refused, in whole or in part, to respond to Committee
requests for interviews and documents. Faced with widespread
resistance, the Majority lacked the political will to enforce
the subpoenas issued, compel document production and deposition
testimony, or hold public hearings and confront the groups. It
settled instead for four days of hearings in which academics
and public interest organizations discussed the problem
generally and urged campaign finance reform.3
Despite the absence of a vigorous investigation and in-
depth hearings, available evidence demonstrates that a number
of independent groups engaged in partisan, election-related
activities in 1996, that some of these groups coordinated their
activities with a political party or candidates, and that
additional investigation by the U.S. Departments of Justice and
Treasury and the FEC is warranted. The evidence also
demonstrates that legislation is needed, not to halt election-
related activities by independent groups, but to bring their
efforts within the existing legal requirements for contribution
limits and disclosure.
1996 election-related activities
During the 1996 election cycle, both parties benefited from
the expenditures and activities of independent groups. The most
visible example is televised ads. A study conducted by a
nonpartisan organization, the Annenberg Public Policy Center,
estimated that, during the 1996 election cycle, independent
groups spent between $67 and $82 million on televised ads that
split about evenly in their support of the two
parties.4 Almost 90 percent of these ads named
specific candidates.5 Groups like the AFL-CIO,
Citizen Action, Citizens for Reform, and Citizens for the
Republic Education Fund each spent millions of dollars on these
televised ads.
While both parties benefited from the activities of
independent groups, the evidence before the Committee indicates
that the Republican National Committee (``RNC'') organized and
financed independent group activities to a much greater extent
than did the Democratic National Committee (``DNC'') during the
1996 election cycle. For example, FEC records indicate that, in
1996, the RNC gave nearly $6 million to tax-exempt
organizations,6 or 30 times more than the DNC which
gave less than $185,000.7 Documents produced by the
parties indicate that, while both asked supporters to make
contributions to sympathetic groups, the RNC explicitly planned
to raise millions of dollars for certain pro-Republican groups
and actually collected and delivered specific checks to
them.8 Documents produced to the Committee also
indicate that the Republican Party worked to identify, on a
national and regional level, the groups most likely to help
Republican candidates win office; 9 instructed its
candidates to develop formal ``coalition plans'' with
sympathetic groups; 10 and distributed a ``coalition
building manual'' to help them do so.11 No
comparable manual, memoranda or any other evidence before the
Committee indicates this level of effort by the Democratic
Party. The evidence before the Committee also suggests that the
RNC undertook a wide variety of specific election-related
activities with independent groups, including joint issue
advocacy efforts, joint polling and joint election strategy
sessions; the evidence does not support a similar level of
coordination between the DNC and independent groups sympathetic
to Democratic candidates.12
The following chapters describe the parties' interactions
with independent groups, the 1996 election-related activities
of a few of the most active organizations, and a brief
description of allegations involving other groups. Because the
Committee did not hold hearings or enforce its document and
deposition subpoenas, the available information is limited, and
many unanswered questions remain. However, the types of
campaign activities undertaken, the unmistakable signs of
coordination with political parties and candidates, and the
millions of dollars involved provide overwhelming evidence that
independent groups were significant players in the 1996
election cycle.
On the Republican side, the following chapters chronicle
how the RNC developed plans and worked with outside groups to
affect the outcome of the 1996 elections; Americans for Tax
Reform used $4.6 million in RNC soft dollars to conduct a
direct mail and telephone bank operation in 150 Congressional
districts countering anti-Republican ads on Medicare; Triad
Management formed and directed two tax-exempt organizations to
run over $3 million in televised ads attacking Democratic
candidates; and the Christian Coalition spent at least $22
million and distributed 45 million voter guides before election
day, manipulating the information in those guides to favor
Republican candidates. On the Democratic side, the chapters
examine the AFL-CIO's $35 million televised ad and get-out-the-
vote efforts; Ickes' recommendation that Warren Meddoff
contribute $1 million to specified pro-Democratic groups; the
Teamsters' contribution-swapping schemes with other independent
groups and attempt to involve the DNC; and contributions
directed by Democratic officials to Vote Now '96.
Corporations, unions and other independent groups are
legally permitted to participate in federal election activity
if they comply with federal requirements for contribution
limits and disclosure. The complaint with these groups in the
1996 election cycle is that they sought to affect election
outcomes, while evading the contribution limits and disclosure
requirements that apply to other entities engaged in campaign
activities. It is this evasion of the law, and the resulting
erosion of public confidence in the federal campaign finance
system, that has made the election activities of independent
groups such a serious concern.
LEGAL ANALYSIS
Some of the activities engaged in by independent groups
during the 1996 election cycle raise issues invoking both
federal election law and federal tax law. While some of the
campaign restrictions set out in these laws are clear, other
provisions provide insufficient guidance on what conduct is
lawful, while ambiguities in other provisions may hinder
criminal prosecutions and civil enforcement actions in this
area. As with the provisions banning foreign contributions,
legislation is needed to strengthen and clarify the laws
applicable to independent groups engaged in campaign activity.
Categories of independent groups
The groups examined include a variety of organizations
whose common denominator is a claim of independence from any
political party, candidate or campaign committee, and a refusal
to report contributions or expenditures to the Federal Election
Commission.
Two types of groups that raised considerable concern during
the 1996 elections are charitable and social welfare
organizations exempt from taxation under section 501(c) of the
Internal Revenue Code.13 Historically, these
organizations have not engaged in significant election activity
due to constraints in federal tax law.
Section 501(c)(3) exempts from taxation organizations
organized and operated for ``religious, charitable, scientific
. . . educational'' and similar purposes. Unique among 501(c)
tax exempts, donors to 501(c)(3) charitable organizations are
allowed to deduct from their federal income tax a portion of
their donations. The statute explicitly prohibits these
charitable organizations from engaging in any campaign
activity, stating that the exemption covers only an
organization ``which does not participate in, or intervene in
(including the publishing or distributing of statements), any
political campaign on behalf of (or in opposition to) any
candidate for public office.'' 14 In addition, the
statute prohibits section 501(c)(3) charitable organizations
from operating for the benefit of any private interest,
including a political party.15 Conferring such a
private benefit violates the organization's tax exempt status
and provides grounds for denying or terminating an
exemption.16 Examples of charitable organizations
active during the 1996 election cycle are Vote '96 and the
Americans for Tax Reform Foundation.
Social welfare organizations are exempt from taxation under
section 501(c)(4) of the Internal Revenue Code. To qualify for
this exemption, social welfare organizations must engage in
activities that promote ``the common good and general welfare
of the people of the community.'' 17 The
implementing regulation states, ``The promotion of social
welfare does not include direct or indirect participation or
intervention in political campaigns on behalf of or in
opposition to any candidate for public office.'' 18
This regulation has been interpreted as prohibiting social
welfare organizations from engaging in campaign activity as
their primary pursuit, but allowing them to engage in it as a
secondary pursuit.19 Any campaign activity engaged
in must be nonpartisan, so that the organization does not
confer a private benefit on a particular political
party.20 In contrast to charitable organizations
under section 501(c)(3), donations to 501(c)(4) organizations
are not deductible by the donor. Examples of 501(c)(4)
organizations active during the 1996 election cycle are
Americans for Tax Reform and Citizen Action. Others, including
the National Policy Forum and Christian Coalition, presented
themselves as 501(c)(4) organizations, despite the fact that
during the 1996 election cycle their applications were still
pending before the IRS.
Two other types of independent groups are labor unions and
corporations. Both are prohibited under 2 USC 441b from making
campaign contributions or expenditures exceptthrough a
separately established political committee or segregated fund that
registers with the FEC, complies with contribution limits, and
discloses its contributions and expenditures.21 Campaign
restrictions on corporations have been part of federal law for 90
years, while restrictions on unions have been in place for more than 50
years.22 The Supreme Court has repeatedly upheld their
constitutionality.23 Despite this history, the advent of the
soft money and issue advocacy loopholes led to an explosion in
corporate and union spending and activism during the 1996 election
cycle.24 Two examples in the 1996 election cycle are the
AFL-CIO and Triad Management.
Each of these four types of groups--charitable and social
welfare organizations, unions and corporations--has social and
economic objectives apart from electioneering. They are not
campaign organizations like the RNC, DNC, candidate committees,
and corporate and union PACs, which register with the FEC under
2 USC 431(4) for the purpose of influencing federal elections
and which file under section 527 of the federal tax code for
groups organized and operated for the purpose of influencing
elections.25 But all four have become increasingly
important players in federal elections.
Disclosure
RNC chairman Haley Barbour announced at a press conference
on October 29, 1996, ``Disclosure of contributions and
expenditures, shining the bright light of public scrutiny, is
the fundamental principle underlying our campaign finance
laws.'' 26 During the 1996 election cycle, however,
many independent groups never disclosed their election-related
activities, contending primarily that they were engaged in
issue advocacy efforts outside the jurisdiction of federal
election laws. Efforts by the media to investigate televised
ads attacking candidates on the eve of election day, sponsored
by groups with unfamiliar names and no readily available
spokesperson, were time-consuming and often
unsuccessful.27 Even after a year-long Senate
investigation, due to the absence of FEC reports and the
groups' defiance of Senate subpoenas, this Committee has
limited information about their 1996 election activities.
The initial legal analysis is to determine, on a case-by-
case basis, whether any of these groups violated federal
election law disclosure requirements. The issues include
whether a particular group qualified as a political committee
under 2 USC 431(4) subject to the reporting obligations in 2
USC 434(a); or whether the group made ``independent
expenditures'' expressly advocating the election or defeat of a
clearly identified candidate subject to the reporting
obligations in 2 USC 434(c). While straightforward in some
respects, these federal disclosure requirements contain many
ambiguities that render enforcement uncertain and difficult.
These provisions would clearly benefit from legislation
clarifying when groups must register as political committees
and what expenditures qualify as independent expenditures,
including better statutory tests to distinguish between
candidate versus issue advocacy. Another possible approach is
legislation which, rather than improving the tests for
distinguishing candidate versus issue advocacy, would instead
require greater disclosure of issue advocacy efforts that name
candidates or take place close in time to federal
elections.28
Coordination
Another relevant legal inquiry concerns coordination,
specifically whether any of the independent groups was
coordinating its efforts during the 1996 election cycle with a
political party, political committee or candidate. In Buckley
v. Valeo, 424 U.S. 1, 47 (1976), the Supreme Court held that
``expenditures placed in cooperation with or with the consent
of a candidate, his agents, or an authorized committee of the
candidate'' are to be treated ``as contributions subject to the
limitations'' on contributions in federal election law. The
Court held that this approach was necessary to ``prevent
attempts to circumvent the Act through prearranged or
coordinated expenditures amounting to disguised
contributions.'' 29 The Court explicitly upheld
disclosure requirements directed to independent groups--
``individuals and groups that are not candidates or political
committees''--for expenditures on ``communications that
expressly advocate the election or defeat of a clearly
identified candidate,'' and for coordinated political
expenditures ``authorized or requested by a candidate or his
agent.'' 30
Twenty years later, in Colorado Republican Federal Campaign
Committee v. FEC, 116 S.Ct. 2309 (1996), the Supreme Court
reaffirmed this approach. The Court stated that Buckley upheld
the constitutionality of contribution limits ``that apply both
when an individual or political committee contributes money
directly to a candidate and also when they indirectly
contribute by making expenditures that they coordinate with the
candidate.'' 31 The Court distinguished between
``coordinated'' and ``independent'' expenditures, holding that
only coordinated expenditures are limited by the Federal
Election Campaign Act (``FECA'').32 The Court also
rejected the proposition that party expenditures should be
treated, without exception, as having been coordinated with the
party's candidates, holding instead that a party has a
constitutional right to make independent expenditures and must
be given an opportunity to demonstrate the absence of candidate
coordination with respect to a particular party expenditure.
Section 441a(a)(7)(B)(i) of FECA states that, for purposes
of applying the law's contribution limits, ``expenditures made
by any person in cooperation, consultation, or concert, with,
or at the request or suggestion of, a candidate, his authorized
political committees, or their agents, shall be considered to
be a contribution to such candidates.''
The significance for independent groups is twofold. First,
if an independent group coordinates expenditures with a
political party, campaign committee or candidate, its
expenditures must be considered contributions subject to FECA's
contribution limits and disclosure requirements. Second, if the
independent group hides its coordinating activity, the group
opens itself up to the charge that it is hiding contributions
and deliberately circumventing federal contribution limits and
disclosure requirements.
The issue of what actions constitute coordination is still
largely unresolved. New regulations, ongoing litigation and FEC
enforcement actions are tackling a variety of questions in this
area. For example, in March 1996, the FEC issued new
regulations which state in part that a corporation or union
distributing candidate voting guides to the general public
``shall not contact or in any other way act in cooperation,
coordination, or consultation with or at the request or
suggestion of the candidates.'' 33 In Clifton v.
FEC, 114 F.3d 1309 (1st Cir. 1997), the First Circuit struck
down the part of the regulation that completely prohibited oral
contact with a candidate as overly restrictive and without
statutory authorization.34 The court held that,
while it ``readily accept[s] that the government has an
interest in unearthing disguised contributions,'' 35
contacts such as simply asking a candidate for his or her
position on an issue are not enough to establish coordination:
[E]xpenditures directed by or `coordinated' with the
candidate could be treated as contributions; but
`coordination' in this context implie[s] some measure
of collaboration beyond a mere inquiry as to the
position taken by a candidate on an issue.36
The FEC is currently engaged in drafting regulations on
coordination, but has yet to issue them.
A few FEC enforcement actions provide further guidance. In
July 1996, for example, the FEC brought an enforcement action
in federal court alleging that the Christian Coalition had
coordinated expenditures during the 1990, 1992 and 1994
election cycles with federal House, Senate and Presidential
candidates and their campaigns, thereby, inter alia, making
illegal corporate contributions in violation of 2 USC
441b.37 The complaint cited coordinated expenditures
made by the Christian Coalition for voter identification and
get-out-the vote efforts, the preparation and distribution of
voter guides, and public communications expressly advocating
the election or defeat of clearly identified candidates. To
date, no court has ruled on the merits of this complaint. The
FEC has also settled two enforcement actions against
independent groups for coordinating their actions with
candidates, obtaining conciliation agreements in which each
group admitted violating FECA. One action was brought against
Americans for Tax Reform (``ATR'') in 1986 for coordinating
with candidates on the timing and distribution of media
advisories related to ATR's Taxpayer Pledge
Program.38 Another was brought ten years later, in
1996, against the Hyatt for Senate campaign committee and Hyatt
Legal Services corporation for using a campaign media adviser
to re-write television commercials broadcast by the
corporation.39 These two settlements were not tested
in court.
A key legal issue now being litigated is the question of
whether the Supreme Court holdings on coordination are limited
to coordinated expenditures which expressly advocate the
election or defeat of a candidate or whether they extend to
expenditures for issue advocacy. On September 25, 1997, several
federal election law experts testified before the Committee
that, while the law is unsettled on this point, their view was
that the Supreme Court holdings did extend to issue
advocacy.40 Lawrence Noble, the FEC's general
counsel, testified that it is the FEC's position that issue
advocacy paid for by an independent group and coordinated with
a candidate may result in a contribution to the candidate, if
the issue advocacy contains an ``electioneering message.''
41 He testified that an issue ad with no
electioneering content would not be affected by FECA, using the
example of an ad broadcast by the Red Cross and coordinated
with a candidate in which the candidate urges the public to
join a blood drive.42 He testified that, in the view
of the FEC, coordinated issue ads which fall short of expressly
advocating the election or defeat of a candidate, but which do
convey an electioneering messagebenefiting the candidate,
result in a contribution. He said that the FEC was currently involved
in litigation to determine if this position is correct. A second
witness, former FEC Chairman Trevor Potter, testified that ``whether it
is express advocacy, or issue advocacy, or anything else, it is
relevant to ask in the case of a nonparty organization whether the
spending . . . was, in fact, directed and controlled by the
candidate.'' 43 Both Noble and Potter testified that a
different legal analysis would apply to coordination involving only a
party and its candidate--and not an independent group--due to a
longstanding legal presumption that coordination between a party and
its candidates is permissible and appropriate.44
Given the lack of certainty, clarifying legislation on the
types of actions that should be considered coordination and how
coordinated issue advocacy should be treated would provide
needed guidance and clear statutory authority to FEC
enforcement efforts.45
Once coordination is established between an independent
group and a political party, political committee or candidate,
a coordinated expenditure becomes a contribution subject to the
contribution limits in FECA. For example, if the expenditure
were made by a corporation or union, the resulting contribution
could be a violation of law--FECA's ban on corporate and union
contributions. Alternatively, if coordination were not
established, the expenditure could nevertheless qualify as an
``independent expenditure'' under 2 USC 431(17) subject to
disclosure under 2 USC 434(c).46 Expenditures or
contributions exceeding $1,000 during a calendar year could
trigger requirements that a group register with the FEC as a
political committee and comply with disclosure requirements in
2 USC 434(a).47
Coordination by an independent group with a political
party, political committee or candidate is not, in and of
itself, improper or illegal. But coordinated expenditures
resulting in a contribution trigger requirements for the
independent group to comply with relevant contribution limits
and disclosure requirements. Coordinated expenditures without
this compliance can constitute misconduct.
Circumvention
A third legal issue focuses on coordination undertaken by
political parties, specifically, whether a political party or
campaign coordinated with independent groups on issue advocacy
spending during the 1996 elections. Political parties are
required by the FEC to pay for their issue advocacy efforts
with a mix of hard and soft dollars.48 The FEC
determined in 1995 that, in a presidential election year, a
political party must pay 65 percent of the cost with hard
dollars that meet FECA contribution limits and disclosure
requirements. The FEC reasoned that issue ads sponsored by a
political party are either administrative expenses or generic
voter drive efforts designed to ``urge the general public to
register, vote or support candidates of a particular party or
associated with a particular issue,'' 49 In the case
of issue advocacy paid for by an independent group but
coordinated with a political party, the questions that must be
asked are, not only whether the independent group has violated
federal contribution limits and disclosure requirements as
discussed above, but also whether the political party
deliberately circumvented federal hard money requirements by
having the independent group serve as the nominal sponsor. For
example, the chapter on Americans for Tax Reform describes a
multi-million dollar issue advocacy effort on Medicare which
was nominally sponsored by ATR, but coordinated with the RNC
and paid for with an RNC soft money donation of $4.6 million.
If the RNC had sponsored the Medicare effort directly, it would
have had to use hard dollars for 65 percent of the cost; it
instead financed the ATR-sponsored effort entirely with soft
dollars.
Third party contributions
A fourth issue involving independent groups arose when the
Committee received evidence indicating that both political
parties suggested to supporters that they make contributions to
sympathetic groups. Although pending campaign finance reform
measures such as S. 25, the McCain-Feingold bill, would outlaw
this practice, there is currently no statutory or regulatory
provision that explicitly prohibits a political party from
suggesting that a person make a contribution to an independent
group, such as a charitable or social welfare organization. The
suggestion alone, without more, does not establish a
coordinated expenditure, unreported contribution, or
circumvention of election law limits and disclosure
requirements.
If, in addition to the fact that a contribution was
recommended, evidence is found that the political party
controlled the timing of the contribution or made the
contribution contingent upon the recipient taking action at the
suggestion of, or in concert with, the party or a candidate, it
is possible that coordination occurred and compliance with
contribution limits and disclosure requirements was required.
Violations of tax law
A fifth set of issues involves federal tax law. Charitable
and social welfare organizations exempt from taxation engaged
in a number of election-related activities during the 1996
election cycle. An initial legal analysis is whether any of
these groups violated their tax-exempt status by engaging in
partisan political activity and conferring benefits on a
particular political party. For social welfare organizations
under section 501(c)(4), an additional question is whether
campaign activities were a dominant or secondary pursuit. A
third question is whether any of these groups made false
statements to the Internal Revenue Service in violation of 26
USC 7206, for example by indicating in an application for tax
exempt status that the organization had not spent and did not
plan to spend any money attempting to influence
elections.50 While the statutory restrictions on
campaign activity are clear for charitable organizations under
section 501(c)(3), social welfare organizations under section
501(c)(4) must rely on a number of regulatory interpretations
that would benefit from legislation clarifying the campaign
restrictions applicable to them.
Another concern that arose during the course of the
Committee's investigation involves the problems associated with
obtaining accurate information about an organization's tax
exempt status. While section 6104 of the tax code makes
available to the public successful applications under section
501(c) and related IRS materials, no similar public disclosure
requirement applies to organizations whose applications are
pending or ultimately rejected. The evidence before the
Committee indicates, for example, that the National Policy
Forum (``NPF'') held itself out and operated as a 501(c)(4)
social welfare organization for four years, from 1993 to 1997,
while its application was pending before the IRS. The IRS
decision letter ultimately rejecting the NPF application
describes the standards used for granting 501(c)(4) status, as
well as the results of an IRS investigation into NPF
activities. This information is as important to the public as
materials associated with successful 501(c) applicants,
particularly since during the four-year period the NPF
application was pending, NPF held itself out to the public as a
501(c)(4) tax-exempt organization as allowed by law. The same
issues apply to the Christian Coalition, whose application for
501(c)(4) status has been pending for seven years. The public
has a right to know during these long periods of time the basis
for an organization's application, its status, and the IRS'
evaluation of the applicant. To solve the problem, section 6104
could be amended to authorize the release of the same
information for all 501(c) applications, rather than just for
the successful ones. Alternatively, section 501(c) could be
amended to prohibit organizations from holding themselves out
as charities or social welfare organizations until their
application for that status is actually approved by the IRS.
A related legislative concern involves indications by some
organizations whose application for 501(c)(4) was rejected that
they will instead claim tax exemption under section 527 of the
tax code.51 Section 527, as explained earlier,
exempts from taxation groups organized and operated primarily
for the purpose of influencing elections. The failed 501(c)(4)
applicants apparently intend to argue that they operate to
influence elections through the use of issue advocacy, rather
than candidate advocacy. In this way, the groups apparently
plan to avoid payment of taxes under section 527, while also
avoiding the disclosure requirements in federal election law
that otherwise subject campaign organizations to public
scrutiny. Their aim, apparently, is to engage in election-
related activities without paying taxes and without disclosing
their activities to the IRS, FEC or public. This plan may
succeed since, currently, section 527 grants a tax exemption
without any required filing or public disclosure--it does not
have a requirement similar to section 501 that organizations
file formal applications for the exemption or annual
information returns; it does not require through section 6104
public disclosure of applications or annual returns (since none
is filed); and it does not require organizations claiming the
exemption to meet the disclosure requirements of the Federal
Election Campaign Act. Corrective legislation could amend
section 527 to limit the availability of the tax exemption to
organizations that have registered with the FEC or the
equivalent state body as a political committee. Legislation
could also require organizations claiming the exemption to file
applications and annual information returns under section 527
in the same manner now required under section 501. These
filings would strengthen the ability of the IRS to detect tax
avoidance and false statements.
footnotes
\1\ On the first day of the Committee's hearings, Senator Glenn
named misuse of independent organizations as a key concern that needed
to be investigated. 7/8/97 Hrg. p. 20. Senator Torricelli stated that
the ``single greatest change in the political culture of the 1996
elections . . . was the use of non-profit, tax-free organizations.'' 7/
8/97 Hrg. p. 98.
\2\ See Chapter 40.
\3\ See hearings on September 23, 24, 25 and 26, 1997.
\4\ See Annenberg Public Policy Center, ``Issue Advocacy
Advertising During the 1996 Campaign: A Catalog,'' Report Series No. 16
(9/16/97), p. 7. The Center estimated that parties and independent
groups together spent between $135 and $150 million on issue ads. Since
the two parties together spent about $68 million on issue ads, that
leaves the total for independent groups alone between $67 and $82
million. See also Washington Post, 2/9/97, which estimated total
election-related spending by independent groups at $70 million.
\5\ Annenberg Public Policy Center, ``Issue Advocacy Advertising
During the 1996 Campaign: A Catalog,'' Report Series No. 16 (9/16/97),
p. 7.
\6\ According to FEC records, in 1996, the RNC gave $4.6 million to
Americans for Tax Reform; $650,000 to the National Right to Life
Committee; and $600,000 to American Defense Institute which later
returned the funds.
\7\ According to FEC records, in 1996, the DNC gave $117,500 to the
National Coalition of Black Voter Participation; $20,000 to the African
American Institute; $10,000 to the Stonewall Gay and Lesbian Club;
$10,000 to the Congressional Black Caucus; and $4,000 to the Hispanic
Caucus.
\8\ See, for example, undated document produced by the RNC entitled
``Soft Money Fundraising Strategy,'' R003215, indicating that the RNC
would raise ``miscellaneous revenue'' totaling $7.7 million for
Americans for Tax Reform, National Right to Life Committee and American
Defense Institute; Exhibit 2400: memorandum from RNC finance chair Jo-
Anne Coe to RNC chairman Haley Barbour and other RNC officials,
regarding the delivery of checks to these organizations; an undated
document produced by the RNC, 10/17/96, R021609, analyzing whether
contributions to five tax-exempt organizations are tax deductible and
whether they would have to be reported to the public; an undated
document, DFP004244, which lists four pro-Republican tax-exempt
organizations and indicates for each organization a large dollar figure
which, when added together, total $15.1 million. See also Chapter 10.
\9\ See for example, Exhibit 2365: memorandum from RNC director of
campaign operations Curt Anderson to RNC chairman Haley Barbour,
entitled ``Group of 12, or Council of Trent, or Whatever,'' 3/4/96,
R006050.
\10\ Exhibit 2363: memorandum from RNC director of campaign
operations Curt Anderson to RNC chairman Haley Barbour, 4/23/96.
\11\ Exhibit 2367, Coalition Building Manual, authored by Curt
Anderson.
\12\ See following chapters.
\13\ Subsection 501(c) authorizes an exemption from taxation for
over two dozen types of organizations.
\14\ See 26 U.S.C. 501(c)(3) and 26 CFR 1.501(c)(3)-1; Association
of the Bar of the City of New York v. Commissioner, 858 F.2d 876 (2d
Cir. 1988), (even insubstantial political activity endangers an
organization's exemption under section 501(c)(3)).
\15\ 26 USC 501(c)(3) and 26 CFR 1.501(c)(3)-1(d)(1)(ii) (``it is
necessary for an organization to establish that it is not organized or
operated for the benefit of private interests''); American Campaign
Academy v. Commissioner, 92 T.C. 1053 (1989) (organization operated for
the benefit of Republican organizations or candidates does not qualify
for tax exemption under section 501(c)(3)).
\16\ American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989)
(organization operated for the benefit of Republican organizations or
candidates does not qualify for tax exemption under section 501(c)(3));
Regan v. Taxation with Representation, 461 U.S. 540 (1983) (tax
exemption is a privilege that can carry severe restrictions).
\17\ 26 USC 501(c)(4); 29 CFR 1.501(c)(4)-1.
\18\ 26 CFR 1.501(c)(4)-1.
\19\ Rev. Rul 81-95, 1981-1 Cumulative Bulletin 332. The statute
states that, to qualify for a tax exemption under 501(c)(4), an
organization must be ``operated exclusively for the promotion of social
welfare'' (emphasis added). The implementing regulation, 26 CFR
1.501(c)(4)-1(a), states that, ``[a]n organization is operated
exclusively for the promotion of social welfare if it is primarily
engaged in promoting in some way the common good and general welfare of
the people of the community'' (emphasis added). It is this regulatory
language that is cited as permitting 501(c)(4) organizations to engage
in campaign activity as a secondary pursuit.
\20\ See IRS decision letter disqualifying National Policy Forum
from tax exemption under section 501(c)(4) due to partisanship, 2/21/
97; Chairman Thompson, 7/23/97 Hrg. p. 225 (``In a 501(c)(4), you are
allowed some political activity. It is not supposed to be partisan
political activity, but you are allowed some. But you are not supposed
to be a subsidiary of a party.''). See also endnotes 15 and 16, supra.
\21\ 2 USC 441b(a). Unions and business organizations such as a
Chamber of Commerce may also be exempt from taxation under section
501(c)(5) or (6) of the Internal Revenue Code, but their exemption does
not carry any prohibition against campaign activity. Unlike charitable
and social welfare organizations, campaign restrictions on unions and
corporations are contained in federal election law, not federal tax
law.
\22\ See, for example, Tillman Act of 1907, prohibiting corporate
campaign contributions. Campaign restrictions on unions date from 1943.
Congressional Research Service Report No. 90-199A, ``Campaign Financing
& Corporate Expenditures: Analysis of Austin v. Michigan State Chamber
of Commerce'' (4/10/90).
\23\ See, for example, FEC v. Massachusetts Citizens for Life, 479
U.S. 238 (1986); Austin v. Michigan State Chamber of Commerce, 494 U.S.
652 (1990).
\24\ See Part 4 on soft money and issue advocacy, infra.
\25\ 26 USC 527(e).
\26\ ``Haley Barbour, Chairman of the Republican National
Committee, Discusses Democratic National Committee Refusal of Pre-
Election FEC Report,'' Presidential Campaign Press Materials, Federal
Document Clearing House, Inc., 10/29/96.
\27\ See, for example, Arkansas Democrat-Gazette, 10/24/96; Kansas
City Star, 10/27/96; Fresno Bee, 11/3/96; Wall Street Journal, 2/5/97;
Washington Post, 3/9/97.
\28\ See S. 25, the McCain-Feingold bill, which proposes a number
of legislative remedies to this problem; statement by Senator Carl
Levin of Michigan, Congressional Record, 10/6/97, pp. S10409-16. See
also Part 4 on issue advocacy, infra.
\29\ 424 U.S. at 46.
\30\ 424 U.S. at 80.
\31\ 116 S.Ct. at 2321.
\32\ See, for example, Parts II and III of the prevailing opinion.
Some Justices suggested, in dicta, that parties should be able to make
unlimited coordinated expenditures with their candidates, but no ruling
was made by the Court on that issue. See, for example, opinion by
Justice Kennedy.
\33\ 11 CFR 114.4(c)(5).
\34\ The court also struck down a requirement in the regulation
that the voting guides provide substantially equal space and prominence
to each candidate.
\35\ 114 F.3d at 1314.
\36\ 114 F.3d at 1311 (citations omitted).
\37\ FEC v. Christian Coalition, Civil Action No. 96-1781 (D.D.C.),
7/30/96.
\38\ FEC MUR 3975. See also chapter 11 discussing Americans for Tax
Reform.
\39\ FEC MUR 3918.
\40\ See, for example, Buckley v. Valeo, 424 U.S. 1, 80 (1976),
discussed above, in which the Supreme Court identified two separate
categories of expenditures by independent groups which could
constitutionally be subjected to disclosure requirements: express
advocacy communications, and expenditures coordinated with candidates.
By mentioning coordinated expenditures in a separate category, apart
from express advocacy communications, the Court implied that
coordinated expenditures which do not reach the threshold of express
advocacy may qualify as candidate contributions subject to contribution
limits and disclosure requirements.
\41\ Lawrence Noble, 9/25/97 Hrg., pp. 34-40.
\42\ Lawrence Noble, 9/25/97 Hrg., p. 38.
\43\ Trevor Potter, 9/25/97 Hrg., p. 36.
\44\ Lawrence Noble and Trevor Potter, 9/25/97 Hrg., pp. 35-36, 39-
40. Potter testified that the FEC had traditionally ``presumed all
party spending was coordinated with candidates'' and had deemed
coordination between the two irrelevant, concentrating instead on
determining whether specific party expenditures were generic party-
building efforts that could not be attributed to individual candidates
or candidate-specific spending subject to contribution limits. 9/25/97
Hrg., p. 22. See also legal analysis provided in Part 5, infra.
\45\ S. 25, the McCain-Feingold bill, proposes a number of
legislative remedies to clarify what actions constitute coordination
and result in contributions subject to FECA.
\46\ 2 USC 431(17) defines an ``independent expenditure'' as ``an
expenditure by a person expressly advocating the election or defeat of
a clearly identified candidate which is made without cooperation or
consultation with any candidate, or any authorized committee or agent
of such candidate, and which is not made in concert with, or at the
request or suggestion of, any candidate, or any unauthorized committee
or agent of such candidate.''
\47\ See 2 USC 431(4); Buckley v. Valeo, 424 U.S. 1, 79 (1976);
Akins v. FEC, 101 F.3d 731 (D.C. Cir. 1996).
\48\ FEC Advisory Opinion 1995-25.
\49\ FEC Advisory Opinion 1995-25.
\50\ See, for example, item 15 on IRS Form 1024, ``Application for
Recognition of Exemption Under Section 501(a).''
\51\ See, for example, Roll Call, 10/20/97, p. 1.
PART 2 INDEPENDENT GROUPS
Chapter 10: The Republican Party and Independent Groups
One of the striking differences between the 1996 elections
and prior elections was the prominent role played by so-called
``independent groups'' that were not registered with the
Federal Election Commission as political organizations.
Typically, these groups ran campaign ads under the guise of
``issue advocacy.'' By operating in that fashion, they were
able to circumvent federal restrictions on campaign financing.
Evidence before the Committee shows that the Republican
National Committee closely coordinated with several ostensibly
independent groups, channeled millions of dollars (from the RNC
and from Republican donors) to such groups, and even
established front organizations.
Additionally, a number of conservative groups acted as
fronts for Republican donors, enabling the donors to circumvent
the campaign finance laws. Many of these purported to be
grassroots organizations but were actually shell organizations
established by professional fundraisers for the purpose of
running attack ads.
Several of the organizations mentioned in this chapter are
discussed at greater length in other parts of the Minority
Report. The purpose of this chapter is to examine how
purportedly independent groups have served as fronts or proxies
for the Republican National Committee and/or Republic donors.
findings
(1) The Republican Party financed and participated in
election-related activities by tax-exempt organizations, in
part to evade the limits of federal election laws and to use
the organizations as surrogates for delivering the Republican
Party's message.
(2) The RNC directly funded, for purposes that benefited
the Republican Party, a number of tax-exempt organizations that
were supposed to operate in a non-partisan manner.
(3) The RNC also solicited, collected and delivered third-
party funds to tax-exempt organizations for election-related
activities to benefit the Republican Party.
(4) The RNC instructed and helped Republican candidates to
coordinate their campaign activities with independent groups.
introduction
A significant number of nonprofit organizations that
claimed to be nonpartisan played an active role in the 1996
elections, spending millions of dollars on behalf of political
parties or specific candidates. These groups were not
registered with the Federal Election Commission as political
organizations and most of them claimed to be ``social welfare''
or charitable organizations, registered with the Internal
Revenue Service as either 501(c)(4) or 501(c)(3) tax-exempt
entities.
The Republican National Committee had close ties to several
of these groups. It coordinated with a number of them and often
provided financial support--directly or by raising money from
conservative donors. The RNC and the independent groups were
able to engage in these activities by exploiting the two most
important gaps in the campaign finance laws: the soft-money
loophole and the issue-advocacy loophole.
The federal campaign finance laws clearly state who is
allowed to contribute to candidates and how much money those
donors are allowed to give and require candidates to identify
individuals who contribute in excess of $2,000 to the Federal
Election Commission.1 Although the rules seem clear-
cut, they are easily circumvented. The biggest loophole is by
way of so-called ``soft money,'' which can be contributed in
unlimited amounts to the political parties and can even be
contributed by corporations, which are barred from making
contributions to specific candidates. Although soft money is
only supposed to be used on behalf of state-level candidates or
for generic, party-building purposes (such as get-out-the-vote
drives), it has become routine for both major parties to spend
these funds in ways that benefit specific candidates (see
Chapter 23).
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Footnotes at end of chapter.
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Issue advocacy is the second most significant loophole. As
long as ads avoid using ``express advocacy'' terms like
``elect'' and ``defeat,'' the advertisers have been able to
argue successfully that they are not running campaign ads--even
if the ads are obviously intended to benefit specific
candidates. When an ad falls into the ``issue advocacy''
category, the campaign finance laws do not apply: Vitually
anyone can contribute money to independent groups to pay for
such ads, there are no limits on how much money a donor can
give, and there is no disclosure of the donor's identity. Thus,
many organizations that run ``issue ads'' are not required to
or do not register with the Federal Election Commission as
political organizations, despite running television ads
attacking candidates, conducting mail and telephone operations
targeting voters, and spending millions of dollars on
activities which affect election outcomes.
Although the issue-advocacy loophole was exploited on
behalf of both Democratic and Republican candidates, the
evidence before the Committee indicates that there were some
major differences. Whereas the Democratic National Committee
does not appear to have engaged in extensive coordination with
independent groups, evidence before the Committee shows that
the Republican National Committee actually established two
nonprofit groups and that it engaged in a high level of
coordination with several others. Documents produced to the
Committee indicate that the Republican Party worked to
identify, on a national and regional level, the groups most
likely to help Republican candidates win office; instructed its
candidates to develop formal ``coalition plans'' with
sympathetic groups; and distributed a ``Coalition-Building
Manual'' to help them do so. In addition to general
organizational and planning efforts encouraging Republican
candidates to coordinate their campaign efforts with
independent groups, the RNC undertook a wide variety of
specific election-related activities with particular
organizations, including joint mailings, joint issue advocacy
efforts, joint media events, and joint polling.
The contrast between the DNC and RNC is even sharper on the
financial side. Federal Election Commission records show that
the DNC contributed less than $185,000 to nonprofit groups in
1996. The RNC, by contrast, contributed close to $6 million (of
which $600,000 was returned) to nonprofits in the weeks before
the November election. The RNC also raised millions of dollars
for ``independent'' groups from major Republican Party donors,
sometimes actually collecting and forwarding donors' checks to
the recipient organizations.
By using outside groups as proxies and surrogates, the RNC
was able to foster the impression that independent,
``grassroots'' organizations were backing the party's agenda
and its candidates. The RNC was also able to circumvent federal
campaign finance laws by channeling ``soft money'' to outside
groups which, in turn, used the funds for issue advocacy. If
the RNC had conducted the same activities itself, it would have
been obliged under FEC rules to use a mixture of soft dollars
and hard dollars. In short, the Republican Party worked with
and financed nonprofit organizations as part of an organized
effort to circumvent the campaign finance laws.
Many of the conservative organizations investigated by the
Committee were organizations that purported to be independent,
grassroots groups. However, the Committee found that several
such groups were created mainly, or exclusively, for the
purpose of running attack ads. Donors who contributed to such
groups were able to spend money on behalf of political
candidates without limit and without disclosure. Professional
fundraisers played a key role in setting up and running such
organizations.
Several of the conservative groups mentioned in this
chapter are discussed at length in subsequent chapters of the
Minority Report, notably Americans for Tax Reform, the
Christian Coalition, and Triad Management Services. The purpose
of this chapter is to examine how such groups have served as
fronts for the Republican Party and/or Republican donors, thus
operating as mechanisms to circumvent the federal campaign
finance laws.
rnc ties to independent groups
Coalition plans
Haley Barbour, a long time Republican lobbyist, became
chairman of the Republican National Committee in January 1993
and served a four-year term. Throughout his tenure, Barbour
encouraged Republican candidates to work closely with
conservative organizations, which are referred to in RNC
documents as ``coalition'' groups.
During Barbour's tenure, the party urged Republican
campaigns to develop coalition plans to organize the campaign's
ties to such groups as the National Right to Life Committee,
the Christian Coalition, and the National Rifle Association.
Coalition plans served many purposes, the principal one being
to convince voters that ``independent'' groups were supporting
GOP candidates. A ``Coalition-Building Manual,'' issued in
1994, notes that ``what we say about ourselves is suspect, but
what others say about us is credible.'' 2 The manual
was prepared by the National Republican Senatorial Committee
(``NRSC''), a division of the RNC.
When messages come from a third party, there are other
advantages, not mentioned in the NRSC manual:
If a Republican candidate runs hard-hitting
attack ads, he can be accused of negative campaigning.
When a third party runs such ads, the Republican
candidate can disavow any responsibility--and can even
denounce the advertiser--while, at the same time,
benefitting from the attack ads. Perhaps the best-known
example of this was the Willie Horton television ad in
the 1988 presidential campaign. The ad, which attacked
Democratic nominee Michael Dukakis, was widely
criticized because of perceived racial
overtones.3 But the Bush campaign averted
blame, because the ad was run by an independent group.
Republican contributors are able to avoid
limits on campaign contributions by donating to
ostensibly ``nonpolitical'' groups engaged in issue
advocacy. Since these donations are not classified as
campaign contributions, corporations, which are
forbidden to contribute to candidates, are free to
donate; there are no limits on the size of
contributions; and donors can hide their
identities.4
RNC documents provided to the Committee show that the RNC
worked to identify, on a national and regional level, the
groups most likely to help Republican candidates win office;
instructed its candidates to develop formal ``coalition plans''
with sympathetic groups; and distributed the NRSC's Coalition-
Building Manual to help its candidates coordinate their
campaign efforts with outside organizations.
On March 4, 1996, Curt Anderson, RNC political director and
head of campaign operations, sent a memo to RNC Chairman Haley
Barbour entitled, ``Group of 12, or Council of Trent, or
Whatever.'' 5 In it, Anderson wrote:
You had asked us in Atlanta to come up with ideas for
a group that would encompass the leadership of the base
Republican coalition. . . . Membership should be
restricted to groups that actually have troops in the
field that they can motivate, activate, and deliver, or
groups that have a track record of expending
significant resources to do the same.
Anderson then listed possible members for a coalition composed
of the leaders of pro-Republican outside groups. Although the
list is heavily redacted, it includes Americans for Tax Reform
(``ATR'), the National Right to Life Committee (``NRTLC''), the
Christian Coalition, and Citizens for a Sound Economy. That
this list was compiled for campaign purposes is demonstrated by
some of the descriptions of possible members. For example, the
memorandum proposes as a member, the Christian Coalition's
``national field director [who] works with campaigns and the
actual field organization.''6
It appears that approximately 40 individuals were later
reviewed by Barbour, Anderson, RNC co-Chairman Evelyn McPhail,
RNC Communications Director Edward Gillespie, and RNC chief
strategist Donald Fierce. Their support for, opposition to, and
comments on each of the proposed persons are tallied on an
undated, two-page document produced by the RNC to the
Committee.7 Two persons had unanimous support: Ralph
Reed of the Christian Coalition and Wayne LaPierre of the
National Rifle Association. Republican officials considered
working with several other individuals, including
representatives of ATR, NRTLC, the United Seniors Association,
the U.S. Chamber of Commerce, GOPAC (House Speaker Newt
Gingrich's ``leadership PAC''), the National Federation of
Independent Business, the Republican Governors Association,
NRCC, NRSC, and a person from ``Tobacco.'' (The NRCC--which
stands for the National Republican Congressional Committee--is,
like the NRSC, part of the Republican National Committee.)
Anderson urged that the coalition include ``only folks with
troops in the field.'' Fierce agreed, suggesting that the group
``only include people who have large coalitions that are
organized that can help us.'' Fierce also suggested keeping the
group ``small enough so you can have confidential
conversations.'' 8 Because no RNC official provided
testimony to the Committee on these issues, it is unclear
whether this evaluation process resulted in a formal coalition
of pro-Republican group leaders which the RNC used to
coordinate campaign efforts.
Several Republican candidates took the RNC's advice and
worked closely with independent groups. As Anderson noted in an
April 23, 1996, memo:
Today, most of our campaigns lead off with their
coalition plan when you meet them.
We no longer treat coalition planning as if it is an
ancillary activity, or a quaint way of getting well
meaning but ignorant people involved.
We teach [in the RNC's campaign management college]
that campaigns must include both a thematic and
tactical approach to including the combined efforts of
every coalition group that they can conceivably appeal
to. We additionally demand that each campaign have a
senior person--campaign manager, deputy, etc.--who has
line item responsibility for the execution of the
coalition plan.
Every state party Victory '96 plan is required to
have a coalition component.
Every Regional Field Representative is in the process
of putting together the definitive list of the 5 top
reachable coalition groups in each state, and their
approximate size . . . [Redacted] will be on this list
for most states, as will the [redacted], and [NRTLC].
Christian Coalition will make the list in about \1/2\
of the states.
At virtually all of our field meetings we have put
together day long meetings in which we bring the
decision makers from the biggest coalition groups. We
generally spend an hour with each of them comparing
notes on races . . .
I should add at this point, that while [redacted] did
do some work in the OR race, both Dave Hansen and Wes
were very frustrated at their unwillingness to think
outside the lines and consider expanding their
activities in the way that some of the other groups
did.
While it has always been true that our coalition
groups need direction on how they can best effect the
outcome of elections, many of the larger groups are
becoming increasingly sophisticated in their approach
and they employ competent professionals who know how to
make things happen.9
This exchange between the two top RNC officials in charge of
the 1996 campaign operations leaves no doubt that the RNC
deliberately planned for its candidates to coordinate with
sympathetic independent groups to affect the outcome of
elections.
The memorandum also illustrates the RNC's attempt to use
only certain groups that clearly supported Republican
candidates and that the RNC distrusted truly independent
endeavors, even by conservative organizations. Barbour had made
the same point in an urgent memorandum to ``Republican
Leaders,'' dated March 5, 1996, warning against ``independent
expenditure campaigns.'' 10 Barbour wrote:
As we approach the time when it may become clear who
our nominee will be, it is crucial our supporters do
not get suckered into participating in any
``independent expenditure'' campaigns that purport to
be helping the Republican nominee for president. . . .
First, the party (the RNC and our state party
organizations) are allowed to run issue and generic
party advertising, and we have a sizeable (though it
needs to be bigger) budget for that. We are scheduled
to begin in April. Second, the party can coordinate our
generic advertising with anybody, but an independent
expenditure group is not allowed to coordinate or
consult with the nominee's campaign or the party. It
must be truly independent. That means it is not only
unaccountable, but could actually turn out to be a
loose cannon saying something very different from what
the message should be.11
The evidence before the Committee shows that the RNC not
only instructed its candidates to develop formal coalition
plans, it provided them with the NRSC's ``Coalition Manual,''
12 which contained instructions on how to coordinate
their campaign efforts with outside groups. The 29-page manual,
which was written by Anderson when he worked at the NRSC,
states that coalition groups can:
Contact their members on your behalf--and at no cost
to you--using mail, phones, even earned media
Make their membership lists available to you so the
campaign can contact them with a message directly from
the candidate
Register new voters
Provide a source of campaign volunteers to complement
the campaign operation
Increase the turnout of their members . . .
Publicly endorsing your candidacy, allowing you to
use their endorsement in your campaign materials
included in your advertising and mail
Private endorsement in the groups' ``internal media''
(e.g. newsletters, meetings, phone trees, mailings)
Providing surrogate speakers for your campaign
Generating public attacks on the Democrat oppo- nent
. . .
Direct mail solicitation of their membership for
contributions to your campaign
Provide contributor lists to your campaign
Host fundraising events among their
constituents.13
The manual also provides a list of specific organizations
that ``have been the most active in encouraging their
constituents to support Republican candidates.'' 14
The manual states that this list excludes groups that ``do not
really engage in voter contact'' and notes that additional
information can be obtained on what specific groups ``have done
in previous campaign cycles.'' 15 The groups are
divided into two categories, ``those who endorse candidates and
those who do not.'' 16 In discussing the groups that
do not endorse candidates, the manual states that ``[s]ome
groups will bend their rules for specific candidates,''
whileothers will nevertheless ``communicate favorable and unfavorable
messages about candidates to their members.'' 17 For
example, the manual classifies the Christian Coalition as a group which
does not endorse candidates, while noting that the Coalition conducted
``some of the most effective and hard-hitting mail and phone programs
last cycle.'' 18
Still other documents demonstrate the RNC's deliberate
coordination with carefully selected outside groups. For
example, an undated internal RNC memorandum entitled,
``Outreach, Auxiliaries, Coalitions,'' states:
The five coalition organizations that have
distinguished themselves and we have to pay special
attention to are: National Rifle Association, National
Right to Life Committee, National Right to Work
Committee, National Federation of Independent
Businesses, Christian Coalition.19
A March 6, 1996, RNC memorandum to Anderson is entitled
``Coalitions'' and lists specific independent groups
categorized by issue areas.20 Although the contents
of the document were heavily redacted by the RNC before it was
produced to the Committee, one entry that did remain describes
``Family issues.'' That entry states: ``Christian Coalition/
Eagle Forum/Pro-Life groups/in-state PACs. In this community
alone, there are probably two dozen different organizations.
What we ask them to do would be very different than what we ask
pro-gun groups to do.''
Coordination during the 1996 election cycle
During the 1996 campaign cycle, RNC officials also met
frequently with representatives of ``independent'' conservative
groups to compare notes about campaign strategy and tactics.
One important venue for information exchange was the
headquarters of Americans for Tax Reform, a nonprofit
organization headed by Grover Norquist, a Republican activist
with close ties to Speaker Gingrich (see Chapter 11). Norquist
hosted weekly meetings at the headquarters of ATR where
representatives of conservative organizations met with
Republican candidates, operatives, and party officials.
Republican Party officials attended these Wednesday meetings
along with 50 to 70 conservative activists at a time. At the
meetings, discussions took place concerning specific
candidates, races, and election strategy.21
The RNC also undertook a wide variety of specific election-
related activities with particular organizations. These
activities included joint polling, joint mailings, joint issue
advocacy efforts, and joint media events. An RNC internal
memorandum dated March 30, 1996, to the RNC's Evelyn McPhail
describing a ``Seniors Program'' illustrates the type of
coordination undertaken.22 (Some of the seniors
groups mentioned in the memo are discussed in Chapter 15 of the
Minority Report.) The memorandum states:
We had a great meeting w. Haley. He was extremely
supportive and wanted us to ``go all the way'' with
this. . .
3/25-3/27 Meetings with Coalition Groups
U.S. Seniors-- . . . Interested in developing
political strategy as to where and how we reach senior
voters in key states. I think they want to do the mail
for the campaign effort.
60 Plus-- . . . They give awards to ``senior
friendly'' members of congress and publicize them. . .
Seniors Coalition-- . . . They were very interested
in sponsorship of our conference. They offered to help
take on some financial obligations as well. They asked
us to determine where we think they should do their
next poll (Kellyanne has done research in CA & FL on
how Medicare and senior issues are playing). They
indicated a willingness to give us some input into the
questions asked as well. Per Judy, I discussed this
with Wes Anderson and he recommended we suggest
Illinois, based on the fact that it is a key
battleground state which leans slightly Democratic, and
could provide for a good sample.23
This memorandum alone provides evidence that the RNC engaged in
joint mailings, joint media event, and joint polling with
independent groups.
RNC funding of independent groups
The RNC not only coordinated with conservative groups, it
provided them with millions of dollars of financing--further
undermining these organizations' assertions that they are
``independent'' and ``nonpartisan.'' An organization that
receives financial help from the Republican Party is, of
course, less likely to stray from the party line. Moreover, the
practice of financing independent groups enabled the RNC to
circumvent limits on how soft money can be spent, as noted
elsewhere in this chapter.
The RNC's practice of donating party money to conservative
organizations did not begin in the 1996 election. In 1990, the
RNC contributed $64,000 in seed money to the Christian
Coalition, which had been founded the year before by religious
broadcaster Marion G. (``Pat'') Robertson, a former Republican
presidential candidate. The Christian Coalition holds itself
out as a ``nonpartisan'' organization, and yet it spends
millions of dollars on behalf of Republican candidates (see
Chapter 14).
In 1992, the National Republican Senatorial Committee
contributed to the American Defense Institute, a 501(c)(3)
charitable organization that conducts get-out-the-vote drives
among retired and serving military people. After the donation
became public, ADI was criticized for accepting Republican
funding of an allegedly nonpartisan voter registration
effort.24 (The Democratic Party has also provided
support to get-out-the-vote organizations, as discussed
elsewhere in the Minority Report.)
Also in 1992, the NRSC contributed to the National Right to
Life Committee, a 501(c)(4) organization.25 Like
other recipients of RNC contributions, the NRTLC claims to be
nonpartisan, but it is closely associated with the National
Right to Life PAC, a political action committee that is a major
donor to Republican candidates. (During the 1996 campaign, for
example, nearly all of the PAC's $180,000 in political
contributions went to Republican candidates.26)
While the National Right to Life PAC donates ``hard money'' to
Republican candidates, the National Right to Life Committee
helps some of the same candidates through ``issue advocacy''
activities.
In 1994, the NRSC contributed $175,000 to the National
Right to Life Committee during the week before the November
election.27 A few months later, Senator Phil Gramm
of Texas, then chairman of the NRSC, told the Washington Post
that the party made this donation because it knew the funds
would be used on behalf of several specific Republican
candidates for the Senate. Senator Gramm, in the Post's words,
said that he had ``made a decision. . .to provide some money to
help activate pro-life voters in some key states where they
would be pivotal to the election.'' 28 He later told
the newspaper that the money had only been given because the
NRTLC's ``message conformed to the Republican message.''
29
RNC funding of independent groups in the 1996 election cycle
During the 1996 election cycle, the Republican National
Committee provided an unprecedented amount of money to
``independent'' groups. It also arranged for Republican donors
to contribute millions of dollars to such groups.
An undated document produced by the RNC analyzes whether
contributions to six tax-exempt organizations, including
Americans for Tax Reform, the National Right to Life Committee,
American Defense Institute, and the City of San Diego, would be
tax-deductible and whether they would have to be reported to
the public.30 (San Diego hosted the Republican
National Convention in August 1996.) Another undated RNC
document lists five tax-exempt organizations, providing for
each its address, telephone and fax numbers, contact person.
The RNC document also states for each group whether it has
section 501(c)(3) or (c)(4) tax-exempt status, whether
contributions to the group are tax-deductible, followed by a
large dollar figure.31 The listed organizations and
corresponding dollar amounts are:
ATR--$6 million;
NRTLC--$2 million;
ADI--$700,000;
the City of San Diego--$4 million; and
the United Seniors Association--$2.4
million.
The figures, when added together, total $15.1 million.
Another RNC document prepared during the 1996 campaign is
entitled ``Soft Money Fundraising Strategy'' 32 and
it suggests various ways in which soft money could be raised
for the party, including direct mailings to corporations and
solicitations by members of Congress and business leaders.
The most intriguing part of the document is a section
headed ``Miscellaneous Revenue.'' This section appears to
outline a plan for the RNC to raise several million dollars
from corporations and wealthy individuals. The document
proposes that ``Haley,'' ``Newt,'' ``Team 100,'' ``V96''
(possibly the GOP's Victory `96 fundraising committee), and a
``cigarette company,'' among others, assist in the fundraising.
Four tax-exempt organizations are identified as possible
recipients of the funds raised and includes, along with the
amounts of money they were apparently slated to receive:
Americans for Tax Reform--$6 million;
National Right to Life Committee--$1
million;
American Defense Institute--$700,000; and
the City of San Diego--$4 million.
Because no RNC official provided testimony to the Committee
about RNC fundraising practices, the precise meaning of these
documents remains unclear. When viewed together, however, they
suggest explicit planning, research, and fundraising goals by
the RNC in an organized effort to provide millions of dollars
in financing to the named organizations. The facts suggest that
the RNC took steps to execute these fundraising plans.
RNC contributions and fundraising help in 1996
Shortly before the November 1996 election, the RNC made
transfers of nearly $6 million to groups mentioned in the
``Soft Money Strategy'' document. The RNC gave $4.6 million to
Americans for Tax Reform, $650,000 to the National Right to
Life Committee, and $600,000 to the American Defense
Institute.33 This direct payment to tax-exempt
organizations is an unprecedented amount. It is roughly 30
times the DNC's donations to tax-exempt organizations in all of
1996,34 and it dwarfs all prior party transfers to
tax-exempt groups in the 20 years the Federal Election Campaign
Act has been on the books. Prior to 1996, no party had given
even $1 million to a tax-exempt organization. Apparently, the
transferred funds consisted entirely of soft money paid over
the course of the two months before election day.
ADI returned the $600,000 in late October. Months later,
when a reporter asked ADI President Eugene B. (``Red'')
McDaniel why the donation was returned, he said that ``we
didn't want to be controversial and we had funding from other
sources.'' 35 He failed to mention that the
``funding from other sources'' had been arranged by the RNC.
(Not only was McDaniel's statement to the press suspect, so was
an ADI document relating to the return of the donation. A
$600,000 check from ADI to the RNC, dated October 25, 1996,
includes the notation on the memo line: ``Repayment of loan.''
36)
RNC Chairman Haley Barbour raised $500,000 for ADI from
Philip Morris and collected checks totalling $510,000 from
other donors, according to an internal RNC document discussed
below. ADI's McDaniel has confirmed to the press that ADI did,
in fact, receive $500,000 from Philip Morris and that Barbour
``could have'' helped solicit it.37 McDaniel also
apparently provided to the press a copy of an October 1996
letter from Jo-Anne Coe, the RNC's deputy finance chair,
enclosing six checks from prominent Republicans totalling
$530,000.38 This letter has not been produced to the
Committee by the RNC. The checks identified in the letter
apparently exactly match the checks described in the October 17
memorandum, with the addition of one new check for $100,000
from an RNC finance chair.39 The letter reportedly
asks McDaniel to ``[p]lease send an acknowledgment to each
individual as well as a receipt for their use in claiming
deductions on their tax returns.'' 40
The evidence indicates that the RNC steered about $1
million to ADI, which is roughly the same amount that of money
ADI spent on its entire voter turnout effort, according to an
estimate by McDaniel.41 These facts suggest that the
RNC essentially provided the funding for ADI's entire voter
effort in the 1996 elections. McDaniel told the press that his
organization was ``apolitical'' and ``had asked for money from
both parties,'' but received funding only from the RNC. ``Asked
why the RNC provided him with so much financial support,
McDaniel said, ``Maybe they think it helps them.''
42 McDaniel did not explain why ADI allegedly asked
the RNC for funding, but then later returned it. One possible
explanation is that ADI returned the $600,000 to the RNC--after
receiving $530,000 in checks from prominent Republicans
delivered by the RNC finance chair--to avoid public disclosure
of the RNC's role in financing ADI's allegedly nonpartisan
effort with partisan dollars.
ADI was just one of several ``independent'' groups whose
contributions had apparently been organized by the RNC. On
several other occasions, RNC officials solicited donors and, at
times, even forwarded checks to the recipient groups.
In the weeks leading up to the November election, the RNC
arranged for pro-Republican donors to give large donations to
three groups listed in the ``Soft Money'' document:
43 Americans for Tax Reform, the National Right to
Life Committee, and the American Defense Institute. The RNC's
role in these donations is made clear in a memorandum dated
October 17, 1996--and marked ``confidential''--from Jo-Anne
Coe, the RNC's deputy finance chair, and addressed to three
other RNC officials: Chairman Haley Barbour, Sanford
McAllister, and Curt Anderson. In the memo, Coe discusses her
efforts to forward a number of checks from third parties to
ATR, NRTLC, and ADI.44 With respect to ADI, Coe
states that ``the following checks for ADI are en route to
me,'' listing five checks which ``will bring the total for ADI
to $510,000--plus the $500,000 Haley obtained from Philip
Morris.'' 45
The RNC also collected and delivered checks from third
parties to Americans for Tax Reform and the National Right to
Life Committee. The October 17 memorandum from Coe to Barbour,
McAllister, and Anderson describes Coe's intention to forward a
$100,000 check from businessman Carl Lindner to ATR and a
second $100,000 check from Lindner to NRTLC.46 Two
letters written by Coe on October 21--which, unlike the ADI
letter, were produced to the Committee--indicate that these
checks were delivered.47 The first letter is
addressed to Grover Norquist, president of ATR, and the second
to David O'Steen, executive director of NRTLC. Each states that
a $100,000 check from Lindner to the organization is enclosed.
Coe also states in each, ``Glad to be of some help. Keep up the
good work.'' According to bank records produced to the
Committee, ATR deposited a $100,000 check on October
23.48 Since no NRTLC bank records were obtained by
the Committee, the evidence is not conclusive that NRTLC
received and deposited the $100,000 check, but there is
currently no reason to believe otherwise.
The evidence before the Committee suggests that the RNC was
not merely collecting and delivering checks to ATR, NRTLC, and
ADI, it may have also been using the checks as leverage to
persuade the three organizations to cooperate or participate in
certain activities. The October 17 memorandum from Coe to
Barbour, McAllister, and Anderson asks the three RNC officials
for a quick response to several questions about the checks
being forwarded to the three organizations ``so I can put this
project to bed.'' 49 The ``project'' itself is not
described in the memorandum; however, a second document may
provide additional information. It is an October 21, 1996,
memorandum from Coe to Barbour. This memorandum states:
As soon as we meet and hopefully come to some
resolution on the joint state mail project, I will
forward these checks to the three organizations. In the
meantime, I am respectfully withholding delivery of the
checks until we have the opportunity to discuss this
matter.50
Could the ``joint state mail project'' be the ``project''
referred to in the October 17 memo from Coe to Barbour? The
fact that the RNC finance director was ``respectfully
withholding'' checks to ``three organizations''--presumably
ATR, NRTLC, and ADI--may be evidence that the RNC was
attempting to use the checks as leverage to persuade these
organizations to participate in a ``joint state mail project.''
Unfortunately, because Coe, McAllister, Anderson, and other top
RNC officials refused to provide testimony to the Committee,
the questions raised by these documents remain unanswered.
(Barbour did testify, but his testimony was limited to issues
surrounding the National Policy Forum, a nonprofit set up by
the RNC. The Minority sought to question him later about other
issues, but was unsuccessful.)
Despite unanswered questions, the evidence before the
Committee establishes that the RNC provided, both directly and
indirectly, millions of dollars to independent groups in
thelast two months before the 1996 election. The RNC's direct payments
to three of these groups exceeded $5 million. The evidence suggests
that the RNC intended to and perhaps succeeded in directing another $10
million in undisclosed third-party contributions to five groups. In the
absence of Committee enforcement of its document and deposition
subpoenas, however, the extent to which the RNC obtained contributions
for pro-Republican independent organizations and what it received in
return for this fundraising remain unexplored.
Circumventing campaign finance laws
Although RNC officials refused to submit to questioning by
the Committee, there have been published reports in which party
officials commented on RNC ``donations'' to nonprofit groups.
For example, Barbour, as noted below, described the donations
as simply contributions to ``like-minded'' organizations.
In fact, the Committee has found that millions of dollars
channeled to ``independent'' groups were used on behalf of
Republican candidates during the weeks leading up to the
November 1996 election. Americans for Tax Reform--the largest
recipient of RNC funds--received $4.6 million, as noted above.
ATR used this money to conduct a massive ``issue advocacy''
campaign aimed at helping the Republicans. With Republican
Party money, ATR sent 19 million pieces of mail to voters and
arranged for telemarketers to make four million telephone
calls. ATR also paid for a television commercial attacking
then-Representative Robert Torricelli (NJ), a Democratic
candidate for the Senate. (see Chapter 11)
By operating through surrogates like ATR, the RNC was able
to circumvent federal campaign finance laws. When a political
party broadcasts issue ads, it is required to pay for them with
a combination of hard dollars and soft dollars. If an outside
group runs such ads, there are no such restrictions--even if
the funding comes from the RNC. Thus, the RNC was able to use
100 percent soft money to pay for ads by outside groups. By
channeling money to outside groups and having them run issue
ads, the RNC was able to conserve precious hard dollars and
circumvent federal restrictions on how soft money can be spent.
Shortly before the November election, Barbour acknowledged,
in effect, that the RNC's contribution to Americans for Tax
Reform made it possible for the party to circumvent the
campaign finance laws. At an October 1996 press conference,
Barbour was asked about the RNC's $4.6 million transfer to ATR
and he made the following statement:
You'll see in our FEC report . . . that we've made
contributions to a number of organizations that are
like-minded, share our views, promote our ideas. . . .
[W]hen we do advocacy, no matter what we do, we
typically have to pay for it, either totally with FEC
dollars or a mixture of FEC and non-FEC dollars. . . .
[W]e often find ourselves in the position where we
cannot match up non-FEC funds with enough FEC funds.
So, when we came to that point, we decided we would
contribute to several groups who are like-minded and
whose activities we think, while they're not
specifically political, we think are good for the
environment for us.51
Barbour's benign description of the RNC as simply supporting
like-minded groups is overshadowed by his admission that it was
the RNC's shortage of ``FEC funds,'' or hard money, to match
its ``non-FEC funds,'' or soft money, that led to its giving
excess soft dollars to groups to undertake activities ``good''
for the Republican Party. This explanation is close to an
admission that the RNC gave soft money to independent groups
primarily to circumvent federal election requirements that
parties use hard money in federal campaigns.
the rnc's front organizations
One problem with outside groups is that they cannot always
be controlled, as Barbour noted in the March 5, 1996, memo
mentioned earlier. One solution, is to channel money to
independent groups, with the understanding that the recipient
will follow the party line. During Barbour's tenure, the RNC
also used an even bolder tactic: It actually established two
nonprofit organizations that served as arms of the Republican
Party.
The National Policy Forum
In May 1993, four months after Barbour became RNC chairman,
he launched the National Policy Forum as a ``think tank'' to
develop conservative ideas and policies 52 (see
Chapter 3). The NPF applied to the Internal Revenue Service for
tax-exempt status as a 501(c)(4) organization, asserting in its
application that it was a nonpartisan, social welfare
organization.
Contrary to what the NPF told the IRS, the NPF was, in
fact, an arm of the Republican National Committee--created by
RNC officials, chaired by Barbour, and operated in such a way
that its work dovetailed with the RNC's. Perhaps most
importantly, the NPF relied heavily on the party for financial
support, receiving millions of dollars in gifts and loans from
the RNC. (For these and other reasons, the IRS eventually
denied the NPF's application for 501(c)(4)
status.53).
Although the NPF was not involved in running issue-advocacy
ads, it did provide services to the party related to political
campaigning. The NPF's main activity was organizing ``forums''
where Republican officials and others could discuss various
public policy options and where Republican donors were able to
meet with members of the GOP congressional leadership. In
addition, the NPF conducted focus groups and commissioned
public opinion surveys which were useful to the party's
strategic planning. In fact, the RNC's chief strategist, Donald
Fierce, was a founding board member of the NPF.54
One of the most intriguing aspects of the NPF is its
fundraising operation, which was clearly intertwined with the
RNC's efforts. On several occasions, prospective donors were
told they could support the party by giving to the NPF. Major
donors to the RNC were also told that one of the benefits of
donating was the chance to attend NPF forums.
The close connection between NPF and RNC fundraising can be
illustrated with two examples.
In July 1995, a company controlled by the family
of Ted Sioeng, a businessman from Indonesia, donated $50,000 to
the National Policy Forum (see Chapter 7). The next day,
Speaker Gingrich attended a luncheon in Beverly Hills hosted by
Sioeng. When Committee staff asked Sioeng's daughter about the
donation, she indicated that she viewed it as a donation to the
Republicans. ``I don't care what department'' the money goes
to, she said.55
Stephen Wynn, chairman and chief executive officer
of Mirage Resorts, Inc., a major casino company in Las Vegas,
is the subject of an internal RNC memo obtained by the
Committee.56 This memo discusses a $1 million pledge
from Wynn and suggests three possible ways in which the money
could be allocated. It says that Wynn could give some of it in
the form of soft money to the RNC and some of it in the form of
a donation to the NPF. The proportions could be changed,
depending, in part, on Wynn's desire for anonymity (since the
NPF donations would not be disclosed).
Coalition for our children's future
While there is no doubt that the National Policy Forum was
a tool of the RNC, it was, at least, a ``real'' organization,
with an office and a large staff. The same cannot be said of
another RNC creation: Coalition for Our Children's Future
(``CCF'), a nonprofit organization founded in May
1995.57 Although its name suggested that it was a
grassroots organization of concerned citizens, CCF was, in
fact, established and controlled by RNC officials.
In 1995 and 1996, CCF ran a series of ``issue ads'' on such
subjects as Medicare and the balanced budget, as discussed in
Chapter 13 of the Minority Report. In August 1995, CCF received
a $500,000 donation from the National Republican Congressional
Committee, part of the RNC.58 Additional money for
the issue ads was raised by RNC Chairman Barbour and Speaker
Gingrich. Among the donors were major Republican contributors,
including large corporations. The Republican party therefore
financed these ads but because the ads were run by CCF, the RNC
was able to create the illusion that the message was coming
from an ``independent'' organization of concerned citizens,
rather than from a national political party. Moreover, if the
RNC had run the ads itself, it would have been obliged to pay
for them with a mixture of hard and soft money.
The Coalition for Our Children's Future was also one of
several nonprofit groups active in the 1996 campaign that
served as vehicles for Republican donors who wanted toinfluence
elections.
fronts for conservative donors
The RNC was not alone in using ``independent'' groups as
fronts to circumvent the campaign finance laws. Several
Republican donors contributed money to nonprofit organizations
that ran purported ``issue ads'' aimed at helping specific
Republican candidates win election in 1996. These nonprofits
were typically put forth as ``grassroots'' organizations but
several were, in fact, established for the main--or sole--
purpose of running political ads under the guise of issue
advocacy.
CCF's attack ads
Shortly before the November 1996 election, Coalition for
Our Children's Future received a large contribution from an
anonymous donor and used the money to run a series of ads
attacking Democratic candidates for the Senate and House of
Representatives. (It also operated on the state level--
attacking Democratic candidates for the Minnesota House of
Representatives.)
When witnesses knowledgeble about CCF's ad campaign were
deposed by the Committee, they testified that all the funds
came from a single donor, but they refused to identify the
donor. The Committee later obtained evidence suggesting that
the ``sole donor'' was actually an entity called the Economic
Education Trust.
The Economic Education Trust was established by Washington
lawyer Benjamin Ginsberg, who is outside counsel to the
National Republican Senatorial Committee and a former general
counsel to the RNC. Ginsberg arranged for several individuals
involved in the attack ads to sign confidentiality agreements
forbidding them to reveal the identity of the donor. According
to a press report, Ginsberg ``said it was done [this way] to
protect aided politicians from charges of quid-pro-quos if they
also helped the donors.'' 59 This seems to be an
admission by Ginsberg that the trust, by funding CCF, was
really making de facto campaign contributions.
The Economic Education Trust was also a major donor to two
tax-exempt organizations controlled by a company called Triad
Management Services (``Triad''), which is discussed in Chapter
12 of the Minority Report.
Triad's attack ads
Triad is a for-profit business established in the
Washington area in 1995 by Carolyn Malenick, a former
fundraiser for Oliver North, a figure in the Iran-Contra
scandal and, in 1994, an unsuccessful candidate for a Senate
seat in Virginia.
Triad managed two tax-exempt organizations whose names
suggested they were large, grassroots organizations: Citizens
for Reform and Citizens for the Republic Education Fund. In
fact, both entities were shell companies with no offices, no
employees, and no members. They were established in the spring
of 1996 for the sole purpose of running attack ads--under the
guise of ``issue advocacy''--to help Republican candidates win
election to Congress.
Triad officials refused requests by the Committee to
identify its donors, arguing that the donations did not
constitute campaign contributions. In fact, there is
overwhelming evidence that these so-called ``issue ads'' were
but one tool in a carefully orchestrated campaign to spend
money on behalf of specific Republican candidates without
adhering to federal election laws.
Although Triad would not disclose its donors, the Committee
has been able to identify some of them through a review of bank
documents. The records show that several Triad donors had
contributed the legal maximum in ``hard dollars'' to candidates
who benefited from ads run by Triad's tax-exempt organizations.
This is further evidence that the ads were de facto campaign
ads--and that the ``donations'' to the tax-exempts were de
facto campaign contributions.
By operating through Triad, these donors were able to avoid
complying with federal rules limiting the size of campaign
contributions and requiring disclosure of those contributions.
Triad's donors
Triad's largest donor appears to be the family of Robert L.
Cone of Elverson, Pennsylvania, former chairman of Graco
Children's Products,60 a privately held company in
which the Cone family held a large stake until it was sold in
1996. The Committee found that Cone and members of his family
had, on many occasions, made the maximum legal contributions
(``maxed out'') to candidates who benefitted from the Triad-
orchestrated attack ads.
The second largest donor to Triad's tax-exempt groups
appears to be the Economic Education Trust which, as noted
above, also contributed to Coalition for Our Children's Future.
The Committee has developed circumstantial evidence suggesting
that the Economic Education Trust was funded in whole or in
part by Charles and David Koch, the controlling shareholders of
Koch Industries of Wichita, Kansas,61 as discussed
in Chapter 12 of the Minority Report. For example, many of the
candidates who benefited from attack ads run by Triad's tax-
exempts and by CCF received thousands of dollars in campaign
contributions from Charles Koch, David Koch, and/or their
company's political action committee. (The Kochs were also
active fundraisers: David Koch raised money for Bob Dole, the
Republican presidential nominee, and served as vice chairman of
the Dole campaign.)
Koch Industries, a major oil company with annual revenues
of nearly $30 billion, has been described as the second largest
privately held company in the United States.62 The
Koch brothers are major political donors and have contributed
millions of dollars to public-policy and lobbying groups of
various kinds, as discussed in an endnote to this
chapter.63
The Committee has been unable to confirm that the Kochs
funded the Economic Education Trust. On September 30, 1997, the
Minority staff wrote to Charles Koch asking for his assistance
with the investigation and he received no reply. When
journalists contacted Koch Industries, spokesmen declined to
say whether or not it had funded Triad's ``issue advocacy''
campaign. Benjamin Ginsberg, the lawyer who set up the Economic
Education Trust, also declined to identify the donor or donors
who funded the trust.64 Although it is impossible to
say who funded the Economic Education Trust, it is clear that
the donor (or donors) went to great lengths to avoid exposure--
channeling money through at least two layers of shell
companies. It is noteworthy that similar techniques were used
to obscure the money trail in the Iran-Contra case and that a
few individuals involved in Iran-Contra or with its principal
architect, Oliver North, were later involved in Triad's or
CCF's questionable ``issue advocacy'' activities during the
1996 campaign.65
conclusion
The evidence collected by this Committee shows clearly that
there were really two campaigns conducted during the 1995/96
cycle. There was an ``overt'' campaign and a ``covert''
campaign.
In the ``overt'' campaign, all contributors--whether they
were individual donors or political action committees--revealed
their names, their occupations, and the size of their donations
to the Federal Election Commission. All donors to specific
candidates were subject to strict limits on how much they could
give.
In the ``covert'' campaign, the rules were utterly
different. In this parallel campaign, there was no disclosure
and there were no limits on how much money could be
contributed. Tax-exempt ``issue advocacy'' groups and other
conduits were systematically used to circumvent the federal
campaign finance laws.
Although the secret donors in the covert campaign were
invisible, they had a powerful impact. These anonymous
contributors poured millions of dollars into House, Senate, and
presidential campaigns. In many cases, the secret donors
financed massive advertising blitzes in the closing weeks of
the campaign--boosting certain candidates and undermining their
opponents. There is every reason to believe that these de facto
campaign contributions determined the outcome of some of the
close races.
The secret flows of money used to pay for these attack
campaigns severely undermine our campaign finance laws and
corrupt the electoral process. What is particularly disturbing
is that Republican Party officials were, in many cases, witting
participants, sometimes using party money to finance these
schemes and were, by and large, unwilling to cooperate with the
Committee's exploration of these important issues.
footnotes
\1\ Rosenberg, Lisa. A Bag of Tricks: Loopholes in the Campaign
Finance System. Washington, D.C.: The Center for Responsive Politics,
1996: ``Labor unions have been barred from contributing to candidates
since 1943. In addition, the post-Watergate campaign finance law caps
individual contributions at $25,000 per calendar year, and permits
individuals to give no more than $20,000 to a national party, $5,000 to
a political action committee (PAC), and $2,000 to a candidate.
(Contributions of up to $1,000 each for primary and general elections
are permitted.)'' See also, 2 U.S.C. 434(b)(3)(A) (1977).
\2\ Coalition Building Manual, Overview section, R 1824.
\3\ During Dukakis's tenure as governor of Massachusetts, Horton, a
convicted murderer, was released from a state prison on a weekend
furlough program. He then raped a Maryland woman and attacked her
fiance. Horton is black and his face was featured prominently in the
television ad. His victims were white. Many observers felt the
Republican ad was racist.
\4\ The RNC's own donations to outside groups were reported to the
Federal Election Commission but the donations raised by the RNC from
Republican donors were not disclosed.
\5\ Exhibit 2365: Memorandum from RNC political director and head
of campaign operations Curt Anderson to RNC chairman Haley Barbour,
regarding ``Group of 12, or Council of Trent, or Whatever,'' 3/4/96,
R006050.
\6\ Exhibit 2365.
\7\ Untitled and undated document tallying support for, opposition
to and comments by RNC officials on proposed members in a coalition of
independent group leaders, R021559-60.
\8\ Untitled and undated document tallying support for, opposition
to and comments by RNC officials on proposed members in a coalition of
independent group leaders, R021559-60.
\9\ Untitled and undated document tallying support for, opposition
to and comments by RNC officials on proposed members in a coalition of
independent group leaders, R021559-60.
\10\ Memorandum, from RNC chairman Haley Barbour to ``Republican
Leaders'' on ``Independent Expenditure Campaigns,'' 3/5/96, R028572-73.
\11\ Memorandum, from RNC chairman Haley Barbour to ``Republican
Leaders'' on ``Independent Expenditure Campaigns,'' 3/5/96, R028572-73.
\12\ Exhibit 2367: Coalition Building Manual, authored by Curt
Anderson, R01821-49.
\13\ R01823.
\14\ R01841.
\15\ R01841.
\16\ R01841.
\17\ R01841, R01845.
\18\ R01847.
\19\ Exhibit 2353: undated memorandum from ``Blaise'' to ``Pat,''
regarding ``Outreach, Auxiliaries, Coalitions,'' R51299-30.
\20\ Exhibit 2362: memorandum dated 3/6/96 from ``Hopper'' to RNC
political director and head of campaign operations Curt Anderson,
regarding ``Coalitions,'' R056245.
\21\ See Chapter 11. See also, for example, Drew, pp. 1-6, 14, 33,
82-88, 167-69.
\22\ Exhibit 2364: Memorandum from ``Howard & Phil'' to ``Evelyn
and Judy'' regarding the ``Seniors Program,'' 3/30/96, R033753-54.
\23\ Exhibit 2364: Memorandum from ``Howard & Phil'' to ``Evelyn
and Judy'' regarding the ``Seniors Program,'' 3/30/96, R033753-54.
\24\ Washington Post, 12/10/96.
\25\ See Washington Post, 2/12/95. After the election, the
Democratic Senate Campaign Committee filed a complaint with the FEC
charging the NRSC with transferring the funds to the groups to
circumvent federal limits on coordinated expenditures by the Republican
Party on behalf of its Senate candidate.
\26\ FEC records.
\27\ Washington Post, 12/12/95, citing FEC records.
\28\ Washington Post, 12/12/95, citing FEC records.
\29\ Washington Post, 12/12/95, citing FEC records.
\30\ Undated and untitled document, R021609. The other two
organizations are the United Seniors Association and ``CCRI'' the
California ballot initiative on affirmative action.
\31\ Document DFP004244. This document was not produced by the RNC,
but was produced by the Dole for President campaign.
\32\ Undated RNC document headed ``Soft Money Fundraising
Strategy,'' R 3215.
\33\ FEC records.
\34\ According to FEC records, in 1996, the DNC gave a total of
less than $185,000 to tax-exempt organizations, including $117,500 to
the National Coalition of Black Voter Participation; $20,000 to the
African American Institute; $10,000 to the Stonewall Gay and Lesbian
Club; $10,000 to the Congressional Black Caucus; and $4,000 to the
Hispanic Caucus.
\35\ Washington Post, 10/23/97.
\36\ RNC documents provided to the Committee include a copy of a
check from ADI to RNSEC for $600,000 dated 10/25/96. The memo line
says: ``Repayment of loan,'' R61404.
\37\ Washington Post, 10/23/97.
\38\ This letter is described in the Washington Post, 10/23/97. The
six checks are from the following persons: (1) $100,000 from Jack C.
Taylor, identified as founder of Enterprise Rent-a-Car; (2) $100,000
from Max Fisher, who is a longtime supporter of the Republican Party
and, in 1996, honorary chair of the RNC's premier donor organization,
Team 100; (3) $50,000 from a ``foundation controlled by former defense
secretary Donald Rumsfeld'; (4) $30,000 from ``Houston oil executive
Patrick R. Rutherford;'' (5) $100,000 from ``billionaire investor Kirk
Kerkorian''; and (6) $150,000 from John Moran, a national finance chair
of the RNC and head of Victory ``96, one of the RNC's key fundraising
committees.
\39\ That check was from John Moran. See previous note.
\40\ Washington Post, 10/23/97.
\41\ Washington Post, 10/23/97.
\42\ Washington Post, 10/23/97.
\43\ Washington Post, 10/23/97. The RNC's role in funneling donors'
money to ``independent'' groups is also mentioned in several RNC and
Dole for President memos. See Chapter 11.
\44\ Exhibit 2400: memorandum from RNC finance chair Jo-Anne Coe to
RNC chairman Haley Barbour and other RNC officials, regarding the
delivery of checks to ADI, ATR and NRTLC, 10/17/96, DFP004240. This
document was produced to the Committee by the Dole for President
campaign.
\45\ Exhibit 2400: The five checks are identified in the memorandum
as follows: $100,000 from Jack Taylor; $100,000 from Max Fisher;
$50,000 from Don Rumsfeld; $30,000 from Pat Rutherford; and $100,000
from ``Lincy Foundation (Kirk Kerkorian).''
\46\ Exhibit 2400: Memorandum from RNC Finance Chair Jo-Anne Coe to
RNC Chairman Haley Barbour and other RNC officials, regarding the
delivery of checks to ATR, NRTLC and ADI, 10/17/96, DFP004240.
\47\ DFP004241 & DFP004243.
\48\ ATR/R00850. A second check for $100,000 was deposited on 10/
28/96. Document ATR/R00854.
\49\ Exhibit 2400: memorandum from RNC finance chair Jo-Anne Coe to
RNC chairman Haley Barbour and other RNC officials, regarding the
delivery of checks to ATR, NRTLC and ADI, 10/17/96, DFP004240.
\50\ Exhibit 2402: Memorandum from RNC Finance Chair Jo-Anne Coe to
RNC Chairman Haley Barbour, 10/21/96, DFP004242.
\51\ ``Haley Barbour, Chairman of the Republican National
Committee, Discusses Democratic National Committee Refusal of Pre-
Election FEC Report,'' Presidential Campaign Press Materials, Federal
Document Clearing House, Inc., 10/29/96.
\52\ NPF filed its articles of incorporation in Washington, D.C.,
on 5/24/93.
\53\ Exhibit 353: IRS letter to NPF, 2/21/97, NPF 3375-3387.
\54\ Exhibit 257: NPF's articles of incorporation.
\55\ Staff interview with Jessica Elnitiarta, 6/19/97.
\56\ Exhibit 327: Memo from Kevin Kellum of Team 100 to Haley
Barbour re ``Stephen Wynn, CEO, Mirage Resorts,'' 2/23/96, R 13574.
\57\ Abstract of filing by Coalition for Our Children's Future with
Virginia Secretary of State.
\58\ FEC records.
\59\ Associated Press, 11/1/97.
\60\ According to bank records, Cone contributed at least $325,000
to Triad, while his brother Edward gave at least $404,000. In addition,
a trust believed to be funded by the Cone family gave at least $150,000
to Triad, $400,000 to Citizens for Reform, and $200,000 to Citizens for
the Republic Education Fund.
\61\ In addition to the circumstantial evidence developed by the
Committee, there is documentary evidence that Koch Industries gave a
small amount of money to Triad: The company sent a $2,000 check to
Triad on 10/29/96.
\62\ Forbes, 10/13/97.
\63\ Koch Industries is affected by governmental action in a myriad
of ways, including taxation and environmental regulation. In 1995, the
U.S. Department of Justice filed ``a $55 million civil suit against
Koch [Industries] for causing more than 300 oil spills over a five-year
period,'' according to a report in Business Week, 4/1/96.
Koch Industries has also been criticized on Capitol Hill. In 1989,
the company was accused by a Senate committee of stealing oil from
Indian lands. Final Report and Legislative Recommendations: A Report of
the Special Committee on Investigations of the Select Committee on
Indian Affairs, United States Senate, 101st Congress, 1st Session, 10/
20/89, p. 105.: ``Koch Oil (`Koch'), a subsidiary of Koch Industries
and the largest purchaser of Indian oil in the country, is the most
dramatic example of an oil company stealing by deliberate
mismeasurement and fraudulent reporting.''
The same allegation is made in a qui tam (false claims) suit filed
in 1989 on behalf of the United States Government by a company
controlled by William I. Koch, a former Koch Industries shareholder and
a brother of Charles and David Koch. United States of America ex rel.
The Precision Company et al. v. Koch Industries, Inc., et al. United
States District Court for the Northern District of Oklahoma, Civil
Action No. 91-C-763-B.
Koch Industries denies the oil-theft allegations.
Since the 1970s, the Kochs have donated millions of dollars to the
Cato Institute, a Libertarian think tank that promotes deregulation and
tax cuts. Cato, which was founded in 1977 with financial backing from
Charles Koch, has received more than $21 million from the Kochs,
according to The Nation, 8/26/96. In 1980, David Koch was the
Libertarian Party's candidate for vice president in 1980.
The Kochs have also donated millions of dollars to Citizens for a
Sound Economy, a pro-business organization in Washington that promotes
deregulation. Lewis, Charles and the Center for Public Integrity. The
Buying of the President. New York: Avon Books, 1996, p. 127.
Around the time of the 1989 Senate investigation, the Kochs became
major donors to the Republican party and to Republican politicians,
some of whom defended Koch Industries against the oil-theft
allegations:
In late 1989, Senators Bob Dole (R-Kans.), Nancy Kassebaum
(R-Kans.), Don Nickles (R-Okla.), and David L. Boren (D-Okla.), sent
two letters to Senator Dennis DeConcini, chairman of the Special
Committee conducting the investigation (the ``DeConcini Committee''),
in which they challenged the reliability of testimony given to the
committee. One letter was dated October 24, the other November 2.
On March 26, 1990, Senator Dole gave a speech on the
Senate floor in which he attacked the DeConcini investigation and
characterized Koch Industries as a ``solid corporate citizen.'' Senator
Dole said he was speaking on behalf of himself and Senators Kassebaum,
Boren, and Nickles.
On August 13, 1992, Senators Dole, Nickles, Kassebaum, and
Boren sent a pro-Koch letter to Senator Daniel K. Inouye, chairman of
the Select Committee on Indian Affairs, in which they recommended
attaching an addendum to the DeConcini Committee's 1989 report that
would clear Koch Industries.
\64\ See Chapters 12 and 13
\65\ Some of the techniques used to conceal donors to dubious
``issue advocacy'' groups are reminiscent of methods used to hide
donors to the Nicaraguan Contras during the 1980s. In Iran-Contra, the
conduits included tax-exempt corporations. In ``issue advocacy''
schemes of the 1990s, some of the funds used to pay for purported
``issue ads'' were channeled through tax-exempt corporations and secret
trusts. Another parallel is that a few individuals who were involved
with Iran-Contra or Oliver North were also involved in the purported
``issue advocacy'' activities of either Triad or Coalition for Our
Children's Future.
Fred Sacher, a California businessman, contributed an
estimated $400,000 to the Contras and was also a donor to the 1994
Senate campaign of Oliver North, a central figure in the Iran-Contra
affair. In 1996, he contributed heavily to Triad's tax-exempts: Bank
records show that he gave $50,000 to Citizens for Reform and $150,000
to Citizens for the Republic Education Fund.
J. Curtis Herge, a Virginia lawyer who has represented
numerous conservative groups, helped to form the National Endowment for
the Preservation of Liberty (``NEPL''), a tax-exempt entity which
served as an illegal conduit for aid to the Contras. As a result, the
head of NEPL, Carl R. (``Spitz'') Channell, pleaded guilty to
conspiracy to defraud the United States, a felony. Herge, who was never
accused of wrongdoing, served as a trustee for Oliver North's legal
defense trust. During the 1990s, Herge served as counsel to Coalition
for Our Children's Future.
Lyn Nofziger, a longtime Reagan aide, ran a public
relations firm in Washington after leaving the White House staff. As a
consultant to Spitz Channell, the head of NEPL, Nofziger assisted in
fundraising for the Contras by arranging for some of Channell's donors
to meet with President Reagan at the White House, according to a
spokesman for Channell (Chicago Tribune, 5/5/87). In 1996, Nofziger was
named director and spokesperson for a Triad-controlled tax-exempt:
Citizens for the Republic Education Fund.
Carolyn Malenick, the owner of Triad, had been a
fundraiser for Oliver North's legal defense trust during the Iran-
Contra prosecution. In 1994, she was finance director of his
unsuccessful campaign for the Senate. She then established Triad, which
used two tax-exempt corporations to run attack ads under the guise of
issue advocacy.
PART 3 INDEPENDENT GROUPS
Chapter 11: Americans for Tax Reform
The conduct of Americans for Tax Reform (``ATR'') in the
1996 elections provides a prime example of campaign abuses
involving tax-exempt organizations. Despite a commitment to
nonpartisanship in its incorporation papers, ATR engaged in a
variety of partisan activities on behalf of the Republican
Party during the 1996 election cycle. ATR also accepted $4.6
million in soft dollars from the Republican National Committee
and spent them on election-related efforts coordinated with the
RNC. The ability of ATR to act as an alter ego of the
Republican National Committee in promoting the Republican
agenda and Republican candidates, while shielding itself and
its contributors from the accountability required of campaign
organizations, underscores the need for reform of the rules
governing the political activities of such organizations.
The case of ATR is also a prime example of the
unwillingness of the Majority to examine improper and
apparently illegal activities of the RNC and Republican-
oriented entities with the same vigor and aggressiveness it
demonstrated in examining the activities of the Democratic
National Committee and Democratic-oriented organizations.
Indeed, the refusal of the Majority to exercise the lawful
authority of the Committee in the face of ATR's repeated
defiance of Committee document and deposition subpoenas belies
its stated commitment at the outset of this investigation to
approach the issues in a balanced and bipartisan manner.
Despite ATR's noncompliance and the Committee's failure to
enforce its authority to investigate ATR's activities, the
Minority has been able to piece together the outline of
coordinated campaign efforts between the RNC to nonpartisanship
and ATR that appear to have circumvented hard and soft money
restrictions, evaded disclosure requirements, and abused ATR's
tax-exempt status.
FINDINGS
(1) The Republican National Committee improperly and
possibly illegally gave $4.6 million to Americans for Tax
Reform to fund issue advocacy efforts including mail, phone
calls, and televised ads. By using ATR as the nominal sponsor
of issue advocacy efforts, the RNC effectively circumvented FEC
disclosure requirements and the requirement to fund 65% of the
cost of its issue advocacy with hard (restricted) money.
(2) By operating as a partisan political organization on
behalf of the Republican Party, Americans for Tax Reform
appears to have violated its status as a tax-exempt, social
welfare organization under section 501(c)(4) of the tax code.
(3) ATR's issue advocacy activity was conducted, in part,
by an affiliate called the Americans for Tax Reform Foundation,
which appears to be a violation of the foundation's status as a
501(c)(3) charitable organization, contributions to which are
tax deductible.
BACKGROUND
ATR was established in 1985 by a group of prominent
Republicans to rally support for then-President Reagan's tax
reform proposals.1 It was created as a tax-exempt
corporation under section 501(c)(4) of the Internal Revenue
Code.2 Its articles of incorporation state in
article 3:
---------------------------------------------------------------------------
Footnotes at end of chapter.
---------------------------------------------------------------------------
The purpose for which this corporation is organized
and operated shall be to engage in such charitable,
scientific, educational and political activities
relating to tax reform, the promotion of tax fairness
and economic prosperity as may qualify it as exempt
from federal tax under section 501(c)(4) of the
Internal Revenue Code.3
Article 6 of ATR's articles of incorporation states that ATR's
purposes must be pursued without partisanship:
The Corporation's purposes shall be pursued wholly
without partisanship, and the corporation shall not
participate in, or intervene in (including the
publishing or distribution of statements), any
political campaign on behalf of any candidate for
public office, [nor] engage in any partisan
activity.4
ATR has a number of affiliated organizations.5
The oldest is Americans for Tax Reform Foundation (``ATRF'')
which was created in conjunction with ATR in 1985 as a tax-
exempt corporation under section 501(c)(3) of the Internal
Revenue Code.6 ATRF shares office space, facilities,
equipment, and personnel with ATR. ATRF's stated role is to
educate the public about the need to reduce taxes and simplify
the federal tax system.7 Article 6 of ATRF's
articles of incorporation states that it ``shall not
participate in, or intervene in (including the publishing or
distribution of statements), any political campaign on behalf
of any candidate for public office, nor engage in any partisan
activity.''
GROVER NORQUIST
Since 1987, Norquist has served as the president and
guiding force of both ATR and ATRF.8
Norquist's activism in Republican affairs is long standing.
In the early 1980s, after obtaining a degree from Harvard
Business School, Norquist served as director of the National
College Republican Committee, the collegiate arm of the
RNC.9 He then worked for Americans for the Reagan
Agenda, a grassroots organization supporting President Reagan;
the U.S. Chamber of Commerce; and Citizens for America, another
grassroots organization backing the Reagan agenda.10
After joining ATR as president, Norquist continued to engage in
Republican Party activities. In both 1988 and 1992, he served
as staff to the Republican Platform Committee.11 In
1988, Norquist was an advisor to the Bush/Quayle presidential
campaign.12 Norquist has also, since the early
1980s, been a close advisor and confidant of the Republican
Speaker of the House, Newt Gingrich, and is also a registered
foreign agent.13
In Rock the House, a book written by Norquist on the 1994
Republican takeover of the House of Representatives, prominent
Republicans praise his work on behalf of the Republican Party.
Conservative radio talk show host Rush Limbaugh calls Norquist
``perhaps the most influential and important person you've
never heard of in the GOP today.'' (Original emphasis.) RNC
Chairman Haley Barbour calls Norquist ``a true insider.''
Speaker Gingrich states that Norquist ``has entree at every
level of the Republican Party.'' Journalist Michael Barone of
U.S. News and World Report states that ``Norquist is one of the
few people who both predicted and worked for the Republican
victories in November 1994.'' Norquist's inclusion of these
statements in his book is evidence that he considers them
accurate descriptions of his involvement with the Republican
Party.
Documents produced to the Committee by the RNC demonstrate
Norquist's continued involvement with the Republican Party
during the 1996 election cycle. A December 6, 1994, memorandum
on RNC stationery from Donald Fierce, counselor to the RNC
chairman, prepared at the threshold of the 1996 election
cycle,14 is entitled ``Core Working Group'' and
lists key personnel from the RNC, Republican Governors
Association, and outside organizations sympathetic to the
Republican Party, including Norquist as president of ATR. A
March 4, 1996, memorandum from Curt Anderson, RNC political
director, to RNC Chairman Haley Barbour,15 states:
``You had asked us in Atlanta to come up with ideas for a group
that would encompass the leadership of the base Republican
coalition.'' On that list is Norquist. An August 22, 1996, RNC
media advisory states that, during the Democratic National
Convention, Norquist is available to answer press inquiries as
a ``Republican surrogate.'' 16
Other public statements also portray Norquist as actively
engaged in the effort to elect Republicans to office in 1996.
When Representative Bill Paxon, head of the National Republican
Congressional Committee, was asked to ``list the most important
people or groups behind the Republicans' effort to maintain
control of the House'' in 1996, the first name he gave was
Norquist.17 When Speaker Gingrich held a September
1996 dinner in his so-called ``Dinosaur Room'' and discussed
the state of House campaigns, Norquist attended.18
For his part, when asked in 1995 how to ensure dramatic tax
reform, Norquist replied, ``Elect a Republican president, and
it will happen.'' 19
Norquist has spent the last decade becoming an increasingly
important Republican Party insider, dedicated to electing more
Republicans to office.20 The facts and documents
indicate that he has consistently used ATR to promote not only
Republican ideas but also Republican candidates. In the 1996
election cycle, ATR's partisanship culminated in a $4.6 million
contribution by the RNC, a sum which was more than four times
ATR's total income the previous year.21 ATR used
this money, as well as large contributions directed to it by
the RNC, to finance a range of election-related activities,
including a multimillion-dollar direct mail and phone bank
operation to counter anti-Republican ads on Medicare;
television ads attacking Democratic candidates; media events
and awards to assist Republican candidates and disparage
Democratic candidates; and weekly meetings of conservative
activists at ATR's offices to encourage an organized response
to 1996 election concerns. ATR undertook all of these
activities without registering with the FEC as a political
organization, without disclosing its contributors or
expenditures, and without admitting any partisan or election-
related objectives.
THE $4.6 MILLION OCTOBER SURPRISE
In October 1996, the final month before the election, the
RNC gave $4.6 million to ATR--the single largest dollar
transfer from a national political party to a tax-exempt
organization in the history of American politics.
ATR has refused to provide an accounting of how it obtained
the $4.6 million from the RNC or how it spent the money. It has
told the Committee that such information is outside the scope
of the Committee's investigation, because ``ATR has never
engaged in electioneering of any sort. It has never advocated
the election or defeat of any candidate for any office at any
time; it has never run political advertising on any subject.''
22 The facts and documents show, however, that ATR
used the $4.6 million in RNC funds to finance a number of
election-related efforts, including a multimillion-dollar
direct mail-phone bank operation, in coordination with the RNC,
to counter anti-Republican advertisements on the issue of
Medicare.
For months prior to the transfer, the RNC had been
objecting to television advertisements sponsored by organized
labor and others criticizing the Republican Party for its
positions on Medicare. The RNC claimed that the advertisements
distorted the facts and that Republicans did not intend to
reduce Medicare benefits. Yet, the RNC delayed spending funds
to respond to those ads until October 1996. At an October 25
press conference, RNC Chairman Haley Barbour offered this
explanation of the RNC's decision to delay spending:
[W]e made the decision not to borrow money last year
or early this year in order to try to compete with the
unions and the other liberal special-interest groups'
spending. You see, our campaigns do come into the real
election season late September and October without
having spent all the money . . . to match what the
unions were doing. And you will see us--you are seeing
now, and have been throughout the month of October, you
are seeing Republicans using the resources that we've
raised in voluntary contributions to finish very
strong, to make sure our message is in front of voters
when they are making their voting
decisions.23
One step taken by the RNC to ensure that its message was
``in front of voters when theyare making their voting
decisions'' was to pay ATR $4.6 million from the RNC's soft money
account. ATR then used the money primarily for a direct mail and phone
bank operation targeting 150 Congressional districts with 19 million
pieces of mail and four million telephone calls on the issue of
Medicare.24
The ATR mailings are entitled: ``Straight Talk About You,
Medicare and the November 5 Election.'' 25 One
mailing urges senior citizens to ignore ``political scare
tactics'' involving Medicare, and states ``[t]here's barely a
difference between the Republican Medicare Plan and President
Clinton's Medicare Proposal.'' 26
These mailings were handled by the John Grotta Company, the
contractor that actually managed the Medicare direct mail and
phone bank effort for ATR in October 1996. This company has
also run direct mail campaigns for the RNC and is owned by an
individual--John Grotta--who is a former western political
director for the RNC as well as a former director of voter
contact for the National Republican Senatorial Committee. A key
planning document submitted by the John Grotta Company to ATR
about these mailings is entitled, ``A Strategic Direct Mail and
Telemarketing Proposal to Inform and Activate the Seniors
Electorate in Select Congressional Districts During the 1996
Election Season.'' 27 The proposal's use of the word
``Electorate'' to describe seniors and ``1996 Election Season''
to describe the relevant time period is evidence of an
election-related purpose. The proposal states that, ``[u]nlike
other direct marketing companies, we possess unique campaign
experience and telemarketing technology which allow us to
target your mail and phone programs to produce the results you
need.'' The proposal cites ``vast campaign and political
expertise'' and past ``direct mail and telephone programs for
winning Presidential, Gubernatorial, U.S. Senate and House
Republican candidates'' as two of the company's selling points.
(Emphasis added.)
RNC-produced documents provide further evidence that the
Medicare effort was election driven. An undated memorandum
produced to the Committee by the RNC entitled, ``Memorandum for
the Field Dogs,'' 28 states in its entirety:
Re: Outside Mail and Phone effort
Attached is a rotten copy of the 1st of 3 mail
piece[s] that will be sent to 150 selected
congressional districts it will be directed at, a map
of which has been included for your viewing pleasure.
We discussed this effort during Wednesday's
conference call.
This is an effort undertaken by Americans for Tax
Reform. They are attempting to warn seniors about
Democrat Mediscare tactics . . . 29
This memorandum shows that the RNC had a copy of ATR's
first Medicare mailing before it was sent out--it attaches the
``piece that will be sent.'' It shows that the RNC knew it was
the first of three mailings, and that it was being sent, not to
specified cities or counties or zip codes, but to specified
Congressional districts. To ensure that RNC field personnel
would know exactly which districts were targeted, the memo
included ``a map . . . for your viewing pleasure.'' The memo
also states that RNC field personnel had discussed the ``effort
undertaken by Americans for Tax Reform'' in a previous
``Wednesday's conference call.''
This memorandum demonstrates advance RNC knowledge not only
of ATR's general Medicare effort, but also of ATR's first
specific mailing and of the 150 congressional districts
selected to receive it. The fact that the mailing targets
congressional districts, rather than cities or zip codes, again
demonstrates an election-related intent. The fact that this
information was communicated to RNC field personnel doing
election-related work at the time--and in the last month before
election day--provides still more evidence of an election-
related purpose.
Additional documents analyzed by the Minority indicate that
the RNC knew when it gave ATR the $4.6 million that ATR
intended to spend the funds on the Medicare issue. Consisting
primarily of invoices, check copies, wire transfers and bank
records, this evidence shows that the RNC's $4.6 million
``donation'' to ATR actually consisted of four payments made
throughout the month of October in amounts and on dates that
enabled ATR to pay the bills for the Medicare direct mail and
phone bank operation.
A key document is an October 29, 1996, invoice provided to
ATR's executive director, Audrey Mullen, from the John Grotta
Company.30 This invoice shows that the company sent
out three mailings, directed two rounds of telephone calls, and
purchased a database for ATR. It shows ATR owing various
amounts throughout October 1996. The grand total for the entire
direct mail and phone bank operation, not including postage for
the mailings, is $3,325,498.60, of which only about $608,000
was still owed on October 29.
ATR's bank records,31 provided by Riggs National
Bank in response to a Committee subpoena,32 show
that on October 1, 1996, ATR had two bank accounts with a
combined total of $294,078.50. This amount, less than a tenth
of the total cost of the direct mail-phone bank operation,
would have been insufficient to pay for that effort. The bank
records show, however, that beginning on October 4, the RNC
began transferring funds directly into one of ATR's bank
accounts in amounts that would prove more than enough to pay
for the entire direct mail-phone bank operation.
The timing of the RNC payments is also revealing. According
to the October 29 invoice, ATR owed John Grotta an initial
payment of $195,177.50 on October 7. On October 4, three days
before that initial payment was due, the RNC gave $2 million to
ATR. The RNC didn't write a check to ATR--the bank documents
show that the RNC wire-transferred the funds directly from its
soft money account into ATR's bank account.33 Five
days later, on October 9, ATR paid its bill to John
Grotta.34
Two weeks later, ATR faced another $1,313,677.40 in bills
owed to the John Grotta Company. These bills were due on
October 18 and October 22. On October 17, the RNC made a second
payment to ATR, this time in the amount of $1 million. Again,
this money was wireddirectly into ATR's bank
account.35 Within days of receiving it, ATR paid the John
Grotta Company $1,418,544.38.36
Yet another Grotta bill came due on October 24, in the
amount of $1,104,000. On October 23, however, the total in
ATR's bank account was only $216,344.93. But on October 25, the
RNC made a third payment of $1 million wired into ATR's
account.37 Within hours of receiving this million-
dollar payment, ATR paid the John Grotta Company
$1,104,000.38
The fourth and most telling payment came one week later, at
the end of October. ATR faced a final Grotta bill in the amount
of $607,776.72. On the day before that bill was due, the total
in ATR's bank account was only $70,085.65. But on the next
day--the day when the $607,000 bill was due--the RNC wired ATR
a fourth and final payment in the amount of
$600,000.39 Within two hours of receiving the RNC
funds, ATR paid its final bill for the Medicare direct mail-
phone bank operation.40
The timing and amounts of RNC payments to ATR, when
compared to the billing dates and amounts owed by ATR to the
John Grotta Company, suggest ongoing communication and
coordination between ATR and the RNC. They indicate, for
example, that the RNC's $600,000 payment to ATR just in time
for ATR to pay a $600,000 bill was more than coincidence.
However, when asked publicly about the transactions, RNC
Chairman Haley Barbour and ATR President Grover Norquist denied
that the $4.6 million transfer was part of any coordinated
effort between the two organizations. Barbour told the
Washington Post that ``he had no understanding with Norquist
about how the money would be spent,'' 41 while
Norquist told the press that he had made ``no specific
commitment'' 42 to the RNC on how ATR would spend
the money.
But other statements by the two men indicate the opposite.
When asked to comment on the $4.6 million, Norquist told the
Washington Post that ATR ``just ramped up on stuff we were
going to do anyway. They, the RNC, the conservative movement,
knew the projects we were working on.'' 43
When asked about the $4.6 million at a news conference at
RNC headquarters on October 29, 1996, Barbour said the
following:
Sure. We made a contribution to Americans for Tax
Reform, which is a conservative, low-tax organization.
You'll see in our FEC report now and at the end of the
year that we've made contributions to a number of
organizations that are like-minded, share our views,
promote our ideas.
As you know, when we do advertising, when we do
advocacy, no matter what we do, we typically have to
pay for it, either totally with FEC dollars or a
mixture of FEC and non-FEC dollars. While our
fundraising among small donors has been nothing short
of spectacular, we often find ourselves in the position
where we cannot match up non-FEC funds with enough FEC
funds.
So, when we came to that point, we decided we would
contribute to several groups who are like-minded and
whose activities we think, while they're not
specifically political, we think are good for the
environment for us.44 (Emphasis added.)
In a Washington Post article on February 9, 1997, again
referring to the RNC contribution to ATR, Barbour was quoted as
saying that groups like ATR ```have more credibility' in
pushing a political message than the parties themselves.''
45
These statements by the RNC chairman indicate that the RNC
gave ATR $4.6 million in soft money for two reasons. The first
reason was that the RNC did not have enough matching hard
dollars to allow the RNC to do the desired issue advocacy
itself. FEC filings demonstrate just how few hard dollars the
RNC had during the last month before the election. On September
30, 1996, the RNC reported having $16.7 million on hand, of
which only $3.8 million was hard money; on October 16, of the
$3.9 million the RNC reported having on hand, none was hard
money.46 The FEC has ruled that issue advocacy
undertaken by a national political party in a presidential
election year must be paid for with a mix of 65 percent hard
dollars and 35 percent soft dollars,47 yet the RNC
paid for the ATR Medicare mailings and phone calls without
using a single hard dollar. The second reason the RNC gave for
giving $4.6 million to ATR in October was that political
advertising sponsored by a group like Americans for Tax Reform
had more credibility than advertising sponsored by the RNC
itself. Norquist's statement is unequivocal that the RNC
already knew what projects ATR was working on--one would assume
that included ATR's Medicare project whose projected cost was
three times greater than ATR's entire income the previous year.
The facts, documents and public statements of Barbour and
Norquist, when viewed together, reveal a deliberate,
coordinated strategy of moving RNC soft dollars to a tax-exempt
organization to pay for an election-related direct mail and
phone bank operation. Had the RNC undertaken that operation
itself, it would have required substantial hard dollars which
the RNC did not have. The resulting mailings and telephone
calls were paid for entirely with soft dollars, drew on ATR's
greater credibility, and targeted 150 selected congressional
districts presumably where Republican candidates needed help on
the Medicare issue.48
In addition to demonstrating coordination between the RNC
and ATR to fund the Medicare direct mail-phone bank operation,
the invoices and bank records provide evidence of the
involvement in that operation by the Americans for Tax Reform
Foundation, ATR's affiliated charitable organization which is
legally prohibited from engaging in campaign activity or
operating for the benefit of a private interest like the
Republican Party.49 The documents suggest that of
the $4.6 million provided by the RNC, ATR transferred about
$2.3 million to the Foundation which, in turn, paid the John
Grotta Company for almost half of the direct mail-phone bank
bills. In effect then, the RNC funneled soft money through two
tax-exempt organizations--one a 501(c)(4) and one a 501(c)(3)--
to pay for an election-related effort it could not do on its
own due to a shortage of hard dollars. ATR paid approximately
$1.8 million for the operation, while the ATR Foundation paid
approximately $1.5 million.50 Additional proof of
the Foundation's involvement is provided by one of the mailings
which states, underneath the heading ``Straight Talk About You,
Medicare & the November 5 Election'': ``Paid for by AMERICANS
FOR TAX REFORM FOUNDATION.'' 51
ATR TELEVISED ATTACK ADS
The RNC's $4.6 million paid for more than the Medicare
direct mail and phone bank operation. That operation cost
approximately $3.3 million plus postage. That leaves RNC funds
in the range of $1 million unaccounted for. Although Norquist
told the Washington Post in December 1996, that ATR ``didn't do
televised issue ads,'' 52 and told the Committee in
June 1997 that ``it has never run political advertising on any
subject,'' 53 the evidence establishes that ATR did
in fact produce and run television ads attacking Democratic
candidates, the costs of which appear to have been paid at
least in part with RNC funds.
A videotaped copy of a 1996 television ad attacking then-
Representative Robert Torricelli, the Democratic senatorial
candidate in New Jersey, for allegedly missing votes during his
tenure as a Congressman, was provided to the
Minority.54 The ad states plainly in the closing
frame that it was paid for by ATR. An invoice to ATR from a
company called Title Wave requests roughly $8,000 for producing
an ad called ``Missing.'' 55 In addition, ATR
provided to the Committee invoices from a company called
Mentzer Media Services, Inc. (``Mentzer''). These invoices show
that Mentzer charged ATR $325,230 for a 30-second television
media buy in the New York/New Jersey media markets
56 and another $56,656.25 for media buys in the
Philadelphia/New Jersey media markets.57 These media
buys began in October and lasted until November 4, 1996, the
day before the election. The Mentzer invoices do not specify
the Torricelli/``Missing'' ad, but that is the only ad which
the Minority has evidence was broadcast in those markets. It is
possible, however, that these media buys were for other ATR-
sponsored television ads not yet identified.
ATR's bank records indicate that RNC funds were used by ATR
to pay the bills related to this television attack ad. The
records indicate that on October 4, 1996, the same day it
received $2 million from the RNC, ATR wrote a $4,000 check to
Title Wave as partial payment on the Torricelli/``Missing''
ad's production costs.58 Two weeks later, ATR wrote
a $4,900 check to a company called Soundwave. 59 The
memo at the bottom of the check states that it is payment on an
invoice for the ``Torricelli ad.'' ATR's bank records also
indicate that beginning October 8, ATR wire-transferred a total
of $374,830 to Mentzer Media Services for media
buys.60 Overall, at the beginning of October, ATR's
bank account balances stood at just over $290,000. After
receiving the influx of RNC money, ATR spent over $383,000 on
producing and televising the television ad attacking then-
Representative Torricelli.
Documentary evidence suggests ATR's possible involvement
with other television ads as well during the 1996 election
season. Two such television ads, both of which attack President
Clinton by name, were allegedly sponsored by an organization
called Women ForTax Reform. Both ran in Chicago in the last
week of August, during the Democratic National Convention.61
These ads were announced at a news conference held at the National
Press Club on August 21, 1996.62 The records of Women for
Tax Reform indicate, however, that this organization was formed on
August 15,63 just six days earlier. Since six days hardly
seems sufficient time for a new organization to develop, produce, and
purchase air time for two television ads and announce them at a
National Press Club briefing, the facts suggest that Women for Tax
Reform must have had assistance prior to its formation.
That assistance was likely provided by ATR. The president
of Women for Tax Reform was Audrey Mullen, who served
concurrently as ATR's executive director.64 In
addition, Women for Tax Reform shared office space, facilities,
equipment, and personnel with ATR.65 In its
application to the IRS for tax-exempt status, Women for Tax
Reform states that it has a ``special relationship'' with
ATR.66 The extent to which ATR assisted Women for
Tax Reform with its television ads cannot be determined
conclusively, due to the refusal of both ATR and Women for Tax
Reform to comply with Committee subpoenas for documents and
deposition testimony. But the acknowledged relationship between
the two organizations together with the timing of Women for Tax
Reform's anti-Clinton ads so quickly after its formation
suggest that ATR was more than a bystander in this matter.
Documents also suggest that ATR was working with the RNC to
produce television ads attacking other Democratic candidates.
Among the documents produced to the Committee by the RNC is the
script of a television ad which was designed to attack
Democratic candidates running for open seats.67 The
document states at the top, ``RNC-TV/Open Seat TV:30/
`Control.' '' The ad calls for inserting a picture of a
Democratic candidate, stamping ``Wrong!!'' over it, and then
inserting the ``Democrat Tax Record'' under the picture. The
last line of the ad reads: ``For more information call
Americans for Tax Reform.'' At the bottom of the document is a
typewritten notation ``As of 10/15/96 4:50 PM/ Approved by
legal counsel.'' This document is compelling evidence of
coordination between the RNC and ATR on television attack ads
during the 1996 election season. It reveals a sufficient
investment of resources to involve a written script and legal
consultation three weeks before election day. Since RNC and ATR
officials refused to be interviewed or to appear in response to
a subpoena for deposition testimony, it is unclear whether any
of the contemplated ads were broadcast. Whether or not a
broadcast took place, however, this RNC-produced document is
evidence of ATR-RNC coordination on political advertising.
atr candidate advocacy
During the 1996 election season, in addition to its
Medicare operation and involvement with television ads
attacking Democratic candidates, ATR used its taxpayer pledge
and award programs to assist Republican candidates and attack
Democratic candidates.
ATR first initiated its taxpayer pledge program in
1986.68 Essentially, it consists of ATR's asking
candidates for office to sign a pledge that, if elected, they
will oppose efforts to raise taxes. ATR then publicizes,
through media advisories, press conferences and advertisements,
the willingness or unwillingness of a candidate to sign its
pledge.69
In 1986--the first year of its taxpayer pledge program--the
FEC found reason to believe that ATR had violated federal
campaign laws by improperly coordinating with candidates the
timing and distribution of its pledge media
advisories.70 ATR settled this matter with the FEC
through a conciliation agreement in which it admitted violating
the federal election laws and agreed to pay a $1,000 civil
penalty.
In 1994, in response to complaints from the Democratic
Party, the FEC again investigated ATR's taxpayer pledge
program.71 The investigation initially focused on
ATR activities during a 1994 special election in Kentucky,
expanded to other 1994 congressional campaigns, and also
included examination of ATR activities in 1995 with respect to
the Dole presidential campaign.
In September 1996, the FEC general counsel issued a report
on ATR's activities, including its dealings with the Dole
presidential campaign.72 According to the general
counsel's report, Norquist attended several events in 1995 at
the request of the Dole for President Committee (``Dole
campaign''). The first was a media event on April 7, in
Washington, D.C., at which Senator Dole signed ATR's Taxpayer
Pledge, an action he had not taken previously.73 The
second event, on April 10, was a ``town hall meeting'' in New
Hampshire in which Senator Dole made his formal announcement
for the presidency. According to the general counsel's report,
the press stated that Norquist attended the event to assure
reporters that Senator Dole had finally signed ATR's
pledge.74 After the announcement, Norquist
reportedly flew with the Dole campaign to New York City and
attended fundraisers for the Senator.75 Norquist's
transportation and accommodation costs were paid by the Dole
campaign.76 The general counsel's report describes
similar media events that Norquist attended on behalf of 1994
congressional campaigns, as well as an ATR radio advertisement
during the Kentucky special election which the general counsel
determined contained ``express advocacy,'' meaning that the
radio ad advocated the defeat of the Democratic candidate and
the election of the Republican candidate.
ATR told the FEC that Norquist had attended the 1994 and
1995 media events solely as a spokesman for the organization
and ``with the explicit understanding that [he] would not
advocate the election or defeat of any candidate'' and ``would
not discuss the candidate . . . or the candidate's campaign
outside the context of the taxpayer pledge.'' 77
However, the FEC general counsel's report concludes, in part:
Mr. Norquist's affidavits and press reports show that
ATR and certain federal candidates coordinated the
timing, and possibly the content, of press conferences
and other press events where such candidates announced
that they had taken ATR's pledges. Specifically, ATR
coordinated Mr. Norquist's appearances at such events
with . . . Dole for President. . . . ATR's activities
here appear analogous to those at issue in MUR 2269,
[the 1986 enforcement action] a matter in which the
Commission also found that ATR violated Section
441b(a). . . . [S]uch committees appear to have
accepted corporate in-kind contributions from ATR.
Accordingly, this Office recommends that the Comission
find reason to believe that . . . Dole for President
Committee . . . violated 2 USC 441b(a). . . . [I]t
appears that other issues brought to light in this
matter also require further investigation. . . . ATR's
documents also indicate that it provided candidates
with ideas for their campaigns, i.e., it offered to
coordinate tax rallies, its flyers provided candidates
with ideas on how to win election and it offered free
of charge extra-large copies of its tax pledge that
were designed to assure adequate media coverage. These
appear to be things of ``value'' and thus
contributions. . . . [T]his Office also recommends that
the Commission approve the attached Subpoenas for
documents and Orders for Written Answers.78
The report made similar findings with respect to the 1994
Republican candidate committees. In short, the report found
reason to believe that ATR had engaged in improper coordination
with Republican candidate committees and provided illegal in-
kind corporate contributions to them by coordinating the pledge
media events. The report recommended that the FEC find reason
to believe that ATR had violated section 441b's prohibition
against corporate contributions or, in the alternative, section
433(a)'s requirement for registration as a political committee.
The report also recommended further investigation of ATR. While
the general counsel's findings and recommendations received the
support of three of five Commissioners,79 a vote of
four Commissioners is required to sustain an action, and the
FEC ultimately closed the matter without further
action.80
Other than ATR's actions in 1995 with respect to the Dole
presidential campaign, the FEC did not report on ATR's
activities during the 1996 election cycle. It seems clear,
however, that the FEC general counsel's negative findings
regarding ATR's 1994 and 1995 activities had no deterrent
effect, as ATR continued to use its pledge program to assist
Republican candidates in 1996.
One key document is a March 8, 1996, letter on ATR
stationery from Norquist to RNC Chairman Haley
Barbour.81 In it, Norquist thanks Barbour for his
letter ``regarding our `Taxpayer Protection Pledge', your
support is always greatly appreciated.'' Norquist then writes:
If possible, we would like to receive an updated list
of Republican candidates directly from the RNC. It is
important that we receive this list soon, as we would
like to bring as many candidates on board as possible.
And, in so doing, make the tax issue a central campaign
feature for Republican candidates.
In his own words, Norquist directly ties ATR's taxpayer pledge
program to Republican campaign efforts.
On October 8, 1996--just one month before election day--ATR
held a Capitol Hill press conference to highlight candidates
who had signed ATR's taxpayer pledge. This media event in
Washington, D.C., was coordinated with numerous local media
events across thecountry by candidates who had signed the
pledge. According to ATR's own documents, its Washington press
conference featured high-level speakers from the Dole campaign and
GOPAC, a Republican political action committee set up by Speaker of the
House Newt Gingrich.82 Also included among the speakers were
a Republican Congressional candidate from Hawaii and senior executives
from the Christian Coalition, the Eagle Forum, and the U.S. Chamber of
Commerce.83 No Democratic candidates or representatives of
Democratic-oriented organizations were included in the press
conference.84
Also in October 1996, ATR initiated a new program
announcing ``Enemy of the Taxpayer Awards.'' Media advisories
by ATR on October 28, a week before election day, announced
these awards to ``the most pro-tax, pro-spending Members of the
House of Representatives.'' 85 The 34 taxpayer
``enemy'' awards went to 33 Democrats and one Independent. Not
a single Republican candidate was named.
ATR stated that it had based the awards on the recipients
having voted ``no'' on four specified votes relating to taxes
and a balanced budget. However, a review of the votes shows
that two of the Democrats recipients, Representative Bill
Hefner of North Carolina and Representative William Orton of
Utah, were cited despite the fact that they had voted ``no'' on
only three of the four votes, while two Republicans,
Representative Amo Houghton of New York and Representative John
Porter of Illinois, who had also voted ``no'' on three of the
four votes, were not cited. This double standard between
Democrats and Republicans with similar voting records is
additional evidence of the partisan nature of ATR's Enemy of
the Taxpayer Award program.
At about the same time that ATR initiated its Enemy of the
Taxpayer Awards, it also began citing incumbent Democratic
congressmen as ``Taxpayer Villain of the Month.'' The target of
ATR's November Villain of the Month Award was Representative
Ken Bentsen a Democrat from Texas, who at the time was involved
in a run-off election. Over the course of five days from
December 2, 1996, through December 6, 1996, ATR issued six
different press releases citing Representative Bentsen as a
``Taxpayer Villain'' and criticizing his voting record on a
wide variety of issues.86 Every one of the press
releases cited the fact that Representative Bentsen was facing
a run-off election and gave the date of the election in
December. It should also be noted that despite the fact that
Representative Bentsen had been chosen as the ``Taxpayer
Villain'' for the month of November 1996, the vast majority of
the votes he was criticized for took place in 1995; indeed, the
most recent vote for which he was criticized took place in
April 1996.
In contrast to the ``enemy'' and ``villain'' awards given
to Democrats in 1996, ATR issued hundreds of ``Friend of the
Taxpayer Awards'' and ``Defender of the American Taxpayer
Awards'' to Republicans. According to ATR's published criteria,
the 1996 Friend of the Taxpayer Awards went to House incumbents
who had received a score of 90 percent or better on a series of
19 votes of interest to ATR and who had signed ATR's Taxpayer
Protection Pledge.87 ATR gave this award to 208
Republicans (32 Senators and 176 Representatives) and one
Democrat (Representative Barbara Rose Collins).88 On
September 27--six weeks before Election Day--ATR issued a press
release praising Republican Representative George Nethercutt of
Washington for winning a Friend of the Taxpayer
Award.89 The release reveals, however, that
Representative Nethercutt's vote rating was 85 percent--below
the stated criteria for the award and clear evidence that an
exception had been made for him.90 Other Republicans
who did not meet the 90 percent criterion also won the award,
including Representatives Nathan Deal of Georgia and Michael
Castle of Delaware.91 According to ATR materials,
Representative Castle received the award even though he had not
signed the taxpayer pledge.92
On September 18, ATR issued more than 115 ``Defender of the
American Taxpayer Awards'' to Republican Members of Congress
who cosponsored legislation that opposed alleged efforts by the
United Nations to impose a ``tax'' on American
citizens.93
ATR's 1996 taxpayer awards reveal a clear partisan bias.
Republicans are routinely deemed taxpayer ``friends'' while
Democrats are routinely called taxpayer ``enemies.'' Norquist
himself provides a partisan analysis in the press release
announcing ATR's first enemy of the taxpayer awards: ``It is
unfortunate that tax relief and spending cuts are so alien to
the Democratic party.'' The partisan track record of the 1996
awards, coupled with an FEC enforcement history citing problems
with ATR's coordination of pledge media events with Republican
candidates, indicate that ATR's taxpayer pledge and award
programs are partisan in nature and an abuse of federal
election laws. They also plainly contradict ATR's statements to
the Committee that ATR ``has never advocated the election or
defeat of any candidate for any office at any time.''
94
In fact, on several occasions in 1996, ATR expressed
support for or opposition to a particular candidate outside the
context of any taxpayer pledge event or award announcement. A
case in point is the Kansas Senate race. Republican incumbent
Senator Sheila Frahm, appointed to her seat after Senator
Dole's resignation, faced a primary challenge from then-
Representative Sam Brownback. On June 13, 1996, Norquist sent a
memorandum to ``Conservatives [and] Taxpayers'' on the subject
of ``Sam Brownback's Senate Candidacy.'' Norquist's memorandum
states in part:
A very important race is underway in Kansas. Sam
Brownback, a leader among the freshman in the U.S.
House of Representatives is running for the U.S. Senate
seat which has been vacated by Senator Dole. On
Tuesday, June 11th, Sheila Frahm was appointed to fill
the Dole vacancy until the November election. She will
be running against Rep. Brownback in the Republican
primary on August 6th. Several taxpayer groups and
conservative advocacy groups have inquired about this
race. I have analyzed this race, and as a taxpayer
activist, I wanted to share the following information
that will show the distinction between the candidates.
This race is extremely important to taxpayers in
Kansas and to people around the nation. . . . Brownback
has been an able fighter in bringing about the change
that occurred in the House throughout this current
Congress. He will bring this change to the Senate. Sam
Brownback is a leader who is dedicated to the cause of
cutting taxes, reducing the size and scope of
government, and passing real term limits legislation.
Sheila Frahm stands in the way of these reforms. . . .
This race is a clear battle between a tax and spend
status quo candidate and a tested advocate of
taxpayers, Sam Brownback.95
Despite a statement in the memorandum that ``ATR does not
endorse candidates,'' this memorandum clearly sends the message
that ``conservatives and taxpayers'' should support
Representative Brownback. The memorandum is entitled, ``Sam
Brownback's Senate Candidacy.'' The second sentence states that
``Sam Brownback . . . is running for the U.S. Senate.'' The
first paragraph gives the date of the primary election. The
body of the memorandum praises Representative Brownback for
positions he has espoused in the House of Representatives, and
contrasts his record with a description of Senator Frahm as
``stand[ing] in the way of these reforms.'' ATR's preference
couldn't be clearer than in its final sentence characterizing
the race as ``a clear battle between a tax and spend status quo
candidate and a tested advocate of the taxpayers, Sam
Brownback.''
ATR has also supported specific candidates in general
elections. In the 1996 Iowa Senatorial race, for example,
between Democratic Senator Tom Harkin and Republican challenger
James Lightfoot, citing ``lists provided by their campaigns,''
the Des Moines Register reported that Lightfoot had received
the endorsement of Americans for Tax Reform.96 ATR
was active in Iowa during the prior election cycle as well. In
November 1994--just days before election day--Norquist attended
a press conference with Iowa Republican Greg Ganske who was
challenging the Democratic incumbent Neal Smith. During the
press conference, according to the Des Moines Register,
Norquist said, ``You have a very strong delegation from Iowa,
with the exception of Neal Smith, who stands out like a sore
thumb in the eye of the Iowa taxpayer.'' 97
Another example is a 1996 House race involving Democratic
Minority Leader Richard Gephardt of Missouri. An ATR press
release dated July 8, 1996, announces a press conference to be
held in Representative Gephardt's district in which Norquist
will discuss ``the proliferation of legislators who feel no
accountability towards their constituents.'' 98 The
contact person listed on the ATR press release is ``Wheelehan
for Congress 314-487-8199.'' Wheelehan was the Republican
candidate opposing Representative Gephardt in 1996. Two
versions of the press release state, ``If you would like to set
up an interview with Mr. Norquist, please contact Charlie Van
Esler at (314) 487-8199.'' The telephone number was that of the
Wheelehan for Congress campaign.
The Norquist memorandum on Representative Brownback, his
statements to the media in specific races, ATR press releases
issuing taxpayer awards--each of these activities should be
acknowledged for what it is, ATR's advocating the election or
defeat of specific candidates, while ducking compliance with
legal requirements for organizations engaged in federal
election activity.
ATR: COORDINATED EFFORTS IN 1996 TO ELECT REPUBLICANS TO OFFICE
ATR did more in 1996 than express support for or opposition
to specific candidates. ATR also engaged in several efforts to
coordinate support for Republican electoral success.
Documents produced to the Committee indicate that ATR
coordinated two of its biggest media events in 1996 with
Republican organizations. On April 29, according to an RNC-
produced document,99 a meeting was held in the
conference room of the National Republican Congressional
Committee to discuss ATR's upcoming ``Tax Freedom Day Event''
in May and ``Cost of Government Day'' in July. Attendees
included Norquist and two other persons from ATR; five
representatives from the RNC; two representatives from the Dole
campaign; two representatives from the Republican Governors
Association; one representative each from the Republican Senate
Policy Committee and the House Republican Conference; and a
representative of Republican Senator Paul Coverdell of Georgia,
sponsor of a ``Cost of Government Day'' resolution.
Since ATR and the RNC both refused to respond to Committee
subpoenas to discuss ATR-RNC interactions, little information
is available about what happened at this meeting; however,
another RNC-produced document dated the next day, April 30,
sheds some light.100 Labeled ``Confidential
Memorandum,'' it is addressed to the ``Tax Freedom Day Working
Group'' and is authored by one of the ATR participants who
attended the April 29 meeting the day before. The memorandum
states that ``we are still standing by for a confirmation from
Senator Dole. Gary Koops says he hopes to have an answer for us
this afternoon. I have reminded him that satellite availability
and coalitions turnout could be a real problem if we delay much
further.'' Koops attended the April 29 meeting on behalf of the
Dole campaign. The memorandum also states that, to join a
conference call later that day, persons should ask for the
``Tax Freedom Day Working Group call.'' Read together, the
April 29 and 30 memoranda contain compelling evidence that ATR
had formed a working group with Republican organizations and
candidates, including Senator Dole, to coordinate its media
events in May and July--exactly the type of improper media
coordination that ATR had been cited for by the FEC in
1986.101
Another key development was ATR's decision to host weekly
meetings in its offices that, at least in part, addressed the
1996 elections. These Wednesday morning meetings were convened
by Norquist, attended by 50-70 conservative activists at a
time, and regularly attended by such groups as the Christian
Coalition, the National Right to Life Committee, the U.S.
Chamber of Commerce, the National Rifle Association, the
Seniors Coalition, and GOPAC.102 According to ATR's
own policy documents, these meetings also included ``Capitol
Hill staffers, candidates for national office, and visiting
Members of Congress.'' 103 One meeting, on September
18, took place at the U.S. Capitol, presumably at the
invitation of House Speaker Gingrich who spoke to the group
about ``how Republicans should conduct their campaigns.''
104 At the end of his remarks, Norquist presented
the Speaker with an ATR Friend of the Taxpayer
Award.105
As chronicled in Elizabeth Drew's book Whatever It Takes,
these meetings often served as strategy sessions for the 1996
elections. Drew recounts, for example, group discussions of GOP
presidential primaries and candidates such as Senator Dole,
Patrick Buchanan, Steve Forbes, and Lamar
Alexander,106 as well as specific House and Senate
races such as the Kansas Senate race.107 In some
instances, meeting participants reported on a specific election
contest. For example, after a Washington state primary showed
Republican Representative Randy Tate trailing his Democratic
challenger, a representative of GOPAC told the meeting, ``We
need to pay attention. This is problematic. . . . We have our
work cut out in Washington State.'' 108 In other
instances, staff from the National Republican Congressional
Committee or National Republican Senatorial Committee provided
detailed briefings on specific races.109
In still other instances, Republican candidates made formal
presentations at the meetings and requested support for their
election efforts.110 For example, Representative
Tate, running for re-election in the House, and Representative
Brownback, running for election to the Senate, were permitted
to address the meeting and request the support of the groups
represented there.111 Michael Hammond, running in a
Republican primary against a congressman in New Hampshire, was
allowed to explain why attendees should support him rather than
the Republican incumbent.112 At a meeting on
September 11, 1996, four Republican candidates made such
presentations. Drew writes:
The federal election law stipulates that interest
groups aren't supposed to coordinate their efforts for
or against a candidate, but what actually goes on
appears to be a distinction without a difference. [One
meeting participant] said, ``The Federal Election
Commission says you can't coordinate, but everybody
talks to each other.'' He added, ``We make a practice
of not talking specific amounts with each other. We
talk about who's targeted, how somebody's doing, but
not in terms of `Why don't you throw in three thousand
and we'll throw in five thousand.' '' This is a very
narrow interpretation of the law.113
RNC-DIRECTED CONTRIBUTIONS TO ATR
A final area of concern in 1996 involves documents in the
Committee's possession which reveal that, in addition to
transferring $4.6 million of its own funds to ATR, the RNC also
solicited funds from third parties and directed those
contributions to ATR.
A memorandum dated October 17, 1996, marked
``confidential,'' from Jo-Anne Coe, RNC finance director, to
Haley Barbour, RNC chairman; Sanford McCallister, RNC general
counsel, and Curt Anderson, RNC political director, discusses
efforts by Coe to forward certain sums of money to three tax-
exempt organizations, including a $100,000 check from Carl
Lindner to ATR, another $100,000 check from Lindner to the
National Right to Life Committee, and $950,000 from several
sources to the American Defense Institute.114 The
memorandum poses questions about how certain checks should be
handled and requests quick action ``so I can put this project
to bed.''
The ``project'' itself is not described in the memorandum;
however, a second document may provide additional information.
It is an October 21 memorandum from Coe to Barbour. This
memorandum states:
As soon as we meet and hopefully come to some
resolution on the joint state mail project, I will
forward these checks to the three organizations. In the
meantime, I am respectfully withholding delivery of the
checks until we have the opportunity to discuss this
matter.115
Could the ``joint state mail project'' be the ``project''
referred to in the October 17 memo from Coe to Barbour? Could
it be a reference to ATR's $3.3 million direct mail-phone bank
operation on Medicare? The fact that the RNC finance director
was ``respectfully withholding'' checks to three organizations
appears to be evidence that the RNC was exercising control over
the performance of those organizations in the joint state mail
project in exchange for funding. The fact that this document
was produced, not by the RNC or ATR, but by the Dole for
President committee indicates possible participation of the
Dole campaign in these efforts as well.
Two letters written by Coe on the same date as her
memorandum to Barbour on the joint state mail project offer
additional clues.116 The first letter is addressed
to Norquist at ATR and the second to David O'Steen, the
executive director of the National Right To Life Committee.
Each encloses a $100,000 check from Carl Lindner to the
organization, as described in the October 17 memo. Coe states
in both letters, ``Glad to be of some help. Keep up the good
work.'' A review of ATR's bank records shows that ATR deposited
a $100,000 check on October 23.117 It thus appears
that the RNC directed contributors to write checks payable to
specified tax-exempt organizations such as ATR, but to send
them to the RNC. The RNC then forwarded the checks to the
organizations, possibly in exchange for participation in the
``joint state mail project'' or other campaign activities.
Two additional documents also contain evidence of RNC
coordination with ATR and other tax-exempt organizations. The
first 118 was produced by the RNC and has the same
distinctive ``confidential'' heading as the October 17 memo
from Coe to top RNC officials. This document discusses
contributions to ATR, National Right to Life Committee,
American Defense Institute, United Seniors Association, the
City of San Diego, and ``CCRI,'' which was the California
ballot initiative on affirmative action. Each organization is
analyzed in terms of whether contributions to it would have to
be reported to the public and whether a contribution would be
tax deductible. The final document is a list of the same
organizations with the exception of the CCRI.119 By
each organization's name is a large dollar figure. The figure
for ATR is $6 million. Altogether, the figures add up to $15.1
million.
The significance of these two documents and the dollar
figures is unclear. Could the $6 million figure for ATR
indicate that in addition to giving ATR $4.6 million directly,
the RNC directed another $1.4 million to ATR in third party
contributions to ATR? 120 If the same is true for
the other listed organizations, the RNC may have directed more
than $9 million in undisclosed third party contributions to
these groups. In the absence of Committee subpoenasbeing issued
or enforced, however, the extent to which the RNC obtained
contributions for ATR and other tax-exempt organizations and what it
received in return for this fundraising remain unclear.
ATR AND RNC'S REFUSAL TO COOPERATE
On April 9, 1997, Grover Norquist was quoted in the press
as saying that he would ``cheerfully testify before the
Committee.'' 121 He thereafter continuously refused
to be deposed or interviewed by the Committee staff. When
subpoenaed for a deposition in September 1997,122 he
refused to instruct his attorney to accept service of the
subpoena,123 and he failed to appear. In fact,
despite repeated requests and efforts by the Minority to seek
ATR testimony either voluntarily or by subpoena, no one from
ATR ever submitted to an interview or a deposition by this
Committee. As noted above, ATR also refused to comply with the
Committee's document subpoena, claiming, ``ATR has never
engaged in electioneering of any sort. It has never advocated
the election or defeat of any candidate for any office at any
time; it has never run political advertising on any subject.''
124 Having cloaked itself in this self-serving
proclamation, ATR refused further cooperation or compliance
with document or deposition subpoenas, thereby making a mockery
of the Committee's subpoena process. Despite requests from the
Minority that the Chairman issue an order compelling ATR to
comply with the Committee's subpoena, no action was ever taken
by the Committee to enforce its subpoena authority.
The RNC was equally intransigent. Not one RNC official ever
provided an interview or deposition testimony on the $4.6
million transfer or on any dealings between the RNC and ATR.
POSSIBLE CIVIL, CRIMINAL AND TAX LAW VIOLATIONS
The facts and documents behind the RNC's $4.6 million
transfer to ATR are compelling support for the proposition that
the RNC used ATR as a surrogate to do what the RNC itself had
neither the hard dollars nor the ``credibility'' to do on its
own. In addition to questions of impropriety, questions arise
regarding four sets of possible legal violations by ATR and the
RNC.
Circumvention
The first and most serious issue involves the RNC's
possibly deliberate circumvention of hard money requirements in
funding ATR's election-related efforts.
With respect to the Medicare direct mail and phone bank
operation, FEC rulings are clear that if the RNC had funded
this issue advocacy effort directly, it would have had to pay
the bills with a mix of hard and soft dollars.125
Sixty-five percent of the cost would have had to come from hard
dollars that complied with federal contribution limits. The RNC
instead funded the Medicare effort indirectly through ATR using
only soft dollars. These funds were wired into ATR's bank
account for as short a period as two hours before ATR used them
to pay for Medicare mailings and telephone calls that clearly
benefited the GOP. Given the coordination between the RNC and
ATR on how these funds would be used, their brief detour
through ATR's bank account is possibly insufficient to relieve
the RNC of its legal obligation to comply with hard money
requirements, including contribution limits and disclosure.
The same analysis applies to RNC funds used by ATR to pay
for $383,000 in televised ads attacking the Democratic
Senatorial candidate in New Jersey, and perhaps for other
television attack ads aimed at Democratic candidates. The RNC
funds used to pay for the televised ads consisted entirely of
soft dollars. If the RNC had sponsored these television ads
directly, it could have been required to pay for them entirely
with hard dollars or, at a minimum, 65 percent with hard
dollars. Sponsoring the ads directly also would have subjected
the RNC to federal limits on the direct contributions and
coordinated expenditures that a national political party may
make with respect to a particular Senate race. In the 1996 New
Jersey Senate race, section 441a(h) of the Federal Election
Campaign Act limited the RNC to no more than $17,500 in direct
contributions to the GOP Senate candidate, while section
441a(d)(3) limited the RNC to coordinated expenditures of no
more than $369,807. ATR spent $383,000 on the New Jersey
television attack ads alone. ATR's sponsorship of the
Torricelli attack ads, paid for in whole or in part with RNC
soft dollars, appears to have been a deliberate ploy to allow
the RNC to evade federal limits on contributions and
coordinated spending in that Senate race.
Coordination
A second issue concerns improper or illegal coordination.
The evidence is compelling that extensive coordination took
place between ATR and the RNC regarding ATR's Medicare direct
mail and phone bank operation. The documents show that ATR's
taxpayer pledge, Tax Freedom Day and Cost of Government Day
media events were coordinated with several Republican
organizations and candidates. ATR's weekly meetings repeatedly
analyzed specific candidates, races and election strategy.
Those meetings were attended by Republican Party officials,
candidates and persons sympathetic to electing Republicans to
federal office. Although more information is needed to
establish violations of federal election law, the evidence
available to date justifies an immediate in-depth investigation
by the FEC and Justice Department.
Another coordination issue arises from the documents
establishing that the RNC directed contributions from third
parties to ATR and other tax-exempt groups. Although pending
campaign finance reform measures such as S. 25, the McCain-
Feingold bill, would outlaw this practice, it is currently not
against the law for a political party to suggest that a person
make a contribution to a tax-exempt organization. Even under
current law, however, a directed contribution may become an
illegal act, if the timing of that contribution is controlled
by the political party that arranged it or made contingent upon
the recipient taking action at the suggestion of, or in
coordination with, the party. In the case of ATR, remaining
questions include how many contributions the RNC directed to
ATR in addition to the $100,000 contribution from businessman
Carl Lindner; how those funds were used by ATR; whether the RNC
exercised control over the expenditure of the funds or over
other ATR activities in exchange for the funds; and whether the
facts indicate the directed contributions were an attempt to
circumvent contribution limits and disclosure requirements.
Directed contributions between a national political party
and tax-exempt organizations was a topic of concern for the
Committee when the political party involved was the Democratic
Party. The Committee held an entire day of hearings to take
testimony from businessman Warren Meddoff regarding his
discussions with Harold Ickes, former deputy chief of staff in
the White House, about possible contributions to tax-exempt
organizations by a Meddoff associate. As discussed in Chapter
17 of this Report, Ickes's suggestions were made in response to
a request from Meddoff, and no contributions were ever made.
The RNC did much more than make suggestions--it collected
checks, controlled checks, and delivered checks to tax-exempt
organizations sympathetic to the Republican Party--yet not a
single witness was called to testify on such RNC conduct.
Disclosure
A third issue involves disclosure. RNC Chairman Haley
Barbour stated in an October 29 press conference that,
``[d]isclosure of contributions and expenditures, shining the
bright light of public scrutiny, is the fundamental principle
underlying our campaign finance laws.'' 126 Yet the
RNC's payment of $4.6 million to ATR, when coupled with ATR's
decision not to file any FEC reports on its activities,
effectively prevented all disclosure of expenditures paid for
with RNC funds. The Medicare mailings and telephone calls, for
example, were represented as ATR-sponsored efforts, and RNC
funding was kept secret. When asked about television ads, ATR
denied to the press and to this Committee that it engaged in
television advertising, thereby hiding its televised attack ads
on the New Jersey Democratic Senatorial candidate and keeping
doubly secret the use of RNC funds to pay for those ads.
Additional investigation by the FEC and Justice Department
should be undertaken to establish whether the RNC and ATR
improperly or illegally evaded federal disclosure requirements
by ATR's failing to file any FEC reports on its activities.
Tax laws
A fourth issue involves federal tax law, in particular
ATR's possible abuse of its tax-exempt status and whether
either ATR or the RNC should have, but failed to, report the
$4.6 million as taxable income.
ATR is exempt from taxation under Internal Revenue Code
section 501(c)(4). A 501(c)(4) organization is required to be
engaged in social welfare that promotes ``the common good and
general welfare of the people of the community.''
127 Social welfare organizations may not engage in
campaign-related activity as their primary activity. The
relevant tax code regulation, 26 CFR 1.501(c)(4)-1, describes
the prohibited activity as ``direct or indirect participation
or intervention in political campaigns on behalf of or in
opposition to any candidate for public office.'' Campaign
activity that a 501(c)(4) organization does engage in must be
nonpartisan, so that the organization does not confer a private
benefit on a particular political party, in violation of its
tax-exempt status.128
An analysis of ATR's bank records for 1996 indicates that
the $4.6 million donated bythe RNC provided more than two-
thirds of ATR's 1996 income.129 Despite ATR's claim to be a
grassroots organization supported by taxpayers across the country, its
bank records indicate that only $12,470, or less than 0.2% of its 1996
deposits, came from donations of $1,000 or less.130 The fact
that RNC funds outmatched all other sources of ATR funding by a 2-1
margin is compelling evidence that, in 1996, electioneering was ATR's
dominant pursuit, in violation of its tax-exempt status. ATR's key
activities during the year--from its multimillion-dollar Medicare
direct mail-phone bank operation to its advocacy of particular
candidates to its active support of Republican electoral success--
provide added evidence that electioneering dominated. A second possible
violation of ATR's tax-exempt status lies in the fact that its election
pursuits were clearly partisan in favor of the Republican Party.
Partisan activities do not promote ``the common good'' required of
501(c)(4) social welfare organizations, but confer a private benefit on
the favored political party.131 Together, ATR's partisan,
election-driven activities strongly suggest that it may have violated
its tax-exempt status.
A similar analysis applies to the Americans for Tax Reform
Foundation, a 501(c)(3) organization prohibited by federal tax
law from engaging in any campaign activity.132 The
facts and documents indicate that the Foundation served as a
second conduit for RNC funds, paid nearly half the bills
associated with the Medicare direct mail-phone bank operation,
and placed its name on at least one of the three Medicare
mailings. The Foundation's participation in this RNC-funded,
election-related effort appears to violate the legal
prohibitions against a 501(c)(3) charitable organization's
participating, directly or indirectly, in campaign activity and
against its operating to benefit a private interest such as the
Republican Party.
A final issue is how the RNC and ATR treated the $4.6
million on their tax returns. Section 527 of the federal tax
code suggests that one or the other organization may have been
required to treat this sum as taxable income. As a political
organization, the RNC's income is exempt from taxation to the
extent it is used for the purpose of influencing an
election.133 If the money which the RNC received
from contributors and then transferred to ATR was for election-
related purposes, then the RNC could exclude the amount from
its taxable income; however, if the RNC made a non-election-
related, charitable contribution to ATR, then it is possible
that this income is taxable to the RNC. Conversely, ATR's
income is exempt from taxation to the extent that it is used
for charitable and not election-related purposes.134
While ATR is entitled to engage in a limited amount of
election-related activity, income expended on such activity is
taxable. It would thus seem that if the $4.6 million was for an
election-related purpose, the RNC could exclude it from its
taxable income, but ATR could not. In contrast, if the $4.6
million was for a charitable purpose, then ATR could exclude it
from its taxable income, but the RNC could not. It is unclear
how either organization treated this money, whether any tax was
paid, and whether any violation of tax law occurred as a
result, but what is clear is that this issue merits further
investigation and analysis by the appropriate authorities
within the Department of the Treasury.
CONCLUSION
The facts and documents, as well as the public statements
of Haley Barbour and Grover Norquist, make it clear that RNC
soft money--$4.6 million in all--flowed through ATR bank
accounts and paid for a multimillion-dollar direct mail-phone
bank operation as well as other election-related efforts such
as television attack ads. It is also clear that if the RNC had
paid for these election-related efforts directly, it would have
required substantial amounts of hard dollars. The facts suggest
that the RNC laundered 1996 soft dollars through ATR in order
to avoid using hard money to pay for election-related
activities, to capitalize on ATR's ostensibly greater
credibility, and to avoid public disclosure of RNC involvement.
The facts and documents also show that, in 1996, ATR
undertook a host of partisan activities to support the
Republican agenda and elect Republican candidates to office.
ATR's efforts included taxpayer pledge and award media events
coordinated with specific candidates; Tax Freedom Day and Cost
of Government Day media events coordinated with Republican
organizations, and weekly meetings with outside groups designed
in part to further Republican electoral success in 1996. These
partisan, election-driven activities appear to violate the tax-
exempt status of ATR and its Foundation; ATR's coordination
with the Republican Party may have resulted in other federal
election law violations as well.
Was the RNC directing contributions from third parties to
ATR to circumvent contribution limits and disclosure
requirements? Did the RNC and ATR violate campaign disclosure
requirements? Did the RNC or ATR violate federal tax law in how
they reported the $4.6 million on their tax returns?
The evidence of possible civil, criminal, and tax-law
violations involving ATR is powerful and should have been
explored at a Committee hearing with full opportunity for
examination and cross-examination. Unfortunately for the
American public, ATR's role in the 1996 elections remained
largely unexplored in this Committee's investigation. The
Committee did not call a single hearing witness to testify
about the $4.6 million transfer. The Committee rejected
repeated requests from the Minority to hold hearings on the
subject. Committee investigators were thwarted in their efforts
to interview or depose witnesses from the RNC or ATR regarding
the $4.6 million or any other dealings between the two
organizations. Despite public statements promising cooperation,
no one from either the RNC or Americans for Tax Reform provided
any testimony to the Committee, in public or in private,
regarding the relationship between the RNC and ATR.
The Committee's failure to investigate does not, however,
eliminate ATR or the RNC's potential legal liability. Because
of the quality of the evidence and the potentially serious
misconduct involved, the Minority has determined to refer
information regarding the apparent coordination between the RNC
and ATR to the U.S. Departments of Justice and Treasury and the
FEC for further investigation into potential civil, criminal,
and tax-law violations.
FOOTNOTES
\1\ The original officers of ATR were Peter Ferrara, president, and
William P. Barr, the secretary/treasurer. See also letter from John M.
Richman, chairman and CEO, Dart & Kraft to William E.C. Dearden,
chairman, Hershey Foods Corporation, 10/3/85, ATR000579.
\2\ FEC MUR 4204, ATR Answers to Interrogatories, Section A,
question (1). To qualify under IRC section 501(c)(4), an organization
must be operated to benefit the common good and general welfare of the
community.
\3\ Articles of Incorporation of Americans for Tax Reform, amended
3/31/93, ATR000013.
\4\ Articles of Incorporation of Americans for Tax Reform, amended
3/31/93, ATR000013.
\5\ In addition to the Foundation, ATR's affiliated organizations
include Citizens Against a National Sales Tax; Women for Tax Reform, a
501(c)(4) corporation; and the Anti-Tax PAC, a political action
committee established 4/5/96, but inactive during the 1996 election
cycle. Norquist also recently established The Merritt Group Ltd., a
lobbying firm in which he is a principal along with two senior ATR
employees and a fourth individual from outside of ATR.
\6\ Letter from Jeffrey L. Yablon to Whom It May Concern at the
Internal Revenue Service, submitting ATRF and ATR's applications for
tax-exempt status; Application for Recognition of Exemption, Form 1023,
Attachment F, submitted by Fairness for Families, the former name of
ATRF, 8/30/85.
\7\ Articles of incorporation of Fairness for Families, the former
name of ATRF, 7/2/85, p. 1; Application for Recognition of Exemption,
Form 1023, Attachment E, submitted by Fairness for Families, 8/30/85.
\8\ FEC MUR 4204, ATR Answers to Interrogatories, Section A,
question (3).
\9\ Drew, Elizabeth, Whatever It Takes, New York: Penguin Books USA
Inc., 1997, p. 7.
\10\ Drew, p. 8.
\11\ Norquist, Grover, Rock the House: History of the New American
Revolution, Ft. Lauderdale, FL: VYTIS Press, Inc., 1995, ``About the
Author.''
\12\ Norquist, ``About the Author.''
\13\ Norquist, ``Prologue'' by Speaker Gingrich; Roll Call, 2/6/97.
\14\ R027732.
\15\ R006050.
\16\ See R047456-047458.
\17\ Drew, p. 14.
\18\ Drew, pp. 182-83.
\19\ Baltimore Sun, 4/17/95, p. 2A.
\20\ In his book, Rock the House, pp. x-xi, Norquist writes: ``The
Republican capture of the House of Representatives is the culmination
of a 40-year struggle by a conservative nation to overthrow a liberal
political elite that has used gerrymandering, incumbent protection
laws, and taxpayer dollars to stay in power. . . . Chapter One begins
by describing what actually happened on election day, November 8, 1994:
the size and depth of the Republican victory and the overturning of the
old order. . . . It means that more than 50,000 Democrat political
activists have lost their hold on taxpayer-supported positions as a
result of this election.''
\21\ ATR's annual income in 1994 and 1995 was less than $1 million
each year. ATR's IRS Form 990 for 1994 and 1995.
\22\ Letter from Thomas Wilson of Lane & Mittendorf to Majority
Counsel, 6/11/97.
\23\ Daily Teleconference with RNC Chairman Haley Barbour, 10/25/
96, reported by Federal News Service, Federal Information Systems
Corporation.
\24\ ATR000048.
\25\ See, for example, ATR000194-197 and ATR000504-505.
\26\ ATR000194-195.
\27\ ATR000512-19.
\28\ R014844.
\29\ R014844.
\30\ ATR000560.
\31\ See ATR/R00001-00942.
\32\ Committee Subpoena 000348, issued 8/21/97.
\33\ See ATR/R00864.
\34\ See ATR/R00871 and ATR/R00875.
\35\ See ATR/R00866.
\36\ See ATR000560.
\37\ See ATR/R00867.
\38\ See ATR/R00877 and ATR000560.
\39\ See ATR/R00868.
\40\ See ATR/R00881.
\41\ Washington Post, 10/29/96.
\42\ Drew, p. 223.
\43\ Washington Post, 12/10/96. The John Grotta Company proposal
for the Medicare direct mail-phone bank operation is dated 7/8/96,
three months before ATR received the first $2 million from the RNC.
\44\ ``Haley Barbour, Chairman of the Republican National
Committee, Discusses Democratic National Committee Refusal of Pre-
Election FEC Report,'' Presidential Campaign Press Materials, Federal
Document Clearing House, Inc., 10/29/96.
\45\ Washington Post 2/9/97.
\46\ See RNC filings with FEC, 9/30/96 and 10/16/96. See also
Newsday 12/28/97.
\47\ FEC Advisory Opinion 1995-25.
\48\ ATR has not identified the 150 Congressional districts, nor
how they were selected. The ``Field Dogs'' memorandum, supra, however,
shows that at a minimum the RNC was fully informed of the particular
districts selected.
\49\ 26 USC 501(c)(3); 26 CFR 1.501(c)(3)-1(d)(1)(ii) (``it is
necessary for an organization to establish that it is not organized or
operated for the benefit of private interests''); The Association of
the Bar of the City of New York v. Commissioner, 858 F.2d 876 (2nd Cir.
1988), cert. denied, 1989 (even insubstantial political activity
endangers an organization's exemption under section 501(c)(3));
American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989)
(Republican organizations and candidates are not a charitable class,
but a private interest; an organization operated for the benefit of
Republican organizations or candidates does not qualify for tax
exemption under section 501(c)(3)).
\50\ The ATR Foundation's involvement in the direct mail-phone bank
operation was difficult to uncover due to incomplete document
production. The Foundation never produced, for example, any bank
records. Although ATR's bank had possession of and was willing to
produce the Foundation records, it felt it could not do so under the
wording of the Committee subpoena without ATR's consent. ATR refused to
allow the bank to produce the Foundation records. See letter from
Thomas E. Wilson of Lane & Mittendorf, to Alan Edelman, Associate
Counsel to the Minority, 9/19/97. When the Ranking Member subsequently
asked the Chairman to issue a new subpoena to the bank explicitly
requesting ATRF records, the request was ignored. See letters from
Senator Glenn to Chairman Thompson, 10/1/97 and 10/14/97. This forced
the Minority to re-create the Foundation's role from documents already
obtained.
ATR's bank documents indicate that on October 4, 1996, the RNC
wired $2 million to ATR. See Document ATR/R00864. On October 17, the
RNC wired another $1 million to ATR. Document ATR/R00866. The next
day--October 18--ATR transferred $508,000 to the ATR Foundation.
Document ATR/R00844. Four days after that--on October 22--ATR
transferred another $851,000 to the Foundation. Documents ATR/R00846 &
ATR/R00848. The RNC wired yet another $1 million to ATR on October 25.
Document ATR/R00867. That same day, ATR transferred the $1 million to
the Foundation. Document ATR/R00852. The result is a pattern of the RNC
transferring money to ATR, and ATR then either using that money
directly to pay the John Grotta bills or routing it through its
Foundation to pay the John Grotta bills. This pattern is all the more
striking, because ATR bank records for the preceding year and a half,
from June 1995 to December 1996, do not indicate a single month in
which ATR transferred money to its Foundation. Yet in October 1996, ATR
transferred over $2 million to ATRF.
Two types of evidence indicate that the Foundation used the RNC
funds to help pay for the direct mail-phone bank effort. First,
comparing the October 29 Grotta invoice, Document ATR000560, to ATR
bank records shows that for every recorded bill payment but two there
is a corresponding wire transfer from ATR's bank account to the John
Grotta Company. The two exceptions are two bill payments that are both
shown as having been made on October 25--one in the amount of $468,000
and one in the amount of $1,104,000. Both payments are shown on the
invoice as having been made by ATR, but there is no corresponding wire
transfer from ATR's bank account. However, both payments were made
after ATR had transferred over $2 million to the ATR Foundation. Logic
suggests that the Foundation must have made both bill payments on ATR's
behalf. While the Foundation's bank records would have provided
affirmative proof of its payments to Grotta, the Minority's requests
for these bank records were denied. In the meantime, one of the
mailings paid for with RNC funds, Document ATR000194-000195, states
that it was ``[p]aid for by AMERICANS FOR TAX REFORM FOUNDATION.''
\51\ ATR000194-000195
\52\ Washington Post , 12/10/96.
\53\ Letter from Thomas Wilson of Lane & Mittendorf, to Majority
Chief Counsel Michael Madigan, 6/11/97.
\54\ A copy of the videotape is maintained in the files of the
Committee.
\55\ ATR000101
\56\ ATR000106
\57\ ATR000107-000108
\58\ ATR/R00590
\59\ ATR/R00602
\60\ See ATR/R00870,00873,00878,00880
\61\ Women for Tax Reform Media Reminder, 8/21/96, alerting media
to a press event that day on the formation of the group and its
intention to televise anti-Clinton ads.
\62\ Women for Tax Reform Media Reminder, 8/21/96, alerting media
to a press event that day on the formation of the group and its
intention to televise anti-Clinton ads.
\63\ It is interesting to note that Women for Tax Reform was formed
with a contribution of $100,000 from a single, private (and unnamed)
individual. See Exhibit C to Form 1024, Application for Recognition of
Exemption Under Section 501(a), WTR0070.
\64\ See Exhibit C to Form 1024, Application for Recognition of
Exemption Under Section 501(a), WTR0070. Women for Tax Reform was
granted tax exempt status under Section 501(c)(4) by the Department of
Treasury on November 6, 1996, see WTR0024-0025.
\65\ See Exhibit C to Form 1024, Application for Recognition of
Exemption Under Section 501(a), WTR0070.
\66\ Exhibit C to Form 1024, Application for Recognition of
Exemption Under Section 501(a), WTR0070.
\67\ R001938.
\68\ FEC MUR 4204, General Counsel's Report, 9/10/96, p. 2.
\69\ FEC MUR 4204, General Counsel's Report, 9/10/96, pp. 2, 5. In
recent years, ATR has presented federal candidates with two additional
pledges, an ``anti-VAT pledge'' opposing a national value added tax,
and a ``legislative probity pledge'' opposing certain health care
reform legislation. FEC MUR 4204, General Counsel's Report, 9/10/96, p.
2; ATR000816.
\70\ FEC MUR 2269.
\71\ FEC MUR 4204.
\72\ FEC MUR 4204, General Counsel's Report, 9/10/96.
\73\ See, for example, Kansas City Star, 4/11/95.
\74\ FEC MUR 4204, General Counsel's Report, 9/10/96, p. 8.
\75\ FEC MUR 4204, General Counsel's Report, 9/10/96, p. 8.
\76\ FEC MUR 4204, General Counsel's Report, 9/10/96, p. 9.
\77\ FEC MUR 4204, General Counsel's Report, 9/10/96, p. 9.
\78\ FEC MUR 4204, General Counsel's Report, 9/10/96.
\79\ There was one vacancy on the Commission at the time.
\80\ FEC MUR 4204, Statement of Reasons, 12/10/96.
\81\ R 004610.
\82\ ATR000056-57.
\83\ ATR000056-57.
\84\ In September, ATR also held a ``Taxpayer Salute to the 104th
Congress'' in the Cannon Caucus Room of the U.S. House of
Representatives to thank the Republican House for its work and ``to get
earned media attention for the accomplishments of the 104th Congress.''
Documents ATR000659 and ATR000058. A 9/17/96 memoranda from Norquist
inviting attendance at the event is addressed to ``House Republican
Members and Staff'' and states that the program will feature the
``Republican leadership.'' Document ATR000659. This ``Salute'' is
another example of an ATR-sponsored media event benefiting the
Republican Party prior to the 1996 elections.
\85\ ATR000272.
\86\ ATR000599-599F.
\87\ ATR000054.
\88\ ATR000054; ATR states elsewhere in the document, on ATR000048,
that the award went to 210 officeholders, but the specific list of
award-winners includes 209 names. The sole Democrat who won the award
did not run a general election campaign in 1996, having lost in the
primary.
\89\ ATR000388.
90 The basis for this exception is unclear, but may have
been due to the symbolic importance of his seat to the Republican
Party. Rep. Nethercutt had gained office in 1994 by defeating
Democratic Speaker of the House Thomas Foley.
91 ATR000536-46.
92 ATR000536-46.
93 ATR000056. It is possible that one Democrat,
Representative James Traficant of Ohio, received the award, but ATR's
refusal to cooperate with the Committee prevented making a final
determination.
94 Letter from Thomas Wilson, of Lane & Mittendorf, to
Majority Chief Counsel Michael Madigan, 6/11/97.
95 ATR000547.
96 The Des Moines Register , 11/3/96.
97 The Des Moines Register, 11/2/94. At the time of
Norquist's statement, Rep. Smith was the only Democratic member of the
Iowa congressional delegation.
98 ATR000549-551.
99 R 047272.
100 R 004605.
101 ATR's 1996 annual report on its activities also
states that RNC Chairman Haley Barbour ``issued a three-page press
release on [Cost of Government Day]. The RNC also sent copies of our
information packet to all state Republican parties.'' It states that
Norquist gave a June briefing to ``Republican district directors'; ATR
was ``involved in putting together a briefing paper and talking points
for the House Republican Conference'; and that ATR ``contributed
language on Cost of Government Day for the GOP National Convention.''
ATR 000052-54.
102 Drew, pp. 5-6.
103 ATR000087
104 Drew, p. 168.
105 Drew, p. 169.
106 Drew, pp. 1, 155-56. Anti-Clinton discussions also
took place; Drew, pp. 82-84, 206-7.
107 Drew, pp. 86, 111, 156, 168, 184, 207-9.
108 Drew, pp. 167-68.
109 Drew, p. 207.
110 Drew, pp. 65, 84, 156.
111 See Drew, pp. 65, 156.
112 See Drew, p. 84.
113 Drew, pp. 18-19.
114 DFP004240. This document was produced to the
Committee by the Dole for President campaign.
115 DFP004242.
116 DFP004241 and DFP004243.
117 ATR/R00850. A second check for $100,000 was
deposited on 10/28/96. ATR/R00854.
118 R021609.
119 DFP004244.
120 An analysis of ATR's bank records shows that, from
August 1 to October 31, 1996, ATR received more than $5.8 million in
major donations, including $4.6 million from the RNC, four $100,000
donations, one $75,000 donation, four $50,000 donations, two $30,000
donations, and nine $25,000 donations. In addition, ATR received a
$10,000 donation from the Coalition for Our Children's Future.
CCF000384-85.
121 Associated Press, 4/9/97.
122 See Committee subpoena 000390.
123 Letter from Thomas Wilson of Lane & Mittendorf, to
Majority Chief Counsel Michael Madigan, 9/19/97.
124 Letter from Thomas Wilson of Lane & Mittendorf, to
Majority Chief Counsel Michael Madigan, 6/11/97.
125 FEC Advisory Opinion 1995-25 to RNC.
126 ``Haley Barbour, Chairman of the Republican National
Committee, Discusses Democratic National Committee Refusal of Pre-
Election FEC Report,'' Presidential Campaign Press Materials, Federal
Document Clearing House, Inc., 10/29/96.
127 26 CFR 1.501(c)(4)-1(a).
128 See IRS decision letter disqualifying National
Policy Forum from tax exemption under Section 501(c)(4) due to partisan
activites, 2/21/97. See also Footnote 49.
129 An anlysis of ATR's bank records shows that, from
August 1 to October 31, ATR received more than $5.8 million in major
donations, including $4.6 million from the RNC, for $100,000 donations,
one $75,000 donation, four $50,000 donations, two $30,000 donations,
and nine $25,000. In addition, ATR received a $10,000 donation from the
Coalition for Our Children's Future. CCF000384-85.
130 Norquist's statement that, ``ATR didn't receive more
than ten percent of its funds from any one company or industry,'' Drew,
p. 10, is therefore misleading, since the majority of its funding in
1996 came from the RNC and a few other sources.
131 See footnote 49.
132 See footnote 49.
133 See 26 U.S.C. 527(a) and (e)(2).
134 See 26 U.S.C. 501(a) and 527(f).