[Senate Report 105-167]
[From the U.S. Government Publishing Office]
105th Congress Rept. 105-167
SENATE
2d Session Vol. 1
_______________________________________________________________________
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 1 of 6
March 10, 1998.--Ordered to be printed
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996
FEDERAL ELECTION CAMPAIGNS--VOLUME 1
105th Congress Rept. 105-167
SENATE
2d Session Vol. 1
_______________________________________________________________________
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 1 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
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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
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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
Preface
In mid-1995, the President and his strategists decided that
they needed to raise and spend many millions of dollars over
and above the permissible limits of the Presidential campaign
funding law if the President was going to be reelected. They
devised a legal theory to support their needs and proceeded to
raise and spend $44 million in excess of the Presidential
campaign spending limits.
The lengths to which the Clinton/Gore campaign and the
White House-controlled Democratic National Committee were
willing to go in order to raise this amount of money is
essentially the story of the 1996 Presidential campaign
scandal. The President and his aides demeaned the offices of
the President and Vice President, took advantage of minority
groups, pulled down all the barriers that would normally be in
place to keep out illegal contributions, pressured policy
makers, and left themselves open to strong suspicion that they
were selling not only access to high-ranking officials, but
policy as well. Millions of dollars were raised in illegal
contributions, much of it from foreign sources. When these
abuses were discovered, the result was numerous Fifth Amendment
claims, flights from the country, and stonewalling from the
White House and the DNC.
Over a brief period of three months of hearings, the
Committee was able to fulfill its responsibility in laying out
the available facts to the American people. A much clearer
picture of what happened during the 1996 Presidential campaign
has been developed and presented. However, many questions
remain unanswered. It is now the responsibility of the Attorney
General or, more appropriately, an independent counsel to take
these facts and aggressively pursue any and all indications of
criminal wrong-doing. Indeed, the three most important legal
developments to come out of the 1996 campaign finance scandal
are all attributable to the investigation conducted by the
Committee on Governmental Affairs. First, Yah Lin ``Charlie''
Trie, an associate of the President, has been indicted for,
among other things, obstruction of the Committee's
investigation. Second, Maria Hsia, a prominent Democratic
fundraiser, has been indicted for laundering campaign
contributions that were a focus of the Committee's inquiry.
Finally, the Attorney General has requested appointment of an
independent counsel to determine whether Secretary of the
Interior Bruce Babbitt lied to the Committee.
Procedural Background and Overview
introduction
In the wake of numerous revelations in the news media of
unusual, and possibly illegal, campaign contributions to the
Democratic Party during the 1996 presidential campaign, the
Senate Majority Leader announced during the first week of
December 1996, that the Committee on Governmental Affairs would
conduct an investigation on behalf of the Senate into
fundraising practices of the Democratic National Committee
(``DNC'') following the convocation of the 105th Congress in
January 1997. The Majority Leader determined to centralize all
aspects of the inquiry in the Governmental Affairs Committee
(hereafter referred to simply as ``the Committee''), which has
the broadest oversight jurisdiction and most extensive subpoena
authority of any committee of the Senate.
The investigation and its public hearings had three
fundamental and interrelated purposes, consistent with the
constitutional responsibilities of the Senate: informing the
public, examining the operation of the law and of government
officials, and developing a record to assist the Senate in
considering legislation.
The first of these purposes was to create a record of what
occurred during the 1996 election cycle to inform the American
people. A knowledgeable electorate is the cornerstone of
democracy, and the public has a right to know what went on
during the 1996 campaign. The people need to be informed of the
operations of their government and the effectiveness or
ineffectiveness of the laws in order to make informed judgments
at the polls. Because all else flows from the people in a
democracy, this purpose of informing the people must be ranked
as the primary purpose of the investigation. In this regard,
the Committee carried on the official inquiry, while the media
fulfill their similar, but unofficial role, of informing the
people of the facts. The Committee succeeded in laying before
the American people a great deal of information that would
never have become public in the absence of the Committee's
investigation. It was not always the Committee itself that
released the information, but it was the Committee that was
responsible for the release. For example, the White House
released a great deal of information to the media before
producing it for the Committee. None of that information would
have been publicly disclosed without the Committee's demands
for the information from the White House. Vindicating the
public's right to know, more than drawing its own conclusions
or achieving partisan political goals, was the paramount
purpose of the special investigation, and the Committee
succeeded in satisfying this first purpose.
A second purpose of the inquiry and hearings was to
scrutinize the operation of the current legal and regulatory
framework for federal elections. For Congress to legislate and
govern effectively, it must conduct routine oversight to learn
how the government is functioning. Congress also has a
responsibility to examine the operation of current laws on the
government and private parties. This Committee is particularly
well-suited to conduct such a broad oversight inquiry into the
multifarious elements of this scandal because it has the
broadest oversight jurisdiction in the Senate: ``to study or
investigate the efficiency and economy of operations of all
branches of the Government.'' 1
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\1\ S. Res. 54, Section 13(d)(1), 143 Congressional Record S1421
(daily ed. Feb. 13, 1997).
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The investigation reviewed the operations of a large number
of disparate agencies. From the Commerce Department, which
employed John Huang, to the Interior Department and the role of
campaign contributions on the approval of off-reservation
Indian casinos, to the Energy Department, senior officials of
which were caught up in Roger Tamraz's effort to buy access and
to secure a change in U.S. policy in return for political
contributions to the Democratic Party, to the White House staff
and its role in developing and implementing a scheme to evade
the campaign expenditure limits during the President's re-
election campaign, the Committee probed into the often-ignored
corners of government operations to shine light on the impact
political contributions may have on the formulation and
substance of government policy. The hearings informed the
Committee, the Senate, and the American people of these matters
and enhanced our knowledge, not always in a way that made us
proud, but hopefully in a way that will improve our government.
The third purpose of the hearings is the one on which the
Senate's ability to conduct this type of investigation is
founded, its constitutional role to legislate. The Senate
cannot legislate without knowing what is happening. How do the
laws the Congress passes work in the real world? What gaps
exist in their coverage? What gaps exist in the government's
enforcement capabilities? Are there situations where legal
proscriptions do not work? These are the types of questions
relevant to any congressional hearing, as they are central to
the role of Congress in our constitutional republic. The
Committee went forward always bearing in mind that its entire
authority was premised on the underlying legislative
responsibilities of Congress, even though the Committee itself
lacked legislative jurisdiction over many of the items at issue
in these hearings. For this reason, the Committee did not hold
hearings on particular legislative proposals; it never examined
what works and does not work with an eye towards developing and
recommending a legislative solution, which is typically the
responsibility of the legislative committee with legislative
jurisdiction conferred by Rule XXV of the Standing Rules of the
Senate. The hearings did, however, develop a factual record on
which other committees with such jurisdiction can rely in
formulating legislative proposals. Thus, it is the expectation
of the Committee that the facts developed by its investigation
and revealed in its hearings will be of use to the Committee on
Rules and Administration, when it considers legislation to
reform campaign finance laws, and to the other members of the
Senate. Other information developed by the Committee should be
relevant to other committees in the exercise of their
legislative and oversight responsibilities. Finally, some of
the issues investigated by the Committee touched on matters
within the legislative jurisdiction of the Committee, such as
potential violations of the Hatch Act.
This report should be considered an interim report to the
American people and the Senate on the results of the
Committee's investigation. Because the time allotted to the
Committee to conduct the inquiry was severely limited, the
Committee was unable to complete the inquiry, leaving a number
of questions unanswered. This report may serve as a starting
point for other Senate committees, the House of
Representatives, and the Department of Justice to continue the
investigations into the multifaceted aspects of the issues
broached by the Committee's investigation.
procedural chronology
When the 105th Congress convened in early January 1997,
Senator Fred Thompson (R-TN) was confirmed as the chairman of
the Committee. On January 7, 1997, Chairman Thompson named
Hannah Sistare as staff director of the Committee and hired
Michael J. Madigan, a partner in the Washington, D.C., law firm
of Akin, Gump, Strauss, Hauer & Feld, to serve as chief counsel
for the special investigation into campaign fundraising abuses
in the 1996 elections. Senator John Glenn (D-OH) was selected
as the ranking minority member of the Committee, and he named
former Senate Legal Counsel Michael Davidson to serve as
minority chief counsel for the special investigation.
Within a week of hiring Madigan, the Committee hired three
additional lawyers to serve as senior counsel to assist in the
supervision of the special investigation: Harold Damelin,
former chief counsel of the Permanent Subcommittee on
Investigations of the Committee on Governmental Affairs; J.
Mark Tipps, former chief of staff to Senator Bill Frist (R-TN);
and Harry S. Mattice, a partner in the Chattanooga, TN, law
firm of Miller & Martin. In the spring, after a resolution
providing additional funds to the Committee for the purpose of
conducting the special investigation had been approved, the
majority also hired Donald T. Bucklin, a partner in the
Washington, D.C. law firm of Squire, Sanders & Dempsey, as
senior counsel and promoted Tipps from senior counsel to deputy
chief counsel. While some additional staff were hired in
January and February, the hiring of most of the legal,
investigative, and support staff to conduct the special
investigation awaited the adoption by the Senate of a funding
resolution to provide the necessary resources.
On January 28, 1997, Chairman Thompson delivered his
initial statement to the Senate explaining the purposes of the
inquiry.2 The Chairman explained that the Committee
would not be engaged in ``a criminal investigation,'' which is
the constitutional responsibility of the executive. Chairman
Thompson identified two central purposes appropriate for
congressional committees, and these would set the parameters
and tone for the investigation. First, the Committee would
undertake an inquiry with a legislative purpose: to inquire
into and lay out the facts to help inform Congress of the
operation of the law and to assist the Senate in determining
whether relevant laws need to be changed or repealed or new
laws adopted. Second, the Committee would attempt to fulfill
what President Wilson called ``the informing function of
Congress,'' whereby the Committee would seek to find the facts
and reveal them for the American people, so that they can make
informed political choices.
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\2\ See 143 Congressional Record S 716-18 (daily ed. Jan. 28,
1997).
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The Chairman made it clear that the inquiry would not be a
partisan affair directed at the activities of only one
political party. As he informed the Senate, the Committee's
``work will include any improper activities by Republicans,
Democrats, or other political partisans.'' The goal was to
ensure that the American people perceive the investigation and
subsequent hearings ``as being fair and evenhanded.'' The
Chairman was clear, however, that a bipartisan investigation
would not be governed by the need ``to create some false
balance'' between the political parties. The investigation
would examine ``activities . . . not political parties'' and
the Chairman was prepared to let ``the chips fall where they
may.''
As the Committee sought to initiate its inquiry, three
central issues had to be resolved: what was the precise scope
of the inquiry; what resources were to be available to the
Committee; and what time period would be allotted to the
Committee to conduct its inquiry. These three issues consumed a
great deal of time, longer than was anticipated, and, in light
of the time limit ultimately imposed on the inquiry, the delays
in resolving these issues had a significant effect on the
conduct of the inquiry and the hearings.
After consulting with his colleagues in the majority and
reviewing the scope of similar inquiries, Chairman Thompson
proposed an investigation that would examine illegal and
improper campaign fund-raising and spending activities in the
1996 federal election cycle. Chairman Thompson wanted to ensure
that the investigation would not be tied up by partisan
politics, as had occurred when the minority was able to tie up
an extension in the authorization for the Senate Special
Committee to Investigate Whitewater Development Corporation and
Related Matters in the 104th Congress. He therefore sought a
budget that would permit the Committee to conduct a thorough
inquiry without requiring that the Committee seek additional
funds from the Senate while pursuing the investigation. He also
insisted that no deadline be imposed on the investigation,
consistent with the recommendations of former Senators George
Mitchell and Bill Cohen, which they developed in light of their
experience with the Senate's 1987 investigation of the Iran-
Contra affair.
On January 29, 1997, the Committee held its organizational
meeting for the 105th Congress. In addition to its regular
budget, Chairman Thompson proposed a budget of $6.5 million for
the special investigation, which he proposed would look into
illegal and improper activities during the 1996 elections. This
budget was proposed after consulting on January 28 with the
majority members of the Committee.3 No deadline on
the special investigation was proposed. While the minority
supported a broad scope for the investigation, it insisted on a
deadline and refused to support a budget that would allow the
Committee to carry on its work without coming back to the
Senate for additional funding. The minority countered with a
proposal that included a time-limited investigation with a
broad scope and a budget of $1.8 million, which it argued would
be adequate for commencing the inquiry, but which would clearly
be inadequate for completing the inquiry.
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\3\ The proposed $6.5 million budget was based on an evaluation of
the scope of the investigation the Committee was to pursue as well as
comparisons with other major Senate investigations. For example, a
review of the most analogous investigations showed that the 1973
Watergate Committee spent $6.9 million in 1997 dollars; the 1987 Iran-
Contra Committee (a joint Senate-House committee) spent a little over
$5 million in 1997 dollars; the 1995-96 Whitewater Committee spent $1.8
million (not counting Banking Committee resources known to have been
spent on that investigation). Other major congressional investigations
consumed far more than $6.5 million sought by Chairman Thompson (the
1975 Church Committee on the activities of the intelligence community
spent $8.66 million; the 1957 McClellan Committee on improper labor
activities spent $11.46 million; and the 1977 House Select Committee on
Assassinations spent $15.31 million (all figures are in 1997 dollars)).
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Due to the strong disagreement between the majority and
minority on the Committee, the Committee vote on the funding
resolution for the investigation was put over to January 30 to
allow members to try to work out a compromise, which proved
elusive. While the minority supported Chairman Thompson in
seeking a broad scope to the inquiry to allow investigation of
both illegal and improper activities, it was unwilling to pay
for such an expansive inquiry or allow sufficient time to
conduct one. The funding proposed by the minority was grossly
inadequate to support a thorough inquiry of the facts covered
by the broad scope the minority proposed.
When the Committee met on January 30, it unanimously
approved a broad scope to allow the Committee to investigate
illegal or improper activities in connection with 1996 federal
election campaigns. By a 9-4 vote, the Committee then approved
a proposed budget of $6.5 million for an investigation without
a deadline.4 The Committee voted to include within
the broad scope of its investigation:
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\4\ The three additional minority members of the Committee opposed
the resolution by proxy, but proxy votes are not counted on a motion to
report a measure to the Senate from the Committee. Rule 3C, Rules of
the Committee on Governmental Affairs. See 143 Congressional Record
S1195 (daily ed. Feb. 10, 1997) (reprinting the Committee Rules).
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Illegal or improper fund-raising and spending
practices in the 1996 federal election campaigns,
including but not limited to:
Foreign contributions and their effect on the
American political system;
Conflicts of interest involving federal
officeholders and employees, as well as misuse
of government offices;
Failure by federal government employees to
maintain and observe legal barriers between
fund-raising and official business;
The independence of the presidential
campaigns from the political activities pursued
for their benefit by outside individuals or
groups;
The misuse of charitable and tax-exempt
organizations in connection with political or
fund-raising activities;
Unregulated (``soft'') money and its effect
on the American political system;
Promises and/or the granting of special
access in return for political contributions or
favors;
The effect of independent expenditures
(whether by corporations, labor unions, or
otherwise) upon our current campaign finance
system, and the question as to whether such
expenditures are truly independent;
Contributions to and expenditures by entities
for the benefit or in the interest of public
officials; and
To the extent they are similar or analogous,
practices that occurred in previous federal
election campaigns.5
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\5\ See S. Rep. 105-7, Report of the Committee on Governmental
Affairs to Accompany S. Res. 39, p. 3.
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As provided by the Standing Rules of the Senate, the
proposed funding resolution was referred to the Committee on
Rules and Administration. Due to controversy over the scope of
the investigation, the amount of money being sought, and the
lack of a deadline, the Rules Committee decided to consider the
Committee's routine, recurring budget request with those of all
other committees and then consider the budget request for the
special investigation separately. On February 6, the
Committee's recurring budget was to be considered by the Rules
Committee, and the request for funding the special
investigation was specifically put off and was not to be
considered. On that date, Chairman Thompson testified in favor
of the Committee's recurring budget request, but Senator Glenn
opposed the request, arguing that the recurring budget for
normal Committee activities not be approved until the
disagreement over the funding for and scope of the special
investigation was resolved. Nevertheless, the Rules Committee
approved the Committee's recurring budget together with those
of all other Senate committees. This recurring budget was
adopted by the Senate in S. Res. 54.6
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\6\ S. Res. 54 was approved by the Senate by unanimous consent on
February 13, 1997. 143 Congressional Record S 1418 (daily ed. Feb. 13,
1997).
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Major issues surrounding the investigation's scope,
duration, and funding remained. While discussions among the
various parties were underway to resolve these issues, the
Committee initiated its investigation. In January, the small
majority staff of the special investigation started to put
together a list of the central figures in the scandal from news
media accounts in preparation for the issuance of subpoenas.
The minority was asked in January to develop its own list of
potential recipients of subpoenas. On February 7, 1997, the
majority staff provided copies of proposed subpoenas to the
minority staff pursuant to Rule 5C of the Rules of Procedure of
the Committee on Governmental Affairs.7 Additional
subpoenas were presented to the minority on February 10, 1997.
That same day, a list of all subpoenas proposed by the majority
was provided to all members of the Committee.
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\7\ See 143 Congressional Record S 1195 (daily ed. Feb. 10, 1997)
(reprinting the Committee Rules).
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On February 13, 1997, the Committee held a business meeting
to discuss the 54 proposed subpoenas. At that meeting, the
Committee approved the issuance of 44 subpoenas by unanimous
consent. The remaining 10 subpoenas were authorized to be
issued by a vote of the Committee, but their issuance was
deferred until February 19.
Despite the fact that the minority had been asked in
January to develop a list of individuals and groups it believed
ought to be subpoenaed, no such minority list was ready by
February 13. On that day, the minority directed its legal staff
to start the task which the majority had proposed to the
minority in January.
Additional subpoenas were proposed to the minority on
February 24, 1997, and the Committee staff moved ahead and
began interviewing relevant persons on February 25, 1997. The
next day, Michael Davidson was replaced as minority chief
counsel by Alan Baron, a partner in the Washington, D.C. law
firm of Foley, Hoag & Eliot.
While these steps towards initiating the investigation were
being taken, serious questions remained over whether the Senate
would even conduct the inquiry, despite the serious allegations
that had arisen in the media. On February 27, 1997, the Senate
Minority Leader announced that the minority would filibuster
the resolution to fund the special investigation unless
agreement were reached on the amount of funding and a cut-off
date for the probe and its scope. The Minority Leader also
insisted on a firm date for Senate consideration of campaign
finance reform legislation as a condition of allowing the
special investigation to go forward.
In an effort to move forward, on March 4, 1997, Chairman
Thompson reduced the budget request for the investigation to
$5.7 million, but continued to oppose the imposition of a
deadline on the investigation to avoid delaying tactics
designed to stretch the investigation out to the cutoff date.
The proposed funding resolution was to come before the
Rules Committee on March 6, 1997. While the Minority continued
to seek a cut-off date and limited funding to allow them to
control the investigation, many Republicans were concerned
about the broad scope of the inquiry, which allowed the
investigation to look into improper as well as illegal
activities. Many Republicans feared that if that broad scope
approved by the Committee were adopted, the investigation would
lose its focus on the more serious illegal activities during
the 1996 federal elections, and thus be sidetracked into
possible activities that were improper but not illegal. Thus,
as the Rules Committee moved to consider the issue, the
possibility was strong that no investigation would take place.
On March 5, 1997, the Majority Leader decided to strike
what he thought would be an appropriate compromise. Under the
Majority Leader's plan, the scope of the inquiry would be
narrowed to encompass solely illegal activities. This change
would meet Republican concerns. He also proposed a deadline of
December 31, 1997, a change that would meet the Democrats'
concerns. Finally, he proposed a budget of $4.35 million, an
amount he thought adequate to conduct the investigation through
the end of the year. Chairman John Warner (R-VA) of the Rules
Committee agreed to offer the Majority Leader's proposal as a
compromise.
On March 6, 1997, the Rules Committee heard testimony from
Chairman Thompson and Senator Glenn on the funding resolution.
Both Senators opposed the narrow scope of the proposed
compromise, and Chairman Thompson argued against imposing a
deadline on the inquiry. Nonetheless, Chairman Warner offered
the compromise amendment developed by the Majority Leader to S.
Res. 39, the funding resolution, which was approved by the
Rules Committee on a party-line 9-7 vote.
On March 10, 1997, the Committee filed its report, as
required by Rule XXVI.9(a) of the Standing Rules of the Senate,
justifying the Committee's request for non-recurring funding to
support the special investigation.\8\ The Senate took up the
funding resolution that day, and debate continued into March
11. During the debate, Senators from both the majority and
minority expressed concern over the narrowed scope of the
inquiry. To meet these concerns, Chairman Warner and the
Majority Leader offered an amendment that would have required
the Committee to refer to the Rules Committee any evidence of
improper activities in connection with the 1996 federal
elections.\9\
---------------------------------------------------------------------------
\8\ See S. Rep. 105-7, Report of the Committee on Governmental
Affairs to Accompany S. Res. 39, Authorizing Expenditures by the
Committee on Governmental Affairs.
\9\ See Amendment No. 22, as modified. 143 Congressional Record
S2097 (daily ed. March 11, 1997).
---------------------------------------------------------------------------
Because the distinction between what was illegal and what
was merely improper was vague at the time and has continued to
befuddle many acute observers, including the Attorney General
of the United States, some members of the Committee took the
position that this proposed amendment was not a satisfactory
resolution. The Majority Leader thus offered Amendment No. 23
for himself, Chairman Thompson, and Chairman Warner to amend S.
Res. 39 as reported by the Rules Committee to broaden the scope
of the investigation so that it would cover improper as well as
illegal activities.\10\ Amendment No. 23 was approved by a vote
of 99-0 with one senator voting ``present,'' \11\ and S. Res.
39 was also approved, as amended, by the identical vote.\12\
---------------------------------------------------------------------------
\10\ See 143 Congressional Record S2109 (daily ed. March 11, 1997).
\11\ Id. at S2114.
\12\ Id. at S2125.
---------------------------------------------------------------------------
Overview of the Investigation
With the approval of $4.35 million in funding for the
special investigation, the Committee was finally able to hire
staff to conduct the investigation. Only nine and a half months
remained for the Committee's investigation, which would now
cover a broad scope. Two months into the Congress, the real
work of the Committee could finally commence.
Scores of allegations of wrongdoing, either illegal or
improper activities, had been brought to the Committee's
attention, primarily through the news media. The Committee
staff had to analyze each of these allegations, prioritize them
for the investigation, investigate them, prepare for hearings,
and hold hearings all in the space of nine months.
The first task was to complete the hiring of necessary
staff. The majority staff eventually grew to include 23 lawyers
(including the chief counsel, deputy chief counsel, and three
senior counsel), two investigators, and necessary support
staff. In addition, the majority staff included an investigator
detailed from the General Accounting Office. The minority staff
included 14 lawyers (including the chief counsel and deputy
chief counsels), and necessary support staff. Both the majority
and minority were able to use jointly the resources of nine
special agents of the Federal Bureau of Investigation, who were
detailed to the Committee. The work of these agents proved of
invaluable assistance to the Committee, which could not have
undertaken the extensive investigation it was able to conduct
without these professional investigators, many of whom spoke
relevant foreign languages, notably Chinese.
Between March and the end of the year, a period of only
nine and a half months, after hiring staff, the Committee
conducted as thorough and complete an investigation as time
permitted. During that span, the Committee issued 427 subpoenas
requested by both the majority and minority either for
documents or for testimony. The Committee received in response
to its subpoenas over 1,500,000 pages of documents, all of
which had to be reviewed and the relevance of each assessed.
Committee staff took 200 depositions and conducted over200
witness interviews. The Committee held 32 days of hearings, taking
testimony from 72 witnesses. Finally, the Committee undertook to
prepare this report as directed by the Senate.
The Conduct of the Investigation
As the Committee started to hire staff, it also began in
earnest to pursue the investigation into illegal and improper
campaign fund-raising and spending activities during the 1996
election cycle. In addition to the first 54 subpoenas issued in
February, the Committee issued nine subpoenas on March 26,
1997.
Two weeks later, on April 9, 1997, the Committee issued
another 10 subpoenas, including the first six requested by the
minority. In doing so, the Committee demonstrated its
willingness to follow the Chairman's commitment to proceed in a
bipartisan manner to investigate illegal and improper
activities that may have been committed by supporters of either
political party.
Also on April 9, the Committee sent its initial request for
documents, video and audio tapes, e-mail, and other records to
the White House. This request had been discussed in advance
with the Counsel to the President and his staff to ensure
prompt compliance. It contained the first 28 specific document
requests the Committee would make of the White House.
Unfortunately, it also led the White House to begin in earnest
its efforts to obstruct and delay the investigation so as to
run the Committee up against the deadline imposed by the
Senate. The White House's production of records was so poor
from the earliest stages of the investigation that on May 13,
about one month after the first request was sent, Chairman
Thompson called Erskine Bowles, Chief of Staff to the
President, to express his concern over the slow pace of White
House document production. Although Bowles promised improved
performance, the White House's responses to the Committee's
document requests remained so poor as to force the Committee to
issue a subpoena to the White House on July 31 by unanimous
vote. Even after it received the Committee's subpoena, however,
the White House's production remained untimely and laggard,
culminating in the belated production in October of relevant
videotapes responsive to the Committee's April document
request. The White House's obstructionism in this investigation
brought discredit on the President and his staff.
The Committee issued its first 17 subpoenas for bank
records to seek to trace the source of political contributions
on April 15 and April 17, 1997. On May 22, 1997, the Committee
voted to issue 43 additional subpoenas, including one to the
American Federation of Labor-Congress of Industrial
Organizations (``AFL-CIO'') and several to individuals
associated with the National Policy Forum (``NPF''), a think-
tank founded by the Republican National Committee (``RNC''). An
additional 26 subpoenas, 23 of which were for bank records,
were issued on June 3, 1997. The final subpoenas for documents
and records issued by the Committee prior to the start of its
public hearings were approved on June 12, when the Committee
voted to issue 24 subpoenas.
The votes on May 22 to issue subpoenas marked the first
participation in the investigation by Senator Bob Smith (R-NH)
and Senator Robert Bennett (R-UT), who had been selected to
replace Senator Ted Stevens (R-AK) and Senator William Roth (R-
DE) on the Committee for the duration of the
investigation.13
---------------------------------------------------------------------------
\13\ See S. Res. 89. 143 Congressional Record S4915 (daily ed. May
21, 1997).
---------------------------------------------------------------------------
At the Committee business meeting on June 22, Chairman
Thompson announced that the public hearings would begin on July
8, despite the fact that the investigation had been ongoing in
earnest only for a little over three months. Nonetheless, the
existence of the December 31 deadline to complete the
investigation demanded the start of hearings this early,
particularly in the face of the upcoming August recess.
From the time the investigation was authorized, the
Committee was issuing subpoenas and receiving a large number of
documents from many parties. The Committee had also started
interviewing and deposing witnesses during the spring. The
investigation was proceeding with a broad focus because of the
large number of disparate allegations that had been raised
concerning possibly illegal or improper activities during the
1996 federal elections.
To conduct a thorough and comprehensive inquiry into both
illegal and improper activities, including the role of non-
profit groups in influencing federal elections, Chairman
Thompson indicated during the spring that the Committee's
inquiry would proceed in two phases. The first phase would
focus on illegal activities engaged in by candidates and
political parties. The emphasis of this first phase would be on
trying to determine the amount of foreign money contributed to
candidates and parties during the 1996 elections. An additional
area of focus of the first phase of the inquiry would be the
laundering of campaign contributions, as related to foreign
contributions, which were often laundered through those who
could lawfully contribute. Other areas of inquiry that would be
covered by the first phase were the sale of access and policy
decisions in return for political contributions. The second
phase of the investigation would focus on the role of non-
profit and issue advocacy groups and labor unions in the 1996
elections, particularly the issue of whether these groups
illegally coordinated their expenditures with the White House,
the parties, or particular candidates or otherwise engaged in
improper activity.
As the investigation proceeded and the Committee sought to
prepare for the start of public hearings, it encountered
significant obstruction to its inquiry from several sources.
Despite promises of cooperation, the White House continued to
produce little information, slowly, and what the White House
did produce to the Committee was often released first to the
news media, especially if the information was deemed
embarrassing to the President. The DNC, whose 1996 campaign
fundraising and spending practices had led directly to the
Senate authorizing the investigation, was similarly
recalcitrant in producing relevant documents in a timely
manner. Both the White House and the DNC, which acknowledged
acting in concert in formulating a strategy to respond to the
1996 campaign fundraising improprieties,14 appeared
to have developed a shared strategy based on the Senate's
decision to impose a deadline on the investigation: they would
produce information slowly, make any conceivable objection to
its production, and then produce only a portion of it after
requiring great exertion by the Committee in an effort to delay
the inquiry until it ran out of time.
---------------------------------------------------------------------------
\14\ The DNC even attempted to protect information by asserting the
attorney-client privilege both over document production and in
depositions based on discussions between the DNC witnesses and White
House officials, including White House lawyers. In a June 6, 1997
order, Chairman Thompson overruled the assertion of the attorney-client
privilege as to discussions between DNC officials and White House
lawyers.
---------------------------------------------------------------------------
Despite the delaying tactics of the White House and DNC,
the Committee developed a great deal of information in a
relatively short period of time. Large numbers of documents had
been received from many sources, and depositions and interviews
were being conducted. In addition, on June 6, 1997, three
members of the majority staff, two detailed FBI agents, and one
member of the minority staff undertook an investigative trip to
Hong Kong, Taiwan, Macao, and Indonesia to collect information
and interview witnesses.15
---------------------------------------------------------------------------
\15\ The Committee sought permission to send staff to the People's
Republic of China (PRC) to interview witnesses there, but the PRC
refused to issue visas to Committee staff for the purpose of conducting
fact-gathering within the PRC. Accordingly, no staff traveled to the
PRC.
---------------------------------------------------------------------------
Of perhaps equal importance to the information the
Committee was gathering, however, was the information the
Committee was unable to obtain. Thirty-five witnesses with
information relevant to the Committee's investigation asserted
the Fifth Amendment right against self-incrimination and
refused to testify and/or produce documents in response to a
Committee subpoena. In late June, the Committee began
considering whether to grant immunity to some of the witnesses
who had invoked their Fifth Amendment right. On June 27, the
Committee voted to confer immunity on four witnesses. On July
23, the Committee voted to immunize another five witnesses.
Thus, the Committee voted to immunize nine witnesses, five of
whom eventually testified in open session during the
Committee's hearings. An additional ten potential witnesses
fled the country and were beyond the Committee's ability to
issue legal process. The Committee was unable to contact any of
these individuals during the staff's foreign trip. While the
Committee was able to interview a number of foreign witnesses
during that trip, 12 potential foreign witnesses who were
contacted refused requests for interviews, among whom were some
of the most important, including James Riady and Ng Lap Seng.
In addition to Committee's struggle with the obstructionist
tactics of the White House and the DNC, it encountered
resistance from a number of non-profit organizations that
received subpoenas in July, when the Committee started planning
to conduct the second phase of its investigation. Many of the
non-profit organizations that refused to comply had reportedly
played significant roles in the 1996 elections. The Committee
was interested particularly in seeking to determine whether
these organizations, which had primarily engaged in making
allegedly independent expenditures to broadcast so-called issue
advocacy advertisements, had coordinated their activities with
candidates or political parties in violation of the Federal
Election Campaign Act. The Committee subpoenaed a total of 31
such organizations. Of these, a number refused to produce
documents to the Committee, asserting a variety of
constitutional objections, most of which were without any legal
foundation.
the impact of the deadline
The inability of the Committee to procure large amounts of
relevant information was largely attributed to the imposition
by the Senate of the December 31, 1997, deadline. This deadline
essentially invited witnesses and organizations to refuse to
comply with subpoenas. The deadline also encouraged other
witnesses and organizations, particularly the White House and
the DNC, to produce documents and videotapes responsive to
Committee subpoenas in a slow, drawn out manner in an effort to
run the clock out on the Committee's investigation.
Shortly after the Committee issued its first set of
document subpoenas, several recipients informed the Committee
that they were invoking their Fifth Amendment right against
self-incrimination and would therefore not produce responsive
documents. The Fifth Amendment privilege does not, however,
protect the contents of documents. It can protect the act of
producing documents when that act is itself testimonial (i.e.,
the act of production demonstrates the existence of a
particular document). This ``act of production'' privilege
under the Fifth Amendment only applies to personal documents;
it does not apply to the act of producing business records, for
example, that happen to be in the possession of the person
subpoenaed.
In the absence of the December 31 deadline, the Committee
could have sought a judicial determination as to the
appropriateness of various witnesses' efforts to assert broadly
their Fifth Amendment privilege against self-incrimination with
respect to all the documents in their possession. Due to the
December 31 deadline, however, the Committee was essentially
foreclosed at the outset from pursuing the routine course of
seeking a judicial determination as to the appropriateness of
the large number of Fifth Amendment claims. The deadline made
it unlikely the Committee would have ever received the
responsive documents in a timely manner. Had the Committee
sought to enforce its subpoenas against Huang, Webster Hubbell,
Yah Lin ``Charlie'' Trie, Mark Middleton, and the other central
witnesses who refused even to produce documents, it is likely
that the judicial subpoena enforcement actions would not have
been completed in time to receive the documents had it
prevailed in the enforcement actions. Even had the documents
been received prior to the expiration of the deadline, they
would have been received so late as to have been virtually
useless.
Had the Committee filed enforcement actions in April,
responsive pleadings would have been due in May. The district
judge would then have had to review the relevant documents in
camera, a time-consuming task. Even with an expedited decision,
the Committee staff determined it was unlikely to receive a
decision before July, and any decision rendered by a district
judge would have been subject to an appeal, which almost
certainly would have taken to close to the end of the year.
Because of this likely timeline, the Committee staff
determined not to expend resources to litigate enforcement
actions that would not benefit the investigation. Had the
Committee chosen to pursue enforcement actions, its staff would
have been expending its limited time on enforcement rather than
on the investigation itself. Such a diversion of resources was
not an option given the limited amount of time in which the
Committee had to conduct its investigation and hold hearings.
In effect, the Committee had no choice but to proceed without
all the documents or testimony relevant to the investigation,
or else it might have run out of time and could have conducted
no investigation at all.
The inability to pursue these initial enforcement actions
was due directly and solely to the deadline imposed by the
Senate on the duration of the investigation. Once the initial
pattern hadbeen set whereby the Committee did not seek to
enforce its lawful process, others were encouraged to flout the
Committee's subpoenas. Most troubling of all were the organizations
which had played significant roles and spent large sums of money during
the 1996 election cycle. As was already noted, the Committee issued a
subpoena to the AFL-CIO on May 22, 1997 requiring it to produce
responsive documents to the Committee by the middle of June. Over two
months late, on August 20, 1997, the AFL-CIO finally informed the
Committee that it would not produce any documents in response to the
subpoena, other than a few pages of documents that were already in the
public domain. Again, the deadline prevented the Committee from seeking
to enforce the subpoena.
On July 31, 1997, before the AFL-CIO expressed its contempt
for the lawful processes of the Senate, an additional 24 non-
profit organizations active in the 1996 federal election
campaigns were subpoenaed to permit the Committee to determine
whether these organizations had acted legally by making
independent expenditures or illegally by coordinating their
activities with candidates and political parties. With the
example of the AFL-CIO and the Committee's powerlessness to
proceed against the AFL-CIO set before them, a number of these
24 non-profit organizations informed the Committee in late
August and early September that they would not comply with the
subpoenas they had received. Among these organizations that
refused to comply was the Teamsters union, whose documents were
clearly relevant to the Committee's inquiry, as three of its
officials have pleaded guilty to a participating in a broad
criminal conspiracy that included contribution swaps between
the union and the DNC.16
---------------------------------------------------------------------------
\16\ The investigation into the Teamsters has broadened and media
reports indicate that the second-ranking figure of the AFL-CIO, Richard
Trumka, has invoked his Fifth Amendment right against self-
incrimination in response to the grand jury. Trumka simply ignored a
Committee subpoena seeking his deposition testimony, and the reason for
that is now obvious: he wanted to delay the embarrassment to organized
labor of having one of its most senior officials assert his Fifth
Amendment rights.
---------------------------------------------------------------------------
The deadline not only prevented the Committee from
enforcing its subpoenas, but also encouraged other subpoena
recipients to dribble documents out over months and months in
an effort to run out the clock on the Committee. The parties
that perfected this routine to a high art were the White House
and the DNC. The particulars of the delays practiced by these
entities are set out in detail in the body of the report.
Suffice it to say here that the White House continued the
pattern of delay, obstruction, and evasion that it had
practiced in the House Travel Office and Senate Whitewater
investigations. The DNC studied from the White House playbook
and apparently learned its lessons well.
It was not only these political entities that failed to
produce relevant information to the Committee in a timely
manner. Even though the possibility that foreign governments
may have sought to influence U.S. elections was a central focus
of the investigation, the FBI failed to find critical and
relevant information in its own files until well after the
hearings had started and, in one importance instance, not until
after the hearings had ended.
The deadline had one further important effect on the
investigation. Because the work of the Committee had to be
completed by the end of the year, the Committee was unable to
proceed in the most orderly fashion of conducting and
completing its investigation and then holding hearings to lay
the facts before the Senate and the American people. Instead,
the Committee had to begin holding hearings while the
investigation was still quite new and ongoing. Many of the
basic facts of several aspects of the investigation had not yet
been developed when the hearings commenced.
the hearings
Although its investigation had then been underway in
earnest--with Senate-approved funding and an adequate staff--
only for three and a half months, the Committee started holding
public hearings in July 1997. By the time public hearings had
concluded at the end of October, the Committee had held 32 days
of hearings at which 72 witnesses testified.17
---------------------------------------------------------------------------
\17\ The Committee heard from 70 different witnesses; two witnesses
appeared twice.
---------------------------------------------------------------------------
With jurisdiction encompassing such a broad range of
wrongdoing and with such little time available, the Committee's
selection of witnesses and subject matter for its public
hearings required making difficult choices. The choice of
subject matter for individual days and segments of hearings at
this early stage of the inquiry, as outlined by Chairman
Thompson in his ``two-phase'' approach, was dictated both by a
focus on campaign finance illegalities and by a process of
issue triage, whereby the Committee restricted itself to the
most serious matters it was capable of properly developing in
the time available.
Because much of the Committee's initial inquiry focused on
the most troubling issues of foreign contribution-laundering,
the first month of hearings focused largely on these matters.
Much information relevant to this aspect of the inquiry
remained unknown because of the large number of potential
witnesses who chose to flee the country or invoke their Fifth
Amendment rights. Furthermore, because it implicated sensitive
U.S. intelligence and counter-intelligence activities, much of
the relevant information was classified by executive branch
agencies and could not be disclosed in open session. While
Committee members obtained a picture of the U.S. intelligence
and law enforcement communities'' understanding of such issues,
it proved impossible for the Committee to convey more than the
mere outlines of the situation to the American people. The
Committee was able, however, to bring to light evidence that
foreign-source contributions to the DNC were laundered through
domestic ``straw donors'' during the 1996 election cycle.
In addition to illegal foreign contributions and the
laundering of such funds, the hearings focused on campaign
fundraising that took place on government property. The
Committee heard evidence, for example, of widespread
fundraising in the White House. It also heard testimony
regarding fundraising solicitations from government offices
using government telephones, in violation of 18 U.S.C.
Sec. 607. The hearings also inquired into whether the DNC,
particularly its fundraising and advertising activities, were
run out of the White House by federal employees.
The Committee uncovered a donation-laundering scheme
involving a prominent Democratic fundraiser and the
exploitation of a foreign religious institution that began at
least as early as 1993 and continued through the 1996 election,
the principal architects of which have reportedly been linked
to the intelligence service of a foreign government.
Having discovered that part of the scheme to raise large
contributions for the DNC involved the sale of access to senior
government officials--thereby also offering major donors the
concomitant opportunity to purchase policy concessions through
an implicit quid pro quo arrangement, the Committee also turned
its attention to these matters.
The Committee also held hearings to explore the legal
context in which the abuses of the 1996 elections occurred.
Although the Committee lacks legislative jurisdiction over
campaign finance reform legislation, its hearings had
established a record of the operation of current laws. The
Committee sought to explicate the legal and institutional
context in which the abuses and evasion of law which its
investigatory hearings were highlighting occurred, and it heard
from leading experts on campaign finance issues, who helped
explain what had gone wrong in 1996.American people. The
Committee was able, however, to bring to light evidence that foreign-
source contributions to the DNC were laundered through domestic ``straw
donors'' during the 1996 election cycle.
In addition to illegal foreign contributions and the
laundering of such funds, the hearings focused on campaign
fundraising that took place on government property. The
Committee heard evidence, for example, of widespread
fundraising in the White House. It also heard testimony
regarding fundraising solicitations from government offices
using government telephones, in violation of 18 U.S.C.
Sec. 607. The hearings also inquired into whether the DNC,
particularly its fundraising and advertising activities, were
run out of the White House by federal employees.
The Committee uncovered a donation-laundering scheme
involving a prominent Democratic fundraiser and the
exploitation of a foreign religious institution that began at
least as early as 1993 and continued through the 1996 election,
the principal architects of which have reportedly been linked
to the intelligence service of a foreign government.
Having discovered that part of the scheme to raise large
contributions for the DNC involved the sale of access to senior
government officials--thereby also offering major donors the
concomitant opportunity to purchase policy concessions through
an implicit quid pro quo arrangement, the Committee also turned
its attention to these matters.
The Committee also held hearings to explore the legal
context in which the abuses of the 1996 elections occurred.
Although the Committee lacks legislative jurisdiction over
campaign finance reform legislation, its hearings had
established a record of the operation of current laws. The
Committee sought to explicate the legal and institutional
context in which the abuses and evasion of law which its
investigatory hearings were highlighting occurred, and it heard
from leading experts on campaign finance issues, who helped
explain what had gone wrong in 1996.
On October 1, 1997, as these ``policy'' hearings came to a
close, the Committee learned that the White House had only
recently discovered a large number of video and audio tapes
responsive to requests for information the Committee had made
as early as April and called for in the July subpoena as well.
The story of the White House video tapes, the contents thereof,
and the White House's failure to produce them in a timely
manner would become a focus of the remaining month of public
hearings.
As the first phase of the Committee's hearings moved
towards completion, the Committee had to determine whether to
proceed with the second phase, in which it had intended to
focus on the political activities of various non-profit groups.
Because most of the significant non-profits groups had failed
to comply with the Committee's subpoenas, however, the
Committee had little information beyond that already in the
public domain. By October 1997, moreover, because of the
deadline the Committee had neither the time nor the recourse to
judicial proceedings that would have been necessary to acquire
more information. As a result of the poor compliance or non-
compliance from many of the non-profit groups it subpoenaed,
the Chairman decided not to hold hearings on the role of non-
profit groups, and it is accordingly inappropriate to reach
conclusions about their activities in the 1996
election.18 This phase of the investigation would
surely have added significantly to the Senate's and the
American public's understanding of campaign finance
illegalities and improprieties. Because of the December 31
deadline forced on the Committee, however, it was unable to
undertake this task.
---------------------------------------------------------------------------
\18\ Although investigative hearings on the political activities of
non-profit groups were not held, the activities of some of these groups
were outlined during the Committee's policy hearings in September.
---------------------------------------------------------------------------
The Committee closed its public hearings by examining one
particular quid pro quo, the clearest instance yet uncovered,
on which it could obtain witness testimony, of a change of
government policy undertaken in return for campaign
contributions: the denial of a license to three Indian tribes
in Wisconsin for an off-reservation casino. Secretary of the
Interior Bruce Babbitt was one of the witnesses who testified
on this matter. As a direct result of his testimony before the
Committee, at the time of this writing the Justice Department
is considering whether an independent counsel should be
appointed to investigate Secretary Babbitt's role in this
matter.
After 32 days of hearings in July, September, and October,
Chairman Thompson announced on October 31, 1997, that the
Committee was suspending public hearings, although continuing
its investigation through the end of the year. He determined
that the most important information obtained by the Committee
had already been the subject of public hearings, and that given
existing time constraints and the Committee's lack of judicial
recourse, the remaining material should not be pursued in
public hearings. The Chairman left open the possibility that
new hearings would be held if warranted by new information
developed during the remaining two months of the investigation.
Although certain investigative threads were followed during
November and December and interviews and depositions were
conducted, no additional public hearings were held. The
Committee continued to receive documents and videotapes in
December. The DNC's delivery of 15 boxes of documents on
December 22, 1997, about one week before the expiration of the
Committee's authority, marked the final production of
information to the Committee as officially constituted. In
January 1998, after its jurisdiction had expired, the White
House produced documents on Johnny Chung, which were responsive
to its April 1997 document request, to the Committee. Any
relevant information developed after the public hearings were
ended is included in this report.
the report
S. Res. 39 required the Committee to complete its
investigation by December 31, 1997, and to submit a report to
the Senate by January 31, 1998. This report fulfills that
directive. On March 5, 1998, the Committee held a business
meeting, at which it voted 8-7 to approve this report and file
it with the Senate. Voting with the majority were Chairman
Thompson, Senator Collins, Senator Brownback, Senator Domenici,
Senator Cochran, Senator Nickles, Senator Specter, and Senator
Smith of New Hampshire. Voting in the negative were Senator
Glenn, Senator Levin, Senator Liberman, Senator Akaka, Senator
Durbin, Senator Torricelli, and Senator Cleland. Senator
Bennett was not present for the vote but did submit additional
views.
Among the subjects aired at the hearings and detailed
within this report are the takeover of the DNC by the President
and his staff at the White House, who operated the party
apparatus as a slush-fund for the President's re-election
campaign. Along with that takeover went the dismantling of any
system of vetting contributions and contributors to the DNC to
ensure compliance with the law. The theory was to take in as
much money as possible to buy advertising and worry later about
the Federal Election Commission (FEC), whose meager resources,
in any event, were unequal to the task of policing wrongdoing
on the massive scale engaged in by the DNC during the 1996
election cycle. In effect, gripped by an overwhelming thirst
for money driven by the fear that the Republican victories in
the 1994 congressional elections presaged the defeat of
President Clinton in 1996, the Democratic Party and the
President stopped asking or caring about the sources of this
money.
The Committee's investigation explored the DNC's and the
President's enormous thirst for campaign contributions to
support the President's re-election bid and outlined the abuses
carried out in their pursuit, including selling access to the
President and senior officials through ``coffees'' and White
House ``overnights,'' and blatantly trading access to senior
officials in return for campaign contributions. New sources of
money had to be found. In this climate, the door was opened in
1996 to contributions from unsavory figures, from foreign bank
accounts, and possibly from foreign governments as well. The
Committee's hearings exposed a number of these sources,
particularly hitherto untapped foreign sources of money.
Summary of Findings
background and context
On November 8, 1994, Americans shifted control of both
houses of Congress to the Republican Party for the first time
in 40 years. For a time, the election rendered President
Clinton so weak in the polls that many experts questioned his
``relevance,'' suggesting that he might face a primary
challenge as he attempted to secure his re-election in 1996.
The election results spurred great concern among the
President's supporters that he might suffer a similarly
disastrous defeat in 1996.
In early 1995, the President began meeting with his closest
advisors to develop a plan to ensure his re-election by
``pulling out all the stops'' 1 in campaign
fundraising. At this time, in an atmosphere of abject political
desperation, the seeds were sown which would later grow into
the DNC's variegated fundraising scandals of 1996. The
President and his advisors determined that the key to their
success in the 1996 elections would be to wage immediately a
massive television political advertising campaign of
unprecedented cost.
---------------------------------------------------------------------------
\1\ George Stephanopoulos, ``The View From Inside,'' Newsweek,
March 10, 1997, at 27.
---------------------------------------------------------------------------
In the end, of course, their plan was an astonishing
success: the Democratic Party raised three times as much money
for the 1996 election as it had for the 1992 contest, and
President Clinton was re-elected. The President's success,
however, came at a steep price. In the frenzied drive to raise
such large amounts of campaign money, the Democratic Party
dismantled its own internal vetting procedures, no longer
caring, in effect, where its money came from and who was
supplying it. Worse, their campaign eviscerated federal
fundraising laws and reduced the White House, key
Administration offices, and the Presidency itself, to
fundraising tools.
This increasingly mercenary approach also led the
Democratic Party to view America's ethnic communities as
exploitable ``renewable resources'' for political fundraising.
The DNC's recklessness in raising money from their community
unfairly burdened Asian-Americans with the stigma of
lawbreaking by fundraisers such as John Huang, Charlie Trie,
and Maria Hsia.
For the U.S. political process as a whole, the DNC and
White House's reckless fundraising disregarded an obvious
risk--the danger that powerful foreign nationals, or even
governments, would attempt to buy influence through campaign
contributions. The result of all this was foreseeable,
including: the erosion of safeguards in U.S. election law
designed to guard against political corruption, and
unprecedented amounts of illegal foreign contributions making
their way into Democratic coffers. The Committee uncovered
strong circumstantial evidence that the Government of the
People's Republic of China (PRC) was involved in funding,
directing, or encouraging some of these foreign contributions.
President Clinton has attempted to distance himself from
these scandals by trying to distinguish his own ``official''
re-election campaign (Clinton/Gore '96) from the abuses the DNC
carried out. Based on the evidence compiled by the Committee,
however, this distinction is untenable. Indeed, no one has done
more to erode this very distinction than the President himself,
who with his staff effectively seized control of DNC operations
and ran all Democratic party campaign and fundraising efforts
out of the White House. During the 1996 campaign, the DNC was
the alter ego of the White House.
Deputy White House Chief of Staff Harold Ickes, for
example, ran the DNC on a day-to-day basis and presided over
weekly ``money meetings'' at the White House where he reviewed
the DNC's fundraising and expenditures before passing this
information along to the President and the Vice-President. This
White House control made the DNC's national chairman, Don
Fowler, in effect, subservient to Ickes. The Clinton/Gore and
DNC advertising campaigns were also virtually inseparable,
constituting a seamless web of White House-directed campaigning
that employed all the same consultants, pollsters, and media
producers. Ultimately, in fact, the President himself exercised
total control over the DNC advertising. Having reduced the DNC
into an arm of the White House, President Clinton and Vice
President Gore are responsible for the actions it undertook in
their names and at their direction.
Late in the 1996 presidential campaign, public reports
surfaced about foreign donations to the Democratic Party and
the DNC's improper provision of White House access to well-
heeled foreign nationals. The White House succeeded in
preventing the bubbling scandal from derailing the President's
re-election, but these efforts could not prevent an ever more
complex tale of campaign lawbreaking from coming to light, thus
sparking an ongoing series of Congressional and criminal
investigations that have so far involved the White House, the
DNC, several government agencies, hundreds of witnesses, and
several foreign countries. After the November 1996 elections,
the U.S. Senate determined to investigate allegations of
campaign finance wrongdoing. The resolution authorizing the
investigation contained a significant flaw, however--a deadline
set only nine months after the start of the investigation.
The imposition of the December 31, 1997 deadline virtually
invited witnesses to engage in obstructive tactics, perhaps
none more so than the DNC and the White House. This
obstruction, combined with the sheer complexity of the
investigation, made this deadline the single greatest obstacle
faced by the Committee's inquiry. Moreover, more than 45
witnesses either fled the country or refused to cooperate by
citing their Fifth Amendment privilege against self
incrimination. Despite the Committee's request for help,
President Clinton took no action whatsoever to persuade such
individuals to cooperate. Nevertheless, the Committee was able
to answer many important questions and to uncover evidence that
strongly suggests answers to others. The following pages
summarize the major findings of this inquiry.
the dnc raised millions of dollars in illegal foreign funds
Following the 1996 election, and in the wake of the growing
DNC fundraising controversy, the DNC was ultimately forced to
return $2,825,600 in illegal or improper donations.2
Of this total amount, almost 80 percent was either raised or
contributed by two men--John Huang and Charlie Trie.
Strikingly, both men were longtime friends of President
Clinton, and both were in positions to raise large campaign
contributions because of their personal relationships with the
President. Accordingly, the Committee began its hearings by
focusing significant attention on Huang and Trie, hoping to
answer two interrelated questions: what did President Clinton
and his top aides know about their illegal fundraising
activities, and why was nothing done to curb those activities.
This particular inquiry faced significant obstacles because
Trie fled to China soon after the controversy
arose,3 Huang invoked the Fifth Amendment and
refused to cooperate with the Committee, and the President
declined the Committee's invitation to testify. Despite these
obstacles, the evidence strongly suggests that, at a minimum,
the White House and the DNC received clear signs of danger
concerning both men and simply chose to ignore these warnings.
---------------------------------------------------------------------------
\2\ This figure is according to a June 27, 1997, DNC press release.
The DNC has failed to return additional contributions of questionable
legality.
\3\ Trie voluntarily surrendered to U.S. authorities in February
1998, following his indictment on 15 counts including defrauding the
FEC and obstructing the Committee's investigation.
---------------------------------------------------------------------------
John Huang
Huang first met President Clinton in the early 1980's
through their mutual friend, James Riady, the head of the Lippo
Group, an Indonesian industrial conglomerate. By at least 1992,
while employed by Lippo Bank in California, Huang began to
raise illegal foreign money for the DNC through Lippo owned
shell companies; these contributions were reimbursed with funds
from Lippo's headquarters in Jakarta, Indonesia. His
achievements as a fundraiser, coupled with his and Riady's
close friendship with President Clinton, ultimately propelled
Huang to the Commerce Department as a Deputy Assistant
Secretary in 1993. Despite its accompanying security clearances
and intelligence briefings, however, this job in the government
apparently suited neither Huang nor his patron, Riady, as Huang
was left with less real influence than he had enjoyed as a DNC
fundraiser. By the summer of 1995, therefore, Huang sought to
move to the DNC.
Two things are clear about Huang's obtaining a job as a DNC
fundraiser. First, it would not have occurred but for the
President's personal interest and recommendation. Second, it
took place even though Huang had already engaged in illegal
fundraising from foreign sources while at the Commerce
Department, and despite the DNC's awareness of clear
indications that Huang would continue to raise funds illegally
as the DNC's Vice Chairman for Finance.
The story of Huang's move to the DNC, and the fundraising
abuses that followed, began in the summer of 1995, when Lippo
lobbyist C. Joseph Giroir began trying to persuade the DNC to
hire Huang as a fundraiser specializing in the Asian-American
community. On September 13, 1995, Giroir arranged a meeting
between Huang, Riady, Fowler, and DNC Finance Director Richard
Sullivan, at which they discussed the potential for DNC
fundraising among the Asian-American community. Riady--a
foreign national then living in Indonesia and therefore in a
curious position to be consulted by senior DNC officials about
how the Democratic Party could raise money for President
Clinton's re-election--joined Giroir in telling Fowler that
Huang would be the ideal person to organize an Asian-American
fundraising effort for the DNC.
That same afternoon, Giroir, Riady, and Huang met President
Clinton and Presidential aide Bruce Lindsey in the Oval Office.
Giroir and Lindsey claimed to remember little about this
encounter, but Lindsey admitted that they had discussed Huang's
desire to move to the DNC. After this Oval Office meeting,
Lindsey told Ickes about Huang's interest in becoming a DNC
fundraiser. The President himself asked Ickes to interview
Huang regarding the move to the DNC. After meeting with Huang
to discuss the move, Ickes asked DNC Finance Chairman Marvin
Rosen to interview him for the job.
While Fowler's ambivalence may have caused the DNC to not
pursue Huang's services for most of that fall, Fowler's
position changed very quickly after the President intervened to
indicate his personal interest in Huang acquiring a DNC
position. At a fundraiser on November 8, the President asked
Rosen how Huang's move was progressing, and told Rosen that
Huang had been ``highly recommended.'' The DNC interviewed
Huang five days later, and Fowler hired him that same day.
From the beginning, however, some DNC officials were
privately concerned that Huang might illegally raise foreign
money for the party. Sullivan, for example, worried that Huang
might be another Johnny Chung--an Asian-American donor and
friend of Huang's who had offered in March 1995 to pay the DNC
$50,000 if Sullivan would arrange for five of his Chinese
business clients to attend a radio address with the President.
Because of his misgivings about Huang, Sullivan insisted that
Huang be given an extensive special training session on U.S.
election law by the DNC's general counsel, Joe Sandler. As
Sullivan told Huang, this training session was designed to
ensure that Huang knew laws restricting contributions from
foreign nationals. Sandler, however, denied that he was ever
asked to provide such training.
However, the DNC never undertook the special ``training''
sessions for Huang that Sullivan had recommended. Making
matters worse, despite its grave concerns about Huang, the DNC
agreed to compensate him with an ``unprecedented'' incentive
bonus plan clearly designed to encourage even more aggressive
fundraising. The results were all too predictable: Huang
immediately began illegally raising foreign money for the
Democrats.
Near the end of his tenure at the Commerce Department,
Huang developed a relationship with Arief Wiriadinata--a
landscape architect in Virginia who knew the Riadys because his
father had worked for Lippo in Indonesia, and who, with his
wife Soraya, ultimately contributed$450,000 to the DNC. On
December 15, 1995, shortly after Huang arrived at the DNC, the
President hosted a White House coffee to which Wiriadinata had been
invited by Huang. As captured on one of the videotapes the White House
belatedly released to the Committee in October 1997, Wiriadinata shook
hands with the President and confided to him that ``James Riady sent
me.''
Huang's first fundraising event, for Asian-Americans at the
Hay-Adams Hotel in Washington on February 19, 1996, also raised
early warning signs that the DNC's initial concerns about Huang
were well placed. By March 1996, the DNC discovered that two
donations Huang had raised at this event were illegal
contributions from foreign nationals. These checks, both for
$12,500, were attributable to two individuals who live in China
and run an international trading group based there. Although
these donations were returned, DNC officials continued to rely
on Huang. As the Committee subsequently discovered, the Hay-
Adams event raised at least another $25,000 in unlawful
donations laundered through third-party ``straw donors'' from
the Hsi Lai Temple outside Los Angeles.
Among the prominent Asian businessmen who attended the Hay-
Adams event was Ted Sioeng, a foreign businessman who owns a
pro-Beijing Chinese language newspaper in California and has
close ties to the Chinese government. Though he sat next to the
President at the head table at the Hay-Adams, Sioeng was not
then a resident of the United States, could not speak English,
and was ineligible to make political donations. Sioeng's
presence at the fundraiser--as well as at the head table at the
Hsi Lai Temple fundraiser Huang and Maria Hsia organized for
Vice President Gore two months later, and at another Huang
event with the President only two weeks after that--was
apparently arranged through Huang.
Throughout the remainder of 1996, Huang orchestrated
numerous events from which illegal foreign money flowed to the
DNC. On April 8, 1996, for example, Huang collected $250,000
from John K. H. Lee, a South Korean businessman who had flown
from Seoul to have dinner with the President--in return for a
$250,000 donation in the name of a U.S. subsidiary of his South
Korean business, formed shortly before the check had been
written. Huang arranged this contribution after being told that
Lee was merely ``thinking'' about opening a U.S. subsidiary in
California, and knowing that Lee was a foreign national
ineligible to contribute in his own name. This $250,000
contribution was funded by a wire transfer from Lee's South
Korean company. The DNC, however, found the donation
unobjectionable--at least until the 1996 fundraising scandals
first became public, at which point Lee's was the first
contribution returned.
Shortly thereafter, on May 13, 1996, Huang organized
another major DNC event in Washington, D.C. Like his others,
this affair was heavily attended by foreign nationals; Riady
and Sioeng, in fact, each sat beside the President at the head
table. During the course of the night, Huang arranged for
Yogesh K. Gandhi to meet the President and present him with a
bust of Mahatma Gandhi. Gandhi wanted a business associate to
be photographed presenting the award to Clinton, but the White
House had rebuffed his earlier attempts to arrange the meeting.
In exchange for the May 13 photograph with the President,
Gandhi donated $325,000 to the DNC. This money had, in fact,
been wired from one of Gandhi's business associates in Japan.
DNC officials admitted concerns during the 1996 campaign
about the number of foreign nationals who attended Huang's
fundraisers. It was not until July 1996, however, after an
event attended principally by Asian businessmen and their
families, that Rosen finally directed that Huang not manage any
further presidential events. Despite this concern, however, the
DNC was unwilling to forego Huang's fundraising: the party
deprived Huang of his ability to sell access to President
Clinton, but did nothing to check the money he generated.
The Hsi Lai Temple Fundraiser
At a fundraising lunch held on April 29, 1996 at the Hsi
Lai Temple in Hacienda Heights, California, and attended by
Vice President Gore, Buddhist monastics illegally funneled
$65,000 to the DNC through ``straw donors'' at the instigation
of Hsia, a longtime fundraiser for the Vice President. When
press accounts of this donation-laundering appeared, Temple
officials altered and destroyed evidence to protect the Temple,
Hsia, and the Vice President from embarrassment.
Despite his repeated, albeit inconsistent, denials, it is
reasonable to conclude that the Vice President was well aware
that the Temple event was for the purpose of raising money. The
event was organized by Huang and Hsia, who had longstanding
relationships with Vice President Gore that revolved almost
entirely around campaign fundraising. More specifically, in the
weeks prior to his Temple visit, Vice President Gore was
repeatedly reminded that the April 29 luncheon was a fundraiser
and was even meticulously informed by Ickes of the DNC's
``projected revenue'' for the event. The Vice President
received the last of these notifications of the April 29
lunch's ``projected revenue'' only 24 hours before he received
his briefing notes for the Temple lunch.
The Vice President's staff also knew that the Temple event
was a fundraiser. In March 1996, Deputy Chief of Staff David
Strauss had helped arrange a meeting in the White House with
the head of the Temple, Master Hsing Yun--a meeting which
Strauss believed would ``lead to a lot of $.'' The White House
staff repeatedly referred to the event as a ``fundraiser'' in
internal correspondence, and assigned to it a ``ticket price''
of ``1000-5000 [dollars per] head.''
The Temple fundraiser was merely the most egregious episode
in a longstanding pattern of illegal donation-laundering by
Hsia and the Hsi Lai Temple that stretched back at least to
1993. In that year, Hsia and Huang apparently collaborated in
laundering $50,000 to the DNC from the Hsi Lai Temple and from
Lippo Group sources overseas in connection with a meeting
between Vice President Gore's chief of staff and the chairman
of China Resources, a company linked in press reports to
Chinese intelligence. From 1993 until the general elections of
1996, over $140,000 in Temple money was illegally funneled to
Democratic candidates at Hsia's direction.
This pattern of donation-laundering in 1993-96 derived from
a broader relationship between Hsia, Huang, and Vice President
Gore that began in 1988 when Hsia, Huang, and Riady organized a
trip to Taiwan for then-Senator Gore. Hsia thereafter became a
significant fundraiser for the Senator. As early as 1989, her
fundraising efforts for him involved both monastics from the
Hsi Lai Temple and the illegal ``tallying'' of contributions
through the Democratic Senatorial Campaign Committee
(``DSCC'').
Charlie Trie
Trie first met the President in the late 1970's when he
owned and operated a Chinese restaurant in Little Rock. After
Clinton's election in 1992, Trie sold his restaurant and
openedDaihatsu International Trading Company in Washington, D.C. Soon
thereafter, Trie and his wife contributed large sums to the DNC, and by
1994 he had become a DNC ``Managing Trustee''--a title reserved for the
highest level of party contributor. From 1994 to 1996, Trie contributed
or raised approximately $645,000 for the DNC. In 1994, he contributed
$100,000 to the DNC while earning only approximately $30,000 as
president of Daihatsu. Nor could his firm Daihatsu have made up the
difference: throughout this period, it never made any profit.
In reality, most of Trie's money came from his Asian
business partner, Ng Lap Seng, a hotel tycoon in Macao with
reputed links to organized crime who advises the Chinese
government.4 Ng transferred approximately $1.4
million to Trie from 1994 to 1996, with many of these transfers
arriving through the Bank of China. Sometimes Trie contributed
Ng's money directly to the DNC in his own name. In other
instances, he laundered donations through other Asian-
Americans. Two of these ``straw donors'' made donations to the
DNC so that Ng could attend a White House function.
Accordingly, they donated a total of $25,000 to the DNC and
were reimbursed with money from Ng's account.
---------------------------------------------------------------------------
\4\ Ng refused to speak with Committee investigators who traveled
to Macao.
---------------------------------------------------------------------------
In addition to being a major fundraiser and close friend of
the President, Trie visited the White House 31 times in 1994
and 1995 alone. Intriguingly, Ng, who had no ties to the
President except through Trie, also visited the White House 10
times between June 1994 and October 1996. In one of the more
egregious examples of its dilatory document production,
however, the White House did not reveal Ng's still-unexplained
visits until just hours after the conclusion of the Committee's
public hearing on the activities of Trie and Ng.5
---------------------------------------------------------------------------
\5\ Only after end of the Trie/Ng hearing did the White House
release the ``WAVES'' records documenting Ng's frequent but unexplained
visits to the White House. These records had been requested from the
White House three months earlier.
---------------------------------------------------------------------------
Trie's fundraising efforts won him numerous White House
favors, including a Presidential appointment to the Commission
on U.S. Pacific Trade and Investment Policy--an act requiring a
new Executive Order to expand the size of the Commission. In
February 1996, assisted by a $50,000 donation from his business
partner Ernest G. Green, Trie arranged admission to a White
House coffee for Wang Jun, a Chinese arms dealer and advisor to
the Chinese government. Despite his connections to a major
Chinese armaments firm whose plans to smuggle automatic weapons
into the U.S. the Customs Service even then was investigating,
Wang was not vetted by the National Security Council (``NSC'')
and was admitted to the White House only on the strength of his
relationship with Trie and Green.
In March 1996, Trie wrote to the President on how to handle
U.S.-China relations, which were then tense. This letter was
faxed to the White House on the same day that Trie delivered
almost $500,000 to the Presidential Legal Expense Trust
(``PLET''). The Committee has been unable to determine whether
Trie wrote this letter on his own or on behalf of foreign
interests. Trie received a reply from the President prepared by
NSC staff and personally reviewed by National Security Advisor
Tony Lake.
Trie also set about to help the President and First Lady
defray the considerable personal legal expenses they had
accrued in fending off previous scandals. To this end, Trie
raised in excess of $700,000 from a controversial Buddhist sect
devoted to a woman named Ching Hai, and conveyed this money to
the PLET.
The PLET, however, became suspicious about the source of
Trie's funds. With White House approval, the PLET's executive
director, Michael Cardozo, hired an investigative firm that
determined that the money had been coerced from or laundered
through members of the Ching Hai sect. Nevertheless, soon
after, Trie sat next to the President at the head table of a
$5,000 per person fundraising dinner.
By June 1996, the PLET decided to return Trie's donations.
Rather than publicly reporting his contributions under its
regular practice, the PLET hid the fact that Trie had ever
given money to it. Moreover, the White House knew and approved
of this decision. Despite Ickes' and Lindsey's knowledge of
Trie's suspicious fundraising, neither warned the DNC. As a
result, while the PLET returned his donations, Trie's illegal
contributions to the DNC continued; Trie delivered $110,000 to
the DNC in August 1996 in honor of the President's 50th
birthday.
Both the DNC and the White House claimed complete surprise
that Huang and Trie raised substantial amounts of foreign
money. It strains credulity, however, to suggest that these men
could surreptitiously raise over $2.2 million for the DNC--much
of it from foreign donors at major DNC events the President
attended--without anyone suspecting the truth.
The White House and the Presidency Itself Became Fundraising Tools
The White-House inspired DNC drive for new sources of
campaign cash caused more than just an unprecedented influx of
foreign money into the 1996 campaign. More broadly, it debased
the White House and the Presidency itself by employing both in
constant efforts to raise money. Extensive DNC fundraising
occurred because the President and his advisors, including Dick
Morris, decided that the party's massive advertising campaign
would cost more than could possibly be provided by the ``hard''
money in the President's ``official'' campaign treasury. To
fill the gap, they turned to unregulated ``soft'' money even
though such monies could not by law be used to help a
candidate's campaign for office. Unlike official ``campaign''
contributions, however, DNC ``soft'' money could be raised from
wealthy donors in unlimited quantities. By diverting DNC funds
to campaign advertising controlled by the White House, the
Democrats had the best of all possible worlds: de facto
``hard'' money from key donors in unlimited quantities.
Senior White House and DNC staff developed new ways to use
the Presidency to raise campaign money. Among the favors
merchandised were access to senior decision makers, perks such
as ``overnights'' at the White House, Presidential coffees at
the White House (even in the Oval Office), flights on Air Force
One, seats in the President's box at Kennedy Center, and use of
the White House pool and tennis courts.
In this stampede to use the White House for every
conceivable variety of fundraiser, a number of alarmingly
unsavory characters gained access to the President in return
for campaign contributions. One was Chinese arms dealer Wang
Jun. Roger Tamraz, a major DNC donor, was allowed to meet with
the President on several occasions despite the NSC's opposition
and clear warnings that Tamraz might damage U.S. foreign policy
interests in Central Asia. As noted, Ted Sioeng, a foreign
national with suspiciously close ties to the Chinese
government, sat at the head table with the President or Vice
President at several fundraisers and lunched with Vice
President Gore at the Hsi Lai Temple.
White House Coffees
Perhaps nothing illustrates this merchandising of the
Presidency better than the DNC's White House ``coffees''--
fundraising events at which major donors were provided access
to the President in exchange for their campaign contributions.
Between January 11, 1995 and August 23, 1996, the White
House hosted 103 coffees. Most lasted at least an hour, and the
President attended the vast majority of them. Approximately 60
of these were DNC-sponsored coffees, 92 percent of the guests
at which were major Democratic Party contributors. These guests
made contributions during the 1996 election cycle of $26.4
million, an average contribution of over $54,000 per person,
with one-third of their total donations, some $7.7 million,
given within a month of the donor's attendance at a White House
coffee. For example, the five persons attending a coffee on May
1, 1996, in the Oval Office itself each contributed $100,000 to
the DNC one week later.
White House and DNC officials have strenuously denied that
the coffees were ``fundraisers.'' Numerous DNC documents,
however, including detailed memoranda Ickes prepared for the
President and Vice President, tell a different story, referring
to these White House events as ``political/fundraising
coffees.'' These documents carefully track the ``projected
revenue'' that would be raised by each event--to the point of
specifying amounts ``in hand'' (i.e., collected to date) and
the proportion of each coffee's projected revenue that would be
placed in the party's ``hard money'' and ``soft money'' bank
accounts. While not every White House coffee was a fundraising
event, most clearly were.
The coffees also demonstrate the extensive amount of time
the President was willing to spend with small groups of major
donors, and the extraordinary influence such donors had over
the White House and the President's schedule. The June 18, 1996
coffee organized by John Huang is a case in point. The only
guests who were originally to attend this coffee were three
foreign nationals from the CP Group, a Thai conglomerate. They
were clients of Pauline Kanchanalak, a DNC fundraiser and
lobbyist from Thailand. When DNC officials raised concerns
about the propriety of such a coffee, ``some people that might
be potential [legal] donors, [i.e.,] American citizens,'' were
invited at the last moment. It is clear that the coffee's
essential purpose was to sell the President's time to
Kanchanalak--who, with her mother-in-law, donated $235,000 in
to the DNC the next day--to make her look good in front of her
clients.\6\ Even worse, the only guests professing to have any
memory of the event recall Huang openly soliciting DNC
contributions, in the presence of the President. This was
clearly illegal.
---------------------------------------------------------------------------
\6\ Kanchanalak has since fled to Thailand, has refused to
cooperate with the Committee, and is under investigation by the
Department of Justice for possible obstruction of justice in connection
with evidence subpoenaed by the Committee.
---------------------------------------------------------------------------
Telephone solicitations
In addition to attending many major fundraisers and
innumerable smaller events such as coffees, the President--and,
particularly, the Vice President--were willing to use the power
of their offices to make direct telephone solicitations for
money. Vice President Gore made approximately 45 phone
solicitations from his White House office. These calls may have
raised as much as $800,000 for the DNC.
Based upon the premise that these telephone calls raised
only ``soft'' money, the Attorney General has rejected
suggestions that she recommend the appointment of an
independent counsel to investigate whether these calls violated
a federal criminal law prohibiting the solicitation of campaign
contributions on federal property. The Committee disagrees with
her view that raising ``soft money'' on federal property is
permitted, but significantly, even under the Attorney General's
view, the solicitation of ``hard'' money on federal property is
a crime. As DNC general counsel Joe Sandler revealed to the
Committee, of the money raised by Vice President Gore's
telephone solicitations from the White House, more than
$100,000 was deposited into the DNC's ``hard money'' accounts.
Indeed, the Vice President continued to make telephone
solicitations even after being advised by a DNC memorandum in
February 1996 that it was DNC policy to place a certain
proportion of the money thus raised into ``hard money''
accounts.7
---------------------------------------------------------------------------
\7\ Indeed, the DNC improperly allocated money between ``soft'' and
``hard'' accounts without seeking the express permission of donors, as
is required by federal law.
---------------------------------------------------------------------------
The all-consuming fundraising effort
In some ways, the most troubling result of the White
House's and DNC's ceaseless quest for campaign funding is the
great amount of time the President and the Vice President
themselves actually spent raising money. As Vice President Gore
himself noted, ``we can raise the [necessary] money . . . ONLY
IF--the President and I actually do the events, the calls, the
coffees, etc. . . . And we will have to lose considerable time
to the campaign trail to do all of this fundraising.''
Simply put, 25 years after Congress passed election reform
laws intended to insulate the President from an unseemly and
potentially corrupting involvement with campaign money,
President Clinton spent enormous amounts of time during the
1996 election cycle raising money. In the ten months prior to
the 1996 election, President Clinton attended more than 230
fundraising events, which raised $119,000,000. The President
maintained such a pace for over a year before the election,
often attending fundraisers five and six days each week.
According to Presidential campaign advisor Dick Morris,
President Clinton ``would say `I haven't slept in three days;
every time I turn around they want me to be at a fundraiser . .
. I cannot think, I cannot do anything. Every minute of my time
is spent at these fundraisers.' '' This frenzied pursuit of
campaign contributions raises obvious and disturbing questions.
Can any President who spends this much time raising money focus
adequately upon affairs of state? Is it even possible for such
a President to distinguish between fundraising and
policymaking?
Other Improper or Illegal Fundraising Activities
The unfortunate results of the DNC's chase for money were
not limited to its receipt of illegal foreign money and the
merchandising of the White House itself. DNC pressures to
change government policy developed in response to the wishes of
major party donors.
The Roger Tamraz affair
Lebanese-American businessman Roger Tamraz tenaciously
pursued his agenda with the U.S. Government. ``If they kicked
me from the door,'' Tamraz told the Committee, ``I will come
through the window.'' Unfortunately, his eagerness to promote
his business schemes and enlist the government's support
against the vehement protests of U.S. national security experts
found itself an ally in the cash-hungry DNC. The story of
Tamraz demonstrates, perhaps better than any other episode of
the Democratic fundraising scandals, that nothing was sacred in
the President's desperate search for campaign funds: no corner
of the U.S. Government--not even the Central Intelligence
Agency (``CIA'') or the NSC--was off limits.
An international businessman with significant involvement
in the oil business, Tamraz was wanted by French police and
faces an Interpol arrest warrant for embezzlement in Lebanon.
Tamraz was willing to invest great energy, and significant sums
of money, to secure U.S. backing for his oil pipeline project
in the Caucasus. Rebuffed by officials at the NSC who regarded
his schemes as untenable and harmful to U.S. foreign policy
interests, he began making huge contributions to the DNC. As
Tamraz had intended--and as he admitted to the Committee in his
remarkably candid testimony--these contributions enabled him to
enlist senior party officials like Fowler in helping Tamraz
gain the access to senior U.S. officials that a high-level
inter-agency working group had determined to deny him. His
contributions--both directly to the DNC and to various state
Democratic campaigns at Fowler's personal direction--also won
Tamraz the DNC chairman's intercession in a series of highly
inappropriate contacts with CIA officials. In at least two
conversations with a CIA clandestine operative named ``Bob,''
\8\ to whom he had been referred by Tamraz and who had already
been ``lobbying'' the NSC on Tamraz's behalf, Fowler asked the
CIA officer to help him ``clear Tamraz's name.'' Fowler even
telephoned NSC staffer Sheila Heslin to inform her that ``Bob''
would soon be sending her information about Tamraz. (Despite
taking notes of his discussions with Tamraz about Bob, despite
talking with ``Bob'' on at least two occasions, and discussing
the CIA officer with NSC staffers Nancy Soderberg and Heslin,
Fowler continued to deny any memory of his CIA contacts). After
Tamraz was ``disinvited'' from an October 1995 event with Vice
President Gore by the NSC, his DNC allies arranged for him to
attend a dinner with the Vice President at the home of Senator
Edward Kennedy. Despite the NSC's determined efforts to deny
him access to President Clinton, Tamraz's DNC contributions
bought him no fewer than six private meetings with the
President.
---------------------------------------------------------------------------
\8\ At the request of the CIA, the full name of this clandestine
officer (which is classified) had been withheld. In this report, he
will be described simply by his first name, ``Bob.''
---------------------------------------------------------------------------
Tamraz took the opportunity to discuss his pipeline with
President Clinton at a White House dinner on March 27, 1996.
The President assured Tamraz that someone would ``follow-up''
with him, and detailed Presidential advisor Thomas F. ``Mack''
McLarty to look into the matter the next day. Tamraz next met
the President at a White House coffee on April 1, 1996, at
which, Tamraz discussed his pipeline ideas with McLarty.
McLarty asked Energy Department employee Kyle Simpson whether
some reason could be found to support Tamraz's pipeline. When
Simpson conveyed McLarty's instructions to his colleague John
Carter, he told Carter that Tamraz had donated $200,000 to the
DNC and was considering giving an additional $400,000.
The nadir of the Tamraz episode occurred with Carter's
subsequent call to NSC staff member Heslin, who chaired the
inter-agency working group that had sought to deny Tamraz
access to senior government officials and who had determined
that the U.S. should not support his pipeline. Carter told
Heslin that if she reconsidered her opposition to Tamraz, it
``would mean a lot of money for the DNC'' because ``he's
already given $200,000, and if he got [what he wanted] he would
give the DNC another $400,000.'' Heslin refused, despite
Carter's claim that ``the President really wanted'' this and
threats that McLarty might exact reprisals against her.
The Indian Casino decision
The DNC also targeted the Interior Department's Bureau of
Indian Affairs (``BIA'') to influence a decision whether three
bands of Wisconsin Indian tribes would be allowed to open a
casino in Hudson, Wisconsin. A wealthy group of neighboring
tribes in Minnesota, who operated a nearby casino that would
face competition if the Hudson application were approved,
opposed the proposal. Significantly, the opposing tribes had
given large sums of money to the DNC, while the applicants had
not.
After the BIA's Minneapolis office approved the applicant
tribes' plan in late 1994, the opposing tribes hired Patrick
O'Connor, a prominent lobbyist and former DNC treasurer, who
spoke personally with President Clinton about this matter. Four
days later, O'Connor, accompanied by other lobbyists and
opposition tribal leaders, met with Fowler. As one participant
recalled it, Fowler ``got the message: it's politics and the
Democrats are against [the new casino] and the people for it
are Republicans.'' Fowler promised that he would contact Ickes
and have him talk with Secretary of Interior Bruce Babbitt,
which he did a few days later.
After making several calls herself to the Interior
Department, Ickes' assistant Jennifer O'Connor, in June 1995
asked a White House intern to get an update on the Hudson
casino. Heather Sibbison, special assistant to Secretary
Babbitt, told the intern ``it was 95% certain that the
application would be turned down.'' Just two days later,
however, a career BIA employee, wrote a 17-page analysis
recommending approval of the Hudson application. Nevertheless,
theassurances that Secretary Babbitt's staff conveyed to Ickes'
office were correct: despite the BIA's recommendation that it be
approved, a draft letter rejecting the application was prepared on June
29, 1995, and the Interior Department formally denied the application
on July 14.
The opposing tribes apparently had little doubt as to how
to show their gratitude for the Interior Department's decision
to protect them from gaming competition. According to FEC
records, in the four months following the Department's denial
of the Hudson application, the opposition tribes contributed
$53,000 to the DNC and the DSCC; they donated an additional
$230,000 to the DNC and the DSCC during 1996, and gave more
than $50,000 in additional money to the Minnesota Democratic
Party.
Another suspicious aspect of the Hudson episode involves
the inconsistent positions taken by Secretary Babbitt when
asked about the matter. According to Paul Eckstein, a longtime
friend of Secretary Babbitt who had been retained by the
applicant tribes, when Eckstein tried to persuade Secretary
Babbitt to delay making a decision on the Hudson matter,
Secretary Babbitt replied that Ickes had directed him to issue
a decision that very day. Later in their conversation, Eckstein
told the Committee, Secretary Babbitt turned the subject to
political contributions, declaring to Eckstein: ``Do you have
any idea how much these Indians, Indians with gaming contracts
. . . have given to Democrats? . . . [H]alf a million
dollars.''
When asked about these comments by Senator John McCain, who
then chaired the Senate Committee on Indian Affairs, Secretary
Babbitt denied that he had ever told Eckstein anything about
Ickes seeking a prompt decision on the Hudson matter.
Nevertheless, several months later, in response to this
Committee's inquiry, Secretary Babbitt changed his story,
admitting that he probably did make such a remark to Eckstein
about Ickes' request. Secretary Babbitt still claims to have
``no recollection'' of making the comment Eckstein recalls
about the opposing tribes' political contributions.\9\
---------------------------------------------------------------------------
\9\ The Attorney General has requested the appointment of an
independent counsel to investigate Secretary Babbitt's contradictory
statements.
---------------------------------------------------------------------------
The Hudson casino matter is, if anything, more sordid than
the Tamraz story, as political donations to the DNC apparently
succeeded in purchasing government policy concessions. In light
of the opposing tribes' DNC contributions, the DNC's lobbying
effort against the casino, the involvement of Ickes' staff in
drawing Secretary Babbitt's attention to this issue, and
Secretary Babbitt's remarkable comments to Eckstein, the Hudson
casino matter raises serious questions about the propriety--and
the legality--of the Interior Department's decision. And the
DNC also took advantage of two Oklahoma tribes that sought the
return of their former lands, and made contributions in the
belief that their prospects for favorable action would be
enhanced.
Foreign Efforts to Influence the U.S. Elections
The DNC's eagerness to raise unprecedented sums for
President Clinton's re-election, its recklessness in ceasing to
check the origin of such funds, and its entrusting its
fundraising efforts among Asian-Americans to lawbreakers such
as Huang, Trie, and Hsia led to numerous abuses. Among them,
the DNC's heedless pursuit of contributions allowed wealthy and
well-connected foreign nationals to arrange almost unlimited
access to the President and other top U.S. policymakers. Time
after time, figures such as Johnny Chung, who used access to
the President to advance his private business interests, Ted
Sioeng, Ng Lap Seng, Wang Jun, and Eric Hotung met privately or
in small groups with the President, Vice President, or other
senior Administration officials. Since this controversy began,
concerns have been expressed that the flood of foreign money to
the DNC during the 1995-96 election cycle and the access it
purchased might have permitted interested foreign parties to
influence the U.S. political process. Thus, the Committee made
it a priority of its investigation to determine whether this
had occurred.
PRC efforts
The Committee's attempt to examine this issue was
difficult. Many knowledgeable witnesses invoked the Fifth
Amendment and refused to cooperate with the inquiry. Others
fled the country, or were foreign nationals who remained abroad
and refused to cooperate. Finally, much of the information
relevant to this subject is classified and cannot be publicly
disclosed.
Despite these limitations, at the outset of the Committee's
hearings, based on information gathered from law enforcement
and intelligence agencies and open sources, Chairman Thompson
reported that the PRC government had undertaken efforts to
influence the U.S. electoral process during the 1995-96
election cycle. Owing to the sensitive nature of the subject,
it has not been possible until now to elaborate publicly upon
this matter in any detail. The full version of the Committee's
public findings are detailed elsewhere in this report.\10\ In
brief, while the Committee cannot determine conclusively
whether the PRC government funded, directed, or encouraged
certain illegal contributions made in connection with the 1996
election cycle, there is strong circumstantial evidence that
the PRC was involved. The basis for this conclusion is in
summary:
---------------------------------------------------------------------------
\10\ See the section of this report on ``The China Connection.'' In
addition, the Committee has prepared a separate, more detailed, and
classified version of that chapter that will be maintained in secure
environs.
---------------------------------------------------------------------------
Ties between the PRC and prominent figures in the
campaign finance investigation: The Committee has received
information that several individuals who provided donations
from foreign sources (principally in the greater China area) to
the DNC and other causes have ties to the PRC. The Committee
has learned that Maria Hsia has been an agent of the Chinese
government, that she has acted knowingly in support of it, and
that she has attempted to conceal her relationship with the
Chinese government. The Committee has also learned that Ted
Sioeng has worked, and perhaps still works, on behalf of the
Chinese government. The Committee has further learned from
recently-acquired information that James and Mochtar Riady have
had a long-term relationship with a Chinese intelligence
agency. Finally, an unverified single piece of information
shared with the Committee indicates that John Huang himself may
possibly have had a direct financial relationship with the PRC
government.
Evidence of a ``China Plan'' and Other, Possibly
Related Efforts: Against this backdrop, the Committee has
received other information that high-level PRC government
officials devised plans to increase China's influence over the
U.S. political process and to be implemented by diplomatic
posts in the U.S. Some of Beijing's efforts appear relatively
innocuous, involving learning more about Members of Congress,
redoubling PRC lobbying efforts in the U.S., establishing
closer contacts with the U.S. Congress, and funding from
Beijing. But the Committee has learned that Beijing expected
more than simply increased lobbying from its diplomatic posts
in the U.S. Indeed, as the Committee examined the issue in
greater detail, it found a broad array of Chinese efforts
designed to influence U.S. policies and elections through,
among other means, financing election campaigns.
Evidence of Implementation: The Committee has
identified specific steps taken in furtherance of the these
plans. Although some of the efforts were typical, appropriate
steps foreign governments take to communicate their views on
United States policy, others appear illegal under U.S. law.
Among these efforts were the devising of a seeding strategy of
developing viable candidates sympathetic to the PRC for future
federal elections; the creation of a ``Central Leading Group
for U.S. Congressional Affairs'' to coordinate China's lobbying
efforts in this country; and PRC officials discussing financing
American elections through covert means.
In addition, the Committee notes that this report is being
issued at a time in which there have been, and are likely to
continue to be, significant developments in the ongoing
investigation being conducted by the DOJ/FBI task force. If the
Committee receives significant new information that it can
disclose to the public, it may issue a supplemental report.
John Huang
Because of his central role in raising so much of the
foreign money returned to date by the DNC, and because of his
long relationship to the Lippo Group, the Committee examined in
detail John Huang's fund-raising activities and his service at
the Department of Commerce. Huang began involving himself in
U.S. politics in 1988 while an official at LippoBank, working
with James Riady, Hsia, and others to found the Pacific
Leadership Council (``PLC''), an Asian-American interest group
and political fund-raising organ, which organized a trip to
Taiwan (and the Fo Kuang Shan temple there) for then-Senator
Gore. Huang's colleagues at LippoBank--where he served as
President and Director--never understood his corporate duties
and described him as a ``mystery man.''
After the election of 1992, with Riady's encouragement, the
White House placed Huang on its list of ``high priority''
candidates for political appointment. In a letter to Deputy
Director of Presidential Personnel John Emerson, Democratic
activist Maeley Tom recommended Huang for a government
position, describing him as:
the political power that advises the Riady family on
issues and where to make contributions. [The Riadys]
invested heavily in the Clinton campaign. John is the
Riady family's top priority for placement because he is
like one of their own.
Huang was hired in 1993 as Deputy Assistant Secretary for
International Economic Policy at the Department of Commerce.
The work Huang actually performed in his new job, however,
was apparently as perplexing to his colleagues at the Commerce
Department as it had been to his associates at LippoBank.
During the 18 months that Huang worked at the Department, in
fact, he left virtually no mark; many of his colleagues found
themselves wholly at a loss to explain what he did.
Despite his superiors' attempt to ``wall off'' Huang from
matters relating to China, Huang received regular classified
briefings that included the greater China area. Without his
superiors' knowledge, Huang received 37 intelligence briefings,
viewing 10 to 15 intelligence reports at each session--a total
of 370 to 500 items of ``raw intelligence'' during his tenure.
Also unbeknownst to his superiors, Huang made multiple visits
and telephone calls to the Chinese Embassy while at Commerce.
And despite Huang's status as only a mid-level official at
Commerce, he made at least 67 visits to the White House, often
meeting with top officials and receiving briefings on trade
policy.
Equally mysterious were the over 400 contacts Huang had
with Lippo officials while he worked at Commerce: 237 phone
calls to LippoBank and affiliated entities in the United
States, 29 calls and fax transmissions to Lippo's Indonesian
headquarters, and an additional 107 calls to such countries as
China, Indonesia, Taiwan, and Hong Kong. Huang may have made
more such calls from the Washington office of Stephens, Inc.--
an investment banking firm based in Little Rock, partly owned
by the Riady family, which had extended loans to help finance
President Clinton's 1992 campaign--located across the street
from the Commerce Department. Huang secretly used this Stephens
office two or three times a week to make calls, pick up or
deliver faxes, and send packages. Jeffrey Garten, Huang's
superior at Commerce, and John Dickerson,the CIA liaison to
Commerce who provided Huang's numerous classified briefings, were
unaware of Huang's continuing contacts with Lippo.
The full scope and import of Huang's activities while at
Commerce may never be known: he has invoked the Fifth Amendment
and refused to cooperate with the Committee, Riady has left the
country, and many of his former LippoBank colleagues have
returned to Indonesia. The volume of Huang's contacts with
Lippo and the Chinese embassy, however, is cause for concern.
The Committee has found no direct evidence that Huang passed
classified information, but he had the opportunity to do so and
his activities have not otherwise been adequately explained.
the abuse of soft money
As part of its inquiry, the Committee had intended to
investigate the role of nonprofit groups in the 1995-96 federal
election cycle, particularly whether such nonprofit
organizations were genuinely nonpartisan and acted
independently of political parties or candidates, as required
by federal law. In addition, the Committee planned to
investigate whether political action committees evaded
statutory limits on political contributions, and whether
nonprofit organizations coordinated so-called ``issue
advocacy'' advertising with political candidates to be
considered in-kind campaign contributions limited and regulated
under federal election law.
To this end, the Committee subpoenaed 32 nonprofit
organizations, not including the principal party committees and
presidential campaigns. Although a number of these
organizations did begin prompt compliance with the Committee's
subpoenas, most of them, led by the AFL-CIO, refused to produce
any documents or witnesses. Indeed, some groups simply cited
the AFL-CIO's non-compliance as justification for their own
non-compliance. Though the AFL-CIO ostensibly based its refusal
upon various legal and ``constitutional'' grounds, its clear
purpose was to obstruct and impede the Committee's
investigation--as indeed the imposition of the December 31,
1997 deadline virtually invited it to do by preventing the
Committee from relying upon judicial contempt procedures, the
usual means to assure compliance with subpoenas.
In light of the poor cooperation received from most of
these organizations, the Committee believes that it is
generally inappropriate to draw conclusions about the role of
non-profit groups in the 1995-96 election cycle. For the most
part, the information available was insufficient to permit
meaningful analysis: few documents were produced, witnesses
were unavailable to explain the meaning and context of what
documents did arrive, and key individuals with knowledge of the
matters in question refused to testify before the Committee.
Despite these obstacles, however, the Committee received
information that the AFL-CIO coordinated its political
activities with both the DNC and the Clinton/Gore campaign.
Testimony from White House and DNC officials made clear that
White House aides and the AFL-CIO carefully reviewed each
other's advertisements and coordinated their timing and
placement.
With regard to conservative organizations, the Committee's
investigation uncovered no evidence that Triad Management
Services engaged in such coordination with the Republican
Party, although Triad may have coordinated with individual
candidates. The Committee also determined that while the
Republican National Committee (``RNC'') donated funds to
certain non- profit groups, this was in no way illegal or
improper: no evidence existed that the recipients spent this
money to influence federal elections at the RNC's request or
direction.
Finally, the Committee held extensive hearings on the
National Policy Forum (``NPF''), a think-tank established by
the RNC. The Committee was particularly concerned by
allegations that the RNC knew that a loan it made to the NPF--
and upon which the NPF later defaulted amid much acrimony--had
been guaranteed by foreign money through Hong Kong businessman
Ambrose Young. Additionally, the Committee attempted to
determine whether the loan guarantee proceeds were improperly
funneled into federal election campaigns in 1994. Ultimately,
however, the Committee determined that it is neither illegal
nor improper for nonprofit organizations to receive money from
foreign sources, provided that no such funds enter federal
campaigns. No foreign money involved in NPF's loan guarantee
was so used: none of these funds were diverted to Republican
``hard money'' accounts, and their expenditure was not
coordinated with political candidates; rather, the NPF used the
money to repay a valid, pre-existing debt.11
---------------------------------------------------------------------------
\11\ Nor, it should be added, did the Committee find any reason to
conclude that testimony on this matter by RNC Chairman Haley Barbour
was anything less than truthful. Witnesses who testified to the
contrary all made inconsistent statements themselves, and Barbour's
version of events is corroborated by contemporary documents.
The Thirst for Money
The 1994 election results were a major setback for
Democrats. For the first time in 40 years, Republicans
controlled both houses of Congress. The Democrats' loss of
Congress, along with the President's concern that he might face
a primary challenge, fueled an urgent need for political money.
The President and his top advisors decided to raise money early
for his re-election campaign. To accomplish their goal, the
President and his top advisors took control of the DNC and
designed a plan to engage in a historically aggressive fund-
raising effort, utilizing the DNC as a vehicle for getting
around federal election laws. The DNC ran television
advertisements, created under the direct supervision of the
President, which were specifically designed to promote the
President's re-election. To fund this early advertising for the
President's benefit, the DNC had to raise more than three times
what it raised during the 1991-92 election cycle--and nearly
three times what was raised during the 1993-94 cycle.
The panoply of DNC fund-raising irregularities in the 1996
election derived, directly or indirectly, from the
unprecedented need for money to finance this ambitious
advertising strategy.
The President's Precarious Political Position in Late 1994
In the wake of the 1994 congressional elections, the
President was politically vulnerable. The President himself
recognized as much when he was reduced to defending his
``relevance'' in the political process during an extraordinary
prime-time news conference, which was covered by only one
network.1 The President's close political
confidantes were also keenly aware of his weakened political
state.
---------------------------------------------------------------------------
\1\ See Todd S. Purdum, ``Undertones of Relevance,'' The New York
Times, April 20, 1995, p. A18.
---------------------------------------------------------------------------
Terence R. McAuliffe, the DNC's National Finance Chairman
from March 1994 to January 31, 1995, and later National Finance
Chairman for Clinton-Gore '96, testified that ``for the
Democrats, it was not a very optimistic time.'' 2
McAuliffe was in a unique position to assess the mood of both
the Democratic Party and its incumbent President. As DNC
Finance Chairman, McAuliffe testified that he ``had a better
feeling for the mood of the donors . . . than anybody else in
the country.'' 3
---------------------------------------------------------------------------
\2\ Deposition of Terence R. McAuliffe, June 6, 1997, p. 13.
\3\ Id. at pp. 13-14.
---------------------------------------------------------------------------
During his deposition, McAuliffe offered a candid
assessment of the President's political position in December
1994:
I had just finished up as Finance Chairman of--told
the President I was leaving the party, and we had just
lost the House and the Senate for the first time in a
long time. So there was a general mood out there that
the President was in serious trouble. A lot of people
wondered if the President was even going to run again.
I can tell you the political mood at the time clearly
was that he had no chance of winning again, clearly
would not win re-election and would have a very tough
time with a primary. And there was a lot of talk that
people would run against him in a primary. It was a
very tough political time.4
---------------------------------------------------------------------------
\4\ Id. at pp. 11-12.
McAuliffe's concern was shared by Harold Ickes, the Deputy
Chief of Staff to the President from January 1994 until after
---------------------------------------------------------------------------
the 1996 election:
Q: Now, as we move forward--as you move forward from,
say, November [1994] through early 1995, did you have a
major concern about the ability of the President to be
re-elected for a second term because of what happened
in the November elections?
A: If you're a Democrat, you're always concerned
about primaries, and having played a fairly significant
role in the Kennedy-Carter primary of 1980, I
appreciated what a divisive primary in connection with
a sitting President could do that, even if you were to
win the primaries, i.e., win the nomination--``win the
primaries'' is sort of shorthand for that--y[ou] could
be damaged enough to lose the general election. So the
answer is yes, I was concerned at that time because I
think it was--it's fair to say that there were people
within the party--using the party writ broad now--the
Democratic Party family who were questioning whether
the President could win re-election in a general
election, and there was certainly some loose talk
around about some people mounting a primary against
him. So the answer is--the short answer, after a long
answer, is I was concerned.5
---------------------------------------------------------------------------
\5\ Deposition of Harold Ickes, June 26, 1997, pp. 21-22; see also
infra, notes 28-29 and accompanying text.
This was the bleak outlook for the President as he contemplated
his re-election campaign.
An Early Emphasis on Money to Stave off Primary Challengers
Two days after Christmas 1994, the President and McAuliffe
ate breakfast in the President's personal study on the second
floor of the White House.6 The breakfast lasted
about two hours.7 The general discussion concerned
what the President and McAuliffe needed to do to get ``ready
for the '96 election.'' 8
---------------------------------------------------------------------------
\6\ Deposition of Terence R. McAuliffe, June 6, 1997, pp. 10-11.
\7\ Id. at p. 14.
\8\ Id. at p. 12.
---------------------------------------------------------------------------
When asked whether he and the President discussed the
possibility of a primary challenge to the President, McAuliffe
answered:
You know, I can't recall if he talked about a primary
challenge, but, I mean, just pick up the newspapers, I
mean, I don't think we would have had to have talked
about it. I mean, it was evident that the President was
in a very precarious political situation. I think his
poll numbers, he was in the low thirties.9
---------------------------------------------------------------------------
\9\ Id. at p. 13.
Nevertheless, McAuliffe, who by his own admission is ``not
negative by nature,'' was ``optimistic and thought [the
President] should be re-elected.'' 10 McAuliffe
testified that he was ``willing to lead that fight.''
11
---------------------------------------------------------------------------
\10\ Id. at pp. 12, 13.
\11\ Id. at p. 13.
---------------------------------------------------------------------------
Of course, the President would require money to wage that
fight, a topic which he discussed with McAuliffe. In his
deposition, McAuliffe tried to downplay the discussion of fund-
raising at the breakfast, stating that ``the fund-raising
discussion probably took 32 seconds.'' 12 When they
first sat down for breakfast, the President and McAuliffe
talked about the mood of the donors. McAuliffe described them
as ``depressed'' and ``demoralized.'' 13
Nonetheless, McAuliffe volunteered to ``put this operation
together,'' telling the President, ``Let's not talk about fund-
raising here, sir, I'll handle all that for you.''
14 McAuliffe continued:
---------------------------------------------------------------------------
\12\ Id.
\13\ Id. at p. 14.
\14\ Id.
Mr. President, you have broad support out there in
the donor community, which is what I represented as the
Finance Chair of the party. I'm going to be able to put
this operation together for you. The support of the
people will be there for you. Don't worry about it.
I'll handle it.
And he--I think it took a tremendous burden off his
shoulders. I think he was worried. I think he was
probably worried that I wouldn't be his Finance
Chairman. I mean, they worry about--see, what you
worried about at the time is a lot of the donors and
political supporters would leak off and go to other
candidates. That was a big concern.
Q: And when you say other candidates, you mean other
Democratic candidates?
A: Yeah. You know, that potentially--you know, there
was talk out there that Bradley was looking at it, that
Gephardt was looking at it, that Jesse Jackson might
look at it. You know, the names you normally hear, you
hear them again today.
Q: Did you commit to raise a specific amount of money
for the President in that meeting?
A: I said I'd take care of the money, it would be no
problem: Don't you worry about it, sir, I'll take care
of it. I don't think I knew at the time what the limits
were.15
---------------------------------------------------------------------------
\15\ Id. at pp. 15-16.
According to McAuliffe, most of the remaining two hours were
devoted to discussing ``issues,'' such as ``where this country
was going.'' 16
---------------------------------------------------------------------------
\16\ Id. at p. 14.
---------------------------------------------------------------------------
At the end of the breakfast, the topic of fund-raising
arose again. The discussion centered on what the President
needed to do to help raise funds. The conversation helped set
the stage for, among other things, the White House coffees:
Q: Did you discuss with the President what his
involvement would be in the fund-raising operation?
A: The only thing I discussed with him, I think at
the end of the meeting he said, What do I need to do?
And I said, Mr. President, you know, I need to get some
time with you to meet with some of the key supporters
who are demoralized out there so that you can get them
re-energized and ready for the '96
election.17
---------------------------------------------------------------------------
\17\ Id. at p. 16; see also the section of this report on White
House coffees.
McAuliffe left the meeting knowing that he would be the Finance
Chairman for the President's re-election effort. As McAuliffe
put it, the President ``never said, Terry, will you be my
Finance Chairman? It was clear that I was going to be the
guy.'' 18
---------------------------------------------------------------------------
\18\ Deposition of Terence R. McAuliffe, June 6, 1997, p. 11.
---------------------------------------------------------------------------
McAuliffe did go on to lead Clinton/Gore's fund-raising
effort; however, Clinton/Gore was limited by law to raising
funds in certain increments (no more than $1,000 from an
individual),19 and there was an overall spending
limit. By the end of the summer of 1995, the re-election
campaign had raised ``a good chunk'' of all the funds it could
legally raise.20 No doubt, a strong motivating
factor in quickly raising this money was the need to discourage
potential primary challengers. Indeed, no additional funds
could be raised for the general election due to federal
restrictions.21 In any event, all of the re-election
campaign's funds were expected to be raised by the end of
1995.22
---------------------------------------------------------------------------
\19\ 2 U.S.C. Sec. 441(a)(6).
\20\ Deposition of Terence R. McAuliffe, June 6, 1997, p. 50.
\21\ 26 U.S.C. Sec. Sec. 9003(b)(2) & 9012(b).
\22\ Deposition of Terence R. McAuliffe, June 6, 1997, pp. 50-51.
---------------------------------------------------------------------------
Dick Morris' Early Advertising Blitz--The Need for More Money
Still, a formidable re-election treasury, by itself, would
not resuscitate the President's moribund political position.
After the devastating 1994 mid-term Congressional elections,
the President reached out to his old friend and former
political consultant, Dick Morris, for political advice.
Morris, one of the President's closest political
consultants,23 explained to the President that, even
to consider a chance at re-election in 1996, he must begin in
1995 an advertising campaign unprecedented in scope, timing,
and cost. The President ultimately seized upon Morris's plan,
thereby creating a tremendous need for huge amounts of money to
finance this media crusade.24
---------------------------------------------------------------------------
\23\ After Morris graduated from Columbia College, he became
involved in New York politics and worked for the Citizen's Budget
Commission as a research analyst. Deposition of Richard Morris, August
20, 1997, p. 6. His first political consulting company was the Public
Affairs Research Organization, which provided issue consulting for New
York Democrats. Id. at pp. 6-7. In 1977, he began a new political
consulting firm, Dresner, Morris, which later changed names to Dresner,
Morris, Tortorello, and has remained a full time political consultant
since that time. Id. at p. 7.
In 1977, when President Clinton was the Attorney General of
Arkansas, he first engaged Morris to perform a variety of political
consulting tasks, including polling, advertisement design, and speech-
writing. Id. at p. 8. Morris also assisted President Clinton with his
failed 1980 re-election campaign for Governor of Arkansas and his
successful 1982 bid for Governor. Id. at p. 13. Morris consistently
performed consulting work for Governor Clinton from 1982 through
January 1991. Id. at p. 14. In 1991, Morris terminated his consulting
services for Governor Clinton and testified as follows:
I had become more of a Republican at that point, and I
had handled his 1990 campaign as the only Democrat that I
was working for. And I told--I grandfathered him in, in a
sense, because I had a long relationship with him, and he
---------------------------------------------------------------------------
asked me to handle his 1990 campaign.
Id. at p. 14. Morris did not conduct any professional consulting
services for Governor Clinton throughout his 1992 Presidential
campaign. Id. at p. 15.
---------------------------------------------------------------------------
\24\ Though familiar with the media blitz that gave rise to the
White House's thirst for money, Morris had extremely limited knowledge
of the DNC's and Clinton/Gore's fund-raising activity. He testified as
follows: ``I had no involvement nor have I ever had with fund-raising
for him [the President].'' Id. at p. 8. Morris also denied any
knowledge of John Huang, Charlie Trie or James Riady other than what he
had read in newspaper articles beginning in late 1996. Id. at pp. 8-9.
---------------------------------------------------------------------------
In the spring of 1995, Morris explained to the President
that he needed to advertise early to improve his approval
ratings and give him a chance to win re-election.25
The President agreed to some initial advertisements to
determine if Morris' views were correct. The first ``flight''
of advertising released in July 1995 was paid for by the
Clinton/Gore '96 re-election committee (hereinafter referred to
as ``Clinton/Gore'').26 The results of the July
media ``showed very significant movement'' for the President,
which Morris used to convince the President to undertake the
unprecedented advertising campaign Morris had
proposed.27
---------------------------------------------------------------------------
\25\ Id. at pp. 97-98, 271-72.
\26\ Id. at pp. 130-31. These expenditures occurred prior to any
discussions concerning ``the possibility of funding ads or running
specific ads or the text of ads that would be run under the DNC
label.'' Id. at p. 131.
\27\ Id. at p. 132.
---------------------------------------------------------------------------
As noted, Ickes, the White House deputy chief of staff in
charge of the President's re-election campaign, was concerned
that the President could face a primary contest.28
Ickes believed that the President needed to save Clinton/Gore
funds (which Morris wanted to spend on advertising) in the
event that they were needed for a primary fight.29
For precisely this reason, Ickes opposed Morris' early
advertising campaign. When Ickes was asked whether he and
Morris disagreed about spending money on advertising in 1995--
rather than closer to the election in 1996--Ickes testified:
---------------------------------------------------------------------------
\28\ Id. at p. 126; see also supra, text accompanying note 5
(quoting from Ickes' deposition before the Committee).
\29\ Morris deposition, p. 126.
There was a debate about that running over a period
of months, and different people had different
positions. My own position was that, depending upon
what money you were talking about--there are different
kinds of money, as I'm sure you know by now--that if it
were going to be Clinton-Gore campaign money, that I
was very reluctant to see that money spent that
early.30
---------------------------------------------------------------------------
\30\ Deposition of Harold Ickes, June 26, 1997, p. 31.
Morris, however, was convinced that without a massive
advertising campaign prior to the primaries, the President
would be so weak in the polls that he definitely would face a
primary fight.31
---------------------------------------------------------------------------
\31\ Morris deposition, p. 127.
---------------------------------------------------------------------------
Although Morris was initially unaware of the financial
condition of Clinton/Gore and the DNC at the time he was
pressing for significant advertising expenditures, he learned
that the Clinton/Gore Primary Committee was limited to spending
approximately $30 million.32 Morris shared Ickes'
concern that the media campaign likely would exceed the $30
million limit placed on the Clinton-Gore Primary
Committee.33 Confronted with these funding
limitations, Morris searched for alternative methods to finance
the President's re-election campaign.
---------------------------------------------------------------------------
\32\ Id. at pp. 129-30.
\33\ See id. at p. 132.
---------------------------------------------------------------------------
Morris suggested that the President reject federal matching
funds so as to increase the amount of contributions that could
be legally accepted by Clinton/Gore (and provide the
desperately needed additional funds for
advertising).34 Morris presented this concept to the
President and his top advisors in the March 2 and 16, and April
27, 1995 weekly agendas.35 In July 1995, Erskine
Bowles, then Ickes' counterpart as White House deputy chief of
staff, told Morris that the President had decided not to reject
federal matching funds.36 Bowles told Morris to come
up with a ``plan B,'' i.e., a method for accomplishing his
advertising objectives within the limits of the federal
matching funds expenditures.37 Initially, Morris did
not know how he would fund the advertising plan because the
Clinton/Gore funds would have to be used for other campaign
expenditures.38
---------------------------------------------------------------------------
\34\ Id. at pp. 97-100, 262-63. A presidential candidate who
accepts federal matching funds agrees in return to limit campaign
expenditures in primaries and in the general election. 2 U.S.C.
Sec. 441a(b)(1).
\35\ Morris deposition, pp. 262-63; see March 2 and 16, and April
27, 1995 agendas (Exs. 1, 2 and 3). Morris produced portions of written
agendas for the weekly strategy meetings beginning in February or March
of 1995. See Morris deposition, p. 256. The meetings were chaired by
Morris, and were regularly attended by the President, the Vice
President, Chief of Staff Leon Panetta, Ickes, Bowles, and other top
White House, Clinton/Gore, and DNC officials. Dick Morris, Behind the
Oval Office, p. 26 (1997) (hereinafter ``Behind the Oval Office''). The
weekly agendas were summaries of the advice Morris gave the President
during those meetings. Morris deposition, p. 258.
\36\ Id. at p. 133.
\37\ Id.
\38\ Id.
---------------------------------------------------------------------------
hatching a scheme to evade federal election laws
Ultimately, the White House found a ``Plan B'': running the
advertisements through the DNC under the guise of issue
advertising. Unlike Clinton/Gore, the DNC could raise unlimited
amounts of non-federal, ``soft'' money, although such money can
only be spent for ``party-building'' activities, such as voter
registration and ``get out the vote'' efforts.39
During the 1996 federal election cycle, these restrictions on
the use of ``soft'' money were ignored; the DNC became a shadow
re-election campaign, allowing the President to spend more than
the federal limits to which he had agreed in accepting partial
public financing for his campaign. In short, the President used
the DNC for an end-run around restrictive federal campaign
laws. Both Morris and Ickes claimed credit for this idea in
their testimony before this Committee.
---------------------------------------------------------------------------
\39\ Justice Breyer, writing for the Supreme Court, described the
limited uses of ``soft money'':
We recognize that FECA permits individuals to contribute
more money ($20,000) to a party than to a candidate
($1,000) or to other political committees ($5,000). 2
U.S.C. Sec. 441a(a). We also recognize that FECA permits
unregulated ``soft money'' contributions to a party for
certain activities, such as electing candidates for state
office, see Sec. 431(8)(A)(i), or for voter registration
and ``get out the vote'' drives, see Sec. 431(8)(B)(xii).
But the opportunity for corruption posed by these greater
contributions is, at best, attenuated. Unregulated ``soft
money'' contributions may not be used to influence a
federal campaign, except when used in the limited, party-
building activities specifically designated in the statute.
---------------------------------------------------------------------------
See Sec. 431(8)(B).
Colorado Republican Fed. Campaign Comm. v. FEC, ____ U.S. ____, 116 S.
Ct. 2309, 2316 (1996).
Morris testified that he first ``became aware of the
existence of issue advocacy advertising'' in the spring or
summer of 1995.40 Joseph Sandler, the DNC general
counsel, and Lyn Utrecht, counsel for Clinton/Gore, provided
Morris with his understanding of issue advocacy
advertising.41 He testified that ``all the
impressions that [he had] as to what you could or couldn't do
and still qualify for . . . issue advocacy advertising comes
from their legal opinion.'' 42 Morris explained his
understanding of the legal guidelines concerning issue advocacy
advertising as follows:
---------------------------------------------------------------------------
\40\ Morris deposition, p. 134.
\41\ Id. at pp. 140-41. Morris did not recall who first informed
him of issue advocacy advertising, but he believed it was Utrecht,
Sandler or Bill Knapp, a consultant with the firm Squier Knapp & Ochs.
Id. at p. 134.
\42\ Id. at p. 140.
issue advocacy advertising had to relate to . . . a
legislative issue that was pending before Congress,
that was actively in play and in discussion before
Congress. It had to express a point of view on that
issue which was held by the President, the
administration in general . . . and the leadership of
the Democratic Party; that it had to be an issue
position in which the Republican Party leadership took
a generally different point of view, period. The
advertisement had to be related to the substantive
disagreements between the two camps and had to urge a
substantive point of view in connection--calling for
the adoption of the Presidential/Democratic views on
those issues . . . [t]he advertisements . . . could not
overly [sic] urge the re-election of the President or
the defeat of any particular Republican candidate . . .
that there were constraints on the extent to which the
President's picture could be used in the advertisements
or the picture of possible Republican opponents . . .
that there were restrictions on the proximity to
primary dates that such advertisements could be run in
different states . . . that there was a cut-off date of
Memorial Day '96 after which all advertising . . . had
to come from the campaign.43
---------------------------------------------------------------------------
\43\ Id. at pp. 142-43.
Morris did not perform any independent research to determine
the accuracy of Sandler's and Utrecht's advice.44
Indeed, Morris relied heavily upon Sandler's advice regarding
both DNC and Clinton/Gore advertisements, as evidenced by
Sandler's presence during all media planning
meetings.45
---------------------------------------------------------------------------
\44\ Id. at p. 145.
\45\ Id. at p. 160. Morris argued that his understanding of one
instance where the RNC may have used issue advocacy advertising created
a ``precedent'' for the DNC to run his massive media campaign. Id. at
p. 298. His knowledge of RNC issue advocacy advertising was limited to
second-hand information that, in 1983, ``the Republican Party ran
extensive ads on its success in combating inflation'' unrelated to
President Reagan's re-election. Id. at p. 296.
---------------------------------------------------------------------------
Morris provided the following examples of how he used DNC
funded issue advocacy advertising to further his advertising
plan. From January through April 1996, Morris testified that
advertisements concerning family and medical leave had to be
done by Clinton/Gore because the issue currently was not before
Congress.46 Advertisements on Medicare, however,
could be paid for by either the DNC (through issue advocacy
advertising) or Clinton/Gore because ``it was in play before
the Congress.'' 47 Moreover, from August through
December of 1995, all advertising funds came from the DNC
because the advertisements allegedly pertained to the ``budget
fight'' pending before Congress.48 During the period
of the Republican primaries (approximately January through
April of 1996), however, the funds for advertising were split
between the DNC and Clinton/Gore depending upon the
issue.49 Indeed, once Morris understood the concept
of issue advocacy advertising, he regretted ``having spent the
$2.4 million of campaign money on the crime ads'' Clinton/Gore
ran in the spring of 1995.50 Morris admitted,
however, that irrespective of the method of payment for these
different advertisements, their ultimate goal was the
President's re-election.51
---------------------------------------------------------------------------
\46\ Id. at p. 158.
\47\ Id. at pp. 158-59.
\48\ Id. at pp. 152, 154.
\49\ Id. at p. 153.
\50\ Id. at pp. 134-35.
\51\ Id. at p. 293.
---------------------------------------------------------------------------
Ickes, however, also wished to claim credit for using DNC
``issue'' advertising to circumvent federal election laws. He
testified that he conceived of financing Morris' advertising
campaign with ``soft'' money to run so-called ``issue ads'' on
which unlimited money could be spent.52 Ickes
volunteered that, ``Basically, it was my idea.'' 53
---------------------------------------------------------------------------
\52\ See Deposition of Harold Ickes, June 26, 1997, p. 31.
\53\ Id.
---------------------------------------------------------------------------
Regardless of whether Ickes or Morris deserves the
``credit'' for hatching a scheme to violate the laws, there is
no doubt that this early spending of ``soft'' money was driven
by the President's re-election. In testifying about the purpose
of the early ``soft'' money advertising, Ickes offered another
glimpse into a nervous President's thought process--a President
bent on avoiding a repeat of the 1994 election debacle,
deterring prospective primary challengers, and winning re-
election:
The idea was to try to--to use paid media, in
addition to what the President was saying publicly, to
used paid media to reinforce what he was saying
publicly, and I think that the theory was that through
well-placed, well-designed paid media, that you could
get more--you could educate the public more on what the
President had done and what he was trying to do in an
unfiltered way so that you could have direct contact
with potential voters as opposed to having it filtered
through the media. I think a lesson had been learned--
well. . . .
Q: And was part of the goal of this idea to
successfully avoid a primary in '96, a primary
challenge?
A: I don't think there was a concern at that point,
but it depends what point you're talking about. Where
are we in terms of time frame?
Q: In the '95, say from February through August, time
period.
A: The focus was more--was less on avoiding a
primary, much more on the general election.
Q: The 1996 general election?
A: Yes. The use of--the use of paid media was focused
much more on the '96 general election, but the basic
focus was the President was concerned in '94, he had
not been able to reach, get through, or break through,
to use a campaign term, with the public about the
issues that he had been prosecuting in his agenda in
'93 and '94. He was very concerned about that, and I
think early on the basic thought was that the use of
paid money could help break through and you'd have
direct communication with voters on particular issues,
whether it be crime, welfare reform, or what have
you.54
---------------------------------------------------------------------------
\54\ Id. at pp. 36-37 (emphasis added).
To a President wishing to avoid repetition of the 1994 debacle,
the strategy of using unregulated DNC ``soft'' money to ensure
that his re-election message resonated with the voting public
must have been welcome.
The September 10, 1995 White House Meeting: Unveiling the Scheme
The scheme for spending DNC ``soft'' money to run early
advertising in support of the President's re-election under the
control of the White House was unveiled to the DNC's National
Chairman at a significant meeting at the White House. The
meeting took place on Sunday, September 10, 1995, at 9:00
PM.55 Those present included: the President, the
Vice President, White House Chief of Staff Leon Panetta, Ickes,
DNC National Chairman Don Fowler, and one of the President's
pollsters.56 In addition, the First Lady may have
been present.57 DNC General Chairman Christopher
Dodd was supposed to participate by telephone, but did not, as
he could not be located.58
---------------------------------------------------------------------------
\55\ Deposition of Donald L. Fowler, May 21, 1997, pp. 290-92.
\56\ Id. at p. 292.
\57\ Id.
\58\ Id.
---------------------------------------------------------------------------
Ickes ran the meeting.59 The first topic of
conversation concerned the need to communicate the President's
accomplishments through an advertising campaign.60
The White House's plan was for the DNC to buy this advertising.
The advertising ``was to be funded by the party, but it would
focus on the President's program for the party and what he had
done.'' 61 According to Fowler, ``there was a
general consensus that this was a good idea.'' 62
---------------------------------------------------------------------------
\59\ Id. at p. 293.
\60\ Id.
\61\ Id.
\62\ Id. at p. 294.
---------------------------------------------------------------------------
The meeting then focused on whether there was enough money
to pay for the proposed advertisements. As Fowler put it, ``The
discussion was mostly could we raise enough money to do it, and
the initial plan was 10 weeks at a million dollars a week or
thereabouts, and the discussion was we could raise it.''
63 Everybody in the room discussed whether that
amount of money could be raised.64
---------------------------------------------------------------------------
\63\ Id.
\64\ Id.
---------------------------------------------------------------------------
Although no ``serious doubts'' were expressed in the
meeting about the ability to raise the money, ``a number of
people said it was going to take a lot of work and stuff like
that.'' 65 Apparently, the meeting's participants
also discussed the need for the President and Vice President to
devote more time and effort to fund-raising if the plan was to
be fulfilled.66 The meeting concluded sometime
around 10:30 or 11:00 in the evening.67 The strategy
was set in motion.
---------------------------------------------------------------------------
\65\ Id. at pp. 294-95.
\66\ Id. at p. 295.
\67\ Id. at pp. 295-96.
---------------------------------------------------------------------------
In His Own Words: The President's Knowing Subversion of Federal
Election Law
Clearly, the President and his aides devised a strategy to
subvert the spending limits imposed by federal law on
presidential candidates who agree to accept public financing.
``Soft'' money was used for the express purpose of promoting
the President's re-election. As documented elsewhere in this
report, the money was raised and spent under the supervision of
White House officials.68 The money was spent on ads
that were produced by the firm handling the re-election
campaign's ads, ads that the President himself edited and
revised.
---------------------------------------------------------------------------
\68\ See the section of this report on the White House's control of
the DNC.
---------------------------------------------------------------------------
The President knew that he was using DNC ``soft'' money to
support his re-election campaign. He told a group of major
contributors to the DNC:
[W]e even gave up one or two of our fundraisers at
the end of the year to try to get more money to the
Democratic Party rather than my campaigns. My original
strategy had been to raise all the money for my
campaign this year, so I could spend all my money next
year being president, running for president, and
raising money for the Senate and House Committee and
for the Democratic Party.
And then we realized that we could run these ads
through the Democratic Party, which meant that we could
raise money in twenty and fifty and hundred thousand
dollar lots, and we didn't have to do it all in
thousand dollars. And run down--you know what I can
spend which is limited by law. So that's what we've
done. But I have to tell you I'm very grateful to you.
The contributions you have made in this have made a
huge difference.69
---------------------------------------------------------------------------
\69\ Transcribed Statement of President Bill Clinton, White House
Communications Agency Videotape, Dec. 7, 1995 (Hay-Adams Dinner).
---------------------------------------------------------------------------
the ``bottom line'': pressure on the dnc to satisfy the campaign's need
for money
The President's massive media plan, combined with the DNC's
operating costs, required Democrats to raise an unprecedented
amount of money.70 Morris testified that the media
team constantly needed additional money to fund fully the
planned weekly media purchases. For example, the media team
would plan $1.2 million in paid advertising for a week, but the
DNC would have only $1 million available.71
Consequently, Morris appealed to the President to hold
additional fund-raising events on at least ten occasions, and
to the Vice President on two or three occasions.72
When Morris learned from Doug Sosnik 73 that the
President was not giving fund-raisers enough priority on his
schedule, he made open appeals at the weekly strategy meetings
``for more time to be spent on scheduling fund-raisers.''
74
---------------------------------------------------------------------------
\70\ Morris stated in his book that ``[n]o president had ever
advertised even remotely this far in advance of an election. . . . Ten
million dollars was about equal to what most president or candidates
for the presidency spent on media ads for the entire primary season,
from Iowa through the convention--yet here we were spending it on issue
ads more than a year before the election began.'' See Behind the Oval
Office, p. 150.
\71\ Morris deposition, p. 241.
\72\ Id. at pp. 241, 244. Either Marvin Rosen, Democratic Finance
Chairman, or Terry McAuliffe once even asked Morris to meet with a
potential donor. Id. at p. 249.
\73\ Sosnik was the White House political affairs director.
\74\ Id. at pp. 241-42.
---------------------------------------------------------------------------
In November and December 1995, the DNC ``spent a vast
amount of money'' on advertising to boost the President's poll
numbers during the government shutdown.75 Ickes or
Bowles informed Morris that the extended advertising that fall
had ``functionally cleaned out the DNC money,'' and that there
were insufficient funds to advertise in January.76
In the agenda for the December 7, 1995 White House political
strategy meeting, Morris informed the participants: ``Need to
do phone calls and fund raising to turn around media as soon in
January as possible--or as soon after deal is cut as
possible.'' 77 Morris testified that, in the agenda,
he was requesting the DNC to ``redouble'' its fund-raising
efforts because it was critical that the advertising campaign
on the President's behalf continue.78 Morris'
concern over the lack of funding for advertising is emphasized
in the agenda for the February 22, 1996 White House political
strategy meeting, which warned participants that the
``[f]ailure to advertise is, once again catching up with us.''
79 In the agenda for the March 6, 1996 meeting,
Morris wrote that ``DNC fund raising is not now equipped to
cope with the money needs. . . . We have had trouble getting
this week's DNC money together. . . . Fund raising at DNC level
must be improved.'' 80
---------------------------------------------------------------------------
\75\ Id. at p. 324.
\76\ Id. at pp. 324-25.
\77\ See December 7, 1995 agenda, p. 2 (Ex. 4).
\78\ See Morris deposition, p. 324.
\79\ February 22, 1996 agenda, p. 3 (Ex. 5).
\80\ March 6, 1996 agenda (Ex. 6); see Morris deposition, p. 347.
---------------------------------------------------------------------------
Morris testified that the Vice President ``tended to favor
the advertising that we were doing and . . . worked fairly hard
at trying to raise the money.'' 81 In his book,
however, Morris wrote that the President ``complained
bitterly'' at having to raise the money required to run the
advertisements.82 The fund-raising became so
consuming that the President told Morris:
---------------------------------------------------------------------------
\81\ Id. at p. 245.
\82\ See Behind the Oval Office, p. 150. Morris testified that all
the statements in his book, Behind the Oval Office, were true;
``everything in the book is, as far as I know, true.'' See Morris
deposition, pp. 28, 36-37.
``I can't think. I can't act. I can't do anything but
go to fund-raisers and shake hands. You want me to
issue executive orders; I can't focus on a thing but
the next fund-raiser. Hillary can't, Al can't--we're
all getting sick and crazy because of it.''
83
---------------------------------------------------------------------------
\83\ Behind the Oval Office, p. 151. A recent study of the
President's rigorous fund-raising schedule confirms that the President
was severely taxed by these fund-raising demands. See Glenn F. Bunting,
``A Hard and Fast Ride on Donation Trail,'' Los Angeles Times, December
21, 1997, A1. The President's zeal for fund-raising placed a ``strain .
. . on both the presidency and the operation of the White House.'' Id.
The DNC also felt unprecedented pressure to raise money. As
discussed at some length later in this report, Ickes took
control of the DNC's Finance Division, and held weekly
``Wednesday Money Meetings'' beginning in 1995 to control the
DNC's fund-raising and budgeting.84 In these
meetings, Ickes' emphasis on money was clear. DNC National
Finance Director Richard Sullivan remembered well Ickes'
concern with fund-raising. In discussing the regular money
meetings, Sullivan recalled Ickes' questioning of DNC Chief
Financial Officer Brad Marshall--and even employed some of
Ickes' well-known profanity: ``All Harold cared about was the
bottom line . . . Harold just cared about the bottom line as
they applied to Brad [Marshall]'s numbers of spending
projections. He just cared about what, you know, [`]Goddamn it,
just tell me what's in the bank, Brad.[']'' 85 Ickes
himself agreed that he had a ``bottom line'' focus on the DNC:
``My focus . . . was the bottom line, as they like to say in
the finance business.'' 86
---------------------------------------------------------------------------
\84\ See Deposition of Harold Ickes, June 26, 1997, p. 55; see also
the section of this report on White House control of the DNC.
\85\ Deposition of Richard Sullivan, June 4, 1997, p. 90.
\86\ Deposition of Harold Ickes, June 26, 1997, p. 62.
---------------------------------------------------------------------------
Ickes wrote memoranda summarizing what went on at these
``money meetings,'' and these memoranda prove the White House's
intense involvement in all aspects of DNC fund-raising, and
provide some glimpse into the pressure the DNC was under to
raise funds.87
---------------------------------------------------------------------------
\87\ See the section of this report on White House control of the
DNC.
---------------------------------------------------------------------------
In fact, the amount raised by the DNC during the 1996
election cycle vastly exceeded that raised in earlier years.
McAuliffe characterized his 1994 DNC fund-raising effort as a
much ``smaller operation'' when compared to the DNC's fund-
raising during the 1996 election cycle.88 The
numbers support McAuliffe's description. In 1994, the DNC
raised approximately $37 million.89 By December
1995, a DNC draft budget for 1996 reflected a revenue
projection of $110 million.90 Revenue from major
donors alone in that draft budget was expected to total $80
million--more than twice the entire amount raised by the DNC
during 1994.91
---------------------------------------------------------------------------
\88\ Deposition of Terence R. McAuliffe, June 6, 1997, pp. 20-21.
\89\ Id. See also Deposition of Richard Sullivan, June 5, 1997, p.
147 (estimating amount raised by the DNC in 1994 at $38 million).
\90\ Democratic National Committee Proposed 1996 Budget, December
21, 1995, p. 9 (Ex. 7). When DNC National Chairman Don Fowler first
told Sullivan to plan to raise $120 million, Sullivan told Fowler that
he (Sullivan) ``was expecting a request for a plan of 90 to 100, and I
thought 100 was kind of best case.'' Deposition of Richard Sullivan,
June 5, 1997, p. 154.
\91\ See Ex. 7 at p. 9.
---------------------------------------------------------------------------
But even that ambitious draft budget was not enough. In a
February 9, 1996, memorandum from Ickes to the President and
the Vice President, Ickes reported that Marvin Rosen, the DNC's
Finance Chairman, was ``confident that $125 million can be
raised during the first 10 months of 1996.'' 92 By
July 5, 1996, Ickes could report in another memorandum to the
President and Vice President that the DNC's fund-raising was
``on target,'' and that the DNC was projecting revenue of
$136.6 million by the end of October 1996.93
---------------------------------------------------------------------------
\92\ Memorandum to The President and The Vice President from Harold
Ickes, February 9, 1996, p. 1 (Ex. 8).
\93\ Memorandum to The President and The Vice President from Harold
Ickes, July 5, 1996, p. 2 (Ex. 9).
---------------------------------------------------------------------------
The pressure to raise such enormous amounts of money was
pervasive. DNC National Finance Director Richard Sullivan
characterized the DNC in 1996 as engaged in ``an historic
effort in terms of the aggressiveness of the fund-raising.''
94 Sullivan told the Committee that the DNC ``raised
an enormous amount of money,'' adding that, in the 1995-96
period, the DNC ``almost tripled the amount raised in the 1991-
92 election cycle.'' 95 DNC National Chairman Don
Fowler stated that there were ``pressing needs during the
campaign to raise large sums of money. . . .'' 96
---------------------------------------------------------------------------
\94\ Deposition of Richard Sullivan, June 25, 1997, p. 120.
\95\ Testimony of Richard Sullivan, July 9, 1997, p. 8.
\96\ Testimony of Donald L. Fowler, Sept. 9, 1997, p. 6.
---------------------------------------------------------------------------
conclusion
The many scandals that will be chronicled elsewhere in this
report flow, directly or indirectly, from this ``historic
effort in terms of the aggressiveness of the fund-raising.''
97 The coordinated issue advertising campaign
proposed by Dick Morris, managed by the President, and funded
by the DNC to promote the President's re-election, set the
stage for the scandals that became the Committee's
investigatory focus. To promote the President's re-election,
Morris devised the issue advertising scheme. To pay for this
project became the consuming passion of the President, his
staff, and the DNC. Due to the DNC's need to feed the
advertising beast, it dismantled its process for vetting
contributions to ensure their legality. From the thirst for
advertising dollars developed the DNC's search to tap new veins
for money, such as emerging political groups. From the need for
funds to pay for issue advertising arose the willingness to
sell access to senior government officials and to use
government property to raise funds. The White House and the
Presidency were reduced to tools for fund-raising. In sum,
Morris wrote the script. It was now up to the President and his
cast of supporting actors to implement it. Tales from its
implementation follow.
---------------------------------------------------------------------------
\97\ See Deposition of Richard Sullivan, June 25, 1997, p. 120.
The White House Controlled the DNC and Improperly Coordinated the
Activities of the DNC and Clinton/Gore '96
``That was the other campaign that had problems with that,
not mine.''--President Clinton, November 8, 1996 1
---------------------------------------------------------------------------
\1\ News Conference of President Bill Clinton, November 8, 1996,
CNN Special Event, Transcript # 96110801V06.
In the wake of the President's re-election, questions were
raised about allegations of improper fund-raising. The
President's response was to shift blame away from himself (and
his re-election campaign) and to the DNC. This response was
disingenuous. During the 1996 election cycle, the White House,
in its thirst for money, took control of the DNC.
First, the White House took control of the DNC's finances,
micro-managing how the DNC raised and spent money. Harold
Ickes, Deputy Chief of Staff to the President, simply seized
the reins of financial power at the DNC. The DNC could not
spend any money without prior White House approval. Ickes also
exerted direct control over the DNC's Finance Division, the
division charged with fund-raising. DNC National Chairman Don
Fowler was unsuccessful in contesting Ickes' assumption of
power and asserting control over the DNC.
The White House's financial control of the DNC was designed
to fund the advertising strategy developed by Dick Morris. Yet
White House control was not limited to financial control of the
DNC; using the DNC as an adjunct to the re-election campaign
led to unprecedented coordination between the DNC, Clinton/Gore
'96, and the White House over the content, placement, and
production of advertisements. This unprecedented coordination
violated the letter and spirit of existing federal campaign
laws.
In short, the White House took control of the DNC,
particularly its fund-raising apparatus, to squeeze as much
money out of the DNC as it could. The purpose of this money was
to fuel the White House's massive advertising campaign, which
itself was the result of unprecedented illegal coordination. By
the end of the campaign, any distinctions remaining between the
White House, the DNC, and Clinton/Gore had been obliterated.
ickes takes charge of the DNC as the president's ``designee''
Despite his being a federal employee, Harold Ickes simply
took control of the DNC and ran it from 1995 through the 1996
election. In particular, he micro-managed the DNC's budget,
deciding how much DNC money would be spent and on what
projects. Moreover, he exercised independent control of the
DNC's Finance Division, which controls fund-raising. Ickes did
so with the approval of the President; indeed, Ickes was the
President's ``designee'' for handling DNC issues. Ickes'
control led to friction with the DNC's nominal head, Fowler.
Fowler's involvement with the DNC began in
1971,2 and as time passed and he remained involved,
he developed ``an interest in being Chairman of the National
Committee.'' 3 After the Democrats' devastating
defeat in the 1994 elections, Fowler was given the chance. At
that time, Ickes called Fowler and asked him if he would be
interested in serving as the DNC's National
Chairman.4 The position being offered to Fowler was
unusual; he was to be part of a ``bifurcated'' chairmanship,
the brain child of Harold Ickes.5 Senator
Christopher Dodd (D-CT) would serve as the DNC's ``General
Chairman,'' and be a spokesman for the party. Fowler, as
``National Chairman,'' would be responsible for managing the
day-to-day operations of the DNC.6 Fowler was
initially uncertain about serving in this arrangement, but
after several subsequent entreaties from Ickes and at least one
meeting with the President, Fowler agreed.7 He began
his tenure as National Chairman on January 21,
1995.8
---------------------------------------------------------------------------
\2\ Deposition of Donald L. Fowler, May 21, 1997, p. 12.
\3\ Id. at p. 26.
\4\ Id. at p. 27.
\5\ Deposition of Harold Ickes, June 26, 1997, p. 26.
\6\ See generally Fowler deposition, pp. 26-27; Testimony of Donald
L. Fowler, Sept. 9, 1997, pp. 9-10.
\7\ Fowler deposition, pp. 27-32.
\8\ Id. at p. 12.
---------------------------------------------------------------------------
Fowler quickly learned the limits of his power as
``National Chairman.'' He realized immediately that he and
Ickes ``had differences of opinion about how things should be
run'' at the DNC.9 They disagreed on an entire range
of significant issues from ``budget matters'' to ``the
operational thrust of the party.'' 10 Fowler
testified that the disagreements ``generally [were] about
budget matters.'' 11 According to Fowler, these
disagreements arose as early as the spring or summer of 1995,
and persisted until the very end of his service as National
Chairman in January 1997.12
---------------------------------------------------------------------------
\9\ Id. at p. 38.
\10\ Id. at pp. 38-39; Fowler testimony, p. 20.
\11\ Fowler deposition, p. 38.
\12\ Id. at pp. 38-39. Although Fowler's deposition testimony about
his disagreements and problems with Ickes was strongly worded and
candid, Fowler tried to hedge his testimony during public hearings. For
example, he preferred not to associate himself with his deposition
testimony that he and Ickes had differences of opinion that started
soon after Fowler arrived and continued until Fowler left. Instead,
Fowler testified that he and Ickes had a relationship of ``dynamic
tension.'' Fowler testimony, p. 20. In fact, Fowler even quibbled with
some of the terms he used in his own deposition. See Fowler testimony,
pp. 13-15 (disputing that the Finance Division ``ignored'' his
directives, though such was his deposition testimony, and asserting
that he ``might quibble a little bit with the use of that term on my
part'').
---------------------------------------------------------------------------
Fowler vividly remembered once such instance of his
disagreeing with Ickes concerning the DNC's fund-raising, an
incident in which Fowler was more cautious than Ickes. In the
summer of 1995, the Chicago Sun-Times reported that the DNC was
selling access to the President and to the White
House.13 In response to this report, Fowler proposed
that the DNC limit the contributions it would accept to $2,000
per person.14 Ickes, however, disagreed with
Fowler's proposal, and Fowler's recommendation was never
implemented by the DNC, despite his nominal control over the
organization.15 In this instance, Ickes demonstrated
more enthusiasm than Fowler for raising large sums of money.
---------------------------------------------------------------------------
\13\ Lynn Sweet, ``The President's Price List,'' Chicago Sun-Times,
June 30, 1995, p. 1; see Fowler deposition, pp. 344-45;
\14\ Fowler deposition, p. 343; Fowler testimony, p. 7.
\15\ Fowler deposition, p. 346.
---------------------------------------------------------------------------
Ickes' enthusiasm was not limited to raising money in large
sums; he was also enthusiastic about controlling DNC
expenditures. In fact, the extent of Ickes' control over the
DNC is evident from an April 17, 1996 memorandum from Ickes to
Fowler, which addresses the DNC's expenditures. The entire text
of that memorandum reads:
This confirms the meeting that you and I and [White
House political affairs director] Doug Sosnik had on 15
April 1996 at your office during which it was agreed
that all matters dealing with allocation and
expenditure of monies involving the Democratic National
Committee (``DNC'') including, without limitation, the
DNC's operating budget, media budget, coordinated
campaign budget and any other budget or expenditure,
and including expenditures and arrangements in
connection with state splits, directed donations and
other arrangements whereby monies from fundraising or
other events are to be transferred to or otherwise
allocated to state parties or other political entities
and including any proposed transfer of budgetary items
from DNC related budgets to the Democratic National
Convention budget, are subject to the prior approval of
the White House. It was agreed that a small working
committee would be established which would include
Chairman Fowler (or his representative), Chairman Dodd
(or his representative), B.J. Thornberry, Brad
Marshall, Marvin Rosen, Doug Sosnik, and others as may
be agreed to, to meet at least once weekly, and more
often if necessary, to implement this
agreement.16
---------------------------------------------------------------------------
\16\ See Memorandum from Harold Ickes to Don Fowler, April 17, 1996
(Ex. 1) (emphasis in original).
Although Ickes was ``not sure'' whether he sent the memorandum
to Chairman Fowler, he did affirm that it reflected the process
in place during 1996 concerning the expenditure of funds by the
DNC.17 The memorandum itself purports to memorialize
an agreement struck in a conversation between Fowler, Ickes,
and Sosnik. It is difficult to conceive of any more explicit
evidence of Ickes' level of control over the DNC than the
agreement memorialized in this memorandum.18
---------------------------------------------------------------------------
\17\ Deposition of Harold Ickes, June 27, 1997, p. 24.
\18\ Sosnik testified, ``I don't think I would have sent this
memorandum.'' Deposition of Doug Sosnik, June 20, 1997, p. 65.
---------------------------------------------------------------------------
Fowler, as nominal head of the party, thought that Ickes
was usurping his authority. Fowler testified that, although he
wouldn't necessarily describe Ickes' involvement as ``micro-
management,''
I did feel that he was involved in the management of
the DNC in a fashion that I didn't appreciate, that I
didn't agree with, that I felt that I should have been
the instrument for a management effort and that the
management effort should have come through
me.19
---------------------------------------------------------------------------
\19\ Fowler deposition, pp. 61-62.
Fowler complained to Ickes about his undue involvement in the
management of the DNC. Ickes, according to Fowler,
``disagreed'' with Fowler's concern, and essentially
``ignored'' Fowler's objections.20
---------------------------------------------------------------------------
\20\ Fowler deposition at p. 62; Fowler testimony at pp. 22-23.
---------------------------------------------------------------------------
Given that ``all matters dealing with allocation and
expenditure of monies involving the'' DNC were subject to
``prior approval of the White House,'' 21 it is
obvious that the White House was most concerned with the DNC's
financial condition. In fact, Ickes held regular meetings to
discuss DNC operations with Senator Dodd and
Fowler.22 In March 1995, he began weekly meetings
held on Wednesday afternoons at the White House to discuss the
DNC budget.23 White House representatives at these
meetings included Ickes, Sosnik, and Karen Hancox, Sosnik's
deputy. Fowler, Finance Chairman Marvin Rosen, Finance Director
Richard Sullivan, Chief Financial Officer Brad Marshall, and
Executive Director B.J. Thornberry attended on behalf of the
DNC.24 Ickes ran the meetings.25
---------------------------------------------------------------------------
\21\ Ex. 1.
\22\ Deposition of Harold Ickes, June 26, 1997, p. 44.
\23\ Id. at p. 44, p. 55. These meetings have been referred to as
``money meetings'' and ``budget meetings.''
\24\ Id. at p. 56.
\25\ Deposition of Karen Hancox, June 9, 1997, p. 19; Sosnik
deposition, p. 35.
---------------------------------------------------------------------------
Ickes did a very thorough job keeping the President and
Vice President informed on the daily finances of the DNC. Ickes
prepared weekly memoranda to the President and Vice President
(copied to various senior White House officials) summarizing
the information gleaned from these weekly DNC money meetings.
The memoranda generally identified deposits, projected fund-
raising, calculated actual fund-raising (including federal, or
``hard'' dollars raised), documented expenditures, and reviewed
the DNC's budget in detail. These memoranda demonstrated the
President's concern with the DNC's fund-raising, and the level
of control the White House asserted over such fund-raising.
Some of these memoranda provide glimpses into Ickes'
attention to the DNC's finances. For example, Ickes' January 2,
1996, memorandum to the President and Vice President (among
others) regarding the DNC's proposed 1996 budget notes that
Ickes, Sosnik, and Hancox had met with Fowler, Rosen, and
others ``to review the first draft of the proposed calendar
1996 DNC budget as well as the proposed source of funds.''
26 The memorandum then analyzes the DNC budget in
great detail, making comments and recommendations. Ickes''
January 31, 1996 memorandum to the President and Vice President
also analyzes the DNC's budget, noting that ``Chairman Fowler
was also asked to take a very hard look at the $25 million
coordinated campaign's budget and see how much savings could be
achieved there.'' 27 Like many of Ickes' memoranda,
Ickes used the passive voice (``Chairman Fowler was also
asked'') when recounting his instructions to Fowler. The
memorandum goes on to note Ickes' suggestion for ``a meeting
early next week including the President, Vice President,
Chairman Dodd and Chairman Fowler to review the revised
proposed DNC operating budget. . . .'' 28
---------------------------------------------------------------------------
\26\ Memorandum from Harold Ickes to The President et al., January
2, 1996, p. 1 (Ex. 2).
\27\ Memorandum from Harold Ickes to The President and The Vice
President, January 31, 1996, p. 2 (Ex. 3).
\28\ Id.
---------------------------------------------------------------------------
Collectively, Ickes' weekly memoranda document a White
House that closely scrutinized all aspects of the DNC budget.
Ickes' memoranda kept the President and the Vice President
closely apprised of all details of the DNC's finances on a
weekly basis, presumably to advise the President of the status
of the fund-raising effort to support his re-election through
the DNC's advertising.
The White House's control of the DNC was especially evident
in the ``special relationship'' that developed between the
White House and the DNC's Finance Division--the division in
charge of fund-raising.29 This relationship also had
its roots in Ickes' involvement with the DNC, and the
relationship may have infused the Finance Division with an
attitude conducive to abuse and impropriety.
---------------------------------------------------------------------------
\29\ See Fowler deposition, p. 80 (referring to Finance Division's
``special relationship with the White House'').
---------------------------------------------------------------------------
Fowler testified ``that the Finance Division had an
independent relationship with the White House that sometimes
bypassed what my office would do or would be involved in.''
30 The officials in the Finance Division believed
they derived their authority directly from the White House; in
fact, Fowler testified that the Finance Division ``thought it
had a separate charter from the White House.'' 31
Because of this ``separate charter,'' the Finance Division
believed that it did not have to respond to Fowler's
directives.32 In Fowler's view, the Finance Division
had a ``disposition to ignore'' him.33
---------------------------------------------------------------------------
\30\ Id. at p. 75.
\31\ Id. at p. 79; see also Fowler testimony, p. 16.
\32\ Fowler deposition, p. 80; Fowler testimony, p. 16.
\33\ Fowler deposition, p. 80.
---------------------------------------------------------------------------
Of course, organizations do not have ``relationships;''
people within organizations do. The people within the Finance
Division who had the special, independent relationship with
White House personnel were principally Rosen and
Sullivan.34 From the White House, Ickes had the most
authoritative relationship with Sullivan and Rosen, although
Hancox also had frequent contact with them.35 Sosnik
also had a relationship with Sullivan and Rosen.36
---------------------------------------------------------------------------
\34\ Id. at p. 75.
\35\ Id. at pp. 85-86.
\36\ Fowler testimony, pp. 15-16.
---------------------------------------------------------------------------
As a result of these relationships, Rosen and Sullivan both
clearly understood that, if they wanted something to happen or
not to happen, it was Ickes, not Fowler, who had the final
authority to make a decision.37 Fowler even
acknowledged that Rosen and Sullivan knew that, if they
disagreed with Fowler, they could go to Ickes, and Ickes could
``in every case overrule'' Fowler.38 Sullivan
testified that he knew he could go around Fowler to the White
House.39
---------------------------------------------------------------------------
\37\ Id. at p. 86; See also Fowler testimony, pp. 23-24.
\38\ Id.
\39\ Sullivan testified that he knew that when Fowler disagreed
with either Ickes or Doug Sosnik, Ickes' or Sosnik's position ``would
usually prevail.'' Deposition of Richard L. Sullivan, June 4, 1997, p.
60.
Ickes had a somewhat different view of his power. He ``absolutely''
denied that he circumvented Fowler and dealt directly with the DNC's
Finance Division, and testified that Fowler ``ran the day-to-day
operation of the DNC.'' Deposition of Harold Ickes, June 26, 1997, p.
208; see also id. at pp. 208-10. When Senator Domenici read these
portions of Ickes' deposition to him, Fowler dryly noted that he
``perhaps would have described it a little differently.'' Fowler
testimony, p. 247.
---------------------------------------------------------------------------
Needless to say, the Finance Division's unique relationship
with the White House created management problems. Fowler
testified that ``having any division of an organization like
that, not being fully integrated in the operations of the other
divisions is a problem in the process.'' 40 Fowler
was concerned that this attitude spawned a number of problems,
including: insufficient notice to his office regarding events;
41 failure to coordinate dates and participants for
events; 42 and failure to follow the Chairman's
directives.43
---------------------------------------------------------------------------
\40\ Fowler deposition, p.77; see also Fowler testimony, p.17. Had
the Finance Division's independent relationship with the White House
not existed, Fowler believed that he might have had a curative effect
on some of the things that went wrong at the DNC during the 1996
election cycle. See Fowler testimony at p. 18.
\41\ Fowler deposition, pp. 57-58.
\42\ Id. at p. 74.
\43\ Id. at pp. 59-60. See generally Fowler testimony, pp. 12-13.
The most striking example of the latter occurred during the summer of
1996, when Fowler became aware that some DNC fund-raisers were listing
the address of contributors as 430 S. Capitol Street, which is the
DNC's headquarters. Fowler deposition, pp. 79-80. Fowler testified that
he believed ``that would never have happened if we had more thorough
control over the Finance Division.'' Id. at p. 79. Fowler circulated a
memorandum, requiring DNC fund-raisers to obtain the actual address for
donors. In the memorandum, Fowler noted, ``If you are able to get
people to give you checks for thousands of dollars, you really should
be able to get them to give you their addresses.'' Memorandum to DNC
Fund-raisers from Don Fowler, August 1, 1996 (Ex. 4). Fowler later
learned that the directive was disobeyed, and he blamed the Finance
Division's special relationship with the White House for such
disobedience. Fowler deposition, pp. 80-83.
---------------------------------------------------------------------------
As nearly everyone was aware of the tension afflicting the
relationship between Ickes and Fowler,\44\ including the Vice
President,\45\ the question that naturally arises is whether
the President was aware of the disagreements between Fowler and
Ickes, and, if so, with whom the President usually sided.
Fowler testified that he did not know what the President
understood about Ickes' ability to prevail in the many
disagreements between Ickes and Fowler, and he declined to
venture an opinion.\46\
---------------------------------------------------------------------------
\44\ Sullivan testified that ``there were times when there was
tension exhibited between Fowler . . . and Harold Ickes and Doug
Sosnik.'' Deposition of Richard Sullivan, June 4, 1997, p. 57. Sullivan
recalled that Fowler and Ickes disagreed often over ``state splits,''
the amount of money the DNC would give to a state party or campaign
when a fund-raising event was held within a state. Id. at pp. 58-59.
Senator Dodd, the DNC's General Chairman, was also aware of the running
disagreements between Fowler and Ickes. Fowler deposition, p. 63. Dodd,
however, refrained from taking a position concerning these
disagreements. Id. at 64. Deborah DeLee, Fowler's immediate predecessor
at the DNC, also shared Fowler's concerns. She informed Fowler that
``she had [had] some of the same problems'' with Ickes. Id. at 65.
\45\ Fowler testified that the Vice President was aware of the
running disagreement between Ickes and Fowler, as the Vice President
made allusions to it in conversation. Fowler deposition, p. 64.
\46\ Fowler testimony, pp. 243-44.
---------------------------------------------------------------------------
Ickes was not so shy. Though he interspersed his comments
with allusions to the ``latitude'' given to Fowler to run the
DNC, Ickes' testimony makes clear that he was the President's
``designee'' for running the DNC:
Q: If in these Wednesday fund-raising meetings that
you chaired in the White House, if there were
disagreements about fund-raisers or amounts of money or
anything of that nature, did you make the final
decision, or how was the authority line there
structured?
A: The President is to have the party. He is the CEO
of the party. If the President says this is the way I
want it, it was up to me to see that it was done, and
the chairman understood that, but beyond that, the
chairman had great latitude, and there may--whatever
disagreements there were, we tried to work out
collectively . . .
* * * * *
Q: It turns out the way they structured that, I
understand the answer to be that basically the
President had ordered that you would be in charge and
if there were a disagreement, that you would be the one
to make the final decision?
A: No, I didn't say that.
Q: Okay.
A: What I said was that the president of the party,
in this case the Democratic, is basically, some people
say, the titular leader of the party, but I think any
chairman would tell you that his president, that is the
party chairman's president, is the person who basically
has the last word.
Now, from a very technical point of view, the party
is a separate entity and we all recognize that. It has
its own charter and all of that, but the President's
opinion has extraordinary weight within the party
apparatus, as it should. He is the party's leader.
Although we're not a parliamentary system, it's
basically, in some sense, similar to that.
* * * * *
But Fowler was a full-time real operational head of
the party and acted as such. That's not to say there
was not very close consultation with the White House;
there was, very close consultation with the White
House.
Q: I was trying to get at, and I think you answered
in a round-about way, about if there were disagreements
and you tried to work it out and whatever, who made the
final decision? Was it you or----
A: If there were disagreements, the President of the
United States wanted something, you know what? The
President of the United States got his way. And you
know what? That's the way it ought to be.
Q: So you would make the final decision if there were
disagreements?
A: If the President of the United States wanted
something and there was a disagreement between the
President of the United States and the chairman of the
party, the President prevailed. That's the way it
should be.
Q: And in this context of Wednesday meetings, it
would be through you as his designee?
A: Through me as his designee. I kept the President
fully informed, as you can see by reams and reams and
reams of documents. . . .47
---------------------------------------------------------------------------
\47\ Deposition of Harold Ickes, June 26, 1997, pp. 209-12
(emphasis added).
The President, who acknowledged using the DNC as a vehicle
for running ads designed to assist his re-
election,48 had to know that the DNC was being run
out of Ickes' hip pocket. The logical conclusion is that the
President was comfortable with Ickes' serving as his
``designee,'' which may explain why Fowler never went over
Ickes' head to try to get any of his decisions
overruled.49 Ickes was merely doing the President's
bidding.
---------------------------------------------------------------------------
\48\ Transcribed statement of President Bill Clinton, White House
Communications Agency videotape, December 7, 1995 (Hay-Adams dinner).
\49\ Fowler testified, both in his deposition and hearings
testimony, that the only people to whom he could have gone to overrule
Ickes were the President, the Vice President, and Leon Panetta, Chief
of Staff to the President. Fowler testified, however, that he never
tried to go over Ickes' head to discuss his concerns about Ickes'
intrusion into DNC affairs. Fowler testimony, p. 23; Fowler deposition,
p. 64.
---------------------------------------------------------------------------
Coordination in the Retention and Payment of DNC and Clinton/Gore '96
Media Consultants
While Ickes was busy controlling the DNC's purse strings,
Dick Morris was busy controlling the closely-coordinated
campaign activities of Clinton/Gore '96 and the DNC--the very
purpose for which the DNC, under Ickes control, was raising
funds. The close coordination commenced in December 1994, when
the President made three commitments to Morris to get him to
work on the President's behalf: (1) Penn & Schoen would be
hired as polling consultants; (2) a White House staff member
would be hired as personal liaison for Morris; and (3) Morris
would get weekly meetings with the President.50
These commitments marked the beginning of extensive
coordination between the White House, the DNC and Clinton/Gore
'96 on a massive advertising campaign to re-elect the
President.51 The coordination included: (1) sharing
and compiling consultants' work product between the White
House, the DNC and Clinton/Gore for media purposes; (2)
extensive contact between the DNC and Clinton/Gore '96
consultants and the White House regarding advertising and
polling issues; and (3) weekly strategy meetings held in the
White House with DNC and Clinton/Gore '96 representatives
specifically designed to coordinate and implement the
President's re-election campaign. Moreover, the work of Morris
and the other consultants was used for both political and
official purposes.52
---------------------------------------------------------------------------
\50\ Deposition of Richard Morris, August 20, 1997, p. 70: see Dick
Morris, Behind the Oval Office (1997), pp. 24-25. Morris testified that
all the statements in his book, Behind the Oval Office, were true,
Morris deposition, pp. 28; 36-37.
\51\ From April through June 1995, Morris described the substance
to the consultants' work as follows:
You decided whether you are going to advertise, what you
are going to advertise about, what goals you seek to
achieve in the advertisement. You poll the best ways of
presenting the ads. Then you try to think of creative and
attractive ways of presenting it. You write the ads. You
produce them. In general, sometimes you test them before
audiences . . . and then you have to decide what markets
you are going to run it in, how much money you are going to
spend, how many points you are going to buy, what programs
you are going to buy it on, and how long you are going to
---------------------------------------------------------------------------
run them.
See Morris deposition, p. 79.
---------------------------------------------------------------------------
\52\ Id., at pp. 85-87. Morris defined political activity as
activity ``designed to promote the re-election of the President or to
assist the Democratic Party generically in the 1996 elections'' and
official activity as activity ``undertaken by the President or a member
of his staff in connection with his duties as President.'' Id. at p.
87.
---------------------------------------------------------------------------
In early October 1994, the President hired Morris for the
first time since 1991 to conduct a survey concerning issue
positioning and strategy for the 1994 congressional
elections.53 Morris did not have a written agreement
concerning these services.54 In fact, from October
1994 through January 1995, Morris was unaware of whether he was
retained by the White House, Clinton/Gore '96 or the DNC,
despite performing work that was used by all three
entities.55 In addition, he did not recall receiving
any invoices or Internal Revenue Service 1099 forms in
connection with his consulting work during this time
period.56 He billed the DNC and Clinton/Gore '96 in
one of four different methods: (1) receipt of funds personally,
whereupon he would pay a subcontracted ``interviewing house'';
(2) the ``interviewing house'' was paid directly; (3) his
company, Message Advisors, was paid directly; or (4) Penn &
Schoen was paid directly.57 With regard to whether
the DNC, Clinton/Gore '96, or the White House paid for his
consulting services, Morris testified as follows:
---------------------------------------------------------------------------
\53\ Id. at p. 25.
\54\ Id. at p. 43. Morris and the President initially agreed to
keep their consulting relationship a secret because of, among other
reasons, Morris's work on behalf of Republican clients. Id. at p. 46.
Morris used the code name ``Charlie'' to disguise his initial meetings
with the President. Id. at p. 54.
\55\ Id. at p. 62. Morris testified that he did not routinely send
out client invoices and that, on occasion, he would receive checks
without formally billing a client. Id. at pp. 30-32.
\56\ Id.
\57\ Id. at pp. 41-42.
I did not understand--I did not know whether it was
being done on behalf of the DNC or the Re-Election
Committee for the President. I, again, assumed that it
was a poll for the President, but I don't know how he
elected to pay for it.58
---------------------------------------------------------------------------
\58\ Id. at pp. 43, 60.
At Morris's request, Penn & Schoen began working for the
President and the DNC.\59\ Mark Penn reported to Ickes, whom
Penn believed had the highest authority relative to the DNC and
Clinton/Gore '96 work performed by Penn & Schoen.\60\ Penn was
unsure whether his firm had been retained by the White House,
the DNC, or Clinton/Gore '96.\61\ He testified as follows:
---------------------------------------------------------------------------
\59\ Penn deposition, p. 8. In early 1995, Morris convinced the
President to retain the polling firm of Penn & Schoen. Morris
deposition, p. 64. For a period of time, Penn & Schoen paid Morris for
his consulting work as a subcontractor, such that he received no
compensation directly from the White House, the DNC or Clinton/Gore
'96. Id. at pp. 64-66. Morris also was unaware of whether Penn & Schoen
had a written agreement with the White House, the DNC, or Clinton/Gore
'96, nor did he know which of those entities paid for their services.
Id. at pp. 66-67. In July 1996, Morris finally negotiated a
compensation arrangement consisting of a $15,000 monthly retainer from
the Clinton/Gore Primary Campaign Committee and a percentage of the
commissions from DNC and Clinton/Gore '96 media time buys. Id. at p.
104.
\60\ Penn deposition, pp. 26-28.
\61\ Id. at pp. 11, 18.
Q: And at the time you conducted polling from the
spring of '95 through the election, you were not sure,
Penn & Schoen was not sure whether or not a specific
poll was for the Re-Elect or the DNC; is that correct?
A: Right. We knew that we were doing polling that
would work--that would be work for both entities, but
we didn't know exactly which poll or part of polls
would be for which entity. \62\
---------------------------------------------------------------------------
\62\ Id. at p. 32.
* * * * *
---------------------------------------------------------------------------
Q: Was there ever a time that you were aware of in
these creative meetings where you were working
simultaneously on a DNC ad and a Re-Elect ad?
A: Yes. I think in '96--in '96 I think there were
some points where ideas relative to the DNC and ideas
relative to Clinton/Gore would have been on the table
at similar times.\63\
---------------------------------------------------------------------------
\63\ Id. at p. 44.
* * * * *
---------------------------------------------------------------------------
Q: * * * But to the best of your understanding when
the bill [for consulting services] was actually--or the
invoice was submitted to Ickes, did your firm make an
effort to distinguish what work was performed on behalf
of either the DNC or the Re-Elect?
A: Typically, no.\64\
---------------------------------------------------------------------------
\64\ Id. at p. 48.
---------------------------------------------------------------------------
The White House WEekly Strategy Meetings
Representatives from the White House, the DNC, and Clinton/
Gore would meet at the White House approximately once a week at
what became known as the weekly strategy meetings (which the
President agreed to conduct pursuant to Morris' three
conditions). The topics discussed at the weekly strategy
meetings included media, polling, speech writing, and policy
and issue positioning.\65\ All the attendees of the weekly
strategy meetings were involved in the process of creating the
advertising in various degrees.\66\ Morris listed the following
individuals as a ``typical guest list'' for the White House
weekly strategy meetings:
---------------------------------------------------------------------------
\65\ See Morris deposition, p. 124.
\66\ Id. at p. 187.
the President; the Vice President; Leon Panetta, chief
of staff; Harold Ickes, deputy chief of staff; Evelyn
Lieberman, deputy chief of staff; George
Stephanopoulos, senior adviser; Don Baer, director of
communications; Doug Sosnik, political affairs
director; Ron Klain, vice president's chief of staff;
Sandy Berger, deputy national security adviser; Senator
Chris Dodd of Connecticut; John Hilley, legislative
director; Maggie Williams, First Lady's chief of staff;
Mike McCurry, press secretary; Henry Cisneros,
secretary of Housing and Urban Development; Mickey
Kantor, secretary of Commerce; Mack McLarty, adviser
and former chief of staff; Peter Knight, campaign
manager; Ann Lewis, deputy campaign manager and
director of communications; Ron Brown, secretary of
Commerce, until his death; Erskine Bowles, deputy chief
of staff, until his departure; Jack Quinn, vice
president's chief of staff until his appointment as
White House counsel; Dick Morris, consultant; Doug
Schoen, consultant; Mark Penn, consultant; Bob Squier,
consultant; Bill Knapp, consultant.\67\
---------------------------------------------------------------------------
\67\ See Dick Morris, Behind the Oval Office (1997), p. 26, note.
The weekly strategy meetings, which ``became the central forum
for campaign strategy and decisions,'' are a definitive example
of the illegal and improper coordination between the White
House, the DNC, and Clinton/Gore.\68\ Morris chaired the
meetings, distributed his weekly agendas summarizing the advice
the consultants and he planned on giving the President, and
received substantive input from most of the attendees.\69\
---------------------------------------------------------------------------
\68\ Id. at p. 26.
\69\ Id.
---------------------------------------------------------------------------
The Implementation of Morris' Advertising Campaign Resulted in
Unprecedented, Illegal, and Improper Coordination Between the DNC,
Clinton/Gore, and the White House
Ickes' management of the DNC, particularly its fund-raising
operation, was designed in large part to quench the White
House's thirst for advertising money. The flip side of the same
coin was that the White House, the DNC, and Clinton/Gore '96
engaged in extensive coordination to develop, fund, and run
that advertising. Simply stated, all practical distinctions
between the White House, the DNC, and Clinton/Gore were
eliminated.
The White House, the DNC, and Clinton/Gore '96 retained a
number of media and advertising consultants, but made little
distinction concerning which consulting work was being
performed on behalf of each entity. The consultants' work was
shared by all three entities, without regard to laws limiting
coordination between the DNC and Clinton/Gore '96 or
restrictions against White House participation in political
activity. The improper coordination between the DNC and
Clinton/Gore '96 is demonstrated by the failure of the
political consultants to know which entity they were working
for with respect to specific assignments. Moreover, these same
consultants often were unaware of which entity was paying for
their consulting work.
According to Morris, DNC General Counsel Joe Sandler and
Lyn Utrecht, Clinton/Gore '96's counsel, ``laid down the rules
of what advertisements--of what the content of advertisements
and the timing of the media buys could be in connection with
the Democratic National Committee advertising and in connection
with the Clinton-Gore advertising.'' 70 Morris did
not receive any legal advice from Sandler or Utrecht, however,
concerning the type of coordination between the White House,
Clinton-Gore '96, and the DNC that was permissible when
creating the issue advocacy advertisements.71 In
fact, Morris testified that he ``never received any information
from them which would have indicated any limitations on
discussions with the President, the Vice President, or members
of the White House staff concerning the advertising that was
done by the DNC'' and that he was ``never advised that there
were constraints on that.'' 72 Moreover, Morris
testified ``there was no indication of any such constraints in
connection with DNC coordination with the Clinton-Gore
campaign.'' 73 He recalled a meeting at Utrecht's
office where he specifically was informed that the identical
pollsters, consultants, and media creators would be used to
prepare advertisements paid for by the DNC and advertisements
paid for by Clinton/Gore '96, and, ``since it was the same
people [working on both DNC and Clinton/Gore '96
advertisements], that the closest of coordination was perfectly
acceptable legally.'' 74 Indeed, the coordination
between the DNC and Clinton/Gore '96 was so extensive because
the consultants used by each ``were the same people.''
75
---------------------------------------------------------------------------
\70\ See Morris deposition, pp. 117-18. In the July 26, 1995
agenda, Morris first explained that the campaign would use DNC funds to
pay for advertisements. Id. at p. 288; see also July 26, 1995 meeting
agenda (Ex. 5). Morris testified that:
This agenda was issued after the President had approved
and, in fact, was airing crime ads funded by Clinton-Gore.
It was also subsequent to my conversation with Bowles in
which he advised me to come up with a plan B after I had
investigated DNC media and found that that was precisely
what I wanted to do anyway.
So, this marks the beginning of the DNC phase of the
media campaign and here I recommend that we do media aimed
at swing Republican Senators on Medicare during the recess.
Morris deposition, p. 289.
---------------------------------------------------------------------------
\71\ Id. at pp. 146-47.
\72\ Id. at p. 147.
\73\ Id. at p. 148.
\74\ Id. Morris was never instructed by the DNC or Clinton/Gore '96
attorneys that there are legal restrictions against coordinating the
consultants and media team efforts with White House officials. Id. at
p. 164. Indeed, at the time of his deposition on August 20, 1997,
Morris still was unaware that such restructions existed. Id.
\75\ Id. at p. 149.
---------------------------------------------------------------------------
The coordination in the advertising campaign became so
extensive that Mark Penn, a consultant at the firm Penn &
Schoen who worked on the President's campaign with Morris, had
a White House office from September through December of 1995
located in a coat closet adjacent to Sosnik's
office.76 Penn had access to a computer and a
dedicated campaign telephone line.77 Eventually,
Morris had the President ``evict'' Penn from the office,
stating that he ``did not think it was appropriate for a
political consultant to have an office in the White House,
particularly not one that was located 40 or 50 feet away from
where the speeches were being written when that consultant had
a plethora of commercial clients who had interests in those
speeches.'' 78
---------------------------------------------------------------------------
\76\ Id. at p. 191; See Deposition of Mark J. Penn, June 19, 1997,
pp. 131-33.
\77\ See Morris deposition, p. 191.
\78\ Id. at pp. 192-93.
---------------------------------------------------------------------------
The coordination between the DNC and Clinton/Gore '96
extended to the exact day the media team chose to run a DNC
advertisement versus a Clinton/Gore '96 advertisement. For
example, Morris testified as follows concerning coordination
between placing a DNC or a Clinton/Gore '96 advertisement:
Q: Now, did anyone ever caution you or advise you as
to whether or not a coordination of expenditures like
this by the DNC and Clinton/Gore would run afoul of any
laws or regulations?
A: No, and indeed, Sandler and Utrecht advised us to
do this coordination because their view was that you
had to stop your DNC advertising four weeks before a
primary, and then you had to start again with Clinton-
Gore.
There were some States where we literally pulled an
ad off the air, and then the next day went on with a
Clinton-Gore ad so that we could continue our hit in
the State, but it was an entirely different ad because
it was funded differently.79
---------------------------------------------------------------------------
\79\ Id. at pp. 339-40.
Further demonstrating the close coordination between the
DNC and Clinton/Gore '96, the July 26, 1995 meeting agenda
states that, with regard to DNC issue advocacy advertising,
``[u]se DNC to pay for it, we [the joint White House, DNC and
Clinton/Gore media team] control production.'' 80
Morris testified he was:
---------------------------------------------------------------------------
\80\ See Ex. 5.
afraid that there would be an effort made by Ickes to
make the DNC ads produced by a separate media creator
and I was making the point here that I wanted the same,
for us to control the creation of both ads so that we
[the November 5th Group] were not sending contradictory
messages.81
---------------------------------------------------------------------------
\81\ Morris deposition, p. 296.
Moreover, specific media planning and fund-raising details were
contained in virtually each weekly agenda produced to the
Committee. Indeed, Morris testified that the February 22, 1996
agenda contained ``the specific underlying factual detail as to
how much money of Clinton-Gore we needed for each week'' and
the need to use Clinton/Gore '96 money to pay for
advertisements that could not be paid for by the
DNC.82
---------------------------------------------------------------------------
\82\ Id. at pp. 338-39; see also Feb. 22, 1996 meeting agenda (Ex.
6). The coordination between the DNC and Clinton/Gore '96 extended to
the budgeting of advertising expenditures. In order to project his
advertising budget, Morris received periodic estimates of the incoming
funds from both the DNC and Clinton/Gore '96. See Morris deposition,
pp. 304-06. Morris testified that his ``proposal for advertising
totaled 50 million,'' with $17 million from Clinton/Gore and $33
million from the DNC. Id. at p. 304.
---------------------------------------------------------------------------
Morris believed the use of issue advocacy to pay for the
President's advertising throughout most of 1995 was appropriate
because it ``had basically nothing to do with re-election
advertising.'' 83 In support of that theory, Morris
testified as follows:
---------------------------------------------------------------------------
\83\ Id. at p. 138.
I was not very concerned . . . throughout most of '95
with the President's reelection, per se, because I felt
that for the President to have a hope of being re-
elected, he first had to win the fight over the budget.
He first had to defeat the agenda of the Gingrich-Dole
Congress and win the battle associated with the budget
and tax cut issues, and I felt that winning that battle
was a condition prior to being able to be re-elected
President. I felt that if he failed to win that fight,
there was no way that he would ever be re-
elected.84
---------------------------------------------------------------------------
\84\ Id. at p. 135.
Regarding whether the DNC issue advocacy advertisements would
provide any benefit to the President's re-election effort,
---------------------------------------------------------------------------
however, Morris testified:
. . . at any point in a presidency, any advertising, any issue
advertising the President does whether for health care reform
or for the stimulus package or to win the budget fight would
eventually accrue to his benefit in the reelection.
* * * * *
I believe that once we won the budget fight, first of all,
it was a very important victory for the party, it was a very
important substantive issue the President was heavily invested
in, and I believe that winning that fight, itself, was a
prerequisite to being able to win the election.85
---------------------------------------------------------------------------
\85\ Id. at p. 293.
Another manner of coordination between the White House, the
DNC and Clinton/Gore '96 occurred through the same consultants'
use of information obtained for each respective entity in the
planning and execution of advertisements. While Morris
testified that the consultant team determined whether an
advertisement was on behalf of the DNC or Clinton/Gore '96
based on the results of mall tests and other forms of feedback,
even the funding for these polls was shared between the DNC and
Clinton/Gore '96.86 In addition, while the nature of
a particular advertisement allegedly determined whether it was
paid for by the DNC or Clinton/Gore '96, Morris conceded that
advertisements originally planned as DNC ads were switched to
Clinton/Gore '96.87 The advertisements were created
in the same room, by the same consultants with identical
information.88 In fact, Morris often was unaware of
which entity actually paid for advertisements; 89
apparently such distinctions were unimportant. Morris testified
that the only thing separating DNC and Clinton/Gore '96
materials ``was a bright line running through the middle of our
conference table of DNC versus Clinton-Gore.'' 90
---------------------------------------------------------------------------
\86\ Id. at pp. 160-61.
\87\ Id. at pp. 157-60.
\88\ Id. at p. 161.
\89\ Id. at pp. 279-80.
\90\ Id. at p. 161.
---------------------------------------------------------------------------
Morris testified that ``[t]here was a review [of the
polling] as to the extent to which it was related to the
reelection campaign or the Democratic Party generically, but
all of it was treated as political.'' 91 In fact,
the only attempts to separate the polling data between the DNC
and Clinton/Gore '96 came after the polling was
completed.92 Morris understood that, after polls
were conducted, Ickes and Utrecht reviewed them and apportioned
the cost between the DNC and Clinton/Gore '96 based on the
content of the questions.93
---------------------------------------------------------------------------
\91\ Id. at p. 90.
\92\ Id. at p. 90.
\93\ Id. at p. 91.
---------------------------------------------------------------------------
Ickes apparently was aware that this close coordination in
advertising and polling created legal risks; indeed, he pressed
Morris to sign an indemnification agreement so that Morris
would be responsible for any FEC fines. Morris testified:
Ickes was pressing for an indemnification . . . he
wanted an indemnification where basically, any
violation that the FEC found, we would be indemnifying
the campaign and saying, ``It's our fault guys.'' And
what we were offering was an indemnification where, if
there was any FEC fine of the campaign that resulted
from our refusal or inability to produce documentation
about the time buy that we would be liable, but that if
the FEC ruled that the underlying expenditures
themselves were illegal under FEC rule[s] and imposed a
fine, we took the position that we were doing this
pursuant to the legal advice we were given from Sandler
and Utrecht and the instruction we were given from
Ickes to follow their legal advice, and therefore,
there was no reason for us to indemnify
them.94
---------------------------------------------------------------------------
\94\ Id. at pp. 361-62.
---------------------------------------------------------------------------
white house coordination in the design and implementation of issue
advocacy advertising
The relationship between Morris and Bill Curry provides an
example of the coordination between the White House and the DNC
and Clinton/Gore media consultants. Curry was the White House
staff member specifically hired to work with
Morris.95 The President suggested that Morris work
with Curry to implement a ``series of principles'' to guide the
President's ``comeback in the face of the Republican victory.''
96 Morris made it clear to the President, however,
that he ``needed Curry to work directly with [him] to implement
the entire strategy, not just a piece of it.'' Morris testified
he and Curry:
---------------------------------------------------------------------------
\95\ See Morris deposition, p. 72.
\96\ Dick Morris, Behind the Oval Office (1997), pp. 37-38.
would talk frequently, and he would give me his
thinking as to what he thought we should be saying in
our advertisements, and I would listen to it and I'd
take account of it, and I would--and it was one of a
number of inputs I received on that.97
---------------------------------------------------------------------------
\97\ See Morris deposition, p. 74.
In addition to the advertising and consulting work, Morris and
Curry worked on Presidential ``policy initiatives,'' the
President's position on issues of national concern,
congressional strategies, speech writing, polling results, and
media plans on a regular basis.98 Morris also
testified that ``a number of people at the White House [and] at
the DNC . . . participated at one point or another in the
process of thinking up ideas for a media.'' 99
---------------------------------------------------------------------------
\98\ Id. at pp. 73-74.
\99\ Id. at p. 76.
---------------------------------------------------------------------------
As a result of the early advertising using Clinton/Gore '96
funds and the subsequent use of DNC-funded issue advocacy
advertisements, Morris divided White House involvement in
campaign advertising into two distinct time periods: April 1995
through June 1995; and July 1995 through August
1996.100 From April through June 1995, the media
consultants conducted polls and created advertisements
primarily for Clinton/Gore '96 because they had not yet adopted
the concept of using DNC funded issue advocacy
advertising.101 From July 1995 through August 1996,
the media consultants conducted polls and created
advertisements using DNC funded issue advocacy advertising and,
to a limited extent, Clinton/Gore '96 funds.102
Thus, the coordination that occurred between White House
officials, the DNC, and Clinton/Gore '96 is analyzed in these
distinct time periods.
---------------------------------------------------------------------------
\100\ Morris resigned during the Democratic National Convention in
August 1996 due to a personal scandal. See Dick Morris, Behind the Oval
Office (1997), pp. 331-34.
\101\ Morris deposition, pp. 78-90.
\102\ Id. at pp. 125, 154-55.
---------------------------------------------------------------------------
Morris testified that among the White House officials who
primarily coordinated with the DNC and Clinton/Gore '96 media
consultants and representatives were: the President, the Vice
President, Leon Panetta, Harold Ickes, George Stephanopoulos,
Erskine Bowles, and Doug Sosnik.103 Morris described
the involvement of each of these individuals as follows:
---------------------------------------------------------------------------
\103\ Id. at p. 76.
---------------------------------------------------------------------------
The President
The President had significant involvement with the Clinton/
Gore '96 and DNC media consultants in the areas of polling,
advertising, speech-writing, legislation strategy, and general
policy advice. The President: (1) reviewed, modified and
approved all advertising copy; (2) reviewed, adjusted and
approved media time buys; 104 (3) reviewed and
modified polling questions; and (4) received briefings on and
analyzed polling results.105 Indeed, a significant
amount of the polling work the consultants performed for the
President ``related to substantive issues in connection with
his job as President, but it [also] could be considered
political.'' 106
---------------------------------------------------------------------------
\104\ Time buys are the ``list of markets . . . to buy ads in and
how much you are going to spend in each media market.'' Id. at p. 83.
For example, at the March 2, 1995 weekly strategy meeting, the
President decided Clinton/Gore '96 would pay for the time buys during
that period. Id. at pp. 84-86.
\105\ Id. at pp. 80-84.
\106\ Id. at p. 81.
---------------------------------------------------------------------------
The President wanted to keep total control over the
advertising campaign designed by Morris and the media
consultants.107 From May through June 1995, Morris
testified that the President ``insisted on seeing every
question before [the consultants] asked it in the
questionnaire.'' 108 In addition to the weekly
strategy meetings, Morris met with the President privately to
discuss the media campaign.109 For example, if the
media team ``had to do an ad and there wasn't a strategy
meeting scheduled conveniently,'' i.e., a rapid response to
Republican advertisements, Morris would schedule a private
meeting with the President.110
---------------------------------------------------------------------------
\107\ Id. at p. 167.
\108\ Id. at pp. 176-77.
\109\ Id. at p. 190.
\110\ Id.
---------------------------------------------------------------------------
The President's participation began with initial
discussions concerning the specific details of DNC and Clinton/
Gore '96 advertisements.111 He would review the
story lines and scripts and occasionally make detailed and
significant changes.112 Morris testified that the
President was the ``day-to-day operational director'' of the
media campaign.113 The President ``worked over every
script, watched each ad, ordered changes in every visual
presentation, and decided which ads would run when and where.''
114 Morris further testified that the President
``was as involved [in the DNC and Clinton/Gore '96 media
campaign] as any of his media consultants were,'' ``[e]very
line of every ad came under his informed, critical, and often
meddlesome gaze,'' such that ``[t]he ads [for both the DNC and
Clinton/Gore '96] became . . . the work of the President
himself.'' 115 From July 1995 through August 1996,
Morris described the President's involvement in the media
campaign as follows:
---------------------------------------------------------------------------
\111\ Id. at p. 177.
\112\ Id.
\113\ Id. at pp. 182-83.
\114\ Id. at p. 183.
\115\ Id. at pp. 182, 183, 184-88, 189; see also Dick Morris,
Behind the Oval Office (1997), p. 144.
The President would be heavily involved in the first
issue, the discussion of the strategy, and he would
look at the ad--and we would present to him at each of
these strategy meetings the scripts of media that we
wanted to run and the visuals, the animatics that had
been tested, and would brief the assembled group, which
included the President and the Vice President, on the
results of the mall test. And armed with those results,
looking at the visual and looking at the script, the
President would make fairly specific suggestions as to
what he wanted or didn't want included in the final ad.
We would then take those suggestions, and suggestions
that were also made by all the other people in the
group in the room, including Senator Dodd and
Stephanopoulos and a bunch of folks, and we would then
have a creative meeting, which was a group meeting of
the consultants, right after the-the day after the
strategy meeting.116
---------------------------------------------------------------------------
\116\ See Morris deposition, pp. 168-69. Morris and the other
consultants also assisted the President with speech writing. Id. at p.
197.
Morris recounted a conversation with the President that
demonstrates both the high level of White House coordination
with the DNC and Clinton/Gore '96 advertising and its true
purpose of supporting the President's re-election. Morris
recalled a private Oval Office meeting with the President to
discuss the use of comments by Speaker Gingrich and Senator
Dole in advertisements.117 The President stated that
he did not want to run ``the Dole Medicare quote in our
national ad buy'' because he feared Senator Dole might lose the
Republican nomination if he were associated with the proposed
Medicare reforms.118 Because the President and
Morris wanted to run against Senator Dole,119 Morris
wrote an advertisement that ``in early November . . . featured
Gingrich's quote but not Dole's,'' and this advertisement ran
``for three weeks in about 40 percent of the country during the
[federal government] shutdown.'' 120
---------------------------------------------------------------------------
\117\ See Dick Morris, Behind the Oval Office (1997), p. 184.
\118\ Id.
\119\ Id.
\120\ Id.
---------------------------------------------------------------------------
Based on the evidence provided by Morris, it is evident
that of all the White House officials involved in the
advertising campaign, the President himself was the most
actively and intimately involved.
The Vice President
From April through June 1995, the Vice President was
involved with the DNC and Clinton/Gore '96 concerning polling,
advertising, speech-writing, legislation, policy and general
advice to a lesser degree than the President.121 The
Vice President reviewed, modified and approved
advertisements.122 From July 1995 through August
1996, the Vice President attended all the strategy meetings and
would make suggestions to proposed
advertisements.123 In placing the level of
individual involvement in the media campaign and polling work
on a scale from one to 100 (with 100 representing the
President's level of involvement), the Vice President's
participation was roughly 40 percent of the President's level
of involvement.124
---------------------------------------------------------------------------
\121\ See Morris deposition, pp. 187-88.
\122\ Id.
\123\ Id. at p. 186.
\124\ Id. at pp. 187-88.
---------------------------------------------------------------------------
Leon Panetta
From April through June 1995, he had essentially the same
involvement in the media campaign as did the Vice President,
which included polling, advertising, speech-writing,
legislation, policy and general advice.125 From July
1995 through August 1996, Morris placed Panetta's level of
involvement at approximately 50 to 60 percent of the
President's level of involvement.126
---------------------------------------------------------------------------
\125\ Id. at pp. 95-96.
\126\ Id. at p. 188.
---------------------------------------------------------------------------
Harold Ickes
Morris believed that Ickes was in ``minute to minute
control over all field activities in connection with the
Clinton-Gore campaign or the DNC.'' 127 Morris
understood that Ickes essentially ran the DNC and, until Peter
Knight arrived, he also ran the Clinton/Gore '96 re-election
campaign.128 Morris testified that:
---------------------------------------------------------------------------
\127\ Id. at p. 236.
\128\ Id.
[Ickes] was the one who had to approve any
expenditure of money, and he was the one who had to be
informed of any polling and had to be informed of any
media.
* * * * *
I had the impression that he was in charge of every
aspect of the campaign except for the substance of the
message which I was in charge of.129
---------------------------------------------------------------------------
\129\ Id. at pp. 236-37.
Regarding Ickes' involvement with the advertising campaign,
Morris testified that, from April through June 1995, Ickes had
approximately the same level of involvement in the media
campaign as did the President.130 Ickes did not have
final approval (as the President did) and made fewer
substantive changes than the President, but he ``focused with
greater scrutiny than the President on the amount and the
distribution of the time buy.'' 131 For example,
Ickes approved every questionnaire, script, time buy or other
campaign expenditure.132 He also chaired all the
meetings with Sandler and Utrecht in which it was determined
whether an advertisement should come from the DNC or Clinton/
Gore '96.133 In addition, Ickes was ``heavily
involved'' in discussions concerning how much to spend on
advertising and whether the President should accept Federal
matching funds.134 From July 1995 through August
1996, Ickes' level of involvement was roughly 10 to 20 percent
of the President's level of involvement in the advertising
campaign.135
---------------------------------------------------------------------------
\130\ Id. at p. 96.
\131\ Id.
\132\ Id. at p. 221.
\133\ Id.
\134\ Id. at p. 97.
\135\ Id. at p. 188.
---------------------------------------------------------------------------
George Stephanopoulos
Stephanopoulos was a senior White House advisor. From April
through June 1995, Stephanopoulos did not have any significant
involvement in the media process.136 He became more
involved in September of 1995 and remained actively involved
through Morris' departure from the campaign in August of
1996.137 On behalf of both the DNC and Clinton/Gore
'96, he reviewed advertising copy before it was approved and
suggested changes to advertising visuals and advertising
themes.138 He also was in charge of the vetting
process for factual accuracy for both DNC and Clinton/Gore '96
advertisements.139 Beginning in May 1995,
Stephanopoulos played a greater role in reviewing the polling
conducted by Morris.140 By September 1995,
Stephanopoulos' role ``evolved to a point where he received all
questionnaires in advance and approved the questions and
frequently made suggestions for modifications, additions, or
deletions.'' 141 Morris also called Stephanopoulos
``[e]ach morning at seven-twenty . . . with the data from the
previous night's interviewing so he could report to the daily
seven-thirty meeting that Leon [Panetta] held with the top
White House staffers.'' 142 From July 1995 through
August 1996, Stephanopoulos' level of involvement was roughly
70 to 80 percent of the President's level of involvement in the
media campaign.143
---------------------------------------------------------------------------
\136\ Id. at p. 101.
\137\ Id. at p. 103.
\138\ Id. at p. 101-02.
\139\ Id. at pp. 102, 106, 170.
\140\ Id. at p. 107.
\141\ Id.
\142\ See Dick Morris, Behind the Oval Office (1997), p. 183.
\143\ See Morris deposition, p. 188.
---------------------------------------------------------------------------
Erskine Bowles
Bowles was a White House deputy chief of staff (and now
serves as chief of staff). He attended the weekly strategy
meetings and acted as a liaison between Morris and the
President.144 Bowles also supported Morris' view
that advertising should not be conducted on a piecemeal
basis.145 At Bowles' suggestion, Morris divided the
advertising plan into four components, each costing
approximately $10 million.146 From July 1995 through
August 1996, Morris placed Bowles' level of involvement at
roughly 10 to 20 percent of the President's level of
involvement in the media campaign.147
---------------------------------------------------------------------------
\144\ Id. at p. 110.
\145\ Id. at p. 111.
\146\ Id.
\147\ Id. at p. 188.
---------------------------------------------------------------------------
Doug Sosnik
From July 1995 through August 1996, Sosnik's level of
involvement was roughly 30 to 40 percent of the President's
level of involvement in the media campaign.148
---------------------------------------------------------------------------
\148\ Id.
---------------------------------------------------------------------------
The President and Vice President Agreed to Limit the Amount of Money
They Would Spend on Their Campaign, and the Violation of That Agreement
May Constitute a Violation of 18 U.S.C. Sec. 371
In addition to the White House's coordination with and
control of the DNC in producing and paying for ads containing
electioneering messages on behalf of the President's
reelection, there is a question as to whether the fundraising
and expenditures necessitated by the desire to run those ads
constitute a ``conspiracy to defraud the government.''
149
---------------------------------------------------------------------------
\149\ Under 18 U.S.C. Sec. 371, ``[i]f two or more persons conspire
either to commit any offense against the United States, or . . . to
defraud the United States, or any agency thereof, and commit an overt
act in furtherance of the conspiracy, then they have committed a
federal criminal offense'' (emphasis supplied).
---------------------------------------------------------------------------
Under the FECA, a presidential candidate who accepts
federal matching funds cannot exceed the applicable expenditure
limits for his campaign.150 To ensure that the
statutory scheme and its purposes are complied with, the FECA
requires that candidates who receive matching funds under 26
U.S.C. Sec. 9037 certify that they will not exceed the FECA
expenditure limits.151
---------------------------------------------------------------------------
\150\ 26 U.S.C. Sec. 9035. The expenditure limits are set out at 2
U.S.C. Sec. 441a(b)(1)(A).
\151\ 26 U.S.C. Sec. 9033(b).
---------------------------------------------------------------------------
Here, the certification was made, and the government wrote
its check only after being told that what in fact was already
occurring (the raising and spending of private money) would not
occur. The foresworn fundraising and spending was undertaken
using the DNC as a conduit.
As pointed out above, the intent of the FECA in providing
limited federal funding is to remove the candidate from the
fundraising process and to prevent the raising of large private
campaign contributions. The deal the taxpayers make with the
candidate is that in exchange for their funding, the candidate
will forswear outside money, thereby making it less likely that
the election will be influenced or appear to be influenced by
big money. Obviously, in the matter before us, the clear
purpose of the law was circumvented. If a candidate can easily
circumvent those limitations through coordination with a third
party, such as by raising unlimited sums for a party committee
the candidate controls, that objective of the statute is
completely undermined.
The ``defraud the United States'' portion of section 371 of
title 18 is broad in scope and is applicable to any activity
that has the effect of defrauding the government. This is the
case even if no other criminal statute has been violated. In
other words, under section 371 even an act that is not itself a
violation of any statute can result in criminal liability if
the government is defrauded. Accordingly, the quotation
attributed to Attorney General Reno that ``a conspiracy has to
be a conspiracy to violate specific laws'' is
incomplete.152 That statement may be correct in
regard to the portion of section 371 dealing with conspiracy
``to commit an offense against the United States,'' but
apparently does not address the conspiracy ``to defraud the
United States,'' which is the other portion of section 371. So
even though it appears that the FECA may have been violated,
even if the FECA was not violated, the activity at issue may
still constitute a conspiracy to defraud the United States.
---------------------------------------------------------------------------
\152\ David Johnston, ``Campaign Finance: Wider Implications;
Justice Dept. Reopens Campaign Plot Case,'' The New York Times,
December 11, 1997, p. A24.
---------------------------------------------------------------------------
For instance, in United States v. Touhey,153 the
court decided a case in which the defendants conspired to gain
control of a bank without reporting the transaction to the
FDIC. Because each co- conspirator purchased less than 10% of
the bank's stock, the group thereby evaded the reporting
requirement. Violations of the reporting requirements carry
only civil, not criminal penalties. The court held that the
defendants' acts defrauded the government by interfering and
obstructing the FDIC's lawful government function of
administering the banking laws. Therefore, criminal sanctions
were imposed even though the underlying acts were not criminal
violations.
---------------------------------------------------------------------------
\153\ 867 F.2d 534 (9th Cir. 1989).
---------------------------------------------------------------------------
The Supreme Court has read section 371 even more broadly.
It has consistently held that the participants in a conspiracy
need not conspire to violate any particular criminal or civil
statute if they conspire to defraud the government. In the
leading case, Dennis v. United States,154 the
defendants submitted false affidavits to the NLRB purporting to
satisfy the requirement of federal labor law that union
officials not be members of the Communist Party. Such an
affidavit was required to be filed before the union could call
upon the NLRB to investigate charges. The defendants were
alleged to have falsely certified that they were not Communist
Party members. The government charged the defendants with
conspiracy to defraud the NLRB under section 371.
---------------------------------------------------------------------------
\154\ 384 U.S. 855 (1966).
---------------------------------------------------------------------------
The Supreme Court found that, unable to secure the benefits
of the NLRB without submitting non-Communist affidavits, the
union officers deliberately concocted a fraudulent scheme. In
furtherance of that scheme, they submitted false affidavits,
and then used the NLRB facilities made available to the
union.155 The Court held that such a scheme was a
conspiracy to defraud the United States, whether or not the
affidavits were themselves violations of the false statements
statute. As the Court found, section 371 covers ``any
conspiracy for the purpose of impairing, obstructing or
defeating the lawful function of any department of
Government.'' 156 For the Court, the key facts of
the conspiracy in Dennis were ``that petitioners and their co-
conspirators could not have obtained the Board's services and
facilities without filing non-Communist affidavits; that the
affidavits were submitted as part of a scheme to induce the
Board to act; that the Board acted in reliance upon the fact
that affidavits were filed; and that these affidavits were
false. Within the meaning of section 371, this was a conspiracy
to defraud the United States or an agency thereof.''
157
---------------------------------------------------------------------------
\155\ Id. at p. 861.
\156\ Id.
\157\ Id. at p. 862.
---------------------------------------------------------------------------
The advertisements themselves may be specific and credible
evidence that overt acts were carried out in support of the
conspiracy to evade the expenditure limits and other FECA
requirements. The resulting interference and obstruction of the
FEC's lawful function of administering the election laws as a
result of either a civil or criminal violation of the FECA may
form the basis for a criminal conspiracy to defraud the
government under section 371.158
---------------------------------------------------------------------------
\158\ In the most famous example of an attorney general's use of
the discretionary provision of the Independent Counsel Act, Attorney
General Meese sought the appointment of an independent counsel to
investigate Col. Oliver North. The immediate issue presented in that
case was whether any criminal law may have been violated by Col.
North's diversion of CIA funds to the Nicaraguan contra rebels in light
of the Boland Amendment which prohibited the use of CIA funds for that
purpose. Violation of the Boland Amendment carried no civil or criminal
penalties.
---------------------------------------------------------------------------
As far as the President's use of the DNC to run the money
through, a person cannot protect himself from liability by
doing something in another's name that he is not allowed to do
himself. Direct criminal prohibitions are not skirted through
indirect violation. Whittaker v. Whittaker Corp.159
---------------------------------------------------------------------------
\159\ 639 F.2d 516 (9th Cir. 1981) (corporate insider violates
section 6(a) of the Securities Act of 1934 by purchasing company stock
for his mother's account over which he ``exercised complete control''
and selling stock for his own account within six months; this
prohibition applies to such person's transactions ``for his benefit'').
---------------------------------------------------------------------------
Also, ``[m]en must turn square corners when they deal with
the Government.'' Rock Island & L.R.R. Co. v. United
States.160 Ordinary American citizens dealing with
the Internal Revenue Service, for example, come to learn this
quickly. Under our system of law, the same obligation is placed
on the President.
---------------------------------------------------------------------------
\160\ 254 U.S. 141, 143 (1920).
---------------------------------------------------------------------------
Coordination Between the DNC, Clinton/Gore, the White House, and Union
Organizations
Morris testified that in August 1995 Ickes organized and
chaired a White House meeting in the Roosevelt Room between
representatives of the DNC and Clinton/Gore '96 media team and
approximately seven representatives of various labor
unions.161 Morris recalled the meeting was attended
by, among other individuals, representatives of the National
Education Association, the American Federation of State,
County, and Municipal Employees, the American Federation of
Labor-Congress of Industrial Organizations, Sosnik,
Stephanopoulos and Ickes.162 During the meeting,
both the union representatives and the DNC and Clinton/Gore '96
media team displayed advertisements each had run or were
considering running.163 Morris testified that the
union representatives:
---------------------------------------------------------------------------
\161\ Id. at pp. 216, 223.
\162\ Id. at pp. 216-17.
\163\ Id. at p. 217.
Spoke in turn about what their media plans were that
they were planning to advertise in States of Republican
Senators, they were going to spend $1 million over the
course of the next year on doing it, here are the ads
they had already run, here were the ads that they were
about to run. It was a full briefing of us by them on
their media plans.164
---------------------------------------------------------------------------
\164\ Id. at p. 222.
Morris testified that the union representatives ``suggested
to us [Clinton/Gore '96 and the DNC consultants] that there be
coordination of the advertising . . . issue-oriented ads about
the budget.165 Morris also recalled the union
representatives suggesting Clinton/Gore '96 should run
advertisements in states where the unions were not advertising
and, in particular, he recalled the following specific
suggestion of coordination:
---------------------------------------------------------------------------
\165\ Id. at p. 217.
And I remember in particular they said, for example,
we're going to be on in Vermont to go after Jeffords,
and you don't care about winning Vermont politically,
so we'll do Vermont and you don't.166
---------------------------------------------------------------------------
\166\ Id.
While Morris could not recall the name of the individual who
suggested the coordination, he believed it may have come from
the union representatives' time buyer (possibly affiliated with
Vic Fingerhut's agency).167 Morris testified that
Ickes was in favor of the coordination.168 In
contrast, Morris testified that he rejected a coordinated
advertising effort between the White House, the DNC, Clinton/
Gore '96, and the unions because he believed the union's media
strategy was flawed.169
---------------------------------------------------------------------------
\167\ Id. at p. 222.
\168\ Id. at pp. 222, 224.
\169\ Id.
---------------------------------------------------------------------------
Conclusion
One does not expect government officials, with salaries
paid by the taxpayers, to manage directly the day-to-day
operations of a political party. Yet that is precisely what
happened in 1995-96. Ickes ran the DNC as the President's
``designee.''
The White House's unprecedented level of control over the
DNC arose because the DNC was not in any sense independent from
the President's re-election effort; the DNC was merely a
vehicle for financing Morris' advertising blitz. With the
Democratic Party serving primarily as a re-election vehicle,
the President wanted control. Ickes obliged that desire, and
Fowler was unable to go over Ickes' head, because Ickes was
merely doing the President's bidding.
The nation's oldest political party simply became an arm of
the White House with the primary mission of re-electing the
President. The illegalities and improprieties discussed in this
report stem from this simple fact. The President's attempt to
slough responsibility for illegal and improper fund-raising by
the DNC in 1995-96 by pinning blame on ``the other campaign''
rings hollow in the light of the facts uncovered by the
Committee's investigation and outlined in this report.
The DNC Dismantled Its System for Vetting Contributions
As the DNC tried to slake the White House's historic thirst
for campaign cash, it dismantled its system for reviewing
contributions. The Committee concludes that the DNC, at a
minimum, operated with a conscious disregard for the legality
of contributions during the 1996 election cycle. Simply stated,
the DNC knew how to implement procedures reasonably calculated
to diminish the risk of accepting illegal or inappropriate
contributions. The DNC had such procedures in place before the
1996 election cycle, and the DNC has such procedures now. Yet
during the 1996 election cycle, the DNC did virtually nothing
to screen significant contributions.
The 1992 Vetting System
The DNC was not always indifferent to the legality and
appropriateness of large contributions. In preparation for the
1992 election cycle, Rob Stein, a DNC consultant, and later Ron
Brown's Chief of Staff at the Department of Commerce, worked
with then-DNC General Counsel Carol Darr to ensure that the DNC
had an effective procedure in place to vet
contributions.1 Darr, who had worked on the 1988
Dukakis presidential campaign, wanted to institute a system at
the DNC resembling the one used by the Dukakis campaign. Darr
and Stein thus met with Dan Small, who had been in charge of
vetting for the Dukakis campaign.2
---------------------------------------------------------------------------
\1\ Deposition of Robert J. Stein, June 17, 1997, p. 57.
\2\ Id. at p. 58.
---------------------------------------------------------------------------
Following this meeting, the DNC implemented a system
similar to the Dukakis campaign's for vetting contributions
over $10,000. Any check for $10,000 or more was to go through a
vetting desk.3 This desk was supervised by Barbara
Stafford, an attorney in the DNC's Office of General Counsel.
Stafford had full-time responsibility for vetting
contributions, as did her assistant, David Blank.4
In fact, the 1992 vetting system involved an entire group of
DNC staff, usually numbering between six and 10, who did
nothing but vet major contributions.5 Current DNC
Deputy General Counsel Neil Reiff has confirmed to the
Committee that there was once a separate ``unit'' of about
seven or eight people, supervised by Barbara Stafford, that
vetted checks.6 Likewise, current DNC General
Counsel Joseph Sandler testified that ``for the 1992 election a
procedure known as Major Donor Screening Committee'' was in
place.7
---------------------------------------------------------------------------
\3\ Id.
\4\ Id. at p. 81.
\5\ Deposition of Melissa A. Moss, June 11, 1997, pp. 12, 17.
\6\ Deposition of Neil Reiff, June 20, 1997, p. 30.
\7\ Deposition of Joseph E. Sandler, May 15, 1997, p. 47.
---------------------------------------------------------------------------
In short, the 1992 vetting system involved a special
vetting desk, staffed by six to 10 people, directly supervised
by the DNC's Office of General Counsel.
1994: Vetting Fades
Carol Darr and Barbara Stafford were no longer in the
Office of General Counsel during the 1994 election cycle.
Darr's replacement, Sandler, was apparently somewhat less
concerned with vetting contributions. Unlike the old vetting
desk, supervised directly by the Office of General Counsel, the
DNC began to rely on a less formal system involving one member
of the DNC's Office of General Counsel and the part-time
efforts of one member of the DNC's Research Division, Rumi
Matsuyama, who was charged with helping DNC Deputy Counsel Neil
Reiff vet checks larger than $25,000.8
---------------------------------------------------------------------------
\8\ Deposition of Rumi Matsuyama, June 10, 1997, p. 21; see also
Reiff deposition, p. 37.
---------------------------------------------------------------------------
Matsuyama would receive a check and an attached form,
entitled ``Major Donor Screening Form,'' from
Reiff.9 She would then perform a NEXIS search using
the information on the form; relevant information would be
downloaded. In addition, she would search a CD-ROM of Federal
Election Commission records to ascertain whether the donor made
other, presumably legal and appropriate
contributions.10 She would then prepare a memorandum
summarizing her research.11 The memorandum, as well
as the downloaded research, was attached to the Major Donor
Screening Form, which was the same or substantially similar to
the form used by the DNC's vetting desk in 1992, and all of
these documents were returned to Reiff.12 Reiff
would then review the information and decide whether the DNC
should accept and deposit the contribution.13
---------------------------------------------------------------------------
\9\ See, e.g., Major Donor Screening Form dated May 24, 1993 (Ex.
1); Major Donor Screening Form dated April 17, 1993 (Ex. 2).
\10\ Matsuyama deposition, pp. 11-13.
\11\ Id. at pp. 14, 39.
\12\ Id. at pp. 13-14, 39.
\13\ Reiff deposition, pp. 27-28.
---------------------------------------------------------------------------
Matsuyama testified that she spent approximately five to 10
hours a month performing this vetting function; the remainder
of her time was spent researching political
issues.14 She left the DNC in May 1994.15
She was not replaced, and the check-vetting process for large
contributions essentially ceased.
---------------------------------------------------------------------------
\14\ Matsuyama deposition, pp. 7, 22.
\15\ Id. at p. 6.
---------------------------------------------------------------------------
the 1996 election cycle: what really happened?
The Committee's search for information about the DNC's
vetting procedures following Matsuyama's departure in May 1994
was difficult. In many respects, the Committee could learn
little more than DNC National Chairman Don Fowler could:
Q: What was your reaction to the vetting process that had
been in place once that was explained to you?
A: Well, at that point, it became--it was reasonably clear
that we should explore some more thorough vetting process than
we had, more systematic vetting process, and we put that in
place.
* * * * *
Q: And were you told during that explanation that in about
the summer of '94, the DNC changed its process of doing Lexis-
Nexis research on potential contributors?
A: I was told that the prior process was suspended and that
the responsibility was given to the Finance Division. I think
we're talking past each other. I don't think----
Q: I think we're talking about the same. And how was it
explained to you that the Finance Division carried out its
vetting process?
A: There was a lot of vagueness there.
Q: Did you press for specifics in asking that question?
A: Yes, and there were no specifics available.16
---------------------------------------------------------------------------
\16\ Deposition of Donald L. Fowler, May 21, 1997, pp. 348, 350.
The Committee encountered similar difficulties in trying to
find out what vetting procedure, if any, was in place during
the 1996 election cycle. As will be seen, much of the
uncertainty stems from the testimony of those who should have
been most responsible for ensuring that an adequate vetting
procedures existed--the staff of the DNC's Office of General
Counsel. The conclusion the Committee reaches is essentially
the same as that reached by the DNC's National Finance
Director, Richard Sullivan, who testified that it was his view
that there was ``a poor compliance system and no legal
vetting.'' 17
---------------------------------------------------------------------------
\17\ Deposition of Richard Sullivan, June 25, 1997, p. 120.
---------------------------------------------------------------------------
Two self-serving explanations have been offered by
witnesses associated with the DNC's Office of General Counsel
for the absence of any vetting procedures during the 1996
election cycle. First, Joe Sandler and Neil Reiff essentially
tried to shift blame to the Finance Division for poor vetting,
by asserting that the vetting function had been transferred to
that division. Second, they engaged in historical revisionism,
attempting to segregate vetting for ``legality'' from vetting
for ``appropriateness,'' and then asserting that the 1992 and
1994 procedures--which plainly collapsed in 1996--related only
to ``appropriateness'' vetting, while ``legality'' vetting
continued throughout. At every turn, Sandler and Reiff
attempted to exculpate themselves from any responsibility for
failing to catch the approximately $3 million in illegal and
inappropriate contributions that the DNC has itself
returned.18
---------------------------------------------------------------------------
\18\ According to a June 27, 1997 DNC press release, the DNC had by
that date returned $2,825,600 in suspect contributions accepted during
the 1996 election cycle. The DNC has failed to return other
contributions of questionable legality. See, e.g., the section of this
report on the contributions of Ted Sioeng, his family, and related
business interests.
---------------------------------------------------------------------------
the explanation that vetting was transferred to the finance division
At first, based on the sworn testimony of DNC officials,
the Committee believed it would learn that someone within the
DNC's Finance Division had taken over Matsuyama's
responsibilities for researching contributors for purposes of
vetting major contributions. During the first day of his
deposition, Sandler testified that ``as of when Matsuyama left
the DNC . . . a Nexis account number was given to the Finance
Division, and . . . the Finance Division used that Nexis
account from time to time . . . to screen donors. . . .''
19 Likewise, Sandler's deputy, Reiff, testified that
``we approached Jeff King as a staffer on the finance
department at the time, and . . . my recollection is that he
did agree in principle to do this function of research.''
20 Reiff further testified that, at a meeting he
attended with King, ``[m]y impression essentially was that the
finance department in principle said they would do this
function of research to continue some type of appropriateness
vetting for donors.'' 21
---------------------------------------------------------------------------
\19\ Deposition of Joseph E. Sandler, May 15, 1997, p. 59.
\20\ Reiff deposition, pp. 39-40.
\21\ Id. at p. 41. Reiff also told B.J. Thornberry, the DNC's Chief
of Staff, that ``the vetting responsibility was moved to Finance'' when
Matsuyama left the DNC. Deposition of B.J. Thornberry, May 20, 1997, p.
78. Thornberry, who was attempting to respond to press inquiries,
investigated the DNC's vetting procedures on her own during the fall of
1996. She concluded that ``while the function was transferred to
Finance, that clearly, if it was happening, it was happening on an
episodic basis and it never became standard operating procedure.'' Id.
at p. 79. The basis for this conclusion was that ``we were in the midst
of beginning to return checks that had clearly not gone through any
quality control procedures.'' Id. (emphasis added).
---------------------------------------------------------------------------
This testimony was only partially truthful. The Committee
concludes that, although there was discussion of moving
Matsuyama's research function into the Finance Division, and
although a Finance Division staffer originally agreed (subject
to the approval of his superiors) to have a particular Finance
Division employee perform that research, the employee who was
to perform the research was laid off within a matter of days
and the research function was never assumed by the Finance
Division. Thus, the Finance Division never performed the
research that Matsuyama previously undertook, and the DNC's
Office of General Counsel simply fell out of the process of
automatically reviewing major, new contributions.
The Committee's conclusion is based on the testimony of
Jeff King, who primarily handled operations issues within the
Finance Division. He rebutted the attempt to shift
responsibility to the Finance Division for the dismantling of
vetting procedures by establishing that Reiff knew that the
Finance Division had not undertaken the vetting function. King
testified that he had a meeting with Reiff (and others) about
the time that Matsuyama left, and in the course of that meeting
King agreed to have Nicole Hecker, a Finance Division employee,
perform the Nexis searches--so long as King's superiors
agreed.22 Shortly after that meeting, the DNC laid
off Hecker.23 As a result, ``the whole process never
was implemented.'' 24 After Hecker's layoff, it was
clear to King that the Finance Division could not assume the
responsibility of conducting the NEXIS research.25
More telling, King had a phone conversation with Reiff within
six weeks of King's deposition, in which Reiff acknowledged
that ``he knew [the Finance Division] just didn't have the
manpower to do what was necessary and that [it] certainly did
not have the resources to do it.'' 26 Thus, Reiff
later admitted that he knew that the Finance Division was not
undertaking the research associated with vetting contributions.
---------------------------------------------------------------------------
\22\ Deposition of Jeffrey King, June 26, 1997, pp. 18-19, 23-24,
43.
\23\ Id. at pp. 24, 43.
\24\ Id. at p. 29.
\25\ Id. at pp. 30, 43-44.
\26\ Id. at p. 31; see also id. at pp. 30, 44.
---------------------------------------------------------------------------
Richard Sullivan, the DNC's National Finance Director,
confirmed King's account. Sullivan testified that he was never
aware of any shift in responsibility for performing vetting
research from the Office of General Counsel and Research
Division to the Finance Division.27 It was always
Sullivan's understanding that the General Counsel was
responsible for screening contributions.28 Sullivan,
the highest-ranking paid employee of the Finance Division,
agreed that it was not conceivable that the Finance Division
would assume responsibility for check vetting without his
knowing about it.29 When Sullivan first heard the
suggestion that the responsibility had been shifted to the
Finance Division, he investigated and could not find any
individual within the Finance Division who was aware of such a
shift in responsibility.30 During 1997, however, he
did learn from Jeff King that King had met in 1994 with Reiff
and Sandler, and they discussed the possibility of an
individual with the Finance Division assuming responsibility
for screening in the light of DNC layoffs; however, King
informed Sullivan that the individual (Hecker) had left within
a few days of the meeting, and King ``told the people that were
in the meeting with him that [the Finance Division] couldn't
take that responsibility, so that [it] never took that
responsibility.'' 31
---------------------------------------------------------------------------
\27\ Deposition of Richard Sullivan, June 5, 1997, pp. 124, 128.
\28\ Id. at pp. 120-21, 129-30.
\29\ Id. at pp. 128-29.
\30\ Id. at p. 129.
\31\ Id. at p. 133.
---------------------------------------------------------------------------
In addition to his pre-deposition admission to
King,32 there is other evidence that Reiff knew that
the DNC had stopped researching new contributions. He testified
that he would review about five to 10 Major Donor Screening
forms per week when Matsuyama was still a DNC
employee.33 After she left, Reiff testified that
``the [vetting] process that I knew, that I was running, was
over.'' 34 Reiff simply was ``no longer involved in
the vetting of donors for appropriateness at that point.''
35 At no point did Reiff testify as to any personal
awareness that someone else was conducting the review of
research materials that he had once conducted, nor did he
testify that he trained anyone within the Finance Division to
perform that review.
---------------------------------------------------------------------------
\32\ See supra, text accompanying note 26.
\33\ Reiff deposition, p. 36.
\34\ Id. at p. 43.
\35\ Id.
---------------------------------------------------------------------------
To the contrary, Reiff testified that Scott Pastrick, the
DNC's Treasurer, ``complained to me that there was no process
within the finance department'' for vetting.36 Reiff
recalled that this conversation took place in the summer of
1996.37 If the DNC's Treasurer--a volunteer, part-
time officer--could discern that the Finance Division was not
vetting contributions, it strains credulity to suggest that the
DNC's Office of General Counsel truly believed that research
for purposes of vetting was being carried out by the Finance
Division.38 In fact, the candor of both Sandler's
and Reiff's claim that the Finance Division had agreed to
assume the vetting research is called into question by Reiff's
own testimony strongly implying that both Sandler and he were
aware that vetting had essentially ``ended,'' and that this
concerned both of them.39
---------------------------------------------------------------------------
\36\ Id. at p. 50.
\37\ Id.
\38\ Pastrick testified that he spent ``about eight or ten hours a
week'' at the DNC's offices. Deposition of Robert Scott Pastrick, May
7, 1997, p. 46. The office of treasurer was voluntary and unpaid. Id.
at p. 8.
Interestingly, one of the primary functions of a national committee
treasurer is to sign the committee's FEC reports. See Deposition of
Richard Sullivan, June 4, 1997, pp. 46-47. Under federal election laws,
only the treasurer or an assistant treasurer may sign the FEC reports.
2 U.S.C. Sec. 434(a)(1) (treasurer must sign); 11 C.F.R. Sec. 102.7(a)
(assistant treasurer acceptable). Pastrick never signed an FEC report
on behalf of the DNC. Pastrick deposition, p. 15. Richard Sullivan's
recollection of Pastrick's explanation for this is interesting:
Q: Well, tell me what he [Pastrick] said in those
conversations.
A: He said that he wasn't--he said that he was told by
Brad Marshall [DNC Chief Financial Officer] and Joe Sandler
that he was not allowed to sign the FEC reports.
Q: Did he say why they had told him that?
A: He said that he had a--I think I remember, you know,
insinuating or saying that they may not have wanted him to
be a witness to the spending report side of it.
Q: Did he indicate what that was that they didn't want
him to be a witness to the spending?
A: As I recall, he may have--as I recall, he talked about
the fact that they may have been spending money, making
expenditures that if he--that they didn't want him to know
about. My sense was--and I don't recall if he--my sense of
it is, and memory--I don't recall vividly him saying this,
is that, you know, they may have been giving contributions
to certain campaigns or they may have been--expenditures
that they just didn't know that--just didn't want him to
know about.
And, again, my memory of it is that there may have been
expenditures that they didn't want Scott to know about
because Scott might tell people in the White House, Harold
[Ickes] or Doug [Sosnik].
Deposition of Richard Sullivan, June 4, 1997, pp. 48-49; see also id.
at pp. 53-57. Sandler acknowledged that Brad Marshall, the DNC's Chief
Financial Officer, was ``the designated assistant treasurer for FEC
purposes.'' Deposition of Joseph E. Sandler, August 21, 1997, p. 38.
Sandler denied, however, that he ever told Pastrick that he was not
allowed to sign FEC reports. Id. at p. 47.
---------------------------------------------------------------------------
\39\ Reiff testified as follows:
Q: I also want to be clear. I think you answered before,
but I want to make sure we are clear on it.
After the meeting with Mr. King, you don't recall having
any conversation with anyone at the DNC about what's going
on with this appropriateness screening other than the
Pastrick conversation and up until the press reports?
A: I don't specifically--I am sure over a period of time
I probably expressed disappointment to Joe [Sandler] again
as we went along. I don't know how many times, if I did it
or not, but I'm sure I felt disappointed right after it
happened in terms of 1994. But no, I have no other
recollections of any other conversations.
Q: What was Mr. Sandler's reaction when you expressed
that to him?
A: I can't tell you anything specific. I don't recall
anything specific, but I think we were both generally
disappointed that the process ended, the one that I was
running. That's pretty much all I can tell you about that.
Q: Did you suggest to Mr. Sandler he bring it up with the
higher-ups at the DNC?
A: My impression is that I did. I couldn't tell you when,
how many times, but my impression is I probably mentioned
it on a couple of occasions.
Q: What was his reaction to that?
A: My impression, again, not remembering specifically,
I'm sure he expressed support of my view, but I never asked
him--I don't recall ever asking him specifically whether he
asked or what the response was to his request.
Q: As you sit here today, do you know whether he brought
the issue up with anyone in the management structure of the
DNC?
A: No, I don't really know anything about that. I don't
recall him relaying any information back to me, for that
matter.
Reiff deposition, pp. 68-70 (emphasis added).
King appears to have been worried that the DNC and its
outside law firm would nevertheless exploit his 1994 meeting
with Reiff and others in an attempt to heap blame on him for
the DNC's inadequate vetting. According to Sullivan, King told
him that Debevoise & Plimpton, the DNC's outside law firm, had
``summoned'' King to come talk to them about the subject of
vetting, and King ``stated that he felt like the blame for all
of this was being placed on his shoulders because of this one
meeting. . . .'' 40 King told Sullivan that he
(King) ``felt like they were trying--that the DNC, Debevoise &
Plimpton were trying to blame him.'' 41 In his
deposition, though, King denied telling Sullivan that King
believed that the DNC or Debevoise & Plimpton were trying to
pin blame on him, characterizing Sullivan's sworn testimony as
``inaccurate.'' 42 King later admitted, however,
that he was ``concerned'' that an apparently incomplete
memorandum in the DNC's files could be misinterpreted as
stating that the Finance Division had assumed the NEXIS
research responsibility, when, in fact, it had
not.43 King testified that he might have shared this
concern with Sullivan.44 In fact, Reiff also
testified that he ``got the impression that he [King] was
concerned about being blamed about something.'' 45
---------------------------------------------------------------------------
\40\ Deposition of Richard Sullivan, June 5, 1997, p. 135.
\41\ Id. at p. 139.
\42\ King deposition, pp. 36-38.
\43\ Id. at pp. 46-47; Memorandum from Jeff King to Stephen Goodin,
June 7, 1994 (Ex. 3).
\44\ King deposition, p. 47. Sullivan generally shared King's
concern about the DNC's outside law firm, as Sullivan testified that,
in his own meeting with Debevoise & Plimpton lawyers shortly after the
election, the tone of questions addressed to him about vetting
procedures at the DNC was ``accusatory,'' and he had the ``sense'' that
Debevoise & Plimpton wished to lay blame at his feet. Deposition of
Richard Sullivan, June 25, 1997, pp. 115-16. Sullivan went on to add
that he felt that the Debevoise & Plimpton lawyers ``knew who they
represented and who they didn't.'' Id. at p. 116. He continued:
They represented the DNC as an institution, and the DNC
officers, Fowler, Dodd, and they--you know, and they
conveyed the sense that they--they conveyed the sense, you
know, that that included like the chief of staff and the
general counsel, too.
Q: So, if there was blame to be laid, it would not be
laid at the feet of the officers of the higher-ups; is that
accurate?
A: That was what--that was where they wanted to go.
Q: But it was okay to lay the blame at some of the
subordinate employees----
A: Sure.
Q[continuing]: lay blame at the feet of some of the
subordinate employees?
A: Correct.
Q: You fell into that latter category?
A: Yes.
Id. at p. 117 (emphasis added).
---------------------------------------------------------------------------
\45\ Reiff deposition, p. 47.
---------------------------------------------------------------------------
Whatever effort may have been made by the staff of the
DNC's Office of General Counsel or the DNC's outside law firm
to blame the Finance Division, the evidence is overwhelming
that the Finance Division never in fact undertook to perform
the limited vetting research previously done by Matsuyama, and
that the Office of General Counsel knew this. The DNC's vetting
process simply was allowed to collapse. While many expressed
concerns about the collapse, no one thought to restore the
vetting process, as that might slow or limit the money flowing
to the DNC.
the explanation distinguishing between vetting for ``appropriateness''
and ``legality''
Another supposedly exculpatory contention made only by
Sandler and Reiff is that the DNC did not dismantle its system
for vetting contributions for ``legality.'' To make this
contention, Sandler and Reiff asserted that vetting for
``legal'' issues was always the responsibility of the
individual fundraiser receiving a contribution, and that the
automatic vetting process in place in the 1992 and 1994
election cycles was designed to screen only for
``appropriateness.''
Sandler tried to explain the difference between screening
for legality and appropriateness in the following manner:
[F]irst of all, with respect to legality, throughout
the time period [February 1993 to October 1996] the
finance staff and the accounting staff were advised
that if there was any issue or question of legality,
that it should be brought to the Office of General
Counsel. The Finance staff was issued specific written
guidelines to that effect and there were also training
sessions held for that purpose.
With respect to appropriateness, it is part of
legality, there was automatic screening for donor
limits. In other words, if somebody had written an
individual check and it was checked and it was not
clear if it was designated for the federal account, it
was checked to see if they had already given the
maximum. We routinely check to see if they had given
the maximum to the federal account. If they had, we
automatically put it in a non-Federal account. If they
hadn't, the procedures generally throughout this period
called for the appropriate redesignation form to be
sent out to the donor.
So, I mean that is an aspect of legality. Other more
complicated questions of legality, the procedure was to
bring them to our office for discussion, which was done
routinely and consistently throughout this period.
With respect to appropriateness, I described the
process that was in place until approximately May of
1994. It is my general understanding that as of when
Ms. Matsuyama left the DNC that the research position,
the position of the Research Division that she had, was
either not filled or was used for other research
purposes, and that a Nexis account number was given to
the Finance Division, and that the Finance Division
used that Nexis account from time to time, as they
found it necessary, to screen donors who were not
otherwise well-known to them or about whom they had
some concern for appropriateness.46
---------------------------------------------------------------------------
\46\ Deposition of Joseph E. Sandler, May 15, 1997, pp. 58-59.
This distinction was also urged by Reiff,47 and
Sandler reiterated it in his opening statement before the
Committee in public hearings.48 The exculpatory
nature of this distinction is that Reiff and Sandler can claim
that vetting for issues of ``legality'' was not terminated on
their watch.
---------------------------------------------------------------------------
\47\ See, e.g., Reiff deposition, p. 19 (``There is political and
appropriateness screening, and then there is legal, legality
screening.'').
\48\ Testimony of Joseph E. Sandler, September 10, 1997, pp. 4-8.
Sandler stated that there ``are two distinct aspects to such screening:
legality and appropriateness.'' Id. at p. 4. He then gave an
explanation of the distinction similar to that offered in his
deposition.
---------------------------------------------------------------------------
The attempt to describe the elaborate research of the 1992
``vetting desk'' as mere ``appropriateness'' vetting is
revisionist. Those who created that ``vetting desk'' were
concerned with issues of legality--as well as broader concerns
about the appropriateness of accepting certain contributions.
Rob Stein testified that he and former DNC General Counsel
Carol Darr looked to the 1988 Dukakis campaign because they
``knew that they had [a] well-structured and [a] rigorous
system . . . for complying with the laws governing campaign
finance.'' 49 He testified that the system actually
implemented by the DNC for the 1992 elections was one that
``worked,'' adding that ``we had what we needed to assure that
the laws were being complied with in terms of donor
contributions. And it wasn't just the laws, we had concerns
about conflicts of interest or tainted money or whatever.''
50 The old DNC ``vetting desk'' supplemented the
DNC's training its fund-raisers to be sensitive to legal
issues.51
---------------------------------------------------------------------------
\49\ Stein deposition, pp. 57-58.
\50\ Id. at p. 59.
\51\ Id. at pp. 59-60.
---------------------------------------------------------------------------
Second, the ``appropriateness'' vetting described by
Sandler and Reiff--Nexis searches and searches of FEC
databases--could have triggered a review of contributions for
both legality and appropriateness. After all, an illegal
contribution would seem to be inappropriate, and the research
gathered in assessing the ``appropriateness'' of a contribution
could well be used to ascertain its legality. In fact, Neil
Reiff testified as follows:
Q: So hypothetically if you do a Nexis search on
someone and it turns out that person is a citizen of a
foreign country and the article goes on to state they
don't have any residence status in the United States,
therefore, take it from there they can't make a
contribution, you would be able to use that information
to make a legality decision?
A: Hypothetically, yes.
Mr. Best [DNC lawyer]: Or hypothetically be found
that he was a bankrupt.
The Witness: There is [sic] a million things you
could find out. It is all part of the same process.
By Mr. Kupfer [Counsel for the Committee]:
Q: And so it seems that you stated that you can get
information that would go towards legality from the
appropriateness screening?
A: Hypothetically you can, but it is not a foolproof
system.
Q: I understand it is not a foolproof system. You
could get information that would assist you in making a
legality determination, is that correct?
A: Hypothetically speaking, yes.52
---------------------------------------------------------------------------
\52\ Reiff deposition, pp. 65-66.
Accordingly, the dismantling of the automatic
``appropriateness'' vetting system--to use Sandler's and
Reiff's characterization--removed information from the process
that could have been informative to the potential legality of a
contribution.53
---------------------------------------------------------------------------
\53\ In fact, as discussed earlier, Reiff testified that, before
Matsuyama's departure, he had been reviewing approximately five to 10
Major Donor Screening Forms per week. Id. at p. 36. Obviously, this
afforded Reiff, the DNC's Deputy General Counsel, an opportunity to
apply his legal training to the Nexis and FEC research gathered by
Matsuyama. But, as also discussed earlier, after Matsuyama left, the
responsibility for vetting fell off Reiff's ``radar screen.'' Id. at p.
42.
Despite Reiff's relatively straightforward testimony, Sandler
attempted to assert in his public testimony before the Committee that
the failure to re-assign the so-called ``appropriateness'' screening
did not ``materially contribute to the receipt of the contributions the
DNC has been required to return,'' because ``a routine Nexis check
would not detect contributors serving as conduits for . . . foreign
source contributions.'' Sandler testimony, p. 8. Sandler then offered,
as one of several examples, the Yogesh Gandhi contribution, discussed
elsewhere in this report. See the section of this report on Yogesh
Gandhi. According to Sandler, Lexis-Nexis searches--had they been
performed--would have disclosed ``a small claims court judgment and a
routine State tax lien for a few thousand dollars.'' Sandler testimony,
p. 9. This blithe dismissal of Gandhi's public record caused Senator
Collins to wonder:
First of all, I have to say, I don't think a tax lien of
any sort is routine. But putting aside that question, would
it not have struck you as at least somewhat unusual and
worthy of further investigation that an individual who has
never before made a political contribution in any amount,
comes in with a check for $325,000, and yet your own check,
your own quick review, your own Lexis-Nexis review, reveals
that he has a small claims judgment against him for unpaid
bills as well as a tax lien? When you couple a first-time
donor making a huge contribution with the existence of a
small claims court judgment and a tax lien, why wouldn't
that raise suspicions for you to want more information and
---------------------------------------------------------------------------
to clear this check and vet it more thoroughly?
Hearing Transcript, September 10, 1997, p. 82. No satisfactory answer
was forthcoming, although the answer may underscore Sandler's complete
lack of caution. To Sandler, the existence of unpaid small claims
judgments and state tax liens was not something that raised ``red
flags,'' or was ``unusual.'' Id. at p. 83.
Even assuming that the revisionist explanation should be
accepted, and further assuming that there was no
interdependence between ``appropriateness'' and ``legality''
screening, the legality ``screening'' envisioned by Sandler,
which called on the fund-raisers themselves to vet
contributions, was fatally flawed. The first fatal flaw with
this alleged process was that individual fund-raisers did not
understand that they were to be the only line of defense
against illegal contributions. For example, when the Committee
deposed David Mercer, the DNC's Deputy National Finance
Director, he was shown three consecutively-numbered Lippo Bank
checks, each dated August 1, 1995, from Kenneth R. Wynn to the
DNC, and each for $5,000.54 Each check was pre-
printed with a home address in Jakarta, Indonesia. Mercer
filled out a check tracking form for these
contributions.55 This provoked some of the following
questions:
---------------------------------------------------------------------------
\54\ Checks from Kenneth R. Wynn to the DNC, August 1, 1994, and
accompanying DNC Check Tracking Form (Ex. 4).
\55\ Deposition of David Mercer, May 14, 1997, p. 42. A check-
tracking form was a form usually filled out by the DNC fund-raiser to
keep track of contributors, identify those responsible for soliciting
the contribution, and ascribe the contribution to a particular event
(if applicable).
Q: Is there a procedure in place when receiving a
check with a foreign home address?
A: I do not recall among the literature that we
received, among the guidelines, fund-raising
guidelines, that if you receive a check with a home
address or I don't even know if it's a home address,
but an address that has a foreign city and State in it
that you were to do X, Y or Z.
Q: Were there any procedures in place if you
suspected a check was not from a U.S. citizen?
A: Yeah. Yes.
Q: What were those procedures?
A: To inform the individual that we were unable to
accept contributions from noncitizens.
Q: In this case, you did not, to your recollection,
attempt to contact the individual who made the
contribution; is that correct?
A: That is correct.
Q: Why not?
* * * * *
A: I don't recall contacting somebody to find out
where they lived or whatever else.
To me, I filled out the check tracking form. A lot of
what we do, we receive thousands of checks. I think we
received more than a million checks last year. You'd
fill out the tracking form.
If there's over--if there is--if it is drawn on a
U.S. bank account, that would suffice. If somebody had
a question about it as it went through the process,
they'd bring it back to me. . . .56
---------------------------------------------------------------------------
\56\ Id. at pp. 218-19.
---------------------------------------------------------------------------
Later, Mercer continued:
Q: Earlier when we were talking about his check-
tracking process and we were talking specifically about
these checks that showed an Indonesian home address, if
I recall, you said you'd put down the information on
the check- tracking form and you'd send it through the
system, and if any red flags came up, you'd expect that
they'd bring it back to your attention; is that
correct?
A: Yeah, that's correct.
Q: Who in your mind was the person who would raise
the red flags relating to the information on the check-
tracking form and the checks?
A: In my mind, it would be anybody that was of a
superior to me, or who I reported to or legal counsel
or--you know.57
---------------------------------------------------------------------------
\57\ Deposition of David Mercer, May 27, 1997, p. 14.
In short, although Mercer plainly had received some training
and was provided with legal guidelines, he still thought that
someone, presumably in the Office of General Counsel, was
reviewing new contributions as a matter of course. Needless to
say, this understanding was incorrect.
In fact, Mercer's immediate supervisor, Sullivan, always
understood that a two-step screening process was supposed to be
in place at the DNC: ``I was told that there was sort of a two-
step process. All checks of $10,000 and above are automatically
run through a Lexis-Nexis check by staffers in the . . .
Research Department, and that there was also additional review
by the Legal Department . . . As you know, Lexis-Nexis was
primarily appropriate/inappropriateness, you know, because it
was explained to me Lexis-Nexis doesn't necessarily determine
whether a check's legal or illegal, and so then there was then
a review as to legality by the Legal Department.''
58 This understanding was essentially consistent
with the 1994 vetting process, which involved the collaboration
of Rumi Matsuyama of the Research Division and Neil Reiff from
the Office of General Counsel.59 As discussed, even
this modest system was dismantled. Although Sullivan knew that
he was ``to use [his] best judgment in avoiding potential
problems,'' he also believed that ``once the check was passed
on, this process took place.'' 60 He was not aware
of any change in this process until after the 1996
election.61 Clearly, top DNC fund-raisers were
unaware that they bore primary--indeed, exclusive--
responsibility for raising concerns about potentially illegal
contributions.
---------------------------------------------------------------------------
\58\ Deposition of Richard L. Sullivan, June 5, 1997, pp. 92-93;
see also id. at pp. 95, 120-21.
\59\ See supra, notes 8-14 and accompanying text.
\60\ Deposition of Richard L. Sullivan, June 5, 1997, p. 93.
\61\ Id. at pp. 97, 124.
---------------------------------------------------------------------------
The fact that Mercer and Sullivan were unaware that they
bore exclusive responsibility for legal vetting is
unsurprising; they were not told about the dismantling of the
old research system. A short passage from Sandler's testimony
confirms this:
Q: Let me go back to my prior question and I believe
the answer, with all due respect, is a yes or no
answer.
At the time that Ms. Matsuyama left the DNC and was
no longer--and no one was any longer doing a NEXIS or
an FEC database research, were people within the
Finance Division apprised of the fact that these
searches were no longer being automatically done?
A: Not that I'm aware of.
Q: So, you yourself certainly never apprised them of
that; is that accurate?
A: That's accurate.62
---------------------------------------------------------------------------
\62\ Deposition of Joseph E. Sandler, August 21, 1997, pp. 95-96.
Moreover, even assuming that individual fund-raisers were
aware that they were the first and last line of defense against
illegal contributions, charging them with such final
responsibility would itself be reckless and unreasonable. Fund-
raisers seek funds. DNC fund-raisers obviously wanted credit
for soliciting contributions.63 The DNC kept track
of contributions credited to individual fund-
raisers.64 Presumably, successful fund-raisers could
expect appropriate remuneration or recognition. Making the
fund-raiser responsible for legal vetting of contributions
creates a conflict of interest. Fund-raisers want to raise
money, not reject it. And this common-sense proposition could
never have been more true than it was in 1996 for the DNC,
given the White House's enormous appetite for money.
---------------------------------------------------------------------------
\63\ See, e.g., Deposition of David Mercer, May 27, 1997, p. 53.
\64\ Id.
---------------------------------------------------------------------------
This inherent conflict of interest is the second fatal flaw
with the alleged ``legality'' screening described by Sandler
and Reiff. Mercer's testimony underscores that a fund-raiser is
not the best person to vet contributions for legality:
My responsibility was to work within the parameters
of the guidelines that are outlined and you have copies
of, which I submitted via the subpoena. My job was not
to work in compliance and verify every single check,
its origin, the source of the money and everything
else. We work in this environment on the good faith and
the understanding of the people we work with. If
someone within our--within the DNC had responsibility
for checking into that, I don't know who it was. I
presumed that whether through legal counsel or others,
that those kinds of things would be detected or that
people would question or what have you. I had never
been--it had never been brought to my attention about
any question of checks prior to the stories breaking in
October. But my job was as a fund-raiser to raise the
money and to make sure that the check-tracking forms
were filled out and to submit the check-tracking
forms.65
---------------------------------------------------------------------------
\65\ Id. at pp. 27-28 (emphasis added).
Although Sandler would not agree that the alleged system
for vetting contributions for ``legality'' at the DNC labored
under an inherent conflict of interest, he recognized that ``in
retrospect we've separated the function now.'' 66 He
further acknowledged that ``as a matter of good policy and
practice . . . it was appropriate to have those functions . . .
in a separate Compliance Division rather than in the Finance
Division.'' 67
---------------------------------------------------------------------------
\66\ Deposition of Joseph E. Sandler, August 21, 1997, p. 77.
\67\ Id. at 78.
---------------------------------------------------------------------------
Conclusion
The Committee concludes, as any reasonable observer must,
that the DNC's system for vetting contributions during the 1996
election was wholly inadequate. Most DNC officials agree with
this much of the Committee's conclusion. For example, Joe
Sandler explained what the DNC perceived as deficiencies in its
1996 system: ``[T]here was not automatic screening of
contributions for appropriateness and legality of every donor
not well-known to the DNC above a certain dollar threshold. It
was instead a perceived deficiency . . . that it had instead
been left to the judgment of individual members of the finance
and/or accounting staffs to identify problems of that nature
and bring them to the Office of General Counsel.''
68
---------------------------------------------------------------------------
\68\ Deposition of Joseph E. Sandler, May 15, 1997, pp. 65-66.
Sandler was even more explicit about the vetting deficiencies in his
comments to the press. The following paragraphs from a July 1997
article, which focused on Sandler, are interesting:
What happened, Sandler says, is that ``the person who was
doing the research work wasn't replaced.'' That key job
involved ensuring that contributions were not coming from
inappropriate sources like ex-cons, foreign nationals, or
people with insufficient resources.
Instead, says Sandler, the screening process came to
depend on members of the finance staff bringing questions
and problems to Sandler's office. ``That clearly was a
mistake, and the automatic background checks should have
been continued,'' he says.
When asked whether anyone warned in some formal way that
fund-raisers should look more critically at the money they
were raising, Sandler demurs. ``This is an area I probably
should not comment on in detail because it's of interest to
the investigators,'' he says.
Timothy J. Burger, ``The DNC's Fall Guy?'' Legal Times, July 14, 1997,
p. 16. As discussed earlier, the fund-raisers were not told that they
were the last line of defense. The article also quotes an anonymous
``knowledgeable Democratic operative'' as saying, ``I blame this whole
thing on Joe.'' Id. at p. 15.
DNC National Finance Director Richard Sullivan concurred,
adding additional context:
[T]here was not an adequate legal or compliance
system set up to back up in an historic effort in terms
of the aggressiveness of the fund-raising, and throw
into there the fact that . . . we throw John Huang into
an aggressive fund-raising operation with no--with a
poor compliance system and no legal vetting. This is
what happened.69
---------------------------------------------------------------------------
\69\ Deposition of Richard Sullivan, June 25, 1997, p. 120.
Undoubtedly, the DNC should have been more vigilant and
preserved its vetting procedures--especially in the face of
such historic, aggressive fund-raising.70
---------------------------------------------------------------------------
\70\ Furthermore, the DNC's non-existent vetting procedures were
unique; Democrats cannot protest that ``everybody does it.'' When
Senator Glenn questioned Richard Sullivan, the following colloquy took
place:
Senator Glenn. Well, I guess what I am getting at is
this: I wondered if you had knowledge of what kind of a
system they [Republicans] had set up. Was the system on the
Democratic side very similar to theirs? Was ours more
extensive than theirs? Was theirs more extensive than the
one [on] the Democratic side? Do you have any opinion on
that?
Mr. Sullivan. As to what kind of system, Senator?
Senator Glenn. As to vetting these things, making sure
that campaign contributions were legal, deciding which ones
should be returned, deciding whether we are going to go
after foreign money or not . . . was the system that they
had set up similar to the one that you have been describing
a little bit here?
Mr. Sullivan. Unfortunately, Senator, I'm sorry to tell
you, but their system was much more systematic, complex,
and thorough than our system.
* * * * * * *
Mr. Sullivan. In your question of comparing the legal
vetting of the two committees, it's my understanding that
the Republican National Committee's was much more thorough.
I don't know that for a fact, obviously, but that's just my
sense.
Senator Glenn. Okay. In that opinion, what would back
that up, what observation? Do they have different layers of
people that vetted these things? Do they have different
lawyers, different legal staffs? How would their system be
different from the one that the Democratic National
Committee used?
Mr. Sullivan. I think you described it. I think they had
a much--I think they had a much more thorough--I think a
much more thorough system of vetting of a committee of
lawyers, as I understand it.
Testimony of Richard Sullivan, July 9, 1997, pp. 36-37, 40.
The DNC now has a new compliance system, one very similar
to the ``vetting desk'' in place during the 1992 election
cycle. This may go a long way toward diminishing the risk of
future fund-raising scandals--provided the DNC keeps its system
in place. As for the 1996 federal elections, however, the new
system came too late. As DNC Chairman Don Fowler testified, the
new system ``was the equivalent of closing the door [of] the
barn after the horse left. . . .'' 71
---------------------------------------------------------------------------
\71\ Fowler deposition, p. 351.
---------------------------------------------------------------------------
The interesting question is how the barn door was opened in
the first place. Although it may be convenient to blame the
DNC's Office of General Counsel for simple negligence, as
Sullivan explicitly did,72 the conduct appears worse
than negligent, and the responsibility vests at a level above
the general counsel. After all, the members of the Office of
General Counsel were concerned about the dismantling of the
vetting system, and Reiff had ``the impression'' that Sandler
had raised these concerns with higher-ups.73 It is
no coincidence that vetting was dismantled during a period of
historic need for money to pay for unprecedented advertising,
resulting in huge amounts of foreign and other illegal money.
In fact, it appears that the DNC made a decision to operate
under a ``system'' that would turn a blind eye towards
questionable contributions, allowing the DNC to receive large,
illegal contributions without any accountability for their
receipt in the event that they were detected. In the absence of
any sanctions deterring such behavior,74 the DNC,
run by the White House,75 consciously disregarded
the prospect of illegal contributions.
---------------------------------------------------------------------------
\72\ Deposition of Richard Sullivan, June 25, 1997, pp. 119-20.
\73\ See supra, note 39.
\74\ See the section of this report on the FECA for a discussion of
the sanctions that should be available to the FEC to deter such
activity in the future.
\75\ See the section of this report on the White House's control of
the DNC.
DNC Fundraising in the White House: Coffees, Overnights and Other
Events
overview
The story of the Clinton Administration's use of the White
House as a DNC fundraising tool had its origins in the panic
that set in after the Republican party took control of the
House of Representatives and the Senate in the November 1994
elections. At the DNC, the general mood was nearly apocalyptic.
As Terence McAuliffe recalled,
the President was in serious trouble. A lot of people
wondered if the President was even going to run again.
I can tell you the political mood at the time clearly
was that he had no chance of winning again, clearly
would not win re-election and would have a very tough
time with a primary. And there was a lot of talk that
people would run against him in a primary. It was a
very tough political time.\1\
---------------------------------------------------------------------------
\1\ Deposition of Terence R. McAuliffe, June 6, 1997, pp. 11-12.
For further discussion of this issue, see the sections of this report
on the White House's thirst for money and its control of the DNC.
Democrats realized that if the President were to be reelected,
it would take an extraordinary amount of money, more than had
ever before been raised in a presidential campaign. In an
article subsequently published in Newsweek, George
Stephanopoulos--who was at the time Senior Advisor to President
Clinton--described the bleak atmosphere in the White House in
late 1994, recounting that this extraordinary challenge was
felt to require extraordinary responses. It was believed, he
---------------------------------------------------------------------------
wrote, that reelecting Bill Clinton and Al Gore would
take cash, tons of it, and everybody from the President
on down knew it. So money became a near obsession at
the highest levels. We pulled out all the stops:
overnights at the White House, coffees, intimate
dinners at Washington hotels, you name it.'' \2\
---------------------------------------------------------------------------
\2\ George Stephanopoulos, ``The View From Inside,'' Newsweek,
March 10, 1997, p. 27.
All of these DNC events--coffees, overnights, dinners, and so
forth--would be aimed at raising money.
One of the prime architects of this campaign to ``pull out
all the stops'' was Terry McAuliffe, who met with the President
on December 27, 1994, to discuss in general terms what needed
to be done to prepare the Democratic Party for the 1996
election and the prevailing mood of the donors upon whose
contributions the party's efforts were to focus.\3\ Among other
things, McAuliffe assured the President that he himself would
organize the necessary fundraising and generally put ``the
operation together.'' \4\ It became clear, even during this
discussion, that the President's own commitment of time and
energy to encouraging campaign contributors would be central to
the party's fundraising effort. At the end of their meeting,
the President asked McAuliffe what he needed to do,\5\ to which
McAuliffe responded that he neeeded ``some time with you [the
President] to meet with some of the key supporters who are
demoralized out there so that you can get them re-energized and
ready for the '96 election.'' \6\
---------------------------------------------------------------------------
\3\ Deposition of Terrence R. McAuliffe, June 6, 1997, pp. 12-14.
\4\ Id. at p. 14. McAuliffe told the President that ``you have
broad support out there in the donor community, which is what I
represented as the Finance Chair of the party. I'm going to be able to
put this operation together for you. The support of the people will be
there for you. Don't worry about it. I'll handle it.'' Id.
\5\ Id. at p. 16.
\6\ Id.
---------------------------------------------------------------------------
A few days after meeting with the President, McAuliffe sent
a follow-up memorandum to Nancy Hernreich, Director of Oval
Office Operations, reiterating the ``projects'' he had
discussed with the President.\7\ The first project was to
organize breakfasts, luncheons, and coffees with the President
for about twenty ``major supporters'' at a time--to ``offer
these people an opportunity to discuss issues and exchange
ideas with the President.'' \8\ McAuliffe's second project was
to offer the very top supporters ``overnights'' at the White
House.\9\ The third project in McAuliffe's memorandum was to
include ``key supporters'' in various other activities with the
President, including ``golf games, morning jogs, etc.''\10\ The
key to all three of these projects was to give major donors
``quality time for the President.'' \11\
---------------------------------------------------------------------------
\7\ Terry McAuliffe, memorandum to Nancy Hernreich, Jan. 5, 1995
(Ex. 1). This memorandum is dated January 5, 1993, but McAuliffe
recalls sending it to Hernreich shortly after his meeting with the
President in late December 1994. Deposition of Terrence R. McAuliffe,
June 6, 1997, pp. 113-14.
\8\ Ex. 1.
\9\ Id. His memorandum does not say this explicitly, merely
providing a list of the DNC's ten top supporters. Nancy Hernreich,
however, apparently clearly understood the idea, because she added a
handwritten note reading ``overnights'' to this part of McAuliffe's
memorandum. Hernreich confirmed that she wrote ``overnights'' on the
document, but could not recall whether this had been her idea or that
of the President. Nancy Hernreich deposition, June 20, 1997, p. 126.
Other senior officials also understood that McAuliffe's second project
involved offering overnight visits at the White House to key
supporters. A memorandum from Janice Enright to Harold Ickes enclosing
a copy of McAuliffe's memorandum, to example, lists one of McAuliffe's
three projects as ``overnights for top top [sic] supporters.'' Janice
Enright, memorandum to Harold Ickes, Jan. 6, 1995 (Ex. 2) (discussing
McAuliffe's request to the President).
\10\ Ex. 1.
\11\ Deposition of Terrence R. McAuliffe, June 6, 1997, p. 114.
---------------------------------------------------------------------------
Hernreich forwarded this memorandum to President
Clinton,\12\ asking him whether she should pursue McAuliffe's
first project with Billy Webster, Deputy Assistant to the
President and Director of Scheduling and Advance, whether she
should try to arrange overnights through the First Lady and
Carolyn Huber, and whether she should ``handle'' (i.e.,
include) top supporters in other activities.\13\ Hernreich also
asked whether she should obtain approval for these three
projects from Harold Ickes, Deputy Chief of Staff to the
President.\14\ Meanwhile, according to McAuliffe, the White
House obtained approval from its lawyers for the scheme:
Hernreich's office
---------------------------------------------------------------------------
\12\ See Ex. 1 (handwritten note in upper right-hand corner).
\13\ Id.
\14\ Id.
scheduled the White House, whoever does what they do
over there, legal counsel, whatever, you know, decided
that we could do [events for donors] in the Map Room in
the White House, and I was given two or three dates to
bring our past supporters in to see him [the
President].\15\
---------------------------------------------------------------------------
\15\ Deposition of Terrence R. McAuliffe, June 6, 1997, pp. 113-
114.
Officials apparently believed that there was nothing wrong with
using the White House to cultivate campaign contributors ``for
the upcoming campaign.'' \16\
---------------------------------------------------------------------------
\16\ Id. at p. 113. For top Democratic decision-makers, the end
apparently justified the means: after all, ``it was a very tough time
for us.'' Id. at p. 114.
---------------------------------------------------------------------------
As Vice President Gore himself apparently observed during a
``political budget meeting'' with President Clinton, the DNC
could raise the amount of money it needed ``ONLY IF--the
President and I actually do the events, the calls, the coffees,
etc.'' \17\ For his part, the President responded to
McAuliffe's ideas with great enthusiasm, responding to
Hernreich's note with one of his own: ``yes, pursue all 3
[projects] and promptly--and get other names at 100,000 or
more; 50,000 or more.'' \18\ The President wrote that he was
``[r]eady to start overnights right away--give me the top 10
list back along with the 100, 50 folks.'' \19\ With this note,
President Clinton set into motion the use of the White House to
host fundraising events for the DNC.\20\
---------------------------------------------------------------------------
\17\ Albert Gore, ``Points for Political Budget Meeting with
President,'' undated, p. 4 (Ex. 3); see also generally Testimony of
Jerry Campane, Sept. 18, 1997, pp. 180-181. (The Vice Presidential
notes were produced to the Committee in typewritten form with document
production ``BATES'' numbers following consecutively from a memorandum
to the President from Ron Klain. It is clear from their first-person
voice and distinct typeface that the Vice Presidential notes are a
different document.)
\18\ Ex. 1. The President copied this message to Harold Ickes, Leon
Panetta and Billy Webster, the Director of Scheduling.
\19\ Id.
\20\ See generally, e.g., Testimony of Jerry Campane, Sept. 18,
1997, p. 176 (recounting reasons for his conclusion that coffees were
fundraising events). As even Harold Ickes acknowledged, ``there was no
question that these coffees were in part to facilitate fundraising.''
Testimony of Harold Ickes, Oct. 8, 1997, p. 155.
---------------------------------------------------------------------------
White House Coffees
Documents released by the White House revealed that between
January 11, 1995 and August 23, 1996, White House officials
hosted 103 coffees.\21\ Most of these events were held in the
Map Room or the Roosevelt Room at the White House itself.\22\
Some coffees were held in the Old Executive Office Building
(``OEOB'') and others--some of the coffees hosted by the Vice
President--were held at the Naval Observatory.
---------------------------------------------------------------------------
\21\ Chart of White House Political Coffees, January 11, 1995-
November 5, 1996 (Ex. 4).
\22\ Id. The Roosevelt Room is directly opposite the Oval Office.
In fact, as described herein, at least one of the coffees ostensibly
held in the Roosevelt Room actually occurred in the Oval Office itself.
---------------------------------------------------------------------------
The White House divided these coffees into three
categories:
------------------------------------------------------------------------
Number of Number of
Category coffees guests
------------------------------------------------------------------------
DNC Supporters................................ 60 633
Clinton/Gore '96 Supporters................... 11 110
Political and Community Leaders............... 32 498
-------------------------
Total................................... 103 \23\ 1,241
------------------------------------------------------------------------
Because some persons attended more than one DNC-sponsored
coffee, the 633 people listed as having attended the 60 DNC-
sponsored coffees actually numbered only 532. Checking these
names against lists of campaign contributors available from the
FEC reveals that 92 percent (488 out of 532) of the individuals
who attended DNC-sponsored coffees at the White House
contributed to the Democratic Party in 1995 or 1996. Their
contributions to the DNC during the 1996 election cycle--given
personally or through their businesses--in fact, totaled $26.4
million, an average contribution of approximately $50,000.\24\
Moreover, many of these contributions were closely linked to
the donor's coffee attendance: almost one-third of the total,
some $7.7 million, was given to the DNC within one month of a
donor's attendance at a White House coffee.\25\ Indeed, in
keeping with the DNC's plan to cultivate ``top top''
contributors,\26\ at least 12 individuals contributed at least
$100,000 on or around the dates of the coffees they attended:
Miguell Lausell, David Bonderman, Robert Rubin, Derald
Ruttenberg, Richard Lawrence, Paul Cejas, Peter Mathias, Robert
Menschel, Samuel Rothberg, Barrie Wigmore, Lewis Manilow,
Pauline Kanchanalak, and Melvyn Weiss.\27\
---------------------------------------------------------------------------
\23\ This number does not include White House or DNC employees who
attended the coffees.
\24\ Testimony of Jerry Campane, Sept. 18, 1997, pp. 185-86.
\25\ See generally Testimony of Jerry Campane, Sept. 18, 1997, p.
185.
\26\ Ex. 2.
\27\ Testimony of Jerry Campane, Sept. 18, 1997, p. 190; see also
Chart of individual contributors of $100,000 or more to the DNC within
one month of attending a coffee (Ex. 5).
---------------------------------------------------------------------------
As compared to other fundraising tools, coffees were a
highly effective way for the DNC to raise money. The DNC's
direct mail solicitations during this period were customarily
burdened by overhead costs of 42 percent,\28\ with the effect
that only 58 cents out of each dollar solicited actually found
its way into party coffers. By contrast, however, White House
coffees required only minimal DNC expenditures, ensuring that
almost all of the funds solicited in connection with such
coffees could be pumped into campaigning against the
Republicans. A memorandum Harold Ickes wrote to the President
and Vice President, for example, did not even bother to list
the DNC's expenses for White House coffees, describing such
expenses as ``not applicable.'' \29\ Every cent of every dollar
raised by the DNC through the White House coffees, therefore,
was treated as income.\30\
---------------------------------------------------------------------------
\28\ Testimony of Jerry Campane, Sept. 18, 1997, pp. 186-87.
\29\ Harold Ickes, memorandum to the President and Vice President,
Feb. 9, 1996 (attachment to Todd Stern & Phil Caplan, Memorandum for
the President, Feb. 16, 1996), p. 6 (Ex. 6) (discussing DNC major donor
fundraising events and requests); Testimony of Jerry Campane, Sept. 18,
1997, p. 187. There must have been some minimal expenses associated
with the coffees for the cost of the coffee and pastries served. See
John O. Sutton, memorandum to Tracy B. LaBrecque, Jan. 23, 1995 (Ex. 7)
(noting that ``[p]er Harold [Ickes], the DNC will pay for the
coffees''). It is equally clear, however, that the party regarded these
costs as negligible.
\30\ Testimony of Jerry Campane, Sept. 18, 1997, p. 187.
---------------------------------------------------------------------------
A number of White House and DNC documents underline the
importance of the coffees as fundraising events. An e-mail
message sent by Jennifer O'Connor, Special Assistant to the
President, to Karen Hancox at the White House's Office of
Political Affairs, for example, made clear that White House
officials considered the coffees ``money tool[s]'' from which
party funds could be raised even if no formal admission fee
were charged.\31\ Ironically, White House officials believed
that not explicitly charging an admission fee was the way
``they could make the most money'' from the coffees.\32\ The
bottom line, however, was simple: according to DNC Finance
Director Richard Sullivan, for guests invited to DNC-sponsored
White House coffees, ``[w]e want[ed] potential donors.'' \33\
---------------------------------------------------------------------------
\31\ Jennifer O'Connor, e-mail to Karen Hancox, May 10, 1995 (Ex.
8) (discussing event in New York and describing it as being ``[l]ike
the President's coffees''); see also Testimony of Jerry Campane, Sept.
18, 1997, p. 180.
\32\ Ex. 8.
\33\ Deposition of Richard L. Sullivan, June 4, 1997, p. 128.
---------------------------------------------------------------------------
Although White House and DNC officials later resisted using
the term ``fundraiser'' to characterize the coffees through
which they had tried to raise political contributions in the
White House,\34\ Ickes described them at the time--and in
messages sent to and read by the President--as ``political/
fundraising coffees.'' \35\ Memoranda from Ickes to both the
President and the Vice President also detailed the amounts
raised by the White House coffees, comparing these sums to
contributions obtained through other DNC fundraising
events.\36\ In the first half of 1995, for example, the coffees
raised $1 million for the DNC.\37\ Indeed, Ickes tracked the
progress of the DNC's coffee fundraising on a coffee-by-coffee
basis. Thus, for example, did his bi-weekly reports to the
President and the Vice President list three Presidential
coffees in December 1995 that raised $400,000 each,\38\ and a
coffee in January 1996 that raised $500,000.\39\ For two
coffees in June 1995 that between them raised $1 million,
moreover, Karen Hancox, Deputy Assistant to the President for
Political Affairs, wrote to inform Ickes of ``the coffee
attendees (with POTUS) + amts. raised.'' \40\ Lest there be any
doubt on this point, a 1995 list of ``DNC Fundraising Events''
contained an entry for ``Coffees''--noting that during the
period in question they had already raised $1,000,000.\41\
---------------------------------------------------------------------------
\34\ See, e.g., Ickes testimony, pp. 154-55.
\35\ Harold Ickes, Memorandum to the President, May 14, 1996 (Ex.
9) (using term three times). There is no question that the President
actually read this document. The stamp at the top of the document
indicates that the President saw it on May 15, 1996, and the
President's name on the first page is checked with his unusual left-
handed check mark. The President also made a notation on this
memorandum stating that he wished to discuss it ``once more'' with
Harold Ickes. Id.
It is also apparent that many of the contributors involved with
White House coffees understood their intent. The ``memo'' portion of a
check collected from Ernest Green on the morning before a White House
coffee attended by his sometime business partner Charlie Trie and their
would-be client Wang Jun, for example, was annotated ``Fundraiser.''
Phyllis Green & Ernest Green check #5072 for $50,000 to the DNC on
February 6, 1996 (Ex. 10) (with accompanying DNC Finance Executive
Summary indicating collection of $50,000 in connection with ``POTUS
COFFEE 2/6/96'').
\36\ Harold Ickes, Memorandum to the President and Vice President,
June 28, 1995 (Ex. 11).
\37\ Id. This memorandum has also been stamped that the President
saw the document, it is marked with the President's left-handed check
mark and contains a notation from the President to Ickes.
\38\ Harold Ickes, Memorandum to the President and Vice President,
Jan. 2, 1996, p. 4 (Ex. 12) (discussing bi-weekly DNC report dated
December 22, 1995).
\39\ Harold Ickes, Memorandum to the President and Vice President,
Jan. 29, 1996, p. 11 (Ex. 13) (discussing bi-weekly DNC report dated
January 19, 1996).
\40\ Handwritten note and list of attendees from coffees on June 7
and June 21, 1995 (Ex. 14). The coffee on June 7 raised $400,000, while
the one on June 21 raised $600,000. Id.
\41\ List of DNC events dated June 25, 1995 (Ex. 15).
---------------------------------------------------------------------------
DNC briefing materials prepared for the President
underscore the obvious fact that certain White House coffees
were designed to be fundraising events and functioned as such.
A DNC briefing paper entitled ``Democratic National Committee
Budget/Fundraising Presentation to the President on 6 June
1996,'' for example, contains, among other things, detailed
information tracking various Presidential fundraising events,
including White House coffees. Entries for individual events
feature notations indicating:
(a) the total projected amount to be raised;
(b) how much of that amount had been collected as of
the time of the report's compilation;
(c) the status of the DNC's cash flow into federal
(``hard money'') and non-federal (``soft money'')
accounts;
(d) the proposed fund-raising schedule for the
President and Vice President; and
(e) estimates of the DNC's ability to meet its fund-
raising goals.\42\
---------------------------------------------------------------------------
\42\ See June 6 Presidential Briefing (Ex. 16).
---------------------------------------------------------------------------
Also attached to the June 6 Presidential Briefing are monthly
schedules containing information concerning specific events,
including projected fundraising totals--i.e., projected federal
contributions, corporate contributions, non-federal individual
contributions. Also appearing in these materials are lists of
contributions ``in hand,'' totals of federal contributions
received, and both the projected and the actual costs of
particular events.\43\
---------------------------------------------------------------------------
\42\ Id.
---------------------------------------------------------------------------
The June 6 Presidential Briefing schedules contain entries
for 22 fundraising coffees and nine ``servicing'' coffees. Each
of these fundraising coffees had projected revenues of
$400,000, while the ``servicing'' coffees had no projected
revenue.\44\ As indicated by these figures, the DNC drew a
distinction between fundraising coffees (from which
contributions were anticipated) and coffees at which no money
would be raised. For those coffees designed to raise money for
the DNC, the figures provided in the briefing were so specific
that they identified the portion of each fundraising coffee's
projected revenue that would be apportioned to federal dollars
(i.e., ``hard money'' that would be available to Clinton/Gore
'96 rather than simply to the DNC).\45\
---------------------------------------------------------------------------
\44\ Id.
\45\ Id.
---------------------------------------------------------------------------
In portions dealing with events that had already occurred,
moreover, the June 6 Presidential Briefing and other DNC
memoranda also summarize contributions the DNC had received as
a result of other White House coffees. A May 17, 1996 White
House coffee, for example, had a projected revenue of
$400,000--of which $300,000 was described as already being ``in
hand.'' \46\ In a separate DNC memorandum listing 1996
fundraising events, a White House coffee on February 22, 1996
was described as having had a projected revenue of $400,000,
with $340,000 ``raised to date''--while seven other
Presidential coffees (``POTUS coffees'') were listed as having
each raised all of their projected revenue totals of
$400,000.\47\
---------------------------------------------------------------------------
\46\ Id. at p. 27
\47\ See DNC 1996 events memorandum (Ex. 17).
---------------------------------------------------------------------------
These documents make quite clear that while not all coffees
were fundraisers, many coffees were designed specifically for
that purpose. Such unequivocal accounts of ``projected
revenue'' and the specific bank accounts into which money was
to flow, for example, make irrelevant DNC and White House
officials' reluctance today to employ particular terms or
phrases. Despite these internal documents' clear focus upon
coffee fundraising, DNC officials nonetheless went to some
lengths to preserve the public fiction that the coffees were
not fundraisers. Video footage shot by the White House
Communications Agency (WHCA) of a December 13, 1995 coffee at
the White House, for example, captured a DNC donor offering
Donald Fowler five contribution checks. Fowler refused to
accept this money on the spot, but told the donor that ``[a]s
soon as this thing is over, I'll call you . . . . We'll get it
done.'' \48\ Donors would have to give him their checks for the
coffee outside the White House, in other words, in order to
permit the Democratic Party to continue to pretend that the
coffees were not ``fundraisers.'' This pretense, however,
cannot survive the revelation of DNC internal documents
detailing the party's organization and tracking of White House
coffees under that very name and for that very purpose.
Whatever their organizers might prefer to call them, many White
House coffees were obviously ``fundraisers'' in the most
elementary sense of the word.
---------------------------------------------------------------------------
\48\ White House Communications Agency videotape, Dec. 13, 1995
(footage of White House coffee).
---------------------------------------------------------------------------
Overnights
As with the coffees, the opportunity to spend a night at
the White House was an important means by which the DNC raised
funds from major contributors.\49\ White House records indicate
that between 1993 and 1996, at least 938 individuals were
overnight guests at the White House.
---------------------------------------------------------------------------
\49\ Testimony of Jerry Campane, Sept. 18, 1997, p. 190.
---------------------------------------------------------------------------
White House officials divided these guests into the
following seven categories:
Category Number of guests
Arkansas Friends.................................................. 370
Longtime Friends.................................................. 155
Friends and Supporters............................................ 111
Public Officials and Dignitaries.................................. 128
Arts & Letters.................................................... 67
Family............................................................ 35
Chelsea's Friends................................................. 72
-----------------------------------------------------------------
________________________________________________
Total......................................................... 938
Some 760 of these guests fell into the categories of
``family,'' ``Arkansas friends,'' ``longtime friends,'' Chelsea
Clinton's friends, and ``public officials and dignitaries,''
making them seem unlikely targets for the DNC's ``overnights''
project.\50\ The remaining 178 individuals--from 114 different
families--contributed a total of more than $5 million to the
DNC, either personally or through their businesses, during the
1996 election cycle.\51\ This amounts to an average
contribution per family of over $44,000.\52\
---------------------------------------------------------------------------
\50\ This is not to suggest, however, that none of these 760
persons made contributions to the DNC. In fact, a number did. See
Testimony of Jerry Campane, Sept. 18, 1997, pp. 190-91.
\51\ Id. at p. 191.
\52\ Id.
---------------------------------------------------------------------------
Because the White House refused to provide a complete
accounting of the dates of each guest's stay at the Executive
Mansion, it has not been possible to analyze the nexus between
overnight attendance and the date of individual
contributions.\53\ The limited data the White House has seen
fit to make available to the Committee, however, is highly
suggestive: of 51 ``long time friends'' listed in one document
as having attended a White House overnight,\54\ fully 49--that
is, some 96 percent--contributed a total of $4,077,459 to the
DNC during the 1996 election cycle.\55\ The only two
individuals on this list who did not personally contribute were
Terry McAuliffe himself and one other individual, a relative of
John E. Connelly, whose company contributed $220,000 to the DNC
in 1996.\56\ FEC records also show that 47 percent of these 51
guests contributed, personally or through their businesses, a
total of $882,840.00 to the DNC within one month of their stay
at the White House.\57\ Moreover, if these 51 individuals are
separated into their 38 different families, FEC records reveal
that 97 percent of these families contributed to the DNC during
the 1996 election cycle--for an average contribution of over
$107,000 per family--with more than half of them giving a total
of nearly $900,000 within one month of their stay at the White
House.\58\
---------------------------------------------------------------------------
\53\ The Committee asked for this information in mid-August 1997.
The White House agreed in late November 1997 to produce only the names
and dates of individuals who contributed at least $5,000 to the DNC
during the 1996 election cycle. As of the time of writing, the White
House still has not produced this information.
\54\ As noted, these persons came from the White House's list of
``longtime friends.'' Their contributions, therefore, are not included
in the total given for the 178 individuals discussed above. See
Testimony of Jerry Campane, Sept. 18, 1997, p. 192; List of some
overnight guests with their dates of stay, released by the White House
(Ex. 18).
\55\ Id.; see also Chart of White House overnights as fundraising
tools (Ex. 19).
\56\ Testimony of Jerry Campane, Sept. 18, 1997, p. 193.
\57\ Id.; see also Ex. 19.
\58\ Testimony of Jerry Campane, Sept. 18, 1997, pp. 193-94.
---------------------------------------------------------------------------
The existence of this list of 51 overnight guests makes
clear that although not everyone who stayed at the White House
did so because they had made a donation to the Democratic
Party, White House and DNC officials kept separate records of
overnight attendees from whom they had or intended to solicit
campaign contributions. A certain proportion of the overnight
stays, therefore, were obviously intended to be--and functioned
as--DNC fundraisers.
Other Events
In addition to the coffees and overnights undertaken by DNC
and White House officials with the explicit approval of the
President,\59\ the DNC and White House organized a number of
other activities in order to reach the DNC's fundraising goals.
In a memorandum written in May 1994, in fact, DNC Deputy Chief
of Staff Martha Phipps listed no fewer than 19 different
activities that she said the DNC wished to coordinate with the
White House in order to meet its fundraising targets.\60\ These
activities included a remarkable range of benefits or services
that could be offered to campaign contributors:
---------------------------------------------------------------------------
\59\ See Ex. 1 (with accompanying note by President Clinton urging
officials to ``pursue all 3 [projects] and promptly'').
\60\ Martha Phipps, Memorandum to Ann Cahill, May 5, 1994 (Ex. 20)
(discussing White House activities).
---------------------------------------------------------------------------
seats on Air Force One and Air Force Two;
permission to play on White House tennis
courts;
seats at private White House dinners;
admission to Rose Garden ceremonies and
official White House visits;
invitations to join official delegations
traveling abroad;
appointments to boards and commissions;
meal privileges at the White House Mess;
visits to and overnight stays in the White
House residence;
``guaranteed'' tickets to events at the
Kennedy Center;
seats at the President's weekly radio
addresses
photo opportunities with the President, Vice
President, First Lady and Mrs. Gore;
seats at the Presidential lunches with
corporate CEOs;
``phone time from the Vice President;''
seats at White House screenings of popular
films;
monthly lunches with the First Lady or with
White House officials such as Mack McLarty or Ira
Magaziner;
use of the President's box at two local
theaters; and
meetings with Vice President Gore.\61\
---------------------------------------------------------------------------
\61\ Id.
---------------------------------------------------------------------------
According to Ari Swiller, director of the DNC's Trustee
Program, at least some of these activities were indeed offered
to contributors by the DNC, including the provision of tickets
to the Kennedy Center and visits to the White House residence
and overnight stays.\62\
---------------------------------------------------------------------------
\62\ Deposition of Jacob Aryeh Swiller, May 6, 1997, pp. 55-56.
Swiller also referred to a similar list of activities recounted in
another list compiled in 1994. See also Memorandum to Martha Phipps,
April 25, 1994 (Ex. 21). He also recalled that the DNC had received an
allotment of tickets for White House tours and routinely submitted
names to the White House for overnight stays. Swiller deposition, p.
63.
---------------------------------------------------------------------------
Two particular White House coffees stand out as
illustrations of this aspect of the DNC's fundraising scheme:
the events organized on May 1 and June 18, 1996. These two
coffees will be examined in more detail in the following pages.
The May 1, 1996 coffee
On May 1, 1996, five men attended a DNC coffee in the Oval
Office with President Clinton. Each of these five--Barrie
Wigmore, Lewis Manilow, Peter Mathias, Robert Menschel, and
Samuel Rothberg--agreed to give $100,000 to the DNC just before
the White House coffee. Their checks were collected just after
they visited the White House,\63\ and the DNC recorded their
$100,000 contributions one week after the coffee occurred.\64\
This May 1 event is the first instance documented in which the
President used the Oval Office for one of the DNC's ``money
coffees.''
---------------------------------------------------------------------------
\63\ Memorandum of Interview of Barrie Wigmore, Oct. 28, 1997, p.
5.
\64\ See, e.g., FECInfo database printout of individual contributor
data for Peter Mathias (Ex. 22) (indicating $100,000 contribution to
DNC on May 8, 1996); FECInfo database printout of individual
contributor data for Samuel Rothberg (Ex. 23) (same); FECInfo database
printout of individual contributor data for Barrie Wigmore (Ex. 24)
(same); FECInfo database printout of individual contributor data for
Robert Menschel (Ex. 25) (same).
Manilow does not appear in DNC records as a donor, but he told the
Committee that he made $100,000 in contributions, which were paid in
installments charged to his credit card in order to help him accumulate
``frequent flier'' mileage. Memorandum of Interview of Lewis Manilow,
Oct. 16, 1997, pp. 2-3 (recounting paying via credit card); Wigmore
interview, p. 5 (recounting Manilow's receipt of ``frequent flier''
miles for credit card donation). FEC records show Manilow as having
made $24,000 in contributions to various Democratic causes after the
date of the coffee; the remaining $76,000 of his commitment to Wigmore
may have ended up in the coffers of state Democratic parties. Cf.
FECInfo database printout of individual contributor data for Lewis
Manilow (Ex. 26) (showing contributions during 1995-96 election cycle).
All in all, Manilow had contributed $145,000 to Democrats in the last
three election cycles. See Testimony of Jerry Campane, Sept. 18, 1997,
pp. 187-88.
---------------------------------------------------------------------------
According to participants in this coffee interviewed by the
Committee, these DNC donations originated with the decision--
apparently in early or mid-April 1996--of Barrie Wigmore, an
investment banker with Goldman, Sachs in New York City, to
contribute $100,000 to the Democratic Party. A longtime
supporter of President Clinton, Wigmore said he had made this
decision because he had been upset by the Republican primary
campaigns of 1995 and 1996. He claimed that he had picked the
$100,000 figure because it was a satisfyingly large and
``round'' sum. Wigmore said this figure had no further
significance, and that no one had suggested that he make a
donation of that size.\65\
---------------------------------------------------------------------------
\65\ Wigmore interview, p. 1.
---------------------------------------------------------------------------
Having himself made this decision to donate, Wigmore
recalled, he told his friend Robert Menschel--also at Goldman,
Sachs--about his idea, and asked whether Menschel might be
interested in making a similar commitment. After thinking about
this proposal overnight, Menschel agreed that he, too, would
give $100,000.\66\ Menschel had not previously been a major
political contributor: his largest past contribution was no
more than ``a couple thousand.'' \67\ Over the next few days,
Wigmore persuaded the other three men to commit to identical
$100,000 contributions.\68\ After the group had attended the
Oval Office coffee, Wigmore collected their checks \69\--some
of which had been written beforehand \70\--and passed them
along to the DNC.\71\
---------------------------------------------------------------------------
\66\ Wigmore interview, p. 1; Memorandum of Interview of Robert
Menschel, Oct. 17, 1997, pp. 1-2.
\67\ Menschel interview, p. 1. Indeed, gifts of this size appear to
have been unprecedented for most of these men. See, e.g., FECInfo
database printouts of individual contributor data in 1993-94 for Robert
Menschel, Lewis Manilow, Barrie Wigmore, Peter Mathias, & Samuel
Rothberg (Ex. 27). Manilow told the Committee, however, that he had
given $100,000 during the 1987-88 election cycle. Manilow interview, p.
3.
\68\ Wigmore interview, p. 2.
\69\ As noted above, however, Lewis Manilow made his donations by
means of a credit card. See supra note 64.
\70\ See, e.g., infra note 75.
\71\ See, e.g., Wigmore interview, p. 5.
---------------------------------------------------------------------------
It is clear that the prospect of a White House visit played
some role in inducing the members of this group to commit to a
total of $500,000 in contributions to the DNC. Although one
participant, Menschel, claimed that he would have made his
$100,000 donation whether or not he had been invited to the
White House,\72\ the prospect of a visit does seem to have
affected the nature and timing of at least one of his
colleagues' pledges. According to Lewis Manilow, Wigmore told
him that if Manilow were going to make a large contribution
anyway, ``a nice way to do it'' would be to do so as part of
Wigmore's group, so that he could visit the President.\73\
Having been thus told, in effect, that his donation would buy
him a Presidential audience, Manilow agreed. Making clear that
he understood this connection, Manilow later compared the May 1
visit to his attendance at a previous ``event like a coffee''
by noting that for the earlier trip, ``[t]here was not money at
that point, that was not a money coffee.'' \74\ (It is also
instructive that while some of the checks were written before
the coffee,\75\ Wigmore himself, the principal organizer of
this delegation, refrained from writing his own $100,000
check--and from collecting those written by his colleagues--
until the day after the White House visit had actually
occurred.\76\)
---------------------------------------------------------------------------
\72\ Menschel interview, p. 2.
\73\ Manilow interview, p. 1. As to the existence of a causal
connection between donation and invitation, Manilow said only that
``you can draw your [own] conclusions.'' Id.
\74\ Id. at p. 3.
\75\ See, e.g., Robert Menschel check #1296 for $100,000 to DNC on
April 22, 1996 (Ex. 28).
\76\ See Barrie Wigmore check #4250 for $100,000 to DNC on May 2,
1996 (Ex. 29); Wigmore interview, p. 5 (recounting collecting checks
from other participants after coffee).
---------------------------------------------------------------------------
The members of Wigmore's group seem to have very much
desired a Presidential visit, and to have expected that, after
agreeing to make such significant contributions, they should be
able to meet personally with President Clinton to convey their
messages of support. In discussing the contribution plan with
Manilow, Wigmore recalled, the two men decided that they did
indeed want to meet with President Clinton in order to ``tell
the President how [they] feel, [and] what an important job he's
doing.'' Accordingly, after securing these donation commitments
from his friends, Wigmore promptly called his old friend Thomas
F. (``Mack'') McLarty at the White House in order to ``see if
we can do this.'' McLarty, in turn, put Wigmore in contact with
Ann Braziel at the DNC. According to Wigmore, he told Braziel
that he and his friends supported the President and would like
to meet him. ``We all feel the same way,'' he recalls telling
her, ``and [we] would like to tell the President'' in person.
Braziel told him that ``we'll see what we can do.'' \77\
---------------------------------------------------------------------------
\77\ Wigmore interview, p. 2.
---------------------------------------------------------------------------
The evidence suggests that but for their contribution
commitments, the Wigmore group would not have been invited to
the White House on May 1, 1996. In Wigmore's conversation with
Braziel, he told her that his colleagues would be giving money
to the DNC. Soon after their conversation, Braziel called
Wigmore back to suggest a date on which his group could visit
the White House. After a series of discussions, they settled
upon May 1 as the date for the event.\78\
---------------------------------------------------------------------------
\78\ Id. at p. 2.
---------------------------------------------------------------------------
Although Wigmore claimed not to recall whether he told
Braziel the specific size of their donations,\79\ he apparently
did so. The DNC, the White House staff, and President Clinton
himself--as they planned the Wigmore coffee--were all soon well
aware that these five men had each agreed to become $100,000
donors.\80\ This appears to have been precisely what was
needed: while many Americans may have wished to tell President
Clinton their views, few had $100,000 each to offer the DNC for
this privilege.
---------------------------------------------------------------------------
\79\ Id.
\80\ On a document written by Sullivan on April 29, 1996 and
personally reviewed by President Clinton on the day of the coffee, for
example, White House aide Phil Caplan wrote: ``MR PRESIDENT: Per Doug
[Sosnik], the five attendees of this coffee are $100,000 contributors
to the DNC.'' Richard Sullivan, memorandum on May 1, 1996 coffee, April
29, 1996 (Ex. 30) (memorandum marked ``THE PRESIDENT HAS SEEN 5/1/
96'').
---------------------------------------------------------------------------
Despite the fact that this DNC coffee was originally
planned to take place in the Roosevelt Room,\81\ it actually
occurred in the Oval Office itself, with the President taking
time to meet with Wigmore's five $100,000 donors between
meetings with Palestinian leader Yasser Arafat and the Rev.
Billy Graham.\82\ The use of the Oval Office for this DNC
function was not revealed to the Committee until the
production--after repeated requests for such records--of a
videotape of a portion of this event taken by the White House
Communications Agency.\83\ This tape clearly shows the
delegation being taken into the Oval Office for coffee.\84\
This belatedly-released videotape thus makes the May 1 coffee
the first documented instance in which the Oval Office was used
for a fundraising event.
---------------------------------------------------------------------------
\81\ ``Schedule of the President for Wednesday, May 1, 1996,
Revised Final'', p. 3 (Ex. 31) (listing Roosevelt Room location).
\82\ Wigmore interview, pp. 4-5 (discussing Arafat and Graham);
Menschel interview, p. 3 (recounting Graham meeting).
\83\ For discussion of the White House's delay in producing
videotapes to the Committee, see the section of this report on delays
in White House document production.
\84\ White House Communications Agency videotape, May 1, 1996.
---------------------------------------------------------------------------
As noted above, President Clinton had been made aware of
the group's $100,000 commitments prior to this Oval Office
meeting.\85\ In case he had forgotten their generosity to the
DNC, however, one of the five, Samuel Rothberg, actually
brought up the subject of fundraising in the Oval Office over
coffee and pastries with President Clinton--telling the
President that his speech at the funeral of Israeli Prime
Minister Rabin had moved him to make his DNC contribution.\86\
---------------------------------------------------------------------------
\85\ See supra text accompanying note 80.
\86\ Wigmore interview, p. 4. DNC Chairman Donald Fowler and
Finance Chairman Marvin Rosen were also present during this meeting,
although they apparently did not contribute to the discussion. See id.
at p. 5; Manilow interview, p. 2; Menschel interview, p. 3.
---------------------------------------------------------------------------
Interestingly, the DNC appeared to have been sufficiently
impressed with Barrie Wigmore's ability to raise huge sums for
the Democratic Party from his wealthy friends that it invited
him to become involved in arranging more meetings with the
President for ``key people,'' as part of what Democratic
campaign official Alan Patrikoff termed a ``fundraising
methodology'' involving DNC breakfasts, coffees, dinners, and
other events. At some point during the period just before the
May 1 coffee, Wigmore received a telephone call from Patrikoff,
who tried to persuade Wigmore to help the DNC arrange further
Presidential meetings as a way of raising money from wealthy
donors. Wigmore, however, was not interested in such work;
after pledging $100,000, he felt he had contributed more than
his share to the DNC already.\87\
---------------------------------------------------------------------------
\87\ Wigmore interview, p. 3. Wigmore described Patrikoff as a
friend of his who was a venture capitalist and prominent Clinton
fundraiser, as well as the chair of the Democratic Leadership Council
(DLC). Id.
---------------------------------------------------------------------------
Wigmore's call from Patrikoff underscores the understanding
Wigmore must have had--and the White House and the DNC clearly
had--that the May 1, 1996 coffee with President Clinton was a
DNC fundraising tool. Having already been informed by Patrikoff
that DNC ``coffees'' were part of the party's ``fundraising
methodology'' as a way of enticing contributions from ``key
people,'' Wigmore recalls having been upset when Ann Braziel
subsequently referred to the upcoming May 1 event as a
``coffee.'' Wigmore claims to have bristled at this
terminology; he ``thought the concept of a coffee was
repugnant'' and preferred to think of his group as ``all
serious players wanting to discuss the [Clinton
Administration's] second term.'' \88\ Nevertheless, it is
telling that the word ``coffee'' was used both by Braziel and
in DNC and White House documents relating to the May 1
event.\89\ Ultimately, Wigmore had understood Braziel's
``repugnant'' usage correctly: he and friends were precisely
the sort of ``key people'' from whom the DNC's ``coffee''
system had been designed to elicit campaign contributions. In
Lewis Manilow's words, therefore, the May 1, 1996 event in the
Oval Office was indeed a ``money coffee.'' \90\
---------------------------------------------------------------------------
\88\ Id.
\89\ See, e.g., Ex. 31 (listing ``coffee'' on May 1, 1996 with Doug
Sosnik at DNC staff contact); Ex. 30 (discussing ``coffee with
supporters of the Democratic National Committee'' on May 1, 1996).
Sullivan's memorandum, in fact, described Wigmore's group by noting
that they were ``[a]ll . . . new supporters of the DNC.'' Id.
\90\ Manilow interview, p. 3.
---------------------------------------------------------------------------
The June 18, 1996 coffee
The June 18th coffee illustrates not only the fundraising
character of the White House coffees, but the extraordinary
degree of control that an individual fundraiser could exert
over the DNC decision-making process and over the personal
schedule of the President himself. In pursuit of substantial
campaign contributions, DNC Managing Trustee Pauline
Kanchanalak and DNC Finance Vice Chairman John Huang prevailed
over Sullivan's objections, and organized a DNC-sponsored White
House coffee at which the President met with three foreign
nationals for over one hour. The DNC and the White House
permitted this coffee to go forward even though they knew that
foreign nationals could not legally contribute to the DNC and
that, given the presence of such individuals at the coffee, the
coffee could not be cast as a ``community outreach'' event. In
short, the June 18th coffee was a fundraiser held in the White
House at which the President took time to hear the views of
Kanchanalak's foreign clients in return for substantial
contributions from Kanchanalak or her associates.
The June 18, 1996 White House coffee also raises other
serious questions, including:
Why did the President spend over an hour
with three DNC contributors and a group of foreign
nationals without the knowledge of the NSC and over the
objections of DNC executives?
Why did the coffee occur despite the strong
concerns expressed by the DNC's Finance Chairman that
Kanchanalak might be using the event for an improper
purpose?
Why were foreign nationals the only persons
originally scheduled to attend the coffee if this event
were really a ``community outreach'' or ``donor
servicing event''?
Did the President and/or the DNC believe
that they would receive contributions from foreign
nationals?
An analysis of this coffee demonstrates the following: (a)
individual DNC fundraisers exercised an enormous degree of
control over the DNC, the White House, and the President's
schedule; (b) the DNC's and the White House's claim that the
coffee was merely a ``donor servicing'' or ``community
outreach'' event is false because, as it was originally
planned, no U.S. citizens were invited; (c) John Huang made an
explicit solicitation for financial ``support'' at the coffee;
(d) the coffee was a fundraiser in connection with which Huang
was given credit for raising over $180,000 in contributions
from Kanchanalak and her sister-in-law, Duangnet (``Georgie'')
Kronenberg; and (e) the actions after the coffee of Kanchanalak
and her company, Ban Chang International (USA) Inc. (BCI),
suggest that evidence regarding the coffee has either been
withheld from the Committee or destroyed.
As so often during this investigation, the Committee has
been hampered in its ability to learn all the relevant facts
concerning this coffee. Huang and Kronenberg have asserted
their Fifth Amendment right against self-incrimination in
response to the Committee's inquiries, and Kanchanalak fled the
United States and has remained in Thailand since approximately
December 1996. The following pages recount what information is
available about this event.
Pauline Kanchanalak
Born in Thailand in 1950, Pauline (Pornpimol) Kanchanalak,
a Thai citizen and a legal U.S. resident, graduated from
Stanford University in 1983 and first worked for the press
section of the Thai Embassy. After leaving the Embassy,
Kanchanalak worked in Washington for the Bangkok Post while
both she and her husband, Chupong (``Jeb'') Kanchanalak, sought
private clients for their new lobbying business. Kanchanalak
applied for a position as a Washington lobbyist for the
government of Thailand, but was rejected because Thai officials
did not believe she had the proper connections. Kanchanalak
subsequently became a lobbyist for Ban Chan Group, a Thai
property development company, and President of Ban Chang
International (USA) Inc., a Washington, D.C. based consulting
firm.\91\
---------------------------------------------------------------------------
\91\ For additional information on Kanchanalak's background, see
Raymond Bonner and Stephen Labaton, ``An Inquiry Clouds a Lobbyist's
Success Story,'' New York Times, February 9, 1997, p. 26.
---------------------------------------------------------------------------
An early example of Kanchanalak's attempts to use her
political influence is the Blockbuster deal before the Ex-Im
Bank. In 1996, Maria Haley,\92\ a director at the Ex-Im Bank,
reportedly tried to push through an unusual $6.5 million
financing deal sought by the Sun Tech Group.\93\ A Sun Tech
subsidiary agreed to pay $7.7 million to the Blockbuster video
rental company for the rights to operate more than 100 stores
in Thailand that would be financed by Sun Trust Credit, the
Little Rock unit of a large Florida banking chain. In an effort
to obtain financing from the Ex-Im Bank for the franchise of
Blockbuster video stores in Bangkok, Kanchanalak reportedly
called Haley on June 25, 1996, met with her on July 16, 1996,
and again called her on August 13 and 14, 1996. Allegedly,
Huang also intervened on Kanchanalak's behalf regarding the
status of the Ex-Im Bank's decision to provide financing for
Sun Tech. Ex-Im Bank records show that Huang called Haley on
June 18, 1996 (the date of the White House coffee and
Kanchanalak's $85,000 contribution to the DNC). In August 1996,
Haley was the host of a crucial meeting in her office attended
by Ex-Im officials and Kanchanalak. Eventually, Haley won
support from one of the two groups of Ex-Im Bank officials
required for approval, but the Blockbuster deal collapsed amid
unresolved questions about the franchise's operations.\94\
---------------------------------------------------------------------------
\92\ Haley, a former Arkansas resident with strong political ties
to the President dating back to 1979, assisted then-Governor Clinton
with trade missions to Asia. In 1992, she became the President's trade
advisor (pushing for Arkansas to enter Asian markets). In 1993, Haley
was Deputy White House Personnel Director under Bruce Lindsey. Haley is
credited with assisting the placement of Huang at the Department of
Commerce. In 1994, the President appointed Haley as a Director of the
Export-Import Bank.
\93\ The Sun Tech Group is a Thai conglomerate controlled by
Sawasdi Horrungruang (President of Hemaraj Land & Development Public
Co., Ltd. and a member of the United States-Thailand Business Council),
a wealthy Thai businessman who approached the Ex-Im Bank in late 1995.
\94\ See generally Christopher Drew and Jeff Gerth, ``Appointee of
Clinton Pushed Deal Sought by a Big Donor,'' New York Times, January
23, 1997, p. 1.
---------------------------------------------------------------------------
In 1994, in a second example of the questionable uses to
which Kanchanalak put her political influence, at the request
of Thai government, she helped form the United States-Thailand
Business Council (``USTBC''). On September 30, 1994, telephone
records indicate that Kanchanalak telephoned John Huang at the
Department of Commerce.\95\ On that same day, Huang wrote a
memorandum urging David Rothkopf,\96\ Assistant Undersecretary
at the Commerce Department, to support the USTBC and to
persuade the President to attend the inaugural ceremony.\97\ In
early October 1994, furthermore, Kanchanalak apparently
attended meetings at both the White House and the Department of
Commerce, presumably in an attempt to win Clinton
Administration support for the USTBC. Probably not by
coincidence, within days of these meetings, she contributed
$32,500 to the DNC.\98\ Although the USTBC never received the
grant it wanted, on October 6, 1994, both the President and the
Prime Minister of Thailand (Chuan Leek Pai) attended the
USTBC's inaugural ceremony.
---------------------------------------------------------------------------
\95\ See September 30, 1994 telephone message slips for Huang (Ex.
32).
\96\ Rothkopf and Jeffery Garten, another Commerce official, met
with a group of Indonesian businessmen at the home of James Riady
during President Clinton's trade summit trip to Jakarta in October
1994.
\97\ See John Huang, Memorandum to David Rothkopf, Sept. 30, 1994
(Ex. 33). Huang also used his Arkansas background to urge
administration officials to approve projects in which he was involved.
For example, in Rothkopf's September 30, 1994 memorandum, Huang wrote
that ``[t]here are quite a few members in this proposed Council from
Arkansas. They may want to utilize their contacts to get this matter
squared away directly from the top even if they offend Sandy and NSC.''
Id.
\98\ See FECInfo database printouts of individual contributor data
for Pauline Kanchanalak (Ex. 34).
---------------------------------------------------------------------------
As with so many other DNC contributors during this period,
Kanchanalak's political contributions apparently provided her
almost unquestioned access to the White House. Kanchanalak was
invited to the White House approximately thirty-three times
between January 1993 and November 1996.\99\ As a DNC Managing
Trustee, in fact, she received assistance from DNC and White
House officials in obtaining special access to the White House
and arranging meetings with other influential individuals. A
few examples of such access include: (1) membership in an
October 1995 official Thailand government delegation that met
with Commerce Secretary Ron Brown, in which Kanchanalak was
listed as an advisor to then-Deputy Prime Minister Dr. Amnuay
Viravan;\100\ (2) special White House access for business
associates and friends (i.e., private White House tours);\101\
and (3) three scheduled meetings with Sandra J. Kristoff, a top
Asia expert for then National Security Advisor Anthony
Lake.\102\
---------------------------------------------------------------------------
\99\ See Secret Service WAVES records for Kanchanalak (Ex. 35).
Kanchanalak's WAVES records indicate that she was admitted into the
White House complex under the names Pauline Kanchanalak and Pornpimol
Parichattkul. Id.
\100\ Memorandum for the Office of Security from Jean Kelly,
Thailand Desk Officer for the Department of Commerce, Oct. 18, 1995
(Ex. 36)
\101\ See Ex. 37 (compilation of certain Kanchanalak requests for
private and special White House tours).
\102\ These visits also forced a delay in the consideration of
Anthony Lake's nomination to be Director of the Central Intelligence
Agency, which Lake later asked be withdrawn. See e.g. John Diamond,
``Campaign financing issues cause new delay in Lake confirmation,''
Associated Press, February 12, 1997.
---------------------------------------------------------------------------
Providing this access, however, was not simply an act of
charity. In the early 1990s, Kanchanalak had become a
significant DNC fundraiser, consistently holding the title of a
DNC Managing Trustee on account of her success in these
endeavors. Kanchanalak also served as a co-chair of the DNC's
Women's Leadership Forum and was actively engaged with the
DNC's Finance Board of Directors. As a result of this status in
the DNC, she was invited to and attended numerous White House
events (both official and political) and DNC fundraisers.
Nevertheless, Kanchanalak's status as a significant DNC
fundraiser was built upon shaky foundations. The DNC was forced
to return approximately a quarter of a million dollars in
improper campaign contributions which she helped arrange. These
contributions, totaling $253,500, were made under the name P.
Kanchanalak--and she was duly given credit for them--but were
returned when it was discovered that the money actually came
from her mother-in-law, Praitun Kanchanalak.\103\ The DNC also
returned a contribution by Ban Chang International after it was
discovered that this company was the U.S. representative of a
foreign corporation.\104\
---------------------------------------------------------------------------
\103\ See Flow chart contribution money trail credited to
Kanchanalak and those of her sister-in-law, Duangnet (``Georgie'')
Kronenberg (Ex. 38).
\104\ See DNC Press Release, Nov. 20, 1996 (Ex. 39) (announcing the
returned contributions).
---------------------------------------------------------------------------
Moreover, the contributions credited to Kanchanalak may
have been illegal because they originated from a foreign
source. As detailed in Exhibit 38, the source of the funds used
in Kanchanalak's and Kronenberg's DNC contributions was her
husband, Chupong Kanchanalak. In early June 1996, less than two
weeks before Pauline Kanchanalak's coffee at the White House,
Chupong Kanchanalak sent $200,000 in wire transfers from a bank
in Bangkok, Thailand, into the U.S. bank accounts of Praitun
Kanchanalak and Duangnet Kronenberg. Shortly thereafter, he
transferred an additional $275,510 from Thailand into the bank
account of a company called AEGIS Capital Management--which in
turn transferred $275,000 into the U.S. bank accounts of
Kronenberg and Praitun Kanchanalak. This total transfer of
$475,000 from Thailand to Praitun Kanchanalak and Duangnet
Kronenberg funded the DNC donations these two women made to the
DNC, ostensibly in the name of Pauline Kanchanalak, in
connection with the June 18, 1996 White House coffee. Without
this infusion, neither of their accounts could have afforded
these donations.\105\
---------------------------------------------------------------------------
\105\ Id.
---------------------------------------------------------------------------
The June 18, 1996 coffee
The June 18, 1996 coffee provides an illustration of the
extraordinary influence major DNC contributors had over the
White House, the DNC and high ranking Administration officials.
Several points stand out: (1) DNC documents indicate that the
June 18 coffee was an illegal DNC-sponsored White House
fundraiser planned and attended by high-level DNC and White
House officials; (2) the timing of the contributions credited
to Pauline Kanchanalak, and the DNC reporting method used by
Huang, underline the fact that this coffee was a DNC
fundraiser; (3) high-ranking DNC officials approved this coffee
even though the only non-official attendees at the coffee were
to be foreign nationals whom Kanchanalak was lobbying; (4)
Huang openly solicited contributions during the June 18th
coffee, asking for donations from foreign nationals in the
presence of the President; and (5) the actions of Kanchanalak
and her company, Ban Chang International (USA) Inc., after the
coffee raise serious questions as to whether evidence regarding
the coffee was withheld or destroyed.
(1) Briefing materials
As discussed above, DNC briefing materials prepared for the
President make clear that the June 18, 1996 White House coffee
was indeed a fundraiser. Among its detailed financial accounts
of DNC specific fundraisers--containing information on each
event's projected revenue, what funds had been sent to federal
or non-federal bank accounts, and listings of how much money
was ``in hand''--the briefing entitled ``Democratic National
Committee Budget/Fundraising Presentation to the President on 6
June 1996'' contains explicit information about the June 18,
1996 coffee.\106\ Significantly, the DNC's entry for this
event, which was scheduled to occur less than two weeks after
the date of this briefing, made clear that it was a coffee of
the fundraising variety. This entry contained the following
information:
---------------------------------------------------------------------------
\106\ See Ex. 16, p. 32.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pro. Pro. In Fed. Pro. Actual
Principal Event/source Date revenue Pro. Fed. corp. Pro. NFI hand in cost cost Variance
--------------------------------------------------------------------------------------------------------------------------------------------------------
POTUS........................... Coffee............ 18-Jun...... $400,000 $40,000 $200,000 $160,000 $0 ...... n/a n/a $0
(Kanchanalak)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Two weeks beforehand, therefore, the DNC anticipated that
Pauline Kanchanalak's June 18 coffee would raise $400,000.\107\
As this chart indicates, these figures were so specific that
they identified the portion the coffee's projected revenue that
would be designated as federal dollars (i.e., ``hard money''
that would be available to Clinton/Gore '96 rather than simply
to the DNC).\108\
---------------------------------------------------------------------------
\107\ Id.
\108\ Id.
---------------------------------------------------------------------------
In other DNC documents, moreover, the DNC listed
Kanchanalak's and Kronenberg's contributions as deriving from
the June 18 coffee. A DNC document written on the day after
this coffee entitled ``Directed-Donor Checks Received to-Date''
lists $130,000 in contributions from Duangnet Kronenberg and
$142,500 from Pauline Kanchanalak--and recounts them as having
been generated by the ``John Huang Coffee.'' \109\ All in all,
there can be no question that the coffees were the culmination
of Terry McAuliffe's ``project'' to raise money for the DNC
through fundraising events at the White House, and no question
that the June 18, 1996 event was part of this fundraising
campaign.
---------------------------------------------------------------------------
\109\ See DNC list of ``Directed-Donor Checks Received to-Date''
(Ex. 40).
---------------------------------------------------------------------------
(2) Contribution credits
Both the timing of the contributions credited to
Kanchanalak and her sister-in-law by the DNC and the DNC
reporting methods used by Huang underline this conclusion that
this coffee was a fundraiser. Kanchanalak received credit from
the DNC for an $85,000 contribution on June 18, 1996.\110\
Significantly, the DNC Tracking Form used for this
contribution--which confirms the coffee was a fundraiser by its
use of a ``Fundraiser Code''--lists Huang as the ``DNC
Contact'' and gives the ``Event Location'' as ``6/18/96 coffee
WH.'' \111\ Duangnet Kronenberg also was credited with
contributing $50,000 to the DNC on June 18,\112\ and the DNC
credited Kanchanalak with contributing another $50,000 on June
24.\113\ The DNC Tracking Form for this last contribution had
the same ``Source Code,'' ``Revenue Code,'' and ``Fundraiser
Code'' used for the June 18 contribution; this form, too, lists
John Huang as the DNC contact.\114\
---------------------------------------------------------------------------
\110\ See DNC Tracking Form for P. Kanchanalak donation of $85,000
on June 19, 1996 (Ex. 41). The check for her $85,000 donation is dated
June 19, 1996, but notations on the Tracking Form indicate that it was
credited as of June 18. Id.
\111\ Id.
\112\ See Duangnet Kronenberg, check #211 for $50,000 to DNC on
June 18, 1996 (Ex. 42).
\113\ See DNC Tracking Form for P. Kanchanalak donation of $50,000
on June 24, 1996 (Ex. 43).
\114\ Id.
---------------------------------------------------------------------------
The DNC Tracking Form is used by the DNC to credit the
party representative responsible for soliciting an individual's
contribution and to attribute that contribution to the correct
event.\115\ Richard Sullivan, the DNC's Finance Director at the
time of the June 18 coffee, testified he was aware Huang was
the DNC representative responsible for Kanchanalak's
contributions in and around June of 1996.\116\ The DNC briefing
schedules covering the actual and projected contributions for
the 22 fundraising coffees (including the June 18 coffee) and
Huang's use of the DNC Tracking Form underline the conclusion
that Kanchanalak's contributions were, in effect, a quid pro
quo contribution in return for the DNC organizing a White House
coffee for her clients.
---------------------------------------------------------------------------
\115\ See Deposition of Richard L. Sullivan, June 4, 1997, pp. 161-
62.
\116\ Id. at pp. 124-25.
---------------------------------------------------------------------------
(3) Only foreign nationals were expected to attend
The original guests for the June 18 coffee included only
the President, John Huang, Donald Fowler, Marvin Rosen and
Pauline Kanchanalak and her guests--several top officials from
Charoen Pokphand Group (``C.P. Group'') in Thailand: \117\
Dhanin Chearavanont (Chairman and CEO), Sumet Chearavanont
(Vice Chairman and President) and Sarasin Virapol (Official and
translator). Apart from DNC officials and the President
himself, therefore, not a single U.S. citizen or permanent
resident alien was expected to attend.\118\ Shortly before the
coffee, however, Kanchanalak was forced to invite U.S. citizens
after concerns were raised regarding the appearance of
impropriety. After significant pressure from the DNC to invite
at least someone from the United States, Kanchanalak finally
invited two U.S. citizens, asking them to attend only on the
day before the coffee. Sullivan was so concerned about the
appearance of this coffee that he invited three additional
people to attend: Beth Dozoretz, a DNC Managing Trustee, and
Robert and Renee Belfer, also DNC Managing Trustees.\119\
---------------------------------------------------------------------------
\117\ The C.P. Group is Thailand's largest multinational company
and one of the largest foreign investors in the People's Republic of
China.
\118\ See Deposition of Richard L. Sullivan, June 4, 1997, p. 127.
Perhaps not coincidentally, Dhanin Chearavanont was the only private
businessman with whom the President met on his subsequent trip to
Thailand in November 1996.
\119\ See Deposition of Beth Dozoretz, Sept. 2, 1997, pp. 88-90.
---------------------------------------------------------------------------
Sullivan knew Kanchanalak to have been a DNC fundraiser
since 1991,\120\ and after learning that Kanchanalak wanted to
``help out in a big way,'' he talked with Marvin Rosen and
Huang ``about working with Pauline to get her to come to the
table, to make her contribution, to raise some money.'' \121\
According to Sullivan, in fact, DNC representatives were
``always asking her [to] give something to come to this and
that.'' \122\
---------------------------------------------------------------------------
\120\ See Deposition of Richard L. Sullivan, June 4, 1997, pp. 124-
25. Sullivan also testified that ``the White House looked to her as
some kind of advisor on Asian issues.'' Id. at p. 133.
\121\ Id. at p. 125.
\122\ Id.
John [Huang] came . . . at some point in the late
spring of '96 and said that Pauline is ready to do her
part. She is thinking about doing between 300 and 500
[thousand dollars] in the next couple of months, do a
couple of events.\123\
---------------------------------------------------------------------------
\123\ Id. at p. 126.
Principally, in or about the spring of 1996, Huang wrote to
Kanchanalak to confirm setting up the June 18 coffee with
President Clinton.\124\ Huang recommended that Kanchanalak
``bring a couple of people to a coffee'' to this event.\125\
---------------------------------------------------------------------------
\124\ See John Huang, Memorandum to Pauline Kanchanalak, undated
(Ex. 44) (listing subject as ``Coffee'' on Tuesday, June 18m, 1996).
\125\ Deposition of Richard L. Sullivan, June 4, 1997, p. 126.
Huang's memorandum stated that ``[w]e look forward to seeing you and
your guests at the White House coffee on Tuesday, June 18, 1996.'' Ex.
44.
---------------------------------------------------------------------------
As noted, however, because Huang's original list of her
invitees contained only three Thai executives from the C.P.
Group,\126\ Sullivan grew concerned that Kanchanalak intended
only to invite her foreign clients to the June 18 coffee.
Sullivan expressed concern to Huang that Kanchanalak was using
the coffee for an ``improper'' purpose by inviting only foreign
businessmen,\127\ telling Huang that Kanchanalak needed to
``invite potential donors, American citizens.'' \128\ Sullivan
testified as follows:
---------------------------------------------------------------------------
\126\ See Deposition of Richard L. Sullivan, June 4, 1997, p. 127.
\127\ Id.
\128\ Id. at pp. 127-28, 133.
when John came up with a preliminary list of who she
was going to bring. It included--the list was her and
the three, the three people from Thailand. I said, John
that's not--I recall saying, John that's not what we're
looking for. I don't want to get--I said, I would
prefer--you know, I was thinking she was bringing in
some people, fellow people that she would be working
with in fund raising, some people that might be
potential donors, American citizens.
* * * * *
We want[ed] potential donors and to tell her to, at
least, get some more American citizens, more potential
donors, more people who are of greater use to us down
the road.\129\
---------------------------------------------------------------------------
\129\ Id. at pp. 127-28.
In response to these concerns, Sullivan recalled, Huang
replied that the coffee was ``very, very important to
[Kanchanalak],'' \130\ that he and Kanchanalak were ``adamant''
about having the coffee and ``insisted'' that the C.P. Group
businessmen be permitted to attend.\131\ Indeed, the June 18
coffee was the only time Sullivan could recall Huang
``express[ing] some emotion'' about a particular event.\132\
According to Sullivan, Huang
---------------------------------------------------------------------------
\130\ Id.
\131\ Id. at pp. 128 & 132.
\132\ Id. at pp. 129 & 135.
said something to the effect of, you know, as you know,
Richard, Pauline has been a big contributor, a big
supporter. It goes back to Vic Rayier and Ron Brown and
she is very high maintenance. She has been good to us
and she is making a--she is going to be good to us and
help us into the fall. This is important to her and I
feel strongly about it.\133\
---------------------------------------------------------------------------
\133\ Id. at 129-30.
In effect, therefore, Kanchanalak's continued contributions to
the DNC rode upon whether or not she was permitted to entertain
her Thai clients at the White House.
Ultimately, however, Kanchanalak reacted to Sullivan's
concerns by inviting two U.S. citizens to the coffee: Dr. Karl
Jackson (the president of the USTBC) \134\ and Clarke Wallace
(its executive director).\135\ Sullivan still had concerns
about the propriety of Kanchanalak's coffee, suspecting--
correctly, as it turned out--that neither Jackson nor Wallace
would contribute to the DNC.\136\ Despite Sullivan's continued
reservations, however, Marvin Rosen approved the coffee.\137\
---------------------------------------------------------------------------
\134\ Jackson--who in addition to being the president of the USTBC
served as director of the Southeast Asia Program of the Johns Hopkins
School of Advanced International Studies--had previously worked as
Assistant to the Vice President for National Security Affairs from 1991
to 1993. Prior to that, he was the Special Assistant to the President
for National Security Affairs and Senior Director for Asian Affairs at
the National Security Council (``NSC''). He also served as Deputy
Assistant Secretary of Defense for East Asia from 1986-1989. Jackson
has been employed by Foreign Exchange Concepts since January 1993. See
Karl Jackson, Curriculum Vitae (Ex. 45). As President of the USTBC, Dr.
Jackson worked with Wallace and Kanchanalak. Testimony of Dr. Karl
Jackson, Sept. 16, 1997, pp. 4-5.
\135\ Deposition of Richard L. Sullivan, June 4, 1997, pp. 129,
144-45.
\136\ Id. at p. 144. Sullivan also expressed concerns that there
might be negative press if the President had a small coffee with
foreigners. See Deposition of Richard L. Sullivan, June 5, 1997, p. 81.
\137\ Deposition of Richard L. Sullivan, June 4, 1997, p. 135.
---------------------------------------------------------------------------
(4) Huang openly solicited contributions
According to Jackson and Wallace, the two U.S. citizens
invited at the last minute \138\ to the June 18 White House
coffee by Pauline Kanchanalak in order to assuage Sullivan's
concerns about fundraising impropriety, Huang explicitly
solicited DNC contributions at this event in the presence of
the President.
---------------------------------------------------------------------------
\138\ Jackson received his invitation from Kanchanalak through
Wallace approximately one or two days prior to the coffee. Jackson
testimony, p. 5.
---------------------------------------------------------------------------
Jackson, who had agreed to attend the coffee in the hope
that he would have the opportunity to discuss with the
President the possibility of a Presidential visit to
Thailand,\139\ met Kanchanalak and Wallace outside the White
House, where she introduced Jackson to Huang for the first
time.\140\ While entering the White House security check point,
Jackson overheard Kanchanalak and Huang discussing the
DNC.\141\ In fact, Kanchanalak pulled Jackson aside before they
entered the White House and explained to him that this coffee
was sponsored by the DNC; \142\ prior to that point he had been
unaware of any DNC role.\143\ While on their way to the Map
Room--where the coffee was ultimately held--Jackson met
Kanchanalak's clients from the C.P. Group: Khun Dhanin, Khun
Sumet, and their interpreter, Khun Sarasin.\144\ At the Map
Room, Jackson met Director of White House Personnel Bob Nash,
Don Fowler, Marvin Rosen, Robert Belfer, and Beth
Dozoretz.\145\ Jackson was surprised by the attendance of high-
level DNC representatives such as Fowler because, as a former
official in the Bush Administration, Jackson was aware that it
was illegal to conduct fundraising inside the White House.\146\
---------------------------------------------------------------------------
\139\ Id. at p. 5.
\140\ Id. at p. 6.
\141\ Id. at p. 7.
\142\ Id.
\143\ Id.
\144\ Id.
\145\ Id. at pp. 8-9.
\146\ Id. at pp. 14-15.
---------------------------------------------------------------------------
Once they had been joined by the President and everyone was
seated in the Map Room, Jackson recalled that Fowler stood up
and welcomed everyone.\147\ Jackson then recalled the following
sequence of events:
---------------------------------------------------------------------------
\147\ Id. at pp. 10-11.
Fowler said, ``It's a pleasure to welcome all of you
here to this coffee on behalf of the Democratic
National Committee, and these coffees are important so
that the President can maintain contact with people.
This is particularly--this is important, but it is
particularly important in an election year and this is
an election year, arguable [sic] the most important
since the one that brought Abraham Lincoln to this
house.'' \148\
---------------------------------------------------------------------------
\148\ Id. at pp. 10-11.
After these introductory remarks by the DNC Chairman, Jackson
testified, the party's Vice Chair for Finance gave some brief
---------------------------------------------------------------------------
comments of his own:
Huang stood up and said that he would like to
reiterate the welcome of Chairman Fowler and that he
agreed with Chairman Fowler that this was an election
year, and he went on to say, ``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.'' \149\
---------------------------------------------------------------------------
\149\ Id. at pp. 10-11.
Wallace confirms the substance of these remarks.\150\ Jackson
was shocked that the DNC had sponsored the June 18th coffee
and, in particular, found Huang's statements entirely
inappropriate.\151\ It seemed clear to him that Huang's
comments were a solicitation for political contributions, and
he was astounded such statements had been made in the presence
of the President.\152\
---------------------------------------------------------------------------
\150\ Wallace recalled, however, that Huang's statements may have
been made toward the end of the coffee rather than at its outset.
Testimony of Clarke Wallace, Sept. 16, 1997, pp. 105-07. Jackson's and
Wallace's recollection of the timing of Huang's statements may differ,
but their memory of the substance of his statements is entirely
consistent.
\151\ Jackson testimony, pp. 10-12.
\152\ Id. at pp. 14-15. This testimony is thus far the only direct
evidence of DNC solicitations for money in the White House. Other
solicitations may well have occurred. WHCA's videotape of an April 1996
White House coffee, for example, shows DNC Chairman Fowler commencing
his welcoming remarks to the guests by praising them as ``loyal and
generous supporters.'' White House Communications Agency videotape,
April 1, 1996. As it was WCHA's practice--in the 44 tapes of White
House coffees hitherto released by the White House--to videotape only
the first few moments of each coffee, however, no record is available
of the rest of Fowler's comments to these ``generous'' donors assembled
at the White House on that occasion.
---------------------------------------------------------------------------
The coffee lasted for approximately 90 minutes, with the
C.P. Group officials speaking for most of the time.\153\
Jackson also recalled that he and Kanchanalak spoke
briefly.\154\ During the course of the coffee, Jackson recalled
that someone raised the possibility that the President might
stop in Thailand while in Asia to attend the upcoming APEC
summit.\155\ After hearing this comment, Jackson passed an
encouraging note to the President, stating that were this to
occur, President Clinton would be the first President since
Richard Nixon to visit Bangkok.\156\
---------------------------------------------------------------------------
\153\ Jackson testimony, pp. 12-13.
\154\ Id. at p. 13.
\155\ Id. at pp. 13-14.
\156\ Id.
---------------------------------------------------------------------------
Jackson's recollection of the events at the June 18th
coffee is supported by sworn affidavits submitted by two of his
close associates, R. Roderick Porter and John Taylor,
respectively the President and Chairman of Foreign Exchange
Concepts--who recall Jackson's contemporaneous accounts of the
coffee.\157\ According to Porter, just after Jackson returned
from the coffee on June 18, 1996,
---------------------------------------------------------------------------
\157\ See Affidavit of R. Roderick Porter, Sept. 15, 1997 (Ex. 46);
Affidavit of John Taylor, Sept. 15, 1997 (Ex. 47). Porter has known
Jackson personally and professionally since January 1993 and they
shared the same office in the summer of 1996. See Ex. 46.
[he] explained that he had just attended a small
White House coffee with, among other people, the
President, members of the Charoen Pokaphand Group
Company, Ltd. (``C.P. Group''), Don Fowler and other
gentlemen affiliated with the Democratic National
Committee.
Dr. Jackson stated that he believed the event was an
improper solicitation for money by the DNC in the White
House. Dr. Jackson explained that he was upset because
one of the gentlemen affiliated with the DNC had
solicited money in the White House in the presence of
the President.\158\
---------------------------------------------------------------------------
\158\ Id.
``[W]ithin a day or two of June 18, 1996,'' Taylor recounted,
Jackson expressed the view that he ``believed that the White
House coffee was an improper `shakedown' for money from the
foreign businessmen in the presence of the President.'' \159\
---------------------------------------------------------------------------
\159\ Ex. 47.
---------------------------------------------------------------------------
The credibility of Jackson's testimony, which of course
reflects badly upon Kanchanalak, is further bolstered by his
continuing personal and professional relationship with
her.\160\ He speaks with Kanchanalak over the phone a few times
each month and believes they continue to have a good working
relationship.\161\ Far from having any interest in hurting his
colleague after the June 18 coffee, in fact, Jackson has gone
out of his way to help Kanchanalak. After Kanchanalak told him
that she was closing Ban Chang International because of
negative publicity surrounding her participation in the June 18
coffee, for example,\162\ Jackson opened a new company, Global
Investments, Inc., with Kanchanalak as its only client.\163\
---------------------------------------------------------------------------
\160\ See Jackson testimony, p. 19.
\161\ Id. at pp. 15 & 19. At no point before giving his testimony
before the Committee had Jackson spoken with Kanchanalak about what
transpired at the June 18 White House coffee. Id. at p. 15.
\162\ Id. at p. 18.
\163\ Id. at pp. 112-13.
---------------------------------------------------------------------------
Significantly, Wallace's \164\ recollection of the June 18
coffee corroborates the essentials of Jackson's account.
Wallace knew that Kanchanalak was a financial contributor to
the DNC, and was told by Usma Kahn, a BCI employee, that
Kanchanalak was also a DNC Managing Trustee.\165\ Indeed,
building upon her relationship with the DNC, Kanchanalak
occasionally provided Wallace and other employees the
opportunity to attend White House events,\166\ among them a
White House ceremony in the summer of 1995 on the occasion of
the President's departure on a trip to Michigan.\167\ Wallace
also knew that Duangnet Kronenberg dealt with the DNC on
Kanchanalak's behalf, and that she would call the DNC to
arrange for business associates and other individuals to attend
White House events, among them White House tours, Presidential
radio addresses, and the annual White House Easter Egg
Roll.\168\ In addition, Wallace recalled that Susan Lavine and
Lorin Supina, both DNC affiliates, frequently called for or
visited Kanchanalak, and that Kanchanalak attended business-
related events at the White House attended by the President or
the First Lady.\169\
---------------------------------------------------------------------------
\164\ Clarke Wallace graduated from the University of Virginia in
1990 and then taught English in Thailand for approximately eight
months. After interviewing with Kronenberg and Kanchanalak, Wallace
began working for the USTBC on March 1, 1995. See Deposition of Clarke
Wallace, August 27, 1997, p. 5. The USTBC shared office space with
Kanchanalak's company, Ban Chang International (``BCI''), which was
engaged in the development of new business relating to Thailand (i.e.,
establishing franchises and joint ventures between U.S. and Thailand
businesses) and which has the C.P. Group as one of its most important
clients. (As a result of sharing offices, employees of USTBC helped
with certain BCI matters, such as answering the phone and general
clerical work.) For a period of time, BCI also shared office space with
Ban Chang Group (owned by Chupong Kanchanalak) in Bangkok. Id. at pp.
8-11.
\165\ Id. at p. 16.
\166\ Id. at pp. 17-18.
\167\ Id.
\168\ Id. at pp. 18-20.
\169\ Id. at pp. 21-22 & 26.
---------------------------------------------------------------------------
Wallace also noted that Huang visited and called
Kanchanalak at BCI's offices.\170\ In fact, Wallace remembered,
Huang visited BCI's offices and had a private meeting with
Kanchanalak only a day or two before the June 18 Coffee.\171\
After the meeting, Wallace learned from Kanchanalak that she
was arranging a coffee at the White House for the chairman of
the C.P. Group.\172\ She then asked Wallace to attend the
coffee as well, and told Wallace to inform Jackson that he also
was invited to attend.\173\ In instructing Wallace to invite
Jackson, however, Kanchanalak behaved somewhat oddly,
requesting that Wallace not follow the usual procedure of
sending Jackson a written memorandum. Instead, Kanchanalak
requested that Wallace telephone Jackson in order to discuss
the White House visit.\174\
---------------------------------------------------------------------------
\170\ Id. at p. 26.
\171\ Id. at p. 31-32.
\172\ Id. at p. 32. The C.P. Group delegation arrived in
Washington, D.C. a day before the coffee and left D.C. approximately
two days after the coffee. See Id. at pp. 58-59. It appears that the
June 18 coffee was a primary reason the C.P. Group's executives came to
Washington.
\173\ Id.
\174\ Id. at p. 33. Jackson maintained a separate office from the
USTBC in June of 1996.
She said at some point not to fax information to Karl
but call him on the phone because this was a really
unique, special opportunity and not everyone gets to do
this sort of thing and just exercise caution by just
---------------------------------------------------------------------------
telling him on the phone.\175\
\175\ Id. at pp. 32-33. Kanchanalak also indicated someone might
have the opportunity to fly on Air Force One to Thailand. Id. at p. 34.
On the day of Kanchanalak's meeting with Huang, Wallace also
saw a seating chart for the coffee in Kanchanalak's
office.\176\
---------------------------------------------------------------------------
\176\ Id. at p. 42.
---------------------------------------------------------------------------
Most significantly, Wallace confirmed Jackson's
recollection that Huang solicited contributions at the June 18
coffee. Wallace had met Huang once or twice before the coffee
and knew that he had worked for the Department of
Commerce.\177\ At the coffee, Wallace learned that Huang no
longer worked at the Department of Commerce, and that he was
now working for the DNC--and least through the 1996
election.\178\ Once inside the Map Room, Wallace also met
Dozoretz, Rosen, Fowler and Nash,\179\ and recalls thinking at
the time that Kanchanalak must have been very important to the
DNC in order for Rosen and Fowler to attend.\180\ Wallace
thought it odd to have so many DNC officials at the coffee, and
had the (correct) impression that the coffee had been arranged
in conjunction with the DNC.\181\
---------------------------------------------------------------------------
\177\ Id. at pp. 30-31.
\178\ Id. at pp. 43-44.
\179\ Id. Wallace knew Fowler was Chairman of the DNC and he
learned that Rosen was ``Chairman of Finance'' for the DNC at the
coffee. Id. at pp. 45-46.
\180\ Id. at p. 46.
\181\ Id. at pp. 47-48.
---------------------------------------------------------------------------
According to Wallace, after some opening remarks by Fowler,
a brief statement by the President, and Kanchanalak's
introductions of the Thai officials, C.P. Group Chairman Dhanin
Chearavanont spoke for approximately 30 minutes.\182\ After
this, Jackson and Belfer posed some brief questions.\183\ As
Wallace later recounted, the President then introduced him to
the assembled guests, describing Huang as ``someone who [was] a
friend and someone who had done a lot of good work for the
Democratic National Committee.'' \184\
---------------------------------------------------------------------------
\182\ The topics discussed by Chearavanont included how U.S.
companies could successfully conduct business in China and the pending
transfer of Hong Kong to China. Id. at p. 53.
\183\ Id. at pp. 52-54.
\184\ Id. at pp. 54-55.
And then John Huang spoke and he said that the
President, thank you very much for being here,
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 election in
November and I'm sure you all will do everything you
can to support that, support the-everyone at this table
will do what they can to support the President.\185\
---------------------------------------------------------------------------
\185\ Id.
Wallace also recalled that Huang probably made a comment about
``how expensive elections were.'' \186\
---------------------------------------------------------------------------
\186\ Id. at p. 56.
---------------------------------------------------------------------------
To Wallace, as to Jackson, Huang's comments had very clear
implications: the DNC was asking the President's coffee guests
for campaign contributions. These remarks seemed to be aimed at
[h]elping to either to help to raise the money or help
to strengthen the DNC somehow either through networking
to get people to support the President or to networking
to get people to give donations.\187\
---------------------------------------------------------------------------
\187\ Id. at p. 55.
After recounting the events of June 18 reviewing the relevant
documentation, Wallace concluded that the coffee had been a
---------------------------------------------------------------------------
fundraiser:
Q: Now, you've seen checks from a P. Kanchanalak the
day after the coffee for $85,000 and a week or so later
for $50,000 and you've now seen a DNC document
projecting incomes from a variety of different coffees,
you were at the coffee, you gained an impression and
sense of the things that were at the coffee. Seeing all
that, as you sit here today, do you have an
understanding of what exactly was going on at this
coffee, at this particular June 18th coffee you
attended?
A: It appears it was a Fundraiser.\188\
---------------------------------------------------------------------------
\188\ Id. at pp. 85-86.
After the coffee concluded and the C.P. Group executives
left the White House, Jackson, Wallace and Kanchanalak went to
the NSC offices in the Old Executive Office Building to visit
Bill Wise, who had worked for Jackson when he was Assistant to
the Vice President for National Security Affairs.\189\ Wise was
surprised to hear that the President had just hosted a meeting
with senior executives from Thailand's C.P. Group. Wise had no
prior knowledge of this event or the visit of the Thai
businessmen,\190\ and could find no mention of this event on
the NSC's schedule for the President.\191\ Jackson found the
NSC's ignorance of the meeting troubling; during the Bush
Administration, it was his understanding that the NSC was kept
informed of the President's schedule--and that policy-making
and fundraising were considered separate activities.\192\ The
NSC's ignorance in this case increased Jackson's suspicion that
the DNC and the President had used the coffee to improperly--
perhaps even illegally--solicit campaign contributions in the
White House.\193\
---------------------------------------------------------------------------
\189\ See Jackson testimony, p. 30.
\190\ Id. at pp. 30-31.
\191\ Id. Richard Sullivan claims to have understood that Karen
Hancox of the White House Political Affairs Office had vetted the June
18th coffee attendees with the NSC. See Deposition of Richard L.
Sullivan, June 4, 1997, p. 137. See also the section of this report on
White House vetting procedures.
\192\ Jackson testimony, pp. 91-92.
\193\ Id. at pp. 49-50.
---------------------------------------------------------------------------
(5) Other attendees' recollections
The other persons attending at the June 18 Coffee--
Dozoretz, the Belfers, Rosen, Fowler, and Nash--claimed not to
recall hearing Huang solicit DNC contributions in the Map Room.
On this point, however, their memory may be influenced by their
strong affiliations with the DNC, the White House, or both.
More importantly, while they cannot recall Huang making the
remarks recounted in detail by Jackson and Wallace, these other
attendees recall so little else of substance concerning the
coffee that their lack of memory in this particular respect is
hardly surprising.
Dozoretz was the DNC fundraiser responsible for the
Belfers' invitation to the coffee. She was a successful DNC
fundraiser and a personal friend of the President and the First
Lady.\194\ She was a founding member of the Women's Council for
the Senate, and had helped organize the DNC Women's Leadership
Forum in 1993.\195\ Dozoretz and her husband raised
approximately $120,000 for the Clinton/Gore campaign in
1992.\196\ Between 1992 and 1996, Dozoretz and her husband
personally contributed over $100,000 to Democratic campaigns
and candidates and helped arrange corporate contributions to
the Democratic Party totaling approximately $200,000.\197\ She
consistently earned the status of DNC Managing Trustee between
1992 and 1996, either by personally contributing more than
$50,000 or by raising in excess of $250,000 annually. In fact,
she chaired the DNC Managing Trustee program for approximately
10 months.\198\ Dozoretz's other fundraising achievements
include: raising approximately $100,000 at the kick-off event
for Clinton/Gore '96; \199\ planning a tea event for the First
Lady in October of 1995 for women who had raised a minimum of
$5,000; \200\ and raising more than $2 million for Democratic
gubernatorial, U.S. Senate, and Presidential candidates since
1994.\201\ Dozoretz also spoke frequently with White House
officials such as Harold Ickes, Maggie Williams,\202\ Doug
Sosnik,\203\ Evelyn Lieberman,\204\ and Ron Klain \205\ about
her DNC fundraising activities.
---------------------------------------------------------------------------
\194\ See Dozoretz deposition, pp. 12-16. Indeed, Dozoretz played
golf with the President the day before her deposition by the Committee
and less than two weeks prior to her hearing testimony. Id. at p. 72.
\195\ Id. at pp. 8, 12; see also Beth Dozoretz, personal statement
and resume (Ex. 48).
\196\ See Dozoretz deposition, p. 10.
\197\ Id. at pp. 20-23. Dozoretz also is listed in the Vice
President's DNC fundraising call sheets. See DNC Finance Call Sheet
(Ex. 49).
\198\ See Dozoretz Deposition, pp. 27, 29.
\199\ Id. at pp. 32-33.
\200\ Id. at p. 39.
\201\ Id. at p. 43. Dozoretz also attended two gatherings at local
D.C. hotels to review DNC television advertisements. The first meeting
was in the fall of 1995 and consisted of less than twenty people
(including the President, Rosen and Fowler). Id. at pp. 56-58. The
group previewed advertisements, and Rosen explained the need to raise
extra money to pay for them because of their extraordinary expense. Id.
at p. 61. The second meeting was in the spring of 1996 and celebrated
the success of the advertisements. Id.
\202\ Id. at p. 47.
\203\ Id. at p. 48.
\204\ Id. at pp. 128-29.
\205\ Id. at p. 129.
---------------------------------------------------------------------------
In March or April of 1996, Robert and Renee Belfer agreed
to contribute $100,000 to the DNC through Dozoretz.\206\ Belfer
contributed the first $50,000 of this total in May of
1996,\207\ contributing an additional $40,000 after the June 18
coffee. Renee Belfer's sister contributed the final $10,000,
which was credited toward the Belfers' $100,000
commitment.\208\ At the time Robert Belfer made the $100,000
commitment, Dozoretz told him it was possible he would be able
to meet with the President. Belfer claimed not to have believed
that this contribution was a quid pro quo for the meeting,\209\
but Dozoretz confirmed that although no specific amount was
explicitly requested, guests at such coffees were expected to
make substantial contributions:
---------------------------------------------------------------------------
\206\ See Deposition of Robert Belfer, Sept. 6, 1997, pp. 8-9.
\207\ Id. at p. 9.
\208\ Id. at p. 70.
\209\ Id. at p. 37.
I don't think somebody would really be considered to
attend (a coffee) if they hadn't contributed at a
significant level. It could have been $25 (thousand).
It could have been 50 (thousand), but conversely, it
was not that if you--if you contributed X-amount of
dollars, you would go to one of these gatherings.\210\
---------------------------------------------------------------------------
\210\ See Dozoretz deposition, p. 79.
Richard Sullivan was aware of Dozoretz's fundraising
endeavors on behalf of the DNC.\211\ Indeed, it was Sullivan
who involved her in the June 18 event, calling Dozoretz
approximately two weeks beforehand to inform her that she and
the Belfers might be able to attend a White House coffee.\212\
At this point, however, Dozoretz was unsure of the event's
exact location and time.\213\
---------------------------------------------------------------------------
\211\ Id. at p. 46.
\212\ Id. at pp. 88-89.
\213\ Id. at pp. 89-90.
---------------------------------------------------------------------------
In contrast to the specific recollections of Jackson and
Wallace, in their testimony to the Committee, Dozoretz and the
Belfers had only a vague memory of the details of the June 18
coffee. The Belfers could not say, for example, how long in
advance of the coffee Sullivan had first contacted them, and
remembered few details of the coffee itself.\214\ Neither
Dozoretz nor Belfer could recall Huang soliciting contributions
at the June 18 coffee as recounted by Jackson and Wallace.\215\
Indeed, though she professed to be quite certain that Huang had
not solicited money in the White House, Dozoretz could
apparently remember nothing else about the remarks made at the
coffee. She could not recall, for example, the substance of
Fowler's opening remarks,\216\ anything of what Kanchanalak
said to the assembled guests,\217\ anything of what Jackson
said,\218\ or whether there were any closing remarks at
all.\219\ Dozoretz could not even remember anything of what the
President himself had said at the coffee.\220\
---------------------------------------------------------------------------
\214\ See Belfer deposition, pp. 12-13.
\215\ See Dozoretz deposition, pp. 116-17; Belfer deposition, p.
25. Dozoretz testified that ``[i]f he said anything, it was
inconsequential.'' See Dozoretz deposition, p. 117. She did not recall
Huang saying anything about the election, id. at pp. 142-43, or
expressing the hope that everyone at the coffee would ``support'' the
President. Id. at p. 143. Dozoretz stated that if Huang had made those
types of statements she would have been upset because she ``had two of
[her] donors in the room'' and she ``would have been very sensitive to
anything that would have been brought up about [her] donors being
solicited by anybody but [her].'' Id. at p. 143.
\216\ Id. at p. 108.
\217\ Id. at pp. 109 & 118.
\218\ Id. at p. 114.
\219\ Id. at p. 116.
\220\ Id. at p. 118.
---------------------------------------------------------------------------
It is also noteworthy that Dozoretz had meetings with
Robert and Renee Belfer and with White House attorneys before
her interview and deposition before the Committee. Dozoretz had
conversations with former Counsel to the President Jack Quinn
and with White House Special Counsel Lanny Breuer for example,
prior to her meetings with Committee staff.\221\ Dozoretz also
admitted that she had spoken with the Belfers about the June
18, 1996 coffee before they met with Committee staff.\222\
---------------------------------------------------------------------------
\221\ Id. at pp. 68-72.
\222\ Id. at pp. 148-49.
---------------------------------------------------------------------------
For his part, DNC Finance Chairman Marvin Rosen recalled
attending the June 18 coffee with Kanchanalak, Belfer, Dozoretz
and Huang.\223\ As with Dozoretz and the Belfers, he could not
recall anyone ``making any comment relating to solicitation of
funds for the DNC and/or the Clinton/Gore campaign at that
coffee,'' \224\ and did not remember Huang ``making any
statement at the coffee.'' \225\ He also did not recall
Kanchanalak making any remarks.\226\ His only recollection of
the President's role was that the President addressed the
group; he did not remember anything about what the President
said.\227\ Rosen also testified that while he was not sure what
he believed at the time of the June 18 coffee, he now believed
that Kanchanalak may have used her clients attendance at the
coffee to meet her commitment to raise a certain amount of
funds for the DNC.\228\
---------------------------------------------------------------------------
\223\ See Deposition of Marvin S. Rosen, May 19, 1997, pp. 48-49.
\224\ Id. at p. 49.
\225\ Id.
\226\ Id. at p. 50.
\227\ Id. at p. 51.
\228\ Id. at p. 255.
---------------------------------------------------------------------------
If anything, the memories of DNC Chairman Donald Fowler and
White House Director of Presidential Personnel Bob Nash were
worse than that of Dozoretz, the Belfers, and Rosen. Fowler
remembered attending the June 18 coffee,\229\ but claimed to
have no clear recollection of it.\230\ In fact, Fowler said
that he could not recall whether Huang had attended this
event--or even whether any of the other guests had done
so.\231\ Like Fowler, Nash could recall essentially nothing
about the coffee. He could not remember the date of the event
or the names of all the attendees,\232\ he could not recall any
of the specific topics discussed by the C.P. Group executives,
and he did not know whether the President had made any opening
statement.\233\ Since they could essentially recall nothing
about the June 18 coffee at all, their failure to remember the
Huang solicitation detailed by Jackson and Wallace is hardly
surprising.\234\ Jackson's and Wallace's testimony about the
June 18 coffee, therefore, stands uncontradicted.
---------------------------------------------------------------------------
\229\ See Deposition of Donald L. Fowler , May 21, 1997, p. 135.
\230\ Id. at p. 311.
\231\ Id. at pp. 135-36.
\232\ Deposition of Bobby Nash, June 25, 1997, p. 268.
\233\ Id. at pp. 272-73.
\234\ See, e.g., id. at p. 275.
---------------------------------------------------------------------------
(6) Possible withholding or destruction of evidence
On or about January 1, 1997, Ban Chang International was
closed.\235\ In December 1996, FBI agents visited BCI's offices
in the execution of a criminal search warrant, acting on
information suggesting that the company may have been
destroying documents sought by federal investigators.\236\
Before the company closed, BCI employee Usma Kahn removed
information from Ban Chang files pertaining to projects
intended for a new company called Global Investments.\237\ It
is not known what happened to these files.\238\ In addition, an
outside contractor (who was a friend of Kahn) removed certain
related information from BCI's computer hard-drives, copying it
onto diskettes.\239\ These also seem to have disappeared.\240\
According to Wallace, such removal of information from the hard
drives was unusual.\241\ More ominously, after the FBI raid,
Kanchanalak told Wallace that he would need a lawyer; she even
offered to help pay for one. In a telephone conversation,
Wallace
---------------------------------------------------------------------------
\235\ See Wallace deposition, p. 63.
\236\ Id. at p. 71.
\237\ Id. at p. 64.
\238\ See id. at p. 65.
\239\ Id. at pp. 65-66.
\240\ Wallace did not know what Kahn did with the diskettes and did
not have access to the diskettes when responding to the Committee's
subpoena. Id. at pp. 66-68.
\241\ Id. at p. 69.
told her about the FBI raid, I told her about the
interest [in] the C.P. Group and our donations and she
mentioned the fact that I needed a lawyer to represent
me and she talked about how she may be able to help
financially and then we talked about the U.S. Thailand
Business Council projects like four or five things I
was working on. And she had some knowledge of them
because she was in Thailand and was working with Jeb.
* * * * *
[Kanchanalak then] told me . . . to be careful about,
you know, what I, be careful when I think about what I
remember about the coffee because it could end up being
very controversial or cause some problems for
people.\242\
---------------------------------------------------------------------------
\242\ Id. at pp. 72 & 74-76.
Furthermore, before Wallace was to testify before a federal
grand jury inquiring into campaign finance abuses, Kanchanalak
proposed helping him with financial expenses resulting from
investigations into possible wrongdoing in connection with the
June 18 coffee.\243\ Wallace, however, declined both this offer
of money and Kanchanalak's suggestion that he ``be careful''
about ``what I remember about the coffee.''
---------------------------------------------------------------------------
\243\ Id. at pp. 76-77.
---------------------------------------------------------------------------
Conclusion
There can be no question that the DNC used White House
coffees, overnight stays, and other White House perquisites as
explicit fundraising events to pay for the extraordinarily
expensive media campaign the Democratic Party deemed necessary
to save President Clinton and Vice President Gore from
electoral defeat in 1996. For this reason, as George
Stephanopoulos put it, money ``became a near obsession at the
highest levels'' of the DNC and in the White House. Driven by
this ``obsession,'' the DNC and White House ``pulled out all
the stops'' to raise money, and were not above using the White
House for this purpose \244\--just as Terry McAuliffe had
suggested in his 1994 proposal for various DNC fundraising
``projects.'' \245\ While not every overnight visit and White
House coffee served this purpose, DNC and White House documents
and witness testimony show that the Democratic Party and the
White House unquestionably organized certain coffees and other
events in the White House specifically as fundraisers--even to
the point of assigning ``projected revenue'' totals, assigning
``Fundraiser Codes,'' and tracking contributions given in
connection with each event.\246\ These events netted
approximately $31.5 million for the DNC.
---------------------------------------------------------------------------
\244\ Stephanopoulos, supra note 2.
\245\ See also the section of this report on the White House's
thirst for money during the 1995-96 election cycle.
\246\ It is illegal to solicit campaign contributions on government
property. See 18 U.S.C. ' 607.
---------------------------------------------------------------------------
The May 1, 1996 coffee, was but one example of what Alan
Patrikoff described as the DNC's use of coffees in its
``fundraising methodology.'' There is no question, therefore,
that the May 1, 1996 Oval Office coffee was a DNC fundraising
event. Its participants were invited only after they had each
pledged to give $100,000 to the Democratic Party; these
commitments were well known to the event's DNC organizers, and
the President himself was informed of them in advance of the
meeting. Nor is there any serious question that these donations
and the invitations to the May 1 group were causally connected.
The organizer of the group, Barrie Wigmore, urged at least one
of its participants, for example, to make a contribution as
part of this group because doing so would make possible a visit
with President Clinton. Wigmore, in turn, had himself been told
by DNC fundraisers that the Democratic Party used White House
coffees as part of its ``fundraising methodology''--as a way to
elicit donations from ``key people''--and knew that the DNC
considered the May 1 event to be just such a coffee. It was, in
other words, what Lewis Manilow termed a ``money coffee,''
which occurred in the Oval Office itself, an undeniably
``public'' space within the White House complex. This coffee
constitutes, therefore, the first instance uncovered by the
Committee of President Clinton's use of the Oval Office as part
of his party's ``fundraising methodology.''
If anything, the June 18, 1996 coffee was an even more
blatant and inappropriate use of the White House for DNC
fundraising. It was organized, over the objections of the DNC's
finance director, in order to provide an opportunity for the
President to meet with business executives from Thailand's C.P.
Group in return for donations from and arranged by Pauline
Kanchanalak, who herself funded these contributions with money
from sources in Thailand. The specific details of how and why
this coffee came about remain unclear because the three key
figures--Huang, Kronenberg, and Kanchanalak--have either
invoked their Fifth ``Amendment privilege against self-
incrimination or have simply fled the country.
Moreover, when all the evidence is considered, it appears
that at this June 18 coffee, Huang openly asked for DNC
contributions in the Map Room at the White House, in the
presence of the President. Jackson and Wallace had a clear,
vivid, and consistent recollection of Huang's solicitation. The
Minority has alleged that Jackson invented this story out of
partisan animus supposedly originating in his status as a
registered Republican and as a former assistant to former Vice
President Dan Quayle. As recounted above, however, Jackson's
testimony is supported by Wallace--who has never contributed to
either party--and is corroborated by sworn statements from
Jackson's business associates attesting to his consistent and
contemporaneous memory of these events. Both Jackson and
Wallace, in fact, continue to maintain personal friendships and
business relationships with Kanchanalak. By contrast, Dozoretz
and the Belfers are fervent supporters of the President and the
DNC, and raised or contributed several hundred thousand dollars
on behalf of the Democratic Party in 1996 alone. Moreover,
neither Dozoretz nor any of the other guests apparently
remember enough detail about the events of June 18 to be able
to say anything about it with certainty--and certainly not
enough to enable them to cast serious doubt upon the Jackson
and Wallace accounts simply on the strength of their claimed
inability to recall Huang's comments. At this point, the only
people who might be able to clarify this matter have refused to
cooperate with the Committee: Huang has invoked the Fifth
Amendment, Kanchanalak has fled the country, and President
Clinton has declined to testify.
Fundraising-Calls From the White House
In the aggressive drive to raise funds to support the DNC's
advertising on behalf of the President, new ways were found to
solicit contributors, such as using the public facilities of
the White House to host coffees and other fund-raising events.
In addition, the President and the Vice President made fund-
raising telephone calls from the White House.\1\ In fact,
evidence suggests that the Vice President himself was the
originator of the idea that he make such calls.\2\ In
furtherance of these plans, DNC Finance Chair Marvin Rosen,
Finance Director Richard Sullivan, and others within the DNC's
Finance Division prepared ``call sheets'' for the President,
Vice President, and First Lady to suggest potential donors whom
they might contact, and to encourage them to actually make the
calls.\3\
---------------------------------------------------------------------------
\1\ There is evidence suggesting that the First Lady also may have
made fund-raising phone calls. Memoranda received by the Committee from
the DNC indicated that there was some consideration given to having the
First Lady make fund-raising telephone calls in the period of late
1995. Memorandum from Terence R. McAuliffe to Harold Ickes October 22,
1994 (Ex. 1), and 12 additional call sheets were also received from the
DNC.
The Committee interviewed by telephone a number of the potential
donors listed on those call sheets. Based on this work, the Committee
concludes that it was unlikely that the First Lady actually made any of
the fund-raising telephone calls contemplated by the call sheets.
\2\ In re Albert Gore, Jr., Notification to the Court Pursuant to
28 U.S.C. Sec. 592(b) of Results of Preliminary Investigation, Dec. 2,
1997, p. 7 (Ex. 2).
\3\ Deposition of Marvin Rosen, May 19, 1997, pp. 107-29;
Memorandum from Don Fowler et al. to Harold Ickes, November 20, 1995
(Ex. 3); Memorandum from Harold Ickes to the President and the Vice
President, November 28, 1995 (Ex. 4); Deposition of Richard Sullivan,
June 4, 1997, pp. 178-99; Memorandum from John Raffaelli to Richard
Sullivan (undated) (Ex. 5).
---------------------------------------------------------------------------
The fund-raising calls became an issue in the investigation
because a federal felony statute, 18 U.S.C. Sec. 607, prohibits
soliciting or receiving political contributions in a federal
workplace.\4\ In the early stages of the investigation, and as
explained more fully below, the Committee discovered that the
President and Vice President may have made fund-raising
telephone calls from the White House, thereby potentially
implicating section 607.
---------------------------------------------------------------------------
\4\ 18 U.S.C. Sec. 607 is quoted and discussed infra.
---------------------------------------------------------------------------
Evidence of Fund-raising Phone Calls
Vice President Gore
On March 2, 1997, an article by Bob Woodward entitled
``Gore Was `Solicitor-in-Chief' in '96 Reelection Campaign''
appeared on the front page of The Washington Post. This was
among the first of a series of articles in numerous
publications that detailed the Vice President's fund-raising
activities during the 1996 campaign. The picture that emerged
from these articles was one of the Vice President being among
the most aggressive, and enthusiastic, fund-raisers within the
Clinton/Gore '96 re-election team. The Woodward article
described a number of instances in which the Vice President
made fund-raising telephone calls. One unidentified donor who
received such a call described the Vice President's sales pitch
as ``revolting.'' Another stated that the call that he received
from the Vice President had ``elements of a shakedown.'' \5\
---------------------------------------------------------------------------
\5\ Bob Woodward, ``Gore was `Solicitor-in-Chief' in '96 Reelection
Campaign,'' The Washington Post, March 2, 1997, pp. A1, A18.
---------------------------------------------------------------------------
On the afternoon of March 3, 1997, and in response to a
number of press inquires regarding his fund-raising activities
which had been posed earlier in the day to White House Press
Secretary Mike McCurry, the Vice President went to the White
House press room for an impromptu press conference. In this
press conference, it was revealed for the first time that the
Vice President made some of the fund-raising phone calls from
his White House office. Vice President Gore stated that he had
charged the calls to a DNC credit card.\6\ The Vice President
also stated his belief that everything he did regarding the
calls was legal, but that he had decided, as a matter of
policy, not to make such calls ever again. In the course of the
press conference, the Vice President stated several times that
he had asked potential donors ``to help raise campaign funds,''
``to ask people to make lawful contributions to the campaign,''
to ask potential donors ``to support our campaign,'' to ``help[
] to raise funds for the campaign,'' and ``to help raise money
for the campaign.'' \7\
---------------------------------------------------------------------------
\6\ The Vice President's office later issued a correction, stating
that the Vice President had in fact used a credit card issued by the
Clinton/Gore '96 campaign, not one issued by the DNC. (Of course,
Clinton/Gore '96 can only accept contributions of ``hard money.'') In
addition, the Committee later learned that a number of the calls had
not been charged to any credit card at all, but rather were charged to
official White House telephone bills. The DNC later reimbursed the
government for the costs of such fund-raising calls that were
originally charged to official government telephones. See infra, text
accompanying notes 17-18.
\7\ White House Press Release, Press Briefing by the Vice
President, Mar. 3, 1997, pp. 1-2, 7-8. (Ex. 6).
---------------------------------------------------------------------------
The Vice President was questioned extensively about the
legality of making political fund- raising calls from his White
House office. In response, the Vice President repeated seven
times that he had been advised by his legal counsel that there
was ``no controlling legal authority'' or case that proscribed
his conduct in making these calls.\8\ Nonetheless, the Vice
President acknowledged that in the past, he had taken conscious
steps to make prior fund-raising calls--presumably of private
persons not located in federal buildings--away from official
telephones in the White House. ``I went to the DNC on one
occasion I believe in October of 1994 to help raise money for
the party.'' \9\
---------------------------------------------------------------------------
\8\ Id. at pp. 2-7.
\9\ Id. at p. 6.
---------------------------------------------------------------------------
Based on this press conference, the Vice President's
telephone calls were one of a number of subjects that a
majority of the members of the Senate Judiciary Committee asked
Attorney General Reno to investigate as possibly warranting the
appointment of an independent counsel.\10\ The Judiciary
Committee members believed that the facts known to date
constituted specific and credible evidence that a covered
person may have committed a federal crime.\11\ Specifically,
the Judiciary Committee members suggested that the Vice
President's fund-raising telephone calls might constitute a
violation of 18 U.S.C. Sec. 607(a), which provides:
---------------------------------------------------------------------------
\10\ Letter from Senator Orrin Hatch et al. to Attorney General
Reno, March 13, 1997 (Ex. 7); see 28 U.S.C. Sec. 592(g)(1).
\11\ See Ex. 7; 28 U.S.C. Sec. 591(b).
It shall be unlawful for any person to solicit or
receive any contribution within the meaning of . . .
the Federal Election Campaign Act of 1971 in any room
or building occupied in the discharge of official
duties . . . Any person who violates this section shall
be fined under this title or imprisoned not more than
---------------------------------------------------------------------------
three years, or both.
On April 14, 1997, however, the Attorney General rejected
the Judiciary Committee members' request that she appoint an
independent counsel to investigate, among other things, the
Vice President's telephone fund-raising calls. She listed two
reasons to support her view that there was no specific and
credible evidence that the Vice President's telephone calls
were illegal. First, in her view, section 607 ``specifically
applies only to contributions as technically defined by the
Federal Election Campaign Act (FECA)--funds commonly referred
to as `hard money.' '' \12\ Second, she stated that ``there are
private areas of the White House that, as a general rule, fall
outside the scope of the statute, because of the statutory
requirement that the particular solicitation occur in an area
`occupied in the discharge of official duties.' '' \13\ Since
there was no evidence that the Vice President's calls had
raised hard money, and no evidence that the calls had been made
from areas of the White House that fall within the statutory
prohibition of section 607, the Attorney General declined to
seek the appointment of an independent counsel.
---------------------------------------------------------------------------
\12\ Letter from The Honorable Janet Reno to The Honorable Orrin G.
Hatch, Apr. 14, 1997, p. 4 (emphasis in original) (Ex. 8).
\13\ Id. at p. 5 (quoting 3 Op. Off. Legal Counsel 31 (1979)).
---------------------------------------------------------------------------
As explained later in this section, the Committee rejects
the Attorney General's reading of section 607 with respect to
the scope of ``contributions'' that fall within its
prohibition. Nevertheless, only a few months after her letter
to Senator Hatch, the Committee learned that both of the
factual premises for the Attorney General's declination of the
appointment of an independent counsel were wrong. The Justice
Department had apparently assumed these facts without
investigating them.
DNC General Counsel Joseph Sandler provided the Committee
with critical testimony regarding the Vice President's phone
calls. Sandler's knowledge of these phone calls was unexpected,
and came to the Committee's attention only by piercing the
DNC's frivolous assertions of privilege. The Committee
initially deposed Sandler on May 15 and May 30, 1997. At both
of these sessions, Sandler refused to answer a number of
questions, principally because the DNC was asserting the
attorney-client privilege, or variations of it. In particular,
Sandler refused to answer questions concerning meetings among
lawyers for the White House, the DNC, and Clinton/Gore `96,
based principally on the DNC's assertion of a ``common-interest
doctrine'' theory of the attorney-client privilege.\14\
---------------------------------------------------------------------------
\14\ See, e.g., Deposition of Joseph Sandler, May 15, 1997, pp.
172-99; see also Deposition of Joseph Sandler, May 30, 1997, pp. 106-
08.
---------------------------------------------------------------------------
In response to these assertions of privilege, Chairman
Thompson issued an Order on June 6, 1997, in which he rejected
certain privileges previously asserted by, or on behalf of,
Sandler, including any privileges based on the ``common-
interest doctrine,'' among the DNC, the White House, or any
other third party.15 The ruling thus permitted the
Committee to inquire into conversations that Sandler had with
personnel and attorneys within the White House (including the
Vice President's office) and the Clinton/Gore
Campaign.16
---------------------------------------------------------------------------
\15\ Order of Chairman Fred Thompson, June 6, 1997 (Ex. 9).
\16\ The White House must have been uncomfortable with the DNC's
claim of ``common interest'' between the DNC and the White House, given
President Clinton's public statement, made in an effort to deflect
personal responsibility for the illegalities committed by the DNC in
the course of its fund-raising, that such illegalities were not
committed by the Clinton-Gore campaign, but by ``the other campaign.''
News Conference of President Bill Clinton, Nov. 8, 1997, CNN Special
Event, Transcript # 96110801V06.
---------------------------------------------------------------------------
At his resumed deposition on August 21, 1997, Sandler
identified and discussed a bill for $24.20 from the ``Office of
the Vice President,'' requesting ``Reimbursement to U.S.
Treasury for DNC telephone expenses.'' 17 According
to an attached check, the DNC paid the bill on the day it was
presented, June 27, 1997. Sandler testified that the bill was
for long distance fund-raising telephone calls that were
presumed to have been made by the Vice President from one of
his official telephones, but which had not been charged to a
Clinton/Gore '96 credit card.18
---------------------------------------------------------------------------
\17\ Deposition of Joseph Sandler, August 21, 1997, pp. 114-119;
Invoice from Office of the Vice President to DNC, June 27, 1997 (Ex.
10).
\18\ Deposition of Joseph Sandler, August 21, 1997, pp. 115-23.
---------------------------------------------------------------------------
Sandler further testified that the bill and its payment
were part of a project that he had worked on with the Vice
President's counsel, Charles Burson and Buzz Waitkin, and with
Lyn Utrecht, counsel to the Clinton/Gore '96 campaign,
regarding the telephone calls.19 Sandler stated that
the members working on the project determined that the Vice
President had actually made at least 52 telephone calls
soliciting funds, not including calls in which he was not able
to reach the person he intended to solicit.20 The
Vice President potentially raised $795,000 as a result of his
telephone calls.21 Sandler was asked about legal
issues that were discussed among the lawyers involved in the
project. He described the focus of those discussions as
follows:
---------------------------------------------------------------------------
\19\ See generally id. at pp. 114-27; Deposition of Joseph Sandler,
August 22, 1997, pp. 7-60.
\20\ Deposition of Joseph Sandler, August 22, 1997, p. 37. At his
press conference, the Vice President had indicated that he had raised
funds by telephone ``on a few occasions'' E.g., Ex. 6, p. 1.
\21\ Deposition of Joseph Sandler, August 22, 1997, p. 58.
Q: Did your conversation with Mr. Burson or Ms.
Utrecht involve issues of legality of the calls?
A: Yes, we did discuss that.
Q: And what was said?
A: There were--well, we talked about the question of
whether the statute that prohibits--assuming even for
the sake of discussion, which I believe is not the
opinion of the Office of the Vice President, that this
statute precludes solicitation of people out office
[sic] buildings used in performance of an official
duty, even assuming that, there is a question of
whether it applies to the solicitation of money for
non-Federal accounts of political parties, so-called
soft money. And we looked at the kind of money that was
raised from various donors and looked at the kind of
money that the Vice President would have likely thought
[he] was raising given what was on the call sheets and
that kind of thing. So we discussed that issue,
application of the statute.22
---------------------------------------------------------------------------
\22\ Deposition of Joseph Sandler, August 21, 1997, pp. 117-18.
On this issue, and as part of the project, Sandler
conducted an analysis of the DNC accounts into which
contributions potentially resulting from the Vice President's
phone calls had been deposited.23 In the course of
his work, Sandler discovered that some such contributions had
been deposited into the DNC's federal, or ``hard money,''
accounts. Sandler's deposition testimony described this
discovery as follows:
---------------------------------------------------------------------------
\23\ As evidence of Sandler's work in this regard, the DNC produced
a file of his handwritten notes. File of Joseph Sandler, entitled
``VPOTUS Phone Calls'' (Ex. 11). These notes list all contributions
received by the DNC during the period from October, 1995 to June, 1996
which were determined to be potentially attributable to the Vice
President's fund-raising telephone calls. These handwritten notes show
that a number of these contributions were deposited into DNC federal
accounts. The DNC's individual federal account is denoted by the symbol
``FO1'' in Sandler's notes.
Q: To your knowledge, has a donor solicited by the Vice
President on an official phone call ever made a subsequent
donation to the DNC where any portion of such donation was
deposited in the DNC's Federal account?
A: Yes.
Q: Tell me about that.
A: Well, subsequent--you mean--those were not necessarily
result--donations resulting from the Vice President's
solicitation, but there were donations that were made, you
know, at some point subsequent to the calls. And we prepared a
spread sheet--I prepared a spread sheet showing the Federal--I
believe I prepared one spread sheet showing just the Federal
donations that followed these phone calls by donors who were
called by donors who called for some--you know, covering . . .
some period of time. I don't know how far into '96 we went . .
* * * * *
A: We talked about--I talked about that issue with Mr.
Burson.
Q: In other words, the issue of whether or not the
contribution had properly been deposited in the Federal account
first came up in a conversation between yourself and Mr.
Burson?
A: Well, the question of whether in these particular cases,
if the donor had written one check in excess of the Federal
amount and we deposited the--you know, a portion of the check
in the Federal account and a portion in the non-Federal, that
the DNC should have obtained specific--there's a procedure
you're supposed to do obtain specific designation or
authorization from the donor to do so, and that may not have
been done in these cases. And that was checked at some point.
24
---------------------------------------------------------------------------
\24\ Deposition of Joseph Sandler, August 21, 1997, pp. 123-24;
125-26.
Monies allocated to the DNC's federal accounts are, in the
parlance of the federal campaign finance laws, ``hard''
dollars.25 Thus, under the analysis of Attorney
General Reno in her April 14 letter to Senator Hatch, 'hard'
dollars unquestionably constitute ``contributions'' within the
meaning of the FECA, thus triggering the application of section
607. The Attorney General, of course, had refused to initiate a
preliminary investigation under the Independent Counsel Act at
that time because of her assumption that the Vice President had
raised ``soft,'' as opposed to ``hard money.'' Sandler's August
21, 1997 disclosure to the Committee that certain contributions
presumably resulting from the Vice President's phone
solicitations were deposited into the DNC's ``hard money''
account eviscerated that assumption.
---------------------------------------------------------------------------
\25\ Deposition of Joseph Sandler, August 22, 1997, p. 32.
---------------------------------------------------------------------------
When asked about the Vice President's knowledge regarding
the accounts into which these contributions had been deposited,
Sandler acknowledged that he had never spoken with the Vice
President about the matter, and was not aware whether the Vice
President's counsel had done so.26 Sandler did
volunteer, however, that he and Burson had discussed the matter
among themselves and, based solely on circumstances surrounding
the Vice President's telephone calls, had concluded that the
Vice President must have thought he was raising ``soft
money.''27 The principal circumstances relied on by
Burson and Sandler in forming this conclusion were that the
amount of money that the Vice President would typically ask for
in these telephone calls was in excess of the $20,000 aggregate
annual limit on individual ``hard money'' contributions imposed
by the FECA, and the fact that the Vice President was asking
for money to fund the DNC's media campaign.28
---------------------------------------------------------------------------
\26\ Id. at pp. 27; 41-42.
\27\ Id. at pp. 30-32; 41-42.
\28\ Id.
---------------------------------------------------------------------------
As part of his hearing testimony before the Committee on
September 10, 1997, Sandler addressed these issues in the
following exchange:
Mr. Mattice [Senior Counsel to the Committee]. I
think you will recall, Mr. Sandler, in your deposition,
I asked you in the course of this project whether you
and Mr. Burson, the Vice President's counsel, had ever
had any discussions regarding what might have been the
Vice President's state of mind at the time he made
these calls with respect to how the monies were to be
used or into which accounts they might have been
deposited. Do you recall that?
Mr. J. Sandler. Yes, I do.
Mr. Mattice. Okay. I believe you told me in your
deposition that you personally have never discussed
that matter with the Vice President. Is that accurate?
Mr. J. Sandler. That is correct.
Mr. Mattice. I think you also testified that, to your
knowledge, you do not recall Mr. Burson ever telling
you that he had discussed that issue with the Vice
President. Is that accurate?
Mr. J. Sandler. That is accurate.
Mr. Mattice. All right. And I think that you had also
told me in your deposition that you and Mr. Burson did
discuss this issue, but the things that you relied on
were things such as the amounts of money that the Vice
President was asking for and the fact that at that
point in time, he was asking for money in connection
with the media campaign. Is that accurate?
Mr. J. Sandler. Both that and the fact that the call
sheets given to the Vice President asked him to solicit
amounts in excess of the Federal limits in each of
these cases, in which we had determined that a
contribution resulted from a phone call made by the
Vice President and----
Mr. Mattice. Okay. I just--oh, I am sorry. Go ahead.
Mr. J. Sandler. And the fact that in each of those
cases--and there were five cases that we had
identified, and I know others can add and subtract and
so forth, but--and those five cases that we had
identified, not only did the Vice President's call
sheet ask him to solicit an amount in excess of the
Federal limits, in other words, soft money, but the
donor had written a single check for in excess of the
Federal limits.29
---------------------------------------------------------------------------
\29\ Testimony of Joseph Sandler, September 10, 1997, pp. 34-36.
At his testimony before the Committee on September 10,
1997, Sandler confirmed his deposition testimony that some of
the money raised by the Vice President's telephone calls was
``hard money.'' Throughout his testimony, Sandler insisted that
the Vice President had no knowledge of the DNC accounts into
which contributions resulting from his telephone calls had been
deposited. Sandler even alluded to the Vice President's state
---------------------------------------------------------------------------
of mind in his opening statement, when he said:
Even if the statute did apply in that way, it is
limited by its terms to the solicitation of
contributions subject to the Federal Election Campaign
Act, meaning, in the case of party committees, Federal
or so-called hard money. Though we don't think the fact
is relevant because of our view of--my view of the
application of the statute that I just mentioned, all
the materials that we have seen clearly indicate that
the Vice President was soliciting non-Federal money.
And that's true even though, because of internal DNC
procedures of which the Vice President would have no
reason to be aware, the DNC--after the fact and without
the Vice President's knowledge--deposited a small
percentage of a portion of those contributions that he
had solicited into our Federal Account.30
---------------------------------------------------------------------------
\30\ Id. at pp. 15-16.
At the September 10, 1997 Committee hearing, Sandler was
asked about a series of memoranda prepared by then-White House
Deputy Chief of Staff Harold Ickes that appeared to cast doubt
on whether the Vice President had in fact made his telephone
solicitations with the state of mind that Sandler and the
others had attributed to him. These memoranda described the
manner in which funds raised for the DNC would be allocated.
These memoranda (which sometimes transmitted other memoranda
prepared by Brad Marshall, Chief Financial Officer of the DNC)
repeatedly highlighted the fact that, as a matter of DNC
policy, the first $20,000 of money received annually by the DNC
from an individual donor would be allocated to the DNC's
federal (hard money) accounts, and that only after this
allocation was made would any additional monies raised from
such individual be allocated to the DNC's non-federal (soft
money) accounts.31
---------------------------------------------------------------------------
\31\ See, e.g, Memorandum from Harold Ickes to the President and
the Vice President, February 22, 1996 (Ex. 12); Memorandum from Harold
Ickes to the President and the Vice President, June 3, 1996 (Ex. 13);
Memorandum from Harold Ickes to the President and the Vice President,
July 15, 1996 (Ex. 14); Memorandum from Harold Ickes to the President
and the Vice President, July 28, 1996 (Ex. 15); see also Memorandum
from Bradley Marshall to Debra DeLee, July 12, 1994 (Ex. 16).
---------------------------------------------------------------------------
Most, if not all of these memoranda from Ickes were
directed to both the President and the Vice President.
According to Heather Marabetti, then executive assistant to the
Vice President, the Vice President received an overwhelming
volume of memoranda, and was not able to read them all. Some
memos received by the Vice President were moved, unread,
directly to his ``out'' box. Others, which the Vice President
intended to read, would remain in his ``in'' box. Marabetti
testified that these memoranda from Ickes were the type of
internal memoranda which ``stayed in [the Vice President's] in-
box,'' and, were, therefore, presumably reviewed by
him.32 Obviously, these memoranda raise an
implication that the Vice President had personal knowledge that
a portion of monies he solicited on behalf of the DNC in his
fund-raising telephone calls would be deposited into the DNC's
hard money accounts.
---------------------------------------------------------------------------
\32\ Deposition of Heather Marabetti, September 3, 1997, pp. 66-67
and see Ex. 14.
---------------------------------------------------------------------------
More important, the issue of the Vice President's precise
mental state when making the calls is not necessary in
evaluating whether his calls violated section 607. A Federal
Election Commission regulation on this subject states:
Any party committee solicitation that makes reference
to a federal candidate or a federal election shall be
presumed to be for the purpose of influencing a federal
election, and contributions resulting from that
solicitation shall be subject to the prohibitions and
limitations of the Act. This presumption may be
rebutted by demonstrating to the Commission that the
funds were solicited with express notice that they
would not be used for federal election
purposes.33
---------------------------------------------------------------------------
\33\ 11 C.F.R. Sec. 102.5(a)(3).
The effect of this regulation is to create a legal presumption
that, in the absence of an explicit disclaimer to the contrary,
contributions solicited for party accounts (such as those
maintained by the DNC) are treated as a matter of law as ``hard
money'' if there is a reference in the solicitation to a
particular campaign or candidate. This presumption arguably
renders the subjective state of mind of the solicitor
irrelevant with respect to whether money raised is deposited
into ``hard'' or ``soft'' accounts in an analysis of the
applicability of a statute such as 18 U.S.C. Sec. 607; so long
as the solicitor refers to a particular candidate or campaign,
the resulting contribution is, as a matter of law, ``hard
money.''
At his deposition testimony on August 22, 1997, Sandler
conceded that he and Burson had not considered the effect for
this regulation in their discussions regarding the legality of
the Vice President's telephone calls. He did, however,
acknowledge the operative effect for the regulation:
Q: Was this regulation discussed in the course of
conversation you may have had with Mr. Burson or others in the
course of this project or investigation we've been discussing?
A: Not that I recall.
Q: Okay. Tell me your understanding of what that subsection
of the Code of Federal Regulations does.
A: If money is solicited in a way that's earmarked for the
election of a Federal candidate in the conception of the--the
framework of the FEC rules, it will be treated as Federal money
unless the donor has advised that it was--or indicated that it
would be deposited in a non-Federal account.
* * * * *
Q: All right. Give me again--you're the expert at this sort
of thing. Tell me, can you put in a little bit more layman's
language for me your interpretation of this, of what is done by
this particular regulation?
A: Yes. If you solicit funds to a party account without
indicating to the donor into what account it's going to be
deposited, or if the donor doesn't indicate on the check what
account to deposit to, and you say this is going to be used
to--we're going to use this to elect Senator Smith, you know, a
U.S. Senate race or a U.S. House race, Presidential race, the
money will be presumed to be Federal unless the donor's advised
different.
Q: Was there ever--in the course of the discussions you may
have had with Mr. Burson or others in the course of this
investigation, was there ever any discussion that the Vice
President may have mentioned to any of these potential donors
anything about the accounts into which their contributions
would be deposited?
A: No. I don't think--the Vice President isn't necessarily
going to be familiar with those accounts, which you can tell I
don't even know the codes, and I'm ultimately in charge of
it.34
---------------------------------------------------------------------------
\34\ Deposition of Joseph Sandler, August 22, 1997, pp. 44-45.
The Committee concludes that the regulation is most
probably applicable to the Vice President's solicitation calls,
as he repeatedly volunteered during his March 3, 1997 press
conference that he was raising funds for ``the campaign'' or
for ``our campaign.'' 35
---------------------------------------------------------------------------
\35\ See supra, text accompanying note 7.
---------------------------------------------------------------------------
The timing of the Committee's discovery that monies raised
by the Vice President had been deposited into hard money
accounts is also significant. At his testimony before the
Committee on September 10, 1997, Sandler confirmed that in
construing the Committee's subpoena for documents, the DNC had
concluded that it need not produce to the Committee any
document created after April 9, 1997. Sandler further confirmed
that the fact that, because his handwritten notes, which
indicated that monies raised by the Vice President's calls had
been deposited to hard money accounts, had been produced, those
notes had been prepared on or prior to April 9.36
---------------------------------------------------------------------------
\36\ Sandler testimony, pp. 30-31.
---------------------------------------------------------------------------
This sequence of events makes clear, then, that at least
Sandler and Burson knew that monies presumably raised by the
Vice President's solicitations from his office phone had been
deposited into hard money accounts before the Attorney General
publicly stated her contrary factual assumption in her April
14, 1997 letter to Senate Judiciary Committee Chairman
Hatch.37 A question raised is why, given this
knowledge, Sandler or Burson (or Burson's client, the Vice
President) never undertook to make the Attorney General aware
of the fallacy of her assumption in this regard after her
letter was released.
---------------------------------------------------------------------------
\37\ Sandler also knew before April 9, 1997 that the telephone
calls had been made on the Vice President's official telephones in his
White House office. Deposition of Joseph Sandler, August 21, 1997, pp.
115-16, 123.
---------------------------------------------------------------------------
President Clinton
At a White House press conference on March 7, 1997 (four
days following the Vice President's press conference), and in
response to questions of whether the President had made
telephone calls soliciting contributions to the DNC from the
White House, the following exchange took place:
Q: Mr. President, your press secretary this week left
open the possibility that you, too, had made calls like
the vice president did.
Did you ever make those calls?
A: I told him to leave the possibility open because
I'm not sure, frankly. I don't like to raise funds in
that way. I never have liked it very much. I prefer to
meet with people face to face, talk to them, deal with
them in that way. And I also, frankly, was very busy
most of the times that it's been raised with me. But I
can't say, over all the hundreds and hundreds and maybe
thousands of phone calls I've made in the last four
years, that I never said to anybody while I was talking
to them, ``Well, we need your help,'' or ``I hope
you'll help us.''
At his deposition before the Committee on June 26, 1997, Ickes
testified that based on his review of documents presented to
him by Committee counsel, and based on his vague recollections
and assumptions, the President may have made a limited number
of telephone calls to DNC donors during 1994.38
---------------------------------------------------------------------------
\38\ Deposition of Harold Ickes, June 26, 1997, pp. 80-108; see
also Ex. 3; Memorandum from Harold Ickes to Leon Panetta, December 2,
1994 (Ex. 17); Memorandum from Harold Ickes to Jack Quinn, December 2,
1994 (Ex. 18); Memorandum from Harold Ickes to the President and the
Vice President, November 28, 1995 (Ex. 19); Memorandum from Harold
Ickes to the President with attached call sheets, February 7, 1996 (Ex.
20); Handwritten Notes of David Strauss (Ex. 21); Electronic Mail from
Karen Hancox to Kim Tilley, November 24, 1995 (Ex. 22); Memorandum from
Nancy Hernreich & Rebecca Cameron to the President, December 22, 1995
(Ex. 23); Fax Cover Sheet from Ann Braziel to Karen Hancox with
attached call sheets, March 7, 1996 (Ex. 24).
---------------------------------------------------------------------------
Based principally upon the information provided by Ickes
and on ``call sheets'' apparently prepared for the President by
officials at the DNC, the Committee undertook a project with
respect to the President's telephone calls under the direction
of Jerome O. Campane, Supervisory FBI detailee to the Special
Investigation. As part of this project, the Committee contacted
a number of the potential donors listed on the call sheets to
determine whether the President, in fact, had contacted those
individuals and, if so, what had been the results of the
telephone calls. The results of this project are outlined in
the ``Statement of Jerome O. Campane,'' dated October 28,
1997.39
---------------------------------------------------------------------------
\39\ Statement of Jerome O. Campane, October 28, 1997 (Ex. 25).
---------------------------------------------------------------------------
As can be seen from Mr. Campane's statement, and the
referenced letter dated October 21, 1997 from White House
counsel Charles F.C. Ruff to Michael J. Madigan, Chief Counsel
for the Special Investigation,40 it was ultimately
determined that telephone calls were made from the White House
residence to six of the nine individuals circled on the October
18, 1994 call sheet. Two of the individuals (Jenrette and
Frost) listed in Ruff's letter were among the five persons who
were interviewed in connection with their contributions.
---------------------------------------------------------------------------
\40\ Letter from Charles F.C. Ruff to Michael J. Madigan, October
21, 1997 (Ex. 26).
---------------------------------------------------------------------------
Of these individuals, the Committee was able to determine
that the President had called and solicited a contribution to
the DNC from at least one--Richard H. Jenrette, Chairman of the
Board and Chief Executive Officer of The Equitable Companies,
Incorporated. Mr. Jenrette was interviewed by telephone by the
Committee, and testified before the Committee at a hearing on
October 29, 1997.
Jenrette testified that he received a telephone call from
the President on October 18, 1994, and that the President
requested his assistance in raising two million dollars from
forty friends.41 Jenrette agreed to collect $50,000
to donate to the DNC as his share of that two million dollar
goal. In his orders to fulfill his $50,000 commitment, Jenrette
wrote a personal check for $10,000 to the DNC and collected an
additional $40,000 from businesses he helps manage, and then
forwarded all checks to the President on October 24,
1994.42 In a letter accompanying the checks,
Jenrette described in detail his conversation with the
President, especially the fact of the President's solicitation.
Jenrette provided the Committee copies of the five checks he
collected in response to the President's
solicitation.43
---------------------------------------------------------------------------
\41\ Testimony of Richard Jenrette, October 29, 1997, pp. 3-6.
\42\ Id.
\43\ Id.; Checks drawn on accounts of The Equitable Companies
Incorporated, The Equitable, Richard H. Jenrette, Alliance Funds
Distributors, Inc., and Donaldson, Lufkin & Jenrette, Inc. (Ex. 27).
---------------------------------------------------------------------------
Later that day, White House counsel Ruff, along with his
assistants Lanny A. Breuer and Michael X. Imbroscio, testified
before the Committee. In response to a request from Chairman
Thompson, Ruff agreed to compare entries in memoranda (referred
to as a ``diary'') regarding President Clinton's activities to
White House telephone logs to determine whether the President
had made other fund-raising telephone calls.44
---------------------------------------------------------------------------
\44\ Testimony of Charles F.C. Ruff, October 29, 1997, p. 220.
---------------------------------------------------------------------------
On November 17, 1997, Chief Counsel Madigan received a
letter from Breuer, which set forth the result of that work.
According to that letter, the White House counsel's office was
able to determine that the President placed three other calls
to individuals listed on DNC call sheets. According to Breuer's
letter, the White House could not determine that funds were
raised as a result of any of these calls.45 The
Committee determined that the President's calls had all been
made from the White House residence. Later in November, the
Committee received documents which suggested that other White
House officials may have made telephone calls soliciting funds
for the DNC.46
---------------------------------------------------------------------------
\45\ Letter from Lanny Breuer to Michael J. Madigan, November 17,
1997 (Ex. 28).
\46\ This document, produced by the DNC in late November, after the
Committee's hearings concluded, reflects plans to have Ickes make fund-
raising telephone calls for significant amounts of money to a number of
labor leaders. Because Ickes had already been deposed and had testified
before the Committee in public session, the Committee never had the
opportunity to ask him about the document.
Excerpts from October 11, 1996 DNC Memorandum:
Union--Caller: Request/Action Item
AFSCME--Harold Ickes: Reminder call. Rosenthal suggests
that AFSCME will hold $100,000 to $200,000 for distribution
to coordinated campaigns ``at the end.'' Harold should
confirm this.
AFT--Harold Ickes: List to be prepared by Jill Alper and
Jim Thompson for specific request.
Firefighters--Harold Ickes: Ask for $100,000 with list
prepared by Jill Alper and Jim Thompson . . .
Laborers--Harold Ickes: At the end of June, the Laborers
had $1 Million in the PAC account; ask for contributions
with list prepared by Jill Alper and Jim Thompson . . .
Memorandum from Charlie Baker to Craig Smith, October 11, 1996 (Ex.
29).
The Committee's investigation has shown that at least two of these
organizations made contributions to the DNC after October 11, 1996. To
the extent that Ickes participated in effort to cultivate potential
donors, questions arise concerning 5 U.S.C. Sec. 7323(b), prohibiting
fund-raising by such employees. In fact, if Ickes made the telephone
solicitations that were the subject of the DNC's October 11, 1996
memorandum, quoted above, it would appear that he violated the criminal
provisions for the Hatch Act, prohibiting a federal employee from
soliciting any contributions at any time from any location. The
Committee strongly recommends further investigation of these matters.
---------------------------------------------------------------------------
The Justice Department's Investigation
As discussed, the Attorney General refused to recommend the
appointment of an independent counsel to investigate the Vice
President's telephone calls in April 1997, primarily due to her
assumption that only soft money was raised by those calls. The
Committee's investigation, which began long after the Justice
Department's, had proven these assumptions incorrect by August
21, 1997, the date when Sandler testified to the Committee of
his knowledge that the calls had raised hard money.
In fact, even a consideration of evidence in the public
domain should have caused the Justice Department to realize
that its assumptions were incorrect. This became clear on
September 3, 1997, when an article in The Washington Post,
based on information available to the public, determined that
the Vice President's telephone calls from the White House had
raised $120,000 in hard money for the DNC.47 The
article set forth facts suggesting that at least 8 of the 46
donations that resulted from the Vice President's calls were
deposited into hard money accounts. One donor to whom the
reporter spoke stated that the call ``was clearly focused on
the reelection campaign of Clinton and Gore,'' 48 an
impression consistent with the Vice President's own
recollection of the nature of his calls.49 There is
no question that the Justice Department had not made any
inquiry to determine whether the funds raised by the Vice
President's telephone calls were hard money, despite the
Justice Department's novel view that the answer to that inquiry
determined the legality of the solicitation. ``The first I
heard of it was when I saw the article in `The Washington
Post,' Reno said. . . . It is my understanding that is the
first time that the public integrity section learned of it, as
well.'' 50 In these circumstances, the public and
the Congress are justified in questioning the competency and
credibility of the Justice Department's
investigation.51
---------------------------------------------------------------------------
\47\ Bob Woodward, ``Gore Donors' Funds Used as `Hard Money,' ''
Washington Post, September 3, 1997, p. A1.
\48\ Id.
\49\ See supra, note 7 and accompanying text (discussing Vice
President's characterization of the content of his phone calls at March
3, 1997 press conference).
\50\ Roberto Suro, ``Justice Did Not Review Legality of Gore White
House Solicitations,'' Washington Post, September 6, 1997, p. A1.
\51\ Indeed, the Attorney General adopted a tortured interpretation
of the Independent Counsel Act, one which no prior Attorney General has
adopted for the precise reason that the statute cannot be so read.
According to published reports, the Attorney General will not begin an
investigation of whether a covered person has violated the law until
specific and credible information has been presented to her that such a
violation has occurred, even though a prosecutor may begin an
investigation into anyone's conduct based on any information she
receives. See Susan Schmidt & Roberto Suro, ``Troubled From the Start:
Basic Conflict Impeded Justice Probe of Fund-Raising,'' Washington
Post, October 3, 1997, p. A1. In short, she took the unprecedented
position that unless she is presented with sufficient evidence that
would justify opening a preliminary investigation under the independent
counsel law, then she would not investigate the actions of covered
persons to see whether in fact specific and credible evidence of
wrongdoing existed. Consequently, the Justice Department's
interpretation of the Independent Counsel Act produced the incongruous
result that it became harder to investigate a covered person under that
statute for wrongdoing than to investigate non-covered persons for
potentially crimes generally. Obviously, this interpretation confers an
immunity from investigation that non-covered persons do not enjoy; if
the Justice Department will not look for evidence of wrongdoing, then
no independent counsel will be appointed to fulfill that statutory
role, unless some third party presents specific and credible evidence
of a criminal act by a covered person. This result hardly fulfills the
intent of the Independent Counsel Act, which was designed to make sure
that an authority not beholden to the President could investigate any
allegations of wrongdoing against high-level officials.
---------------------------------------------------------------------------
Prodded by the newspaper article, the Attorney General
commenced a preliminary investigation into whether an
independent counsel should be appointed to investigate the Vice
President's fund-raising calls on October 3, 1997. On December
2, 1997, the Attorney General notified the United States Court
of Appeals for the District of Columbia Circuit, Independent
Counsel Division, that the Department of Justice had concluded
its preliminary investigation, and that she had determined that
there were ``no reasonable grounds to believe that further
investigation is warranted of allegations that the Vice
President violated Federal law, 18 U.S.C. Sec. 607, by making
fund-raising telephone calls from his office in the White
House.'' In her notification, the Attorney General stated the
basis for her determination:
My conclusion is supported by two independent
dispositive grounds. First, the evidence that the Vice
President may have violated Section 607 is insufficient
to warrant further investigation. Second, even if the
evidence suggested a possible violation of law,
established Department of Justice policy requires that
there be aggravating circumstances before a prosecution
of a Section 607 violation is warranted. There is no
evidence of any aggravating circumstances in this
matter.52
---------------------------------------------------------------------------
\52\ Ex. 2, p. 1.
After recounting the factual and legal background for the
preliminary investigation and outlining the scope of the
inquiry, the Attorney General's notification outlined the
results of the investigation. The Attorney General acknowledged
that the fact that DNC contributions were deposited to ``hard''
money accounts raised the ``plausible inference'' that the Vice
President may have asked the donor to make a hard money
contribution. In this regard, the Attorney General addressed
the significance of one of the series of memoranda from Ickes
and Marshall which were directed to the President and the Vice
President. This memorandum described the DNC's ``splitting''
practice whereby the first $20,000 of money received annually
from an individual donor would be allocated to the DNC's hard
money accounts, and only subsequently would additional sums
raised from those individuals be deposited into ``soft'' money
accounts.
According to the Attorney General's notification, the Vice
President stated in an interview with Justice Department
attorneys or FBI agents that he did not recall having seen the
memorandum, and that he tended not to read Ickes' memoranda
that would be discussed at meetings. The Attorney General
concluded, however, that even if the Vice President had seen
the memorandum, it would have significance only if it could be
shown that the Vice President had independent, detailed
knowledge for the DNC's allocation or ``splitting'' practices.
The notification states:
It is my conclusion that the memorandum, standing
alone and without independent knowledge of the
splitting practice, cannot reasonably be read as
putting anyone on notice that the DNC was engaging in a
practice of splitting contributions without the donor's
consent. Therefore, even if the Vice President read the
Marshall memorandum, it is my conclusion that there is
no evidence on which to base a conclusion that the Vice
President was aware of the DNC practice, and thus may
have been soliciting contributions knowing that a
portion of some contributions would end up in hard
money accounts.53
---------------------------------------------------------------------------
\53\ Id. at p. 10.
The Justice Department also attempted to ascertain whether,
in the course of his solicitations, the Vice President had, in
fact, solicited hard money. The notification states that the
FBI interviewed more than 200 of the 216 prospective donors
identified from call sheets prepared for the Vice President by
the DNC. Of this number, the FBI was able to identify 45 who
recalled actually receiving a telephone call from the Vice
President during the period of late 1995 to mid-1996 in which
political contributions were discussed. According to the
notification, ``[n]one of these 45 persons state that the Vice
President explicitly or implicitly asked them to give money to
the DNC's federal account or to any federal political
campaign.'' 54 Accordingly, the Attorney General
concluded:
---------------------------------------------------------------------------
\54\ Id. at p. 13. The Attorney General's notification did not
mention 11 C.F.R. Sec. 102.5(a)(3), which states that if a federal
campaign is referenced, the solicitation will be presumed for federal
election law purposes to be hard money unless the solicitor makes an
explicit statement that the funds are to be deposited into the soft
money account. Nor did she discuss the Vice President's own statements
at his March 3, 1997 news conference, in which he repeatedly made
reference to his making telephone calls on behalf of ``the campaign''
or ``our campaign.'' A reference to the use of the money for a media
campaign is not the same as an explicit disclaimer that the funds would
be accounted for as soft money, particularly given the Committee's
conclusion that these advertisements were in fact Clinton-Gore campaign
advertisements.
It is my view that there are no further grounds to
investigate whether any of these calls violated Section
607 on the mere grounds that a portion of the
subsequent contributions were deposited into hard money
accounts. There is no evidence that the Vice President
was aware that part of the donations would be deposited
into hard money accounts, and the donors' own
descriptions of the solicitations makes it clear that
they interpreted the solicitations as being for soft
money.55
---------------------------------------------------------------------------
\55\ Id. at p. 14.
Beyond her conclusions relating to the Justice Department's
factual investigation, the Attorney General also rested her
determination not to seek an independent counsel on the grounds
that Justice Department policy would, in any event, preclude a
prosecution in the absence of ``aggravating circumstances'' not
presented in this case. The authority cited in the notification
for the Attorney General's reliance on this factor is a
provision of the Independent Counsel Act, 28 U.S.C.
---------------------------------------------------------------------------
Sec. 592(c)(1)(B), which states:
In determining whether reasonable grounds exist to
warrant further investigation, the Attorney General
shall comply with the written or other policies of the
Department of Justice with respect to the conduct of
criminal investigations.
Relying on this authority, the Attorney General observed:
A number of different aggravating factors are
mentioned in the Departmental records concerning
Section 607. They include, in addition to coercion, a
demonstration of specific intent to flout the law by
one who has been put on notice of its requirements; a
substantial number of violations; a substantial misuse
of governmental resources or property in conjunction
with the prohibited solicitations; and a substantial
disruption of government functions resulting from the
solicitations.
We have conducted, as is explained above, an
extensive investigation of the Vice President's
telephone solicitation calls; and I find no evidence in
the investigative results that any of these aggravating
factors is present. There is no evidence that the Vice
President was specifically aware of the prohibitions of
Section 607, and no evidence that he was warned that
his conduct would be in potential violation of that or
any other statute. There are at most five telephone
calls, even if we could draw every conceivable
speculative inference against the Vice President, that
could be construed as hard money solicitations, and
hence potential violations for the law. The bulk of his
calls were not charged to the government, and the few
that were have been reimbursed. There is no suggestion
that either the Vice President or any of the few staff
members who were involved in these telephone
solicitations neglected their official duties as a
result.
Beyond these factors that have been specifically
identified in Department of Justice records as
potential aggravating circumstances in a Section 607
case, I am unable to identify any other factors in this
case that might properly be regarded as
aggravating.56
\56\ Id. at pp. 27-28. A number of these conclusions are
questionable. The fact that the Vice President declined to make fund-
raising telephone calls from the White House in 1994, when he made such
calls from the DNC, but did so in 1996, suggests that he indeed was
specifically aware of the prohibitions of section 607. In addition, if
the statute is not in fact limited to the raising of ``hard money,'' as
discussed below, then the Vice President made 52 such calls that may
have raised as much as $795,000, certainly a ``substantial number of
violations.''
---------------------------------------------------------------------------
Thus, the Attorney General concluded:
In short, the preliminary investigation has
established that, even if the Vice President were found
to have technically violated Section 607, there is no
evidence suggesting the presence of any aggravating
factors of the sort that might warrant consideration of
prosecution under established Departmental policy.
Furthermore, I am unable to identify any way in which
further investigation might lead to development of
evidence of aggravating factors in this case.
Therefore, in light of the clearly established policy
of the Department of Justice that aggravating factors
are required before prosecution of a Section 607 matter
can be considered, it is my obligation under the
Independent Counsel Act to close this matter without
seeking the appointment of an independent
counsel.57
---------------------------------------------------------------------------
\57\ Id. at p. 28.
---------------------------------------------------------------------------
The Committee's Evaluation of the Legality of the Vice President's
Phone Calls
The Committee believes that an independent counsel should
be appointed to review a whole range of possible illegalities
in connection with fund-raising in the 1996 federal election
campaigns, including the telephone calls, to determine whether
high-ranking federal officials violated federal campaign
finance laws, and to make such a determination through a
process that would command public respect.
The primary federal criminal statute implicated by the
fund-raising telephone calls is 18 U.S.C. Sec. 607(a). The
predecessor statute to current 18 U.S.C. Sec. 607 was first
enacted in 1883 as part of the Pendleton Act. Although
telephones were new in 1883, the statute has not been allowed
to fall into disuse as modern communications developed. It was
amended in 1980, and its existence is both a known and constant
reality for all members of Congress. The Committee concludes
that despite several arguments advanced to the contrary,
telephone calls made by any person from an official area of the
White House to solicit campaign contributions violate the
express prohibition of section 607.
Vice President Gore stated at his press conference that no
law prevented the President or Vice President, as opposed to
all other federal employees, from raising federal campaign
contributions from the White House.58 The Committee
disagrees. On its face, the plain language of section 607
applies to all federal officers, indeed, to ``any person'' who
violates the statute, including the President and Vice
President. Nothing in the legislative history or any court
decision excludes the president or vice president from its
scope. Nor has any court case held either of these officials
exempt from any generally applicable federal criminal statute.
In addition, the Attorney General's April 14, 1997 letter
declining to seek an independent counsel in response to the
letter sent her by Senate Judiciary Committee Republicans does
not make the argument that these officials are exempt. Because
such an exemption would have been a dispositive response to a
request for an independent counsel, apparently the Attorney
General was not then prepared to take the position that the
President and the Vice President are excluded from the
operation of section 607.
---------------------------------------------------------------------------
\58\ Ex. 6, pp. 2-3.
---------------------------------------------------------------------------
Nonetheless, more supports this conclusion than the
statutory language and inferences from the Department's failure
to raise the argument. In 1979, the Justice Department's Office
of Legal Counsel issued an opinion which concerned whether the
predecessor statute to section 607 was violated when President
Carter invited about 20 private persons to a dinner in the
Family Dining Room on the first floor of the White House, where
some were solicited for campaign contributions.\59\ In that
opinion, the Department found that the term in the statute ``no
person'' (now ``any person'') was ``broadly inclusive.''
Similarly, the statute then, as now, by reference to section
603, referred to ``an officer or employee of the United States
or any department or agency thereof, or a person receiving any
salary or compensation for services from money derived from the
Treasury of the United States . . .'' That opinion found that
the intent of Congress enacting the original 1883 statute was
that the ``President [and a fortiori the vice president] . . .
be included among the `officers governed by the bill.' '' The
Department concluded that since averting coercion to contribute
was the goal of the statute, then ``[p]articularly where only
criminal penalties were provided rather than provision made for
discharge or removal of an offending official, policy reasons
for prohibiting such abuses of power by the president as much
as by any other Government official are clearly present.'' The
Justice Department's views cannot be squared with Vice
President Gore's claim that the statute does not apply to him
or to President Clinton.
---------------------------------------------------------------------------
\59\ ``The President--Interpretation of 18 U.S.C. Sec. 603 as
Applicable to Activities in the White House,'' 3 Op. O.L.C. 31 (1979).
---------------------------------------------------------------------------
The Committee also concludes that the Attorney General
erred in concluding that section 607 applies only to the
raising of ``hard money.'' Section 607 applies only when
``contributions'' within the meaning of the Federal Election
Act of 1971 are solicited or received in a federal building.
Section 607 references the definition of ``contribution''
contained in section 301(8) of the FECA. Subject to various
exceptions that do not include funding for media advertising,
that legislation defines the term ``contribution'' to mean
``any gift, subscription, loan, advance, or deposit of money or
anything of value made by any person for the purpose of
influencing any election for Federal office. . . .'' Such
definition does not permit ``contribution'' to refer only to
``hard'' and not to ``soft money,'' and the Attorney General
cited no court case for her interpretation for the statute.
Even if the statutory definition were unclear, there are
two reasons why ``contribution'' under the FECA, as referenced
in section 607, cannot be limited to ``hard money.'' First, the
FEC does not equate ``contribution'' with ``hard money.'' In
its view, when coordinated with a candidate, a party's
``electioneering activity'' is subject to regulation as a
``contribution.'' Although the Attorney General purported to
agree that ``[e]lectioneering message'' is the test when
determining whether an advertisement constitutes a
``contribution,'' her April 14, 1997 letter erroneously appears
to equate ``electioneering message'' with ``express advocacy.''
\60\ In actuality, the FEC defines ``electioneering message''
more broadly than express advocacy to mean statements
``designed to urge the public to elect a certain candidate or
party.'' \61\ The advertisements run by the DNC for which Vice
President Gore solicited funds contained electioneering
messages, and because of their coordination with the candidate,
were ``contributions'' within the meaning of the FECA and
section 607. ``Express advocacy'' must be financed with hard
money. By contrast, the FEC has determined that an
advertisement can be a ``contribution'' if it contains an
electioneering message. To the FEC, and contrary to the
Attorney General's letter, the two terms ``hard money'' and
``contribution'' are simply not synonymous.
---------------------------------------------------------------------------
\60\ Ex. 8, p. 7.
\61\ See FEC Advisory Op. 1985-14, 2 Fed. Election Camp. Fin. Guide
(CCH) para. 5819 at 11,185 (April 12, 1985); FEC Advisory Op. 1984-15;
FEC Advisory Op. 1984-23; FEC Advisory Op. 1984-62; MUR 3608; MUR 3918.
---------------------------------------------------------------------------
Under well-established administrative law principles, the
FEC's view that ``contributions'' include soft money used to
fund electioneering messages prevails over the Attorney
General's position that ``contributions'' are limited to hard
money. Where a statute is ambiguous, and Congress charges a
federal regulatory agency to interpret the statute, the
agency's interpretation governs the meaning of the ambiguous
statute, even where another party has a plausible view of the
statute. Chevron Corp. v. Natural Resources Defense Council,
467 U.S. 837 (1984). The Supreme Court has held that the FEC
``is precisely the type of agency to which deference should
presumptively be afforded.'' Federal Election Commission v.
Democratic Senatorial Campaign Cmte., 454 U.S. 27, 37 (1981).
Thus, the Department of Justice is precluded as a matter of law
from interpreting ``contribution'' to mean ``hard money.'' \62\
---------------------------------------------------------------------------
\62\ Under Chevron, statutory terms that are unambiguous apply
without regard to the interpretation provided by an administrative
agency. If this prong of Chevron were to apply, the FEC's view of the
meaning of ``contribution'' would also govern, since it is consistent
with the plain meaning of the statutory definition of ``contribution.''
See Colorado Republican Campaign Comm. v. FEC, ____ U.S.____, 116 S.
Ct. 2309, 2316 (1996) (recognizing that the ``FECA permits unregulated
`soft money contributions to a party for certain activities, such as .
. . voter registration and `get out the vote' drives . . . Unregulated
`soft-money' contributions may not be used to influence a federal
campaign, except when used in the limited, party building activities
specifically designated in the statute'' (emphasis added)). As noted
above, such limited activities do not include general media
advertising.
---------------------------------------------------------------------------
A second reason why ``contributions'' under the FECA are
not limited to ``hard money'' is that, under the Attorney
General's view, the statute would be rendered meaningless. The
FECA's prohibitions on various forms of illegal campaign funds
are all triggered by those funds constituting
``contributions.'' For instance, the FECA prohibits campaign
``contributions'' greater than $1000 per election, 2 U.S.C.
Sec. 441a(1); foreign ``contributions,'' 2 U.S.C. Sec. 441e;
``contributions'' made in the name of another, 2 U.S.C.
Sec. 441f; and cash ``contributions'' in excess of $100, 2
U.S.C. Sec. 441g. Under the FEC's interpretation of
``contribution,'' soft money from these prohibited sources
would be illegal. The DNC apparently agrees with the FEC that
soft money from these sources is illegal; otherwise, it would
not have returned $2.8 million in soft money that came from
foreign and/or laundered sources.
Under the FEC's view, ``contribution'' has the same meaning
each time it appears in the FECA. This approach is consistent
with the ``normal rule of statutory construction'' that
``identical words used in different parts of the same statute
are intended to have the same meaning.'' Gustafson v. Alloyd
Corp., 513 U.S. 561 (1995). By contrast, under the Attorney
General's interpretation of ``contribution,'' all the sums the
DNC returned would have been legal because they were ``soft
money'' and therefore fell outside the various FECA
``contribution'' prohibitions. It would be legally incoherent
that for some purposes in the same statute, ``contribution''
means hard money and for others means ``soft as well as hard
money.'' Since ``contribution'' must have the same meaning each
time it appears in the FECA, then under the Attorney General's
view, it logically follows that it would be legal to raise
foreign soft money in the name of another in unlimited cash
sums. The Committee rejects an interpretation of
``contribution'' that would lead to such absurd results.
Even if the Attorney General's view of the statute were
correct, the Vice President in fact raised hard money. The
calls were made on a Clinton-Gore campaign credit card, which
obviously implies that the calls were made for the purpose of
advancing these candidates. The letters he sent to donors
following his calls state, ``President Clinton and I thank you
for your continued support and contribution to the Democratic
National Committee. We appreciate your dedication to our
Administration and your help at a time when needed.'' \63\ This
ties the donations to the Clinton-Gore Administration and its
campaign for reelection. One letter of the Vice President's, to
Frank Pearl, reads, ``President Clinton and I thank you for
your continued support of our Administration.'' \64\ This
letter makes no reference to the DNC at all, and could not
possibly be read as having raised soft money.
---------------------------------------------------------------------------
\63\ Letter from Al Gore to Michael Adler, Dec. 11, 1995; Letter
from Al Gore to William Dockser, Feb. 5, 1995; and Letter from Al Gore
to Robert L. Johnson, Feb. 5, 1996 (Ex. 30).
\64\ Letter from Al Gore to Frank Pearl, Feb. 9, 1996 (Ex. 31).
---------------------------------------------------------------------------
In addition, the two memoranda cited above from Harold
Ickes to the President, Vice President, and others make clear
that the first $20,000 of donations would be treated as ``hard
money'' and the rest deposited in non-federal accounts because
of the campaign's shortage of federal funds. Moreover, the FEC
regulation cited above states that if the solicitor mentions a
particular candidate or campaign and does not expressly state
that the funds being solicited will be deposited in a ``soft
money'' account, then the money donated will be presumed to be
``hard money.'' Thus, section 607 is not limited to ``hard
money,'' and even if it were, the Vice President raised hard
money.
For section 607 to apply, the solicitation must occur in a
room occupied by federal employees performing official duties.
The Attorney General's April 14, 1997 letter declined to
appoint an independent counsel in the absence of evidence that
the vice president made calls from official places in the White
House. The 1979 Office of Legal Counsel opinion exonerated
President Carter because the solicitation that prompted that
opinion occurred in the family dining room. In OLC's view, the
statute did not apply to solicitations in the private residence
and other areas of the White House. OLC opined that ``the
statute is not framed in terms of property owned or held by the
United States; it rather adopts a functional test, focusing on
areas used by Federal personnel while they are conducting the
Government's business.'' OLC's views therefore mean that
section 607 would apply to calls made from the official office
of the Vice President. Sandler's deposition testimony made
clear that this is where Vice President Gore made his calls.
The record also establishes that President Clinton made his few
calls from the White House residence, so section 607 would not
apply to his calls.
Although the Vice President went to great lengths at his
press conference to state that he did not solicit any federal
employee, and that he did not solicit anyone who was in a
federal building, those two issues are irrelevant to
determining whether section 607 has been violated. On the face
of the statute, this is irrelevant. As the statute
unambiguously reads, it is a criminal offense to solicit or
receive contributions in a federal office. The 1979 Office of
Legal Counsel opinion on which the Attorney General relied for
her view that the statute only applies to official areas of the
White House states that ``solicitations of private citizens
fall within the scope'' of section 607. And the Justice
Department's prosecutorial manual states, ``Section 607 makes
it unlawful for anyone to solicit or receive a contribution for
a federal election in any room, area, or building where federal
employees are engaged in official duties. . . . The employment
status of the parties to the solicitation is immaterial; it is
the employment status of the persons who routinely occupy the
area where the solicitation occurs that determines whether
section 607 applies.'' 65
---------------------------------------------------------------------------
\65\ In neither her April 14, 1997 letter to Senator Hatch nor her
December 2, 1997 notification to the Special Division of the United
States Court of Appeals for the District of Columbia Circuit did the
Attorney General make the argument that section 607 did not apply to
solicitations of non-federal employees by federal employees in areas
where official duties are performed. Since such an argument would have
been dispositive of the legality of the calls, it is clear that the
Attorney General would have relied on it if there were a basis for
doing so.
---------------------------------------------------------------------------
If section 607(a) applied only to the solicitation of
federal employees, then section 607(b) would be meaningless in
the federal criminal code. Under that provision:
The prohibition in subsection (a) shall not apply to
the receipt of contributions by persons on the staff of
a Senator or Representative . . ., provided, that such
contributions have not been solicited in any manner
which directs the contributor to mail or deliver a
contribution to any room, building, or other facility
referred to in subsection (a), and provided that such
contributions are transferred within seven days of
receipt to a political committee. . . .
As section 602 already makes it illegal for members of Congress
to solicit federal employees, and section 603 prohibits members
of Congress from soliciting or receiving contributions from
their own employees, the exemption contained in section 607(b)
would be unnecessary if Congress believed that section 607(a)
merely applied to the receipt of contributions from other
federal employees in their Congressional offices. Congress must
have believed that without this exemption, funds received in
such offices from non-federal employees would nonetheless fall
within the scope of section 607. It is a basic rule of
statutory construction that statutes should be read so as not
to render other parts of that statute surplusage.66
A reading that made section 607 apply only when federal
employees were solicited would render sections 602, 603, and
607(b) redundant. Thus, it is legally irrelevant that the Vice
President's calls were not made to federal employees, since he
was in a room in a federal building in which official duties
are performed at the time he made those calls.
---------------------------------------------------------------------------
\66\ ``Judges should hesitate . . . to treat [as surplusage]
statutory terms in any setting, and resistance should be heightened
when the words describe an element of a criminal offense.'' Bailey v.
United States, 516 U.S. 137 (1995), quoting Ratzlaf v. United States,
510 U.S. 135 (1994)(brackets in original).
---------------------------------------------------------------------------
Finally, it is also incorrect that ``there is no
controlling legal authority'' that section 607 renders criminal
the telephone calls the Vice President made. It is true that no
case has ever been brought under section 607 for soliciting a
non-federal employee from a federal building. But in a
statutory criminal law system such as ours, federal criminal
statutes apply according to their language as soon as they are
enacted. Thus, the statute itself is the ``controlling legal
authority'' that prohibits federal employees from making
telephone calls to non-federal employees from official areas of
federal buildings. The notion that a statute can apply to a
particular set of facts only when a court says that it does so
is a feature of a common law criminal legal system, not
ours.67
---------------------------------------------------------------------------
\67\ Thus, the only Supreme Court decision on the meaning of
section 607, United States v. Thayer, 209 U.S. 41 (1908), is irrelevant
to the facts here at issue. In Thayer, the defendant was outside the
federal building when he mailed solicitations of campaign contributions
to employees at their federal building. Some of the employees read
those letters in their offices. In his defense, Thayer argued that
since he was not in the federal building, he could not have solicited
in the building. Unsurprisingly, the Supreme Court rejected that view.
As the Justice Department manual correctly notes, the holding in the
case was that the statute applies to solicitations made by mail as well
as in person. The case simply does not address the situation in which
the person in the federal building is making a call outside the
building, and the case does not in any way constrict the scope of the
statute.
Moreover, the decision does not stand for the proposition that the
solicitation occurs where the person solicited is located. The Court
pointed out that ``[t]he time determines the place [of the
solicitation].'' Thus, if the letter is written and mailed, but the
letter burns, there is no solicitation in the federal building. Only
when the solicitation reached the employee in the federal building did
the prohibited solicitation occur. 209 U.S. at 43. In fact, until the
time the employee read the solicitation letter, no solicitation
occurred. In Thayer, the Court thus held that if the employee received
the solicitation letter in a federal building, but did not read the
letter until he left the building, no solicitation occurred: i.e., the
time of the solicitation (when the employee read the letter) determined
whether the solicitation occurred in a federal building (thus, no
solicitation occurred if the employee did not read the letter until
after leaving the building). Here, by contrast, at the time the Vice
President made his solicitations, they occurred from a federal
building's official space.
---------------------------------------------------------------------------
The Committee therefore concludes that an independent
counsel should be appointed to evaluate the ample credible
evidence of legal violations. Also, the Committee believes that
the making of these calls was inappropriate for our nation's
highest elected officials. This amounted to unsavory and
unseemly activity that lessens the dignity of these offices,
offices that should command the greatest respect from their
occupants and from citizens. In addition, even without
containing any words that could be construed to amount to
coercion, it would defy reality not to recognize that the
recipients of such calls, many of whom had business interests,
would find it difficult to turn down requests for funds from
persons who exercise such vast power. The Committee hopes that
all future Presidents and Vice Presidents will refrain from
making direct telephone solicitations for campaign
contributions.
White House Vetting of Individuals with Access to the President
Introduction
Since stories of its campaign finance improprieties first
surfaced in the fall of 1996, the Clinton Administration has
been forced to acknowledge again and again that it was
inappropriate for particular unsavory individuals to have
entered the White House or to have attended outside political
functions involving the President or the Vice
President.1 The repeated instances of White House
failure to weed out problematic prospective invitees in advance
of their arrival suggested at least the existence of a
fundamental deficiency in the White House's vetting process.
The Committee has determined that the problem was, in fact,
even more severe. Testimony of individuals familiar with the
White House's creation and evaluation of its guest lists
revealed that a process for vetting proposed attendees was
essentially nonexistent. White House officials testified that
they relied upon the United States Secret Service and the DNC
to vet invitees to or attendees at political events. DNC
officials likewise testified that they too principally relied
upon the Secret Service to identify and remove undesirable
individuals. The Secret Service, however, is charged only with
identifying potential physical threats to the President, and
makes no other determination as to the overall suitability of
invitees. Whether through gross negligence or conscious design,
the result of the absence of an organized vetting system was
the same: too many unsavory individuals were allowed entrance
to the White House and access to President Clinton.
---------------------------------------------------------------------------
\1\ See, e.g., Deposition of Nancy Hernreich, June 20, 1997, pp.
67-68 (conveying President Clinton's opinion that the attendance with
Johnny Chung of a delegation of Chinese businessmen at a March 11, 1995
White House radio address was ``inappropriate'' and that the White
House ``shouldn't have done that''); Kevin Sack, ``From Restaurateur to
Intimate at the White House,'' New York Times, Jan 4. 1997, p. A8
(``Mr. Trie escorted a leading Chinese arms dealer [Wang Jun] to a
small gathering with Mr. Clinton. The President has since described the
arms dealer's presence as `clearly inappropriate.' ''; Glenn F. Bunting
& Ralph Frammolino, ``Cash-for-Coffee Events at White House Detailed;
Politics: Zeal to Raise Funds Transformed Once-modest Sessions into
Major Money-makers, Accounts Indicate,'' Los Angeles Times, Feb. 24,
1997, p. A1 (``White House spokesman Davis also has conceded that it
`was not appropriate' for the president to sip coffee with Eric Wynn
just a few months after his second conviction for penny-stock
fraud.'').
---------------------------------------------------------------------------
White House Vetting Procedures During the 1996 Election Cycle
The White House Political Affairs Office was the designated
recipient of the DNC's proposed guest lists for White House
fundraising coffees and other politically motivated events
attended by the President or Vice President.2 The
Political Affairs Office was also supposed to serve as the
point of contact for the White House's system for vetting
guests at political events to ensure their ``suitability.''
3 Former Deputy Political Director Karen Hancox
testified that she received the list of guests selected by the
DNC for upcoming White House events by fax from Richard
Sullivan, the DNC's National Finance Director.4
Hancox's typical practice involved absolutely no vetting of
Sullivan's suggestions.5 In fact, she testified that
she ``rarely ever look[ed] at the list of names'' submitted by
Sullivan, and instead simply directed that the names be
forwarded to the appropriate offices for insertion into the
President's briefing book and for clearance by the Secret
Service.6 Hancox took further steps only if Sullivan
specifically requested that she check on the suitability of a
particular name on the DNC's list.7 In such an
event, Hancox would contact the appropriate authorities to
determine whether the tentatively proposed individual could
remain on the guest list. Where the invitation of a foreign
national was at issue, the appropriate authority was the
National Security Council (``NSC'').8 If the NSC
objected to the attendance of the proposed individual, Hancox's
response was to contact Sullivan and have him rescind the
invitation.9
---------------------------------------------------------------------------
\2\ The White House Social Office played the primary, but
essentially ``functionary'' role in the creation of guest lists for
White House events. See Deposition of Ann Stock, June 12, 1997, p. 21.
Ann Stock, who headed the Social Office, explained that representatives
of the Political Affairs and other offices within the White House
routinely submitted to Stock's office the names of individuals they
recommend for invitation to unspecified future White House events, and
each specific event's final guest list was compiled from the running
list of submitted names. Id. Stock testified that her office played no
role in vetting potential guests or deciding ``who comes or who doesn't
come.'' Id. She said that she assumes that prospective guests are
vetted by the offices submitting the guests' names, but that she
``could [not] care less'' how the vetting is done. Id. at pp. 131-32.
She testified that it is her understanding that an invited guest's
criminal background would be caught by the Secret Service, which does a
final review of an event's guest list before any guests are admitted to
the White House. Id. at pp. 133-34; see also discussion of the role of
the Secret Service, infra, footnotes 18-21 and accompanying text.
\3\ See Deposition of Karen Hancox, June 10, 1997, pp. 55-56.
\4\ Deposition of Karen Hancox, June 9, 1997, pp. 52 (coffees); see
also id. at p. 109 (overnights); id. at p. 113 (movie events at the
White House); id. at p. 115 (state dinners).
\5\ Id., p. 53.
\6\ Id. at pp. 53-54.
\7\ See, e.g., id. at p. 70 (``Q: When would you call the NSC
regarding attendees to coffees or other events. A: If Richard would
call me up and ask me about a name. Q: Was there ever a time that you
took it upon yourself to call the NSC regarding any attendees to any of
the coffee events or any events that Richard Sullivan sent you lists
for? A: Not that I ever remember, no.'' (emphasis added)); see also
Deposition of Doug Sosnik, June 20, 1997, pp. 167-68.
\8\ See Deposition of Karen Hancox, June 9, 1997, p. 101. Hancox
could remember only one instance in which she received a question about
a prospective guest that was not prompted by that individual's foreign
nationality. On that occasion, Sullivan asked Hancox to determine
whether a particular individual was supportive of the President's
health care policies. Hancox recalls contacting the White House's
Office of Public Liaison to address Sullivan's concerns. See id at pp.
101-02.
\9\ See id. at pp. 104-05; see also Deposition of Doug Sosnik, June
20, 1997, p. 176. Hancox also testified that the responsibility rested
entirely with Sullivan and the DNC to ensure that suspect individuals
who had been identified and removed from an event on one occasion did
not accidentally reappear on a subsequent list. Deposition of Karen
Hancox, June 10, 1997, pp. 50-53, 62-63.
---------------------------------------------------------------------------
Because the White House never raised ``red flags'' about
his proposals unless he ``proactively asked about'' particular
guests, Sullivan understood that the White House ``did not
conduct background checks'' of his proposed guests, and that
the obligation to weed out unsuitable individuals rested
primarily with the DNC. 10 Sullivan, however,
acknowledged a carelessness in the DNC's own vetting, as he
testified that he operated under the ``false sense . . . that
truly bad things would have been picked up . . . by the Secret
Service.'' 11 Sullivan therefore suggested that the
only category of potential guests that he felt the need to
raise with Hancox was ``foreign nationals.'' 12
---------------------------------------------------------------------------
\10\ See Deposition of Richard L. Sullivan, June 4, 1997, pp. 104-
05.
\11\ Deposition of Richard L. Sullivan, June 25, 1997, p. 85.
\12\ See Deposition of Richard L. Sullivan, June 4, 1997, p. 109.
---------------------------------------------------------------------------
It is clear, however, that even foreign nationals did not
necessarily receive proper scrutiny under the White House's
vetting ``process.'' Hancox testified that Sullivan raised
concerns about a total of fewer than twelve
individuals,13 and she has no recollection of
discussing with Sullivan or the NSC the propriety of White
House appearances by several prominent foreign subjects of the
Committee's investigation, including Arief Wiriadinata and a
delegation of Thai businessmen who accompanied Pauline
Kanchanalak to a June 18, 1996 coffee.14 Moreover,
Samuel ``Sandy'' Berger, Assistant to the President for
National Security Affairs, conceded to the Committee that
``[t]here obviously were some situations where foreign
individuals . . . were invited to meetings with the President
where the NSC's judgment was not [sought].'' 15
---------------------------------------------------------------------------
\13\ Deposition of Karen Hancox, June 9, 1997, pp. 78-79; see also
Testimony of Samuel R. (Sandy) Berger, Sept. 11, 1997, p. 48 (``[T]here
were a number, but not a huge number of occasions in which the NSC was
asked its judgment.'').
\14\ Deposition of Karen Hancox, June 9, 1997, pp. 72-74; see also
the section of this report on the activities of John Huang at the
Commerce Department and the section on Coffees, Overnights and other
Fundraising Events, especially the discussion of Pauline Kanchanalak
and the June 18, 1996 coffee.
\15\ Berger testimony, p. 48. Berger also noted the President's
determination that the existing vetting procedures were inadequate, id.
at p. 47, and explained that the NSC had adopted procedures that would
correct these inadequacies by requiring the input of NSC personnel
every time a foreign national is invited into the White House. Id. at
pp. 72-73; see also Memorandum from Samuel R. Berger to ``All NSC
Staff'', June 13, 1997, pp. 1-3 (Ex. 1). After receiving significant
criticism for acceding to a DNC request for a photograph with Eric
Hotung, a Hong Kong businessman, British citizen and husband of a
prominent DNC contributor, Berger, in Ex. 1, also clarified NSC policy
with respect to meetings between NSC staff and individuals from outside
of the U.S. government. After promising in September 1995 to contribute
$100,000 to the DNC, Hotung was granted a meeting with Robert
Suettinger of the NSC, and a photo opportunity with Berger. See
Memorandum from David Mercer to DNC Chairman Don Fowler, stating that
``the Hotungs . . . will be contributing $100,000" and that ``[w]e will
be helping to set up a meeting with the Hotungs at the [NSC]'', Sept.
14, 1995 (Ex. 2); Schedule of Robert L. Suettinger indicating a
September 19, 1995 meeting with Eric Hotung (Ex. 3); electronic mail
message from Stanley Roth to Sandy Berger indicating that Fowler
requested a photo opportunity for the ``fabulously wealthy'' Hotung
with Berger, Oct. 3, 1995 (Ex. 4). Berger testified that he was not
aware at the time of the photograph that the Hotungs were contributors
or even that the request was related to the Hotungs' contacts with the
DNC. Berger testimony, p. 24. Berger did acknowledge, however, that he
knew that the request originated with Fowler. Id.
---------------------------------------------------------------------------
It is also clear that Sullivan was correct when he
described as a ``false sense'' his ultimate reliance upon the
Secret Service to catch the unsavory individuals who fell
through the cracks in the White House's porous vetting system.
As an initial matter, even the limited vetting conducted by the
Secret Service occurs only with respect to events held in the
White House. Hancox testified that with respect to events
attended by the President that were held outside of the White
House, she would not even provide attendee lists to the Secret
Service.16 In those instances, Sullivan's unreliable
inspection of the guest list for the inclusion of foreign
nationals served as the exclusive screen.17
---------------------------------------------------------------------------
\16\ Deposition of Karen Hancox, June 10, 1997, pp. 9-10.
\17\ See id.
---------------------------------------------------------------------------
Colleen Callahan, the Special Agent in Charge of the Secret
Service's White House Division, also stated in an affidavit
submitted to the Committee that the Secret Service plays no
role in determining the ``suitability'' of individuals for
White House admittance.18 Instead, the Secret
Service, which is responsible for the ``physical security of
the White House Complex and Secret Service protectees within,''
19 seeks only to uncover ``pertinent'' criminal
history of individuals invited into the White House through a
search for each invitee's name in a database maintained by the
National Crime Information Center.20 A criminal
history does not necessarily disqualify an individual from
White House admittance. Only if the information uncovered by
the database search ``suggest[s] that the prospective visitor
may be violent, dangerous or otherwise pose a physical or
security threat to a protectee or the White House Complex''
will the Secret Service limit or deny White House
access.21 In other words, although the presence in
the White House of a nonviolent, unthreatening criminal is
certainly inappropriate, this is not the type of individual
that the Secret Service would exclude.
---------------------------------------------------------------------------
\18\ Affidavit of Colleen B. Callahan, Sept. 9, 1997, p. 1 (Ex. 5).
\19\ See id.
\20\ See id. at p. 3.
\21\ See id. at pp. 3-4.
---------------------------------------------------------------------------
The Lack of Proper Vetting Permitted a Series of Unsavory Individuals
Access to the President
As a result of the White House's admitted failure to
properly vet its guest lists, several unsavory individuals were
allowed to enter the White House and to attend events with
President Clinton. The President's meetings with Ted Sioeng,
Yogesh Ghandi, Roger Tamraz, and a delegation of Chinese
businessmen led by Johnny Chung are described in detail in
other sections of this report.22 The following is a
summary of additional unsavory individuals whose White House
visits were permitted to proceed unimpeded.
---------------------------------------------------------------------------
\22\ See the sections of this report on Ted Sioeng, Yogesh Gandhi,
Roger Tamraz, and Johnny Chung.
---------------------------------------------------------------------------
Jorge Cabrera
In November 1995, Jorge Cabrera, a Cuban-born U.S. citizen,
made a $20,000 contribution to the DNC and attended a
fundraising dinner in honor of Vice President Gore in
Miami.23 One month later, Cabrera attended a
Christmas party at the White House and had his picture taken
with the First Lady.24 At the time of Cabrera's
White House visit, he had already been convicted of two
felonies and had served almost five years in prison. Cabrera
pled guilty in 1983 of obstruction of justice for conspiring to
bribe a grand jury witness and again in 1988 for filing a false
income tax return.25 Both charges stemmed from
arrests on drug charges.26 In January 1996, Cabrera
was arrested and charged with importing 6,000 pounds of cocaine
into the United States.27 He is presently serving a
19-year prison term.28
---------------------------------------------------------------------------
\23\ See Don Van Natta, Jr., ``An R.S.V.P. to the President: Deep
Regrets. I`m in Custody.'' New York Times, March 22, 1997, p. A1.
\24\ See id.
\25\ See Anne Farris, ``Secret Service Didn't Tell White House of
Guest's Criminal Background,'' Washington Post, Oct. 26, 1996, p. A14.
\26\ See id.
\27\ See Stanley Meisler, ``Democrats Return Drug Smuggler's
Check,'' Los Angeles Times, Oct. 20, 1996, p. A25.
\28\ See id.
---------------------------------------------------------------------------
Wang Jun
On February 6, 1996, Charlie Trie escorted a group of
individuals including Wang Jun to a White House coffee with
President Clinton.29 Wang Jun's attendance at the
coffee was arranged primarily by Ernest Green, managing
director of the Washington, D.C. office of Lehman Brothers and
a prominent DNC fundraiser.30 Wang Jun is chairman
of the China International Trust and Investment Corporation
(``CITIC''), a financial and industrial conglomerate reportedly
controlled by the Chinese government.31 He is also
the chairman of Poly Technologies, a company that handles most
of Communist China's arms exports.32 In 1996, Wang
Jun and other officials of Poly Technologies were implicated in
a scheme to smuggle thousands of Chinese-made machine guns and
assault rifles to criminal elements in the United
States.33
---------------------------------------------------------------------------
\29\ See guest list for February 6, 1996 coffee with the President
attached to ``Coffee with Supporters of the Democratic National
Committee,'' Feb. 5, 1996, p. 2 (Ex. 6).
\30\ Although Green emphatically denied any role in Wang Jun's
attendance at the February 6 coffee, see Deposition of Ernest Green,
June 18, 1997, pp. 269-70 (``I was not involved in Wang Jun and coffees
at the White House at all. . . . I was not involved at all in Wang Jun
and coffees.''), the copy of Wang Jun's resume produced to the
Committee by the DNC indicates that it was transmitted to the DNC from
a Lehman Brothers' fax machine. Resume of Wang Jun (Ex. 7). Sullivan
also testified that the DNC added Wang Jun to the guest list for the
coffee as a favor to Green. Testimony of Richard L. Sullivan, July 9,
1997, p. 124. Finally, although Green did not attend the February 6
coffee, the DNC attributed Green's $50,000 contribution on February 6,
1996 to the White House coffee held on that day. See ``DNC Finance
Executive Summary,'' Oct. 17, 1996 (Ex. 8).
\31\ See Steven Mufson, ``Chinese Firm Details Visit to White
House; Arkansan is Cited as Intermediary,'' Washington Post, March 18,
1997, p. A4.
\32\ See id.
\33\ See Howard Blum, ``The Trail of the Dargon,'' Vanity Fair,
December 1997, pp. 226-44 (discussing the discovery of a Chinese arms
smuggling ring by U.S. Treasury agents).
---------------------------------------------------------------------------
Eric Wynn
Eric Wynn attended a December 21, 1995 coffee at the White
House with President Clinton. 34 At that time, Wynn
was free on bond pending appeal of his July 21, 1995 conviction
on thirteen counts of conspiracy, securities fraud and wire
fraud. 35 Wynn attended four additional fundraisers
with President Clinton in 1996, despite being arrested several
additional times for offenses such as assaulting a police
officer, resisting arrest, aggravated assault with a motor
vehicle and driving while intoxicated.36
---------------------------------------------------------------------------
\34\ See Bob Woodward & Charles R. Babcock, ``Stock Manipulator
Attended Coffee with Clinton,'' Washington Post, Feb. 1, 1997, p. A1.
\35\ See id.
\36\ See Bob Woodward, ``Felon Also Attended 4 DNC Events with
Clinton,'' Washington Post, Feb. 20, 1997, p. A4.
---------------------------------------------------------------------------
conclusion
Whether by gross negligence or conscious design for
fundraising purposes, the process in place at the White House
for the vetting of individuals granted access to the President
was incapable of keeping unthreatening criminals, inappropriate
foreign citizens and other disreputable characters out of the
White House and away from the President. No White House
employees were specifically charged with evaluating guest lists
submitted by the DNC for the sorts of unsavory individuals who,
in fact, later appeared at White House coffees and other events
with the President and Vice President. Instead, the White House
left the responsibility with the DNC, which took inappropriate
comfort in the background checks performed by the Secret
Service, and therefore only haphazardly reviewed its lists for
the appearance of foreign nationals. As the Secret Service
sought to weed out only those criminals who posed a physical
threat to the White House or the Secret Service's
``protectees,'' convicted criminals that the Secret Service
deemed to be nonviolent or unthreatening were permitted to pass
the White House gate without comment. This was a system
designed to fail, and it operated precisely as designed.
Johnny Chung and the White House ``Subway''
introduction
Johnny Chung, a Taiwan-born businessman and self-described
``die hard Democrat,'' 1 serves as the Chairman and
Chief Executive Officer of Automated Intelligent Systems, Inc.
(``AISI'')--a California corporation based in
Torrance.2 He became prominent as a DNC contributor
and frequent White House visitor during the 1995-96 election
cycle. According to records of the FEC, Chung and AISI began
making substantial contributions to the DNC in August 1994 and
continued such contributions through August 1996.3
These contributions during this two-year period totaled
$366,000.4 After stories began to appear in the
press about Chung's activities, however, the DNC returned all
of this money, allegedly because he had provided the party with
``insufficient information'' as to the source of the
funds.5
---------------------------------------------------------------------------
\1\ Letter from Johnny Chung to Doris Matsui, Jan. 4, 1995 (Ex. 1).
\2\ See Biography of Johnny Chung (Ex. 2). AISI provides a fax
broadcast service that can send faxes simultaneously to thousands of
locations.
\3\ See Chart of contributions by Johnny Chung and AISI, with
attached checks (Ex. 3).
\4\ Id.
\5\ See DNC press release dated June 27, 1997 (Ex. 4).
---------------------------------------------------------------------------
These DNC contributions helped Chung obtain access to the
White House at least 49 times between February 1994 and
February 1996 6--access that he used not only to
further his interests with foreign business clients, but also
to sit in the vestibule of the First Lady's office and stare at
photographs of her. Though he had told DNC officials that he
would be using the White House as a means of entertaining his
foreign clients, and though the National Security Council
(``NSC'') regarded him as a ``hustler,'' Chung was granted
extraordinary access to the White House, and especially the
First Lady's office. There can be no question that Chung's
contributions to the DNC helped give him this access to the
President and the First Lady. So close was the nexus between
Chung's donations and his visits, in fact, that White House
officials actually collected money from him in the First Lady's
office in exchange for allowing him to bring a delegation of
his clients to White House events. This was, however, no
surprise to Chung: as he phrased it, ``[t]he White House is
like a subway: You have to put in coins to open the gates.''
7
---------------------------------------------------------------------------
\6\ See White House Visitor Summary for Johnny Chung (Ex. 5);
United States Secret Service WAVES records for Johnny Chien Chuen Chung
(Ex. 6). The WAVES records, it should be noted, do not include some
events that Chung is known to have attended. For example, these WAVES
records do not show Chung's attendance at the President's Radio Address
on March 9, 1995. However, the White House produced a video tape and
photograph contact sheet that confirm his attendance.
\7\ See Marc Lacey, ``House Subpoenas Torrance Businessman,'' Los
Angeles Times, Nov. 8, 1997, p. A12.
---------------------------------------------------------------------------
johnny chung's admiration for the first lady
One of the reasons Chung spent so much time in the White
House was his admiration for First Lady Hillary Rodham Clinton.
His first contact with the First Lady occurred at least as
early as April 1993, when she wrote Chung to thank him for the
concern he had apparently expressed during her father's
illness.8 Chung and the First Lady apparently first
met in Little Rock, Arkansas.9
---------------------------------------------------------------------------
\8\ Letter from Hillary Rodham Clinton to Johnny Chung, April 12,
1993 (Ex. 7). In a subsequent letter written two weeks later, the First
Lady wrote Chung to wish him luck with what she described as his
``innovative'' fax broadcast business. See Letter from Hillary Rodham
Clinton to Johnny Chung, April 26, 1993 (Ex. 8).
\9\ According to Evan Ryan, special assistant to the First Lady's
chief of staff, Chung once recounted having met the First Lady in
Arkansas. Deposition of Evan M. Ryan, Aug. 7, 1997, p. 57; see also Ex.
7 (comment by First Lady that she hoped Chung enjoyed his visit to
Arkansas).
---------------------------------------------------------------------------
This attention from the First Lady seemed to have sparked
in Chung a remarkable fascination with and admiration for
her.10 Her chief of staff, Margaret A. (``Maggie'')
Williams, testified in her deposition that Chung told her ``how
much he admired and respected'' the First Lady and that he
believed that ``her encouragement had been the turning point in
his business.'' 11 As Chung's admiration grew, on
many of his visits to the White House he would simply sit in
the vestibule of the First Lady's office and stare at pictures
of her, apparently without any other reason for being
there.12 Williams' assistant Evan Ryan, for example,
testified that if Chung were ``in the building'' visiting
someone else, ``he would stop by.'' 13 The First
Lady's staff found these visits ``disturbing,'' because Chung
talked constantly during these visits--continually telling them
about himself, his business, and his admiration for the First
Lady.14
---------------------------------------------------------------------------
\10\ Ryan, for example, testified that Chung told her that the
First Lady ``inspired him and he credited that inspiration for getting
his business and himself going.'' Ryan deposition, p. 57.
\11\ Deposition of Margaret Ann Williams, May 29, 1997, p. 154.
\12\ Williams deposition, pp. 158-59.
\13\ Ryan deposition, pp. 52 & 55.
\14\ Id., pp. 57-58.
---------------------------------------------------------------------------
Williams, however, remained quite well disposed toward
Chung. While she acknowledged that he ``could be irritating,''
she ``didn't care how many times [Chung] wanted to come'' to
their office.15 Rather, Williams felt strongly that
---------------------------------------------------------------------------
\15\ Williams deposition, p. 158.
Chung be accorded respect in our office, and I
realize I may have pushed the limits, but my experience
had been at the White House that people of color and
others in my view were not given overall the kind of
respect that white males were, and I decided I'm the
boss of this office. This is one office where I can run
it the way I want to run it, and the guy is genuinely,
whether right or wrong, interested and grateful to Mrs.
Clinton and doesn't hurt, but he's a contributor to our
part [sic], and we are going to treat him as well as we
would treat any other irritable jerk who would show
up.16
---------------------------------------------------------------------------
\16\ Id., p. 168.
Determined, therefore, to accord such a ``contributor'' the
respect he deserved, Williams permitted Chung to continue his
visits.
visit by haomen group
Chung may have admired the First Lady, but he was not above
using his DNC contributions--and Williams' indulgence--as a
means to impress his business clients through displays of his
access to the President and First Lady. In a January 6, 1995
newsletter to the shareholders of AISI, for example, Chung
boasted of his political clout, claiming that he had ``built up
connections to easily arrange visitations to the White House
and meetings with the President.'' 17 His activity
in this regard was well known to officials at the DNC. Indeed,
Chung had even advised the DNC that his foreign business
clients would be supporting the Democratic Party: in a letter
to Doris Matsui in January 1995, for example, Chung declared
that over the next two years he would be ``coordinating a lot
of visits from Asian business leaders to support [the] DNC.''
18
---------------------------------------------------------------------------
\17\ Letter from Johnny Chung to ``All Shareholders,'' Jan. 6, 1995
(Ex. 9).
\18\ Ex. 1 (advising Doris Matsui of these plans); see also Letter
from Johnny Chung to Richard Sullivan, Dec. 14, 1994 (Ex. 10)
(advising, in connection with visit of a Chinese businessman to White
House, that this businessman would ``play an important role in our
future party functions'').
---------------------------------------------------------------------------
One of the examples of White House access Chung cited in
his January 1995 newsletter was ``the arrangement of a meeting
for Chairman Chen of Tangshan Haomen Group, the second largest
beer manufacturer in China with President Clinton.''
19 Chung arranged this meeting with the assistance
of Richard Sullivan, who was then the Finance Director of the
DNC. In December 1994, Chung wrote Sullivan to relate that he
would be bringing a group of Chinese businessmen to the White
House, including Shi-Zeng Chen, the founder and president of
Tangshan Haomen Group.20 Chung requested Sullivan's
assistance in arranging lunch at the White House Mess, and
asked that the delegation be allowed to have their photograph
taken with President Clinton after his weekly radio address.
---------------------------------------------------------------------------
\19\ Ex. 9.
\20\ Ex. 10.
---------------------------------------------------------------------------
To speed this process along, Chung made a $40,000
contribution to the DNC in the name of his company, AISI.
Although Sullivan would later come to suspect that Chung was
laundering foreign money into the DNC--and although Chung
explicitly told Sullivan that Chen would ``play an important
role in our future party functions'' 21--Sullivan
was apparently unconcerned about this AISI donation and
accepted it without question. Chung was admitted to the White
House on December 19, 1995, the same day that FEC records show
the DNC's receipt of his $40,000.22 The next day,
Chung, Shi-Zeng Chen, and the rest of the Haomen delegation
were admitted to the White House residence for a holiday
reception; 23 they had their pictures taken with the
President and the First Lady.24
---------------------------------------------------------------------------
\21\ Ex. 10.
\22\ The Committee never received the WAVES records of Shi-Zeng
Chen, and was therefore unable to determine whether he also entered the
White House on this date.
\23\ WAVES records for December 20, 1994 holiday reception (Ex.
11).
\24\ See AISI brochure containing picture of Chung and Shi-Zeng
Chen with the President and the First Lady (Ex. 12).
---------------------------------------------------------------------------
the radio address
Despite Chung's $40,000 contribution, however, DNC Finance
Director Richard Sullivan had only partly fulfilled Chung's
request: the Haomen group had not been able to attend the
President's radio address as Chung had requested. Two months
later, Chung again requested Sullivan's assistance in arranging
visits to the DNC and to the White House for his business
clients--another group of Chinese business executives
25--this time presenting a longer and more specific
list of requested services. In a letter dated February 27,
1995, Chung requested that Sullivan help arrange (1) a meeting
with President Clinton, (2) a meeting with Vice President Gore,
(3) lunch at the White House mess, (4) a tour of the White
House, and (5) a meeting with Commerce Secretary Ron
Brown.26 Chung sent an identical letter to Eric
Sildon at the DNC,27 and faxed a letter to Ann McCoy
of the White House Visitor's Office requesting her assistance
in arranging a White House tour.28 He apparently
also asked Mark Middleton for help in setting up meetings with
President Clinton and Vice President Gore, and in arranging a
luncheon at the White House Mess.29
---------------------------------------------------------------------------
\25\ Letter from Johnny Chung to Richard Sullivan, Feb. 22, 1995
(Ex. 13) (providing list of people who would be visiting the White
House and the DNC).
\26\ Letter from Johnny Chung to Richard Sullivan, Feb. 27, 1995
(Ex. 14).
\27\ Letter from Johnny Chung to Eric Sildon, Feb. 27, 1995 (Ex.
15).
\28\ Letter from Johnny Chung to Ann McCoy, Feb. 28, 1995 (Ex. 16).
\29\ Id.
---------------------------------------------------------------------------
By now, at least, Sullivan was becoming suspicious, and did
not help Chung as much as he had for the Haomen delegation.
According to Sullivan,
Johnny had showed up at the DNC and asked if I would
get in--said that he would make a contribution to us of
$50,000 if I would get he and five members of his
entourage into a radio address with the President. They
were all for [sic] China.30
---------------------------------------------------------------------------
\30\ Deposition of Richard Sullivan, June 4, 1997, p. 228.
This time, Sullivan later claimed, he was concerned about
---------------------------------------------------------------------------
accepting money from Chung:
We had gotten money from Johnny previously. I think
he had contributed about 100,000 to that point over the
past year, and the fact that--him showing up with these
five people from China, I had a concern that he might--
that they--he might be taking--I had a sense that he
might be taking money from them and then giving it to
us, you know. That was my concern.31
---------------------------------------------------------------------------
\31\ Id.
Though Sullivan was unaware of it at the time, there were
indeed some grounds for concern in this respect. On March 6,
1995, three days before Chung made his next $50,000
contribution to the DNC--in connection with the visit of this
second group of Chinese executives--he received a wire transfer
from the Haomen Group in the amount of $150,000.32
Chung has claimed that he made his DNC contribution entirely
from personal funds, and that the wire transfer was made as
part of a joint venture with the Haomen
businessmen.33 As of February 28, 1995, however, the
balance of the account upon which his check was drawn was only
$9,860,34 and Chung was apparently never engaged in
any U.S. business with the Haomen Group.
---------------------------------------------------------------------------
\32\ Record of wire transfer from Haomen Group to Johnny Chung's
California Federal Bank account (Ex. 17); California Federal Bank
statement for account of Johnny Chung or Katharina T. Chung for period
ending March 26, 1995 (Ex. 18).
\33\ Glenn Bunting and Alan Miller, ``2 Donors to Democrats Linked
to Asian Funds,'' Los Angeles Times, July 11, 1997, p. A1. The
Committee has received a detailed proffer from Johnny Chung and his
attorney, as part of their request for immunity in exchange for Chung's
testimony after he invoked his Fifth Amendment privilege against self-
incrimination. The Committee, however, declined to offer Chung
immunity. The information contained in Chung's proffer has not been
used in the preparation of this report.
\34\ Ex. 18. Chung, however, claims that he had more than enough to
afford the $50,000 in other accounts. See William Rempel & Alan Miller,
``First Lady's Aide Solicited Check to DNC, Donor Says,'' Los Angeles
Times, July 27, 1997, p. A1.
---------------------------------------------------------------------------
Although Sullivan had concerns about accepting Chung's
contribution, he was nevertheless willing to arrange a meeting
for Chung and his delegation with DNC Chairman Don
Fowler.35 After meeting with Chung and the
delegation, Fowler sent a follow-up letter to one of the
delegation members, Zheng Hongye,36 describing Chung
as ``an excellent facilitator'' and declaring that the
``Democratic Party is lucky to have him as one of our most
ardent DNC members.'' 37 Despite Fowler's
enthusiasm, however, Sullivan did not accept Chung's proferred
contribution and refused to help him arrange the requested
White House services.
---------------------------------------------------------------------------
\35\ Memorandum from Richard Sullivan & Ari Swiller to Katherine,
March 1, 1995 (Ex. 19) (discussing scheduling request for Chairman
Fowler on March 8); see also Ex. 14 (noting ``meet Don Fowler'').
\36\ Deposition of Donald L. Fowler, May 21, 1997, p. 324; see also
Letter from Don Fowler to Zheng Hongye, March 14, 1995 (Ex. 20)
(discussing their meeting the previous week).
\37\ Ex. 20.
---------------------------------------------------------------------------
Stymied with the DNC, Chung then appealed directly to the
First Lady's office for help with his delegation's visit. On
March 8, 1995, Chung requested Evan Ryan's assistance in
obtaining four benefits: (1) a tour of the White House; (2)
lunch in the White House Mess; (3) a photo with the First Lady;
and (4) an invitation to attend the President's Radio Address
for himself and his delegation.38 To clarify his
point, in making these requests, Chung told Ryan that he would
also be making a contribution to the DNC when he was in
Washington, D.C. for this trip.39 Although Ryan did
not recall Chung mentioning a specific amount, she recalled
learning at some point by March 10, 1995, that he intended to
give $50,000.40
---------------------------------------------------------------------------
\38\ Ryan deposition, p. 69. Chung did not request Ryan's
assistance in arranging a meeting with Secretary Ron Brown. Richard
Sullivan and Ari Swiller's memorandum to Katherine mentioned that Chung
and the delegation from China would be meeting with Secretary Brown
during the afternoon of March 9, 1995. See Ex. 19.
\39\ Ryan deposition, p. 75.
\40\ Id.
---------------------------------------------------------------------------
Although the DNC had turned him away, Chung had better luck
at the White House. After talking with Chung, Ryan immediately
informed Maggie Williams of the requests to see if they could
be fulfilled.41 According to Ryan, Williams
responded ``that we would look into it [in order to] see if we
could arrange anything,'' 42 and instructed Ryan to
make the telephone calls necessary to arrange a White House
tour and lunch at the White House Mess for Chung's delegation
of Chinese businessmen.43
---------------------------------------------------------------------------
\41\ Id., p. 77.
\42\ Id.
\43\ Id., pp. 84-85.
---------------------------------------------------------------------------
In this same conversation, Ryan also told Williams that
Chung intended to make a contribution to the DNC.44
Upon hearing this, Williams said that the DNC might be able to
use this money to pay debts it owed the White House, and told
Ryan that she would accordingly speak to Fowler about this
matter.45 Williams apparently attempted to reach
Fowler at least twice that same day, because Fowler left two
messages for Williams on March 8, 1995, indicating that he was
returning her calls.46
---------------------------------------------------------------------------
\44\ Id., p. 77.
\45\ Id., pp. 80-81.
\46\ Telephone message slips to Maggie Williams from Don Fowler
dated March 8, 1995 (Ex. 21).
---------------------------------------------------------------------------
Having been instructed by Williams to help arrange for his
delegation to visit, Ryan informed Chung that the First Lady's
staff would try their ``best'' to fulfill his
requests.47 According to Ryan, this pleased Chung;
he told Ryan that he hoped Williams would get ``credit'' for
his DNC contribution.48 After Chung left, Ryan set
about making the necessary arrangements. Ryan called the White
House Mess to make a reservation in Williams' name for Chung
and his group,49 and called Ann McCoy in order to
arrange for a tour of the White House.50 Ryan did
not make the arrangements for the photo opportunity with the
First Lady, however, because she understood this to be
Williams' responsibility.51
---------------------------------------------------------------------------
\47\ Ryan deposition, p. 84.
\48\ Id., p. 86. Ryan also testified that at some point on March 8
or 9, 1995, Chung told her that ``he wanted this check to go to Maggie
to be delivered to the DNC.'' Id., pp. 83-84.
\49\ Id., pp. 93-94.
\50\ Id., pp. 91-92.
\51\ Id., p. 97.
---------------------------------------------------------------------------
Chung and his delegation arrived at Ryan's office around
11:30 a.m. on March 9, 1995. Ryan then escorted them to the
White House Mess for lunch,52 after which they were
given a private tour of the White House.53 After the
tour, Chung and his delegation returned at approximately 2:00
p.m. that afternoon and were escorted to the Map Room by Ryan
for their photo opportunity with the First Lady arranged by
Williams.54
---------------------------------------------------------------------------
\52\ Id., p. 103.
\53\ Id.
\54\ Id., p. 105.
---------------------------------------------------------------------------
After the photograph, Ryan returned with the group to her
office, where Chung told her that ``he wanted to give his
contribution to Maggie and wanted to have her get it to the
DNC.'' 55 According to Ryan, when she stepped into
Williams' office to inform Williams of Chung's desire to do
this,56 Williams asked Ryan to bring Chung into the
office.57 As Ryan stood at the door of Williams'
office, Chung handed Williams an envelope containing a check
for $50,000 made out to the DNC.58 This contribution
apparently made it possible for Chung to achieve what had
hitherto been denied him: his clients' attendance at President
Clinton's weekly radio address on March 11, 1995.
---------------------------------------------------------------------------
\55\ Id., p. 114.
\56\ Id., p. 116.
\57\ Id., p. 117.
\58\ Id., pp. 117-18; see also Williams deposition, pp. 173-74
(recounting accepting envelope given her by Chung to pass along to
DNC); copy of canceled check for $50,000 to the DNC dated March 9, 1995
from Johnny Chung and Katharina Chung (Ex. 22). Chung also handed
Williams two sweaters for the First Lady on March 9, 1995. See White
House Gift Register (Ex. 23); White House gift tracking form for two
sweaters presented by Johnny Chung to Maggie Williams on March 9, 1995
(Ex. 24). Although Ryan testified that she did not remember seeing
Chung present the sweaters to Williams, she did remember seeing them on
Williams' couch on either March 8 or 9. Ryan deposition, p. 124.
---------------------------------------------------------------------------
According to Chung, in fact, Williams and Ryan had actively
solicited the donation. Upon meeting Ryan on March 8, Chung
recalled, he had asked whether his friends could have lunch in
the White House Mess and meet the First Lady--and whether there
was anything that he could do, in return, to help the White
House. Ryan told him that ``the first lady had some debts with
the DNC'' on account of expenses incurred through White House
holiday festivities; Chung believes that Ryan mentioned a
figure of about $80,000.59 Ryan told him that she
was relaying this request on behalf of Williams, who hoped that
Chung could ``help the first lady'' defray these costs. As
Chung remembers it, at that point ``a light bulb goes on in my
mind. I start to understand . . . I said I will help for
$50,000.'' 60
---------------------------------------------------------------------------
\59\ Rempel & Miller, supra note 34. Though Ryan did not supply a
figure, this account of unpaid DNC debts corresponds closely to Ryan's
own recollection. See Ryan deposition, p. 81.
\60\ Rempel & Miller, supra note 34.
---------------------------------------------------------------------------
Although Williams testified that she did not recall making
arrangements for Chung and his delegation to attend the radio
address,61 a memorandum from Betty Currie, the
President's personal secretary, indicates that Williams had
some involvement.62 More specifically, Chung recalls
that after he handed his envelope to Williams, she immediately
led him into her private office and telephoned to reserve his
group a table at the White House Mess.63 DNC
officials apparently also played a role in setting up the radio
address.64 According to Fowler,
---------------------------------------------------------------------------
\61\ Williams deposition, p. 198.
\62\ According to this memorandum, Ceandra Scott of the DNC had
been ``concerned about Johnny Chung'' and informed Currie that
we should have called them prior to their coming to the
Radio Address. Apparently they were in Maggie's office when
request came and Maggie said she didn't know, but to
---------------------------------------------------------------------------
contact DNC.
Memorandum from Betty Currie to Jon, March 28, 1995 (Ex. 25). According
to Currie, she meant by this that Nancy Hernreich should have called
Scott prior to Chung's attendance, and that Chung was in Williams'
office when he requested an invitation to the radio address. Williams,
Currie explained, claimed not to know how to arrange Chung's
attendance, but recommended contacting the DNC. Deposition of Betty W.
Currie, Aug. 7, 1997, pp. 95-102. (Currie could not explain, however,
why Scott would believe that someone at the White House needed to
contact her before Chung could attend the radio address. Currie did not
have any other recollection of her memorandum. Id., p. 103.)
---------------------------------------------------------------------------
\63\ Rempel & Miller, supra note 34.
\64\ See list of attendees at Radio Address (Ex. 26). Johnny Chung
and the delegation from China are listed under the category of ``DNC
Donors.'' (The list of attendees at the Radio Address also includes
what appears to be the President's left-handed check mark next to the
``DNC Donors'' category.)
Johnny Chung called my office, not me but my office,
and Carol Khare talked to him. He said that he and some
friends wanted to go to a Saturday radio address. This
was just a few weeks after I came up there. Ms. Khare
didn't know anything about--any more about that process
than I did. She went out to this open area where the
clerical people were and said, ``This guy in here wants
to go to the White House address. Does anybody here
know how to do that or know anything about it?''
Sandra [sic] Scott, who was still there, said, ``Yes,
I know the person at the White House who does that.''
And Ms. Khare said, ``Will you call and see if it can
be done?'' She called her friend--and I don't know how
[sic] that person is, not at all--and said, ``Can you
arrange this?'' And she said, ``I don't know. I will
try.''
Ms. Khare went back and reported that to Chung and
that's what I know about it and it's all
hearsay.65
---------------------------------------------------------------------------
\65\ Fowler deposition, pp. 154-55.
Indeed, according to an NSC e-mail message, it was Fowler
himself who stepped in during the evening before the March 11,
1995 radio address to ensure that Chung could attend. According
---------------------------------------------------------------------------
to this document, the
head of the DNC asked the President's office to include
several people in the President's Saturday Radio
Address. They did so, not knowing anything about them
except that they were DNC contributors.66
---------------------------------------------------------------------------
\66\ E-mail from Melanie Darby to Roseanne Hill, Stanley Roth and
Robert Suettinger, April 7, 1995 (Ex. 27).
In any event, it was the Office of Oval Office Operations that
apparently made the final arrangements for Chung's attendance
at the radio address.67
---------------------------------------------------------------------------
\67\ See Deposition of Nancy Hernreich, May 21, 1997, p. 60.
Hernreich testified that her assistant schedules the attendees at radio
addresses; at the time Chung and the delegation from China attended,
Hernreich's assistant was Kelly Crawford. Id. According to press
reports, Carol Khare took Chung's call to Don Fowler requesting a face-
to-face meeting with the President and referred the request to Ceandra
Scott. Scott contacted the First Lady's office, whereupon the request
to let Chung and the delegation attend the Radio Address was approved
by Crawford. See, e.g., Marc Lacey, ``Missing Donor Still Target of
Brickbats,'' Los Angeles Times, Nov. 14, 1997, p. A14.
---------------------------------------------------------------------------
Despite the fact that Chung's requests had now been
fulfilled, Sullivan informed Chung that the White House--acting
on the advice of NSC staff members--did not intend to release
copies of the photographs Chung's delegation had taken with the
President.68 Displeased by this, Chung faxed letters
on April 5, 1995 to Williams seeking her assistance in
obtaining these pictures.69 According to an e-mail
message sent to other NSC officials on April 7 by NSC staff
member Melanie Darby,70 Darby soon thereafter spoke
with or received a message from Nancy Hernreich--whose office
had arranged Chung's attendance at the radio address and who
now urgently needed to know whether or not she could give Chung
the photos from the radio address when he stopped by her office
the next day.71 Although Sullivan had by that point
already told Chung of the problem with the photographs, there
is no evidence that the NSC was asked whether the photos could
be released until April 7, 1995.72 In fact--although
Fowler's office reportedly wanted to release the photographs
because ``these people are major DNC contributors''
73--it appears that the photos were retained because
of concerns expressed by the President himself.74
---------------------------------------------------------------------------
\68\ See letter from Johnny Chung to Maggie Williams, April 5, 1995
(Ex. 28) (regarding photos from Radio Address).
\69\ See id.
\70\ Ex. 27.
\71\ Hernreich testified that she did not make this request to the
NSC and does not know who did. Hernreich deposition, pp. 64-65. This
testimony directly contradicts a White House document listing Chung's
name and those of the members of his Chinese delegation, which also
contains a handwritten note to Nancy Soderberg of the NSC. Name List of
Delegation (Ex. 29). This handwritten note appears to be from
Hernreich, because it is signed ``NH'' and was made with the same type
of calligraphy pen Hernreich customarily uses. See Hernreich
deposition, p. 125. Although a portion of this note is illegible, it
references the Chung radio address and states that ``before photos are
sent out we need to know if we should not send them.'' Ex. 29.
\72\ This was the date of Darby's e-mail message to other members
of the NSC staff inquiring about this matter. See Ex. 28.
\73\ Ex. 28.
\74\ See id. (recounting Chung photograph issue to NSC staff).
Moreover, Hernreich recounted that the President had said, with regard
to the attendance of Chung's group at the radio address, that ``[w]e
shouldn't have done that.'' Hernreich deposition, p. 67. Hernreich
understood this to mean that Chung's clients were ``inappropriate
foreign people.'' Id., pp. 67-68.
---------------------------------------------------------------------------
Replying to Darby's query, however, NSC staff member Robert
Suettinger cautioned her that he thought Johnny Chung was a
``hustler'' who ``should be treated with a pinch of suspicion''
and predicted that Chung would ``become a royal pain, because
he will expect to get similar treatment for future visits.''
75 Nevertheless, Suettinger did not ``see any
lasting damage to U.S. foreign policy'' by giving Chung the
photos and that ``to the degree it motivates him to continue
contributing to the DNC, who am I to complain?'' 76
At some point thereafter, the photographs appear to have been
given to Chung.77
---------------------------------------------------------------------------
\75\ E-mail from Robert Suettinger to Melanie Darby, April 7, 1995
(Ex. 30).
\76\ Id.
\77\ See White House contact sheet of photos with the First Lady
from March 9, 1995 (Ex. 31). On April 11, 1995, in fact, Carol Khare
apparently sent a fax to Chung exclaiming that, ``[t]he White House
assures me that you now have the pictures--hurray! If you don't, give
me a call.'' Facsimile cover sheet from Carol Khare to Johnny Chung
sent April 11, 1995 (Ex. 32). Hernreich, however, claimed to have been
unaware that Chung had received the photos. See Hernreich deposition,
p. 66.
---------------------------------------------------------------------------
As Suettinger's comments suggest, White House officials
were apparently willing to overlook Chung's faults in light of
his considerable contributions to the DNC. Indeed, after the
radio address episode, Chung was admitted into the White House
at least 16 additional times, 12 of which were at the request
of Evan Ryan.78 ``Hustler'' or not, Johnny Chung was
a source of money for the DNC, and the White House granted him
and his Chinese clients almost unquestioned access--even to the
point of actually considering hiring Chung's company to work
for the White House and the DNC.79 White House and
DNC officials, therefore, treated Johnny Chung, his business,
and his Chinese clients as favored guests, ``not knowing
anything about them except that they were DNC contributors.''
80 That was, apparently, all that mattered.
---------------------------------------------------------------------------
\78\ See White House Visitor Summary for Johnny Chung (Ex. 5).
Despite Suettinger's warning, Maggie Williams, who had instructed Ryan
to admit Chung, testified that the NSC never informed her that Chung
should be treated with a ``pinch of suspicion.'' Williams deposition,
p. 202.
\79\ As detailed in White House documents only produced to the
Committee in mid-January 1998--after its investigation had been
completed--Chung's contributions appear also to have persuaded Harold
Ickes and Erskine Bowles to urge the DNC to hire Chung's company. Ickes
told the DNC's Bobby Watson, for example, that he ``strongly urge[d]''
the DNC to acquire a broadcast fax capability through AISI: ``Johnny
Chung's firm has such capability which should be negotiated.''
Memorandum from Harold Ickes to Bobby Watson, July 17, 1995 (Ex. 33).
White House officials also met with AISI representatives to inquire
into the possibility of hiring the company, although they ultimately
concluded that there would be ``legal concerns'' were the White House
itself to hire Chung. See Memorandum from Brian Bailey for
Distribution, March 8, 1995 (Ex. 34). According to Bailey, ``[i]n prior
administrations, similar proposals for mass communications have been
rejected by White House Counsel, which viewed such activities as
violations of anti-lobbying rules.'' Memorandum from Brian Bailey for
Erskine Bowles, March 21, 1995 (Ex. 35) (emphasis in original). Because
of these worries, Bailey recommended that the DNC, rather than the
White House pursue this matter with Chung.
\80\ Ex. 27.
The Contribution of Yogesh Gandhi
Introduction
Yogesh Kathari Gandhi arrived in Washington, D.C., on May
13, 1996 with a bust of Mohandas K. Gandhi, an entourage of
foreign spiritualists, his checkbook, and a keen desire to meet
the President. Gandhi was rebuffed in his attempts to gain
access to the White House, and, indeed, the White House staff
concluded that Gandhi was ``clearly disreputable.''
Nonetheless, once the checkbook had been opened, Gandhi
successfully arranged for his foreign backers to present the
bust to the President at a DNC fundraising dinner. In this
instance, the contributor's dogged tenacity, paired with the
complicity of some DNC fundraising officials, prevailed over
attempts by White House staff to protect the President from an
episode that led to the acceptance of illegal foreign
contributions which were ultimately returned by the DNC.
Yogesh Gandhi is a 48-year-old citizen of India and legal
resident of California who moved to the United States in 1988
and established the Gandhi International Memorial Foundation
(``the Foundation''), now located in Orinda, California. Yogesh
Gandhi claims to be a great grand-nephew of Mohandas K. Gandhi.
He was born Yogesh Kathari and changed his surname to Gandhi
only when he came to the United States. The Foundation, and
Gandhi, initially focused their efforts on the erection of
statues of Gandhi in major cities around the world. In recent
years, however, the presentation of an award given in the name
of Mahatma Gandhi (``the Prize'') has become the principal, if
not sole, activity of the Foundation.
The Prize has typically consisted of both a bust of Mahatma
Gandhi and a cash award. It has been presented to Mother
Teresa, Nelson Mandela, and Mikhail Gorbachev, among others.
The Committee has concluded that the various recipients of the
Prize, the Foundation, and ultimately the legacy of Mohandas K.
Gandhi have been exploited to increase the visibility and
stature of Yogesh Gandhi and his magnate patrons.
Hogen Fukunaga, a 52-year-old citizen of Japan who leads a
religious sect called Tensei was the beneficiary of the events
of May 13, 1996. The scheme was structured as follows: Yogesh
Gandhi supplied the Gandhi name, which gained Fukunaga entree
to a photo opportunity with the President. Funding for the
venture and the DNC contribution came from Yoshio Tanaka, a 64-
year-old Japanese health products tycoon. To complete the
circle, the Committee has learned--from Barry Flint, a United
States-based associate of Tanaka--that Gandhi and Tanaka were
helping Fukunaga in the ultimate expectation that he, or his
sect, would make a large contribution to Tanaka's Earth Aid
International Foundation.1
---------------------------------------------------------------------------
\1\ Memorandum of Interview of Barry Flint, April 7, 1997. Indeed,
Flint informed the Committee that Gandhi, Tanaka, and Fukunaga also
attended a United Nations conference in Istanbul for which Gandhi had
paid $100,000 in funds provided to him by Tanaka. Id.
---------------------------------------------------------------------------
Gandhi's Statements to the Committee
On March 25, 1997, Committee staff met with Gandhi at the
Foundation's office in Orinda, California. During the
interview, Gandhi provided demonstrably false and misleading
information as to the circumstances of the May 13, 1996 dinner,
as well as the source of the funds contributed to the DNC in
connection with that event.2
---------------------------------------------------------------------------
\2\ Memorandum of Interview of Yogesh Gandhi, March 29, 1997.
---------------------------------------------------------------------------
Gandhi stated in the interview that the Board of Directors
of the Foundation decided to present the Prize to President
Clinton in late 1995 or early 1995. Gandhi contacted the White
House, which, he said, agreed to accept the bust of Gandhi but
not the accompanying cash award. Although the bust was
ultimately presented at a DNC fundraising dinner, Gandhi
insisted that there was no connection between the opportunity
to present the bust to the President and his contribution to
the DNC.
Gandhi acknowledged that he had paid $325,000 to attend a
DNC fundraising dinner in Washington on May 13, 1996. He told
the Committee that he wanted to go to the dinner because it was
his 45th birthday and his mother was visiting from India.
Gandhi brought a total of 13 guests, including Fukunaga and
Tanaka, whom Gandhi identified as members of the Foundation's
International Advisory Board. For his party of 14, Gandhi paid
over $23,200 per person to attend the dinner.
Gandhi further stated in the interview that he had met with
Charlie Trie the afternoon of the dinner, that there was a
disagreement about the price of admission, and that haggling
ensued. Gandhi thought the price for the dinner was $12,500 for
a table but told the Committee that Trie wanted $12,500 per
person. Either way, Gandhi paid more than the alleged ticket
price. Ultimately, Gandhi wrote a check for $325,000, which was
more money than he had anticipated spending. Gandhi
acknowledged that he asked Trie to make sure that the check was
not cashed for ten days, so that he could move money into his
bank account.3
---------------------------------------------------------------------------
\3\ As is discussed below, this portion of Gandhi's statement
appears to be accurate. The DNC held Gandhi's check until May 28, 1996,
before cashing it.
---------------------------------------------------------------------------
Gandhi said that while he was in Washington, it occurred to
him that he could ``kill two birds with one stone'' and present
the Gandhi Prize at the DNC dinner. He stated that he kept a
spare bust of his eminent ancestor in New York, and made
arrangements for an associate to fly it to Washington that
afternoon. At the dinner, Gandhi further claimed, he approached
the Secret Service with his request to present the Prize, and
was allowed to make the presentation, with Fukunaga and Tanaka,
after the dinner.
Gandhi provided a number of inconsistent explanations as to
the source of the funds that he contributed to the DNC. During
the course of the interview, he variously maintained that the
funds were: (1) family money which had been wired in from
Egypt; (2) the proceeds of a technology transfer transaction he
had undertaken with a unnamed Australian firm; (3) an advance
on such a deal; and/or (4) simply money that he had in the
account. In the course of the interview, Gandhi agreed to
provide bank records from the relevant period (April-June
1996), however, such records were never voluntarily supplied to
the Committee.
Pursuant to an agreement with Gandhi, on July 1, 1997,
Committee staff traveled to Orinda, California, to take his
deposition. Gandhi appeared with counsel, who stated that
Gandhi would decline to answer questions in reliance upon his
Fifth Amendment right against self-incrimination.4
---------------------------------------------------------------------------
\4\ Gandhi's attorney confirmed this assertion of the privilege in
writing by correspondence dated July 1, 1997. Letter from Peter J.
Coleridge, Esq., to Matthew J. Herrington, July 1, 1997 (Ex. 1).
---------------------------------------------------------------------------
What the Committee's Investigation Established
Contrary to Gandhi's vanilla description of the events of
May 13, 1996, the Committee has established that the
presentation of the Prize was arranged on a straightforward
pay-to-play basis. Only after Gandhi was rebuffed by the White
House did he turn to the DNC, which charged $325,000 for a few
moments rental of the Presidency to a disreputable con man.
In February of 1996, Gandhi wrote to the White House with
the news that President Clinton had been selected to receive
the Gandhi World Peace Award.5 Gandhi also arranged
for both Matin Royeen, a Clinton-Gore reelection campaign
volunteer who wrote on campaign letterhead to the First Lady,
and Senator Charles S. Robb to contact the White House in
support of the invitation.6 Through an examination
of records produced by the White House, the Committee has been
able to reconstruct the events leading up to the rejection of
Gandhi's proposal to present the Prize to the President.
---------------------------------------------------------------------------
\5\ Letter from Yogesh Gandhi to President Clinton, February 5,
1996 (Ex. 2).
\6\ Letter from Matin Royeen to Hillary Clinton, February 15, 1996
(Ex. 3); Letter from Senator Charles S. Robb to President Clinton,
March 26, 1996 (Ex. 4).
---------------------------------------------------------------------------
First, the invitation was referred to the National Security
Council (``NSC''). Andrew Sens, responding on behalf of the
NSC, demurred, citing the fact that the Foundation was a United
States entity, with the implication that the matter was outside
of the NSC's jurisdiction.7 After the Gandhi matter
became public, Sens informed Harold Ickes that the FBI
considered Gandhi ``a fraud.'' 8
---------------------------------------------------------------------------
\7\ Memorandum from Andrew Sens to Stephanie Streett, March 13,
1996 (Ex. 5).
\8\ Notes of Harold Ickes, October 20, 1996 (Ex. 6).
---------------------------------------------------------------------------
Second, the White House Office of Public Liaison, and
specifically Doris O. Matsui and her staff, undertook an
investigation and found that Gandhi's Foundation ``wasn't a
reputable organization.'' 9 Indeed, the White House
staff was informed that the Foundation was a ``one-man
organization'' that Gandhi ``made a living out of,'' and that
Gandhi would ``take advantage of'' a meeting with the
President, who would be ``hurt'' by the
association.10
---------------------------------------------------------------------------
\9\ Deposition of Ann T. Eder, May 28, 1997, p. 201.
\10\ Undated, handwritten notes of the White House Office of Public
Liaison Staff (Ex. 7).
---------------------------------------------------------------------------
Finally, the White House staff conducted a LEXIS/NEXIS
search which revealed that, in addition to the luminaries cited
by Gandhi, the Prize had been given to Ryoichi Sasakawa in
1987. In an article retrieved by the search, and produced to
the Committee by the White House, Sasakawa was described by the
Los Angeles Times as a ``billionaire former war crimes suspect
who made his fortune promoting motorboat gambling.''
11 The same article stated that Sasakawa ``is known
in Japan as `The Godfather' because of his alleged connections
to Gangsters.'' 12
---------------------------------------------------------------------------
\11\ Memorandum (with press clipping attachments) from Chrysanthe
Gussis to Kathi Whalen, March 14, 1996 (Ex. 8).
\12\ Id.
---------------------------------------------------------------------------
On April 17, 1996, the White House formally regretted on
behalf of the President.13 There is no question that
Gandhi misled the Committee as to the decision of the White
House: he maintained that the White House had agreed to accept
the Prize and that it was happenstance that the presentation
occurred at a DNC event. In fact, the White House flatly turned
down Gandhi, which is why he had to scramble to arrange a DNC
venue for the presentation of the Prize and, moreover, the
Fukunaga photo op.
---------------------------------------------------------------------------
\13\ Letter from Stephanie S. Streett & Anne Walley to Yogesh
Gandhi, April 17, 1996 (Ex. 9).
---------------------------------------------------------------------------
To a less industrious huckster--or perhaps to a huckster
under less pressure to produce the President for his client--
the White House's April 17, 1996 ``no'' might have been the end
of the affair. In fact, it was only the beginning, and Gandhi
soon found that John Huang and the DNC would oblige his
request--if the price was right. Huang has refused to answer
the Committee's questions, but the documentary record and the
deposition testimony of his DNC colleagues demonstrate that he
was the key DNC staffer responsible for Gandhi's contribution.
Contrary to Gandhi's assertion to the Committee that there
was no connection between his contribution and the presentation
of the Prize to President Clinton, DNC General Counsel Joe
Sandler testified that the two were directly linked from the
start: ``Huang told me that Gandhi expressed an interest in
attending an event with the President and that he wanted to
contribute to the Democratic Party. He also wanted to, in
connection with attending an event, present this award to the
President.'' 14 When Huang had settled on the May 13
Sheraton-Carlton dinner as the appropriate venue, Huang
arranged in advance with Craig Livingstone, who was the lead
White House advance person for the event, for the President to
receive the Prize during a private reception in a separate room
at the dinner.15
---------------------------------------------------------------------------
\14\ Deposition of Joseph E. Sandler, May 15, 1997, p. 108. Huang
was apparently introduced to Gandhi through Sharon Singh, a DNC
activist in the Indian-American community. Id., 107-108. Because Huang,
Trie, and Gandhi have all declined to provide testimony, the Committee
has been unable to establish the details of the involvement of Huang
and Trie in the Gandhi affair.
\15\ Sandler deposition, May 15, 1997, p. 111. Sandler's testimony
not only betrays the duplicity of Gandhi's statements to the Committee,
but also calls into question the pronouncements of DNC spokesperson Amy
Weiss Tobe. Prior to the November 1996 election, Tobe told the press
that the DNC had not known in advance that Gandhi intended to present
the Prize to the President on May 13. See Alan Miller, ``A Picture
Worth $325,000?,'' Los Angeles Times, Nov. 2, 1996, p. A1. The disjunct
between Sandler's testimony and Tobe's statements to the press is
particularly jarring in that she apparently spoke with Sandler about
the circumstances of the Gandhi contribution prior to speaking with the
press. See Deposition of Amy Weiss Tobe, June 16, 1997, p. 22. In her
deposition, Tobe claimed that Huang told her at the time of the press
inquiries that he had not known about the Prize until the evening of
the Sheraton-Carlton dinner. Id., pp. 21-22. At best, then, Huang
misled Tobe, and may have been in cahoots with Gandhi in attempting to
obfuscate the pay-to-play nature of the event.
---------------------------------------------------------------------------
On May 13, 1996, Gandhi gave Huang and/or Trie a check in
the amount of $325,000. Although Trie, like Huang, has refused
to cooperate with the Committee, his involvement in the Gandhi
affair is confirmed by the relevant DNC check tracking form,
which lists Huang as the ``DNC Contact'' and Trie as the
``Solicitor.'' 16 On the evening of May 13, after
the public program was complete, the President was taken to an
adjoining room and Fukunaga presented the bust to him. Although
video and audio tapes of the May 13 event, as produced by the
White House, do not capture the President's side-door
acceptance of the Prize, still photographs were taken. Within a
few weeks of the event, a photo of Fukunaga presenting the
Gandhi bust to President Clinton was featured on the Internet
web site of Tensei, Fukunaga's religious organization.
---------------------------------------------------------------------------
\16\ DNC Check Tracking Form (Ex. 10).
---------------------------------------------------------------------------
The DNC has publicly denied that any basis existed to be
suspicious of the Gandhi contribution in May of 1996, but the
fact is that well before the Gandhi story hit the press in the
fall of 1996--before the check had even been cashed--there was
concern within the DNC about the propriety of the Gandhi
contribution. Richard Sullivan testified that, after the event,
Huang brought Gandhi's extraordinarily large check by his
office, and that Sullivan inquired to ensure that Huang would
take the check personally to and review it with
Sandler.17 Huang told Sullivan that he was holding
the check until that review had taken place, and later told
Sullivan that Sandler had approved the
contribution.18 Sandler, however, testified that he
was not consulted about the Gandhi contribution prior to the
funds being accepted; he testified instead that his first
discussion of it was after negative press reports.19
Confronted with this contradiction between Sandler's sworn
testimony and Huang's earlier statements, Sullivan weighed in
on the side of Huang. Sullivan believed that Sandler had
``lied'' in an attempt ``to cast his performance in a better
light.'' 20
---------------------------------------------------------------------------
\17\ Deposition on Richard L. Sullivan, June 5, 1997, pp. 37-39.
\18\ Id., pp. 38-39.
\19\ See Sandler deposition, May 15, 1997, p. 107.
\20\ Sullivan deposition, June 5, 1997, p. 39. For other
contradictions between Sullivan and Sandler, see the section of this
report on Huang's illegal fundraising at the DNC.
---------------------------------------------------------------------------
Although Sullivan claimed that the DNC ``proactively'' ran
a LEXIS/NEXIS search on Gandhi,21 such a search
would have turned up stories relating to Gandhi's association
with Sasakawa, the 1987 recipient of the Prize.22
Because it is unclear whether Sandler actually pre-screened the
Gandhi contribution, the Committee cannot speculate as to
whether or not this and other red flags were ignored--or simply
never uncovered--by the DNC. During the Committee's public
hearings, Sullivan conceded that the Gandhi case was ``yet
another example of the DNC failing to do a sufficient job'' in
screening contributions.23 Likewise, Sandler
admitted that under the DNC's new post-1996 election screening
regimen, Gandhi, as a first-time contributor, would have been
thoroughly investigated, and the contribution would not have
been accepted.24 When White House Office of Public
Liaison staff member Ann Eder learned that Gandhi had managed
to present the Prize to President Clinton at a DNC fundraising
dinner, she was ``surprised'' because the Foundation was
``clearly not a reputable entity.'' 25
---------------------------------------------------------------------------
\21\ Id., p. 140.
\22\ See Ex. 8.
\23\ Testimony of Richard L. Sullivan, July 10, 1997, p. 46. See
also the section of this report on the dismantling of the DNC's vetting
process.
\24\ Sandler deposition, May 15, 1997, pp. 118-19.
\25\ Eder deposition, May 28, 1997, p. 202.
---------------------------------------------------------------------------
Finally, the extraordinary degree to which Huang and the
DNC leadership were solicitous of Gandhi is perhaps explained
by the sheer size of the contribution. Gandhi's $325,000
contribution constituted more than half the funds raised at the
May 13 event.26 Put another way, if Gandhi had been
rebuffed in his effort to get the Prize to the President and
had not attended the dinner, or if Sandler had decided
afterwards not to accept the Gandhi contribution, Huang would
have fallen woefully short of the evening's fundraising goal.
---------------------------------------------------------------------------
\26\ See Sullivan testimony, July 10, 1997, pp. 44-45.
---------------------------------------------------------------------------
Analysis of Gandhi's Bank Records
Bank records for Gandhi and the Foundation were obtained by
the Committee pursuant to subpoena. The records amply
illustrate the cause for Gandhi's insistence that the DNC hold
the check for a few weeks. At the time the $325,000 check was
issued on May 13, 1996, the account on which it was drawn held
less than $30,000.\27\ Furthermore, these bank records
establish beyond question that the source of the funds paid to
the DNC was Yoshio Tanaka. The records show a total of $500,000
in incoming wire transfers from Tanaka's Tokyo bank account
between the time that the May 13 check was written, and when it
was cashed on June 3, 1996.\28\
---------------------------------------------------------------------------
\27\ Bank records of Yogesh Gandhi (Ex. 11).
\28\ Id.
---------------------------------------------------------------------------
There is no question in this instance that the funds
received by the DNC were both laundered and originated
overseas, and thus constituted an illegal contribution.
The Delay in the DNC's Return of Gandhi's Contribution
On October 25, 1996, a $325,000 refund check to Gandhi was
drawn on the DNC's account at Nationsbank. Ten days later--but
more importantly, one day after the Presidential election--on
November 6, 1996, the DNC sent the check to Gandhi.\29\
Sandler, who signed the cover letter transmitting the refund
check to Gandhi, has improbably testified that the check was
issued on October 25, 1996, as a preliminary step in an
investigation that did not conclude until the day after the
election.\30\ Ickes' notes of meetings and conference calls
held on October 20 and 28, however, establish that the DNC and
White House knew before the election that: (1) the FBI had
described Gandhi as a ``fraud;'' (2) Gandhi had testified in
court proceedings earlier in 1996 that he was unable to satisfy
a $4,000 default judgment against him; and (3) he was in
arrears on his taxes.\31\ Given that Sullivan himself has
called into question the veracity of Sandler, it is difficult
to credit Sandler's testimony that it was simply a wild
coincidence that the Gandhi refund check--cut days before--just
didn't get into the mail until the day after the election.
---------------------------------------------------------------------------
\29\ Letter from Joseph Sandler (with copy of the check, DNC
expenditure request form, and UPS mailing information) to Yogesh
Gandhi, November 6, 1996 (Ex. 12).
\30\ Sandler deposition, May 15, 1997, p. 115.
\31\ See Ex. 6 & Harold Ickes' notes of October 25, 1996 (Ex. 13).
---------------------------------------------------------------------------
Conclusion
The Committee shares the conclusion of White House lawyer
Lanny J. Davis: ``The professional staff at the White House
checked this matter out and made a correct determination'' as
to the whether Gandhi should gain an audience with the
President.\32\ That said, however, the determination of the
White House staff was either ignored or overridden when Gandhi
coupled his request with a $325,000 contribution to the DNC.
---------------------------------------------------------------------------
\32\ Glenn R. Simpson, ``White House Got FBI Data on Party Donor,''
Wall Street Journal, June 10, 1997, p. A20.
Ted Sioeng, His Family, and His Business Interests
Part I. Introduction
Ted Sioeng, his family, and his business interests gave
$400,000 to the DNC during the 1996 election cycle. Through
extensive analysis of bank records, the Committee has
determined that at least half of this figure, or $200,000, was
made with money wired into the U.S. from accounts in Hong Kong.
Where this money ultimately came from and why it was used for
hefty political contributions are two questions the Committee
cannot answer conclusively. The reason is that Sioeng and his
family left the U.S. after the campaign finance scandal broke
and, through their lawyers, indicated they are unwilling to
talk. The one family member who remains in the United States,
Sioeng's daughter Jessica Elnitiarta, was interviewed in June
1997 by Committee staff but, since then, has indicated she
would assert the Fifth Amendment if compelled to testify. \1\
However, the Committee developed documentary and circumstantial
evidence as to the answers to the aforementioned questions.
That evidence is discussed below.
---------------------------------------------------------------------------
\1\ Letter from Steven R. Ross and Mark J. MacDougall to The
Honorable Fred Thompson, September 17, 1997. (Ex. 1).
---------------------------------------------------------------------------
In many senses, the story of Ted Sioeng is a microcosm of
the Committee's investigation. Sioeng is a wealthy Belize
citizen in his early fifties who, prior to the campaign finance
scandal, spent brief periods in the United States. Sioeng
controls a multinational business empire that appears to
generate substantial income, though not much of it within this
country. Sioeng has ties to the Government of China, but their
full extent is unknown. Despite making modest political
contributions in 1992, 1993, and 1994 in this country, Sioeng
became a major player in 1995 through a series of large
contributions made by him, his family, and his business
interests to a variety of candidates and political entities,
but mostly to the DNC. The contributions earned Sioeng
invitations to lavish fund-raisers attended by President
Clinton or Vice President Gore. The contributions, in some
cases, were made with foreign money.
Ted Sioeng became known to the Committee early in its
investigation. The first press interest in Sioeng stemmed from
his presence at DNC fund-raisers.\2\ Since that time, the
Committee has learned of Sioeng's connections to other key
figures in its investigation, including Maria Hsia and John
Huang, as well as his attendance at several DNC fund-raisers.
In the year leading up to the 1996 elections, Sioeng attended
four major DNC fund-raisers, each of which Huang had a hand in
organizing. To each event, Sioeng brought family members and/or
business associates.
---------------------------------------------------------------------------
\2\ See, e.g., Richard T. Cooper, ``How DNC Got Caught in a Donor
Dilemma; Desire for Dollars to Boost Clinton's Reelection Bid Helped
Fuel Democrats' Pursuit of an Emerging Money Source--Asian Americans
with Strong Overseas Ties,'' Los Angeles Times, December 23, 1996, p.
A1.
---------------------------------------------------------------------------
Sioeng attended the February 19, 1996 Asian Pacific
American Leadership Council fund-raiser at the Hay-Adams Hotel
in Washington, D.C. This was the first major DNC event
organized by Huang. On April 29, 1996, Sioeng attended a fund-
raising luncheon at the Hsi Lai Buddhist Temple in Los Angeles,
California, where he sat next to Vice President Gore. On May
13, 1996, Sioeng attended a dinner for President Clinton at the
Sheraton Carlton in Washington, D.C. where, again, he was
seated at the head table. Two months later, on July 22, 1996,
Sioeng and 48 friends and/or business associates attended a DNC
fund-raiser for President Clinton at the Century Plaza Hotel in
Los Angeles. At dinner, Sioeng sat to President Clinton's
immediate right. To the President's left was James Riady and
his wife Aileen.
The Committee's interest in Sioeng is not related solely to
his attendance at DNC events. It stems also from Sioeng's
relationships with Huang and Hsia, as well as the Chinese
government, and it has been piqued by the evidence that some of
Sioeng's political contributions were made with foreign money.
Sioeng's relationship to the Government of the People's
Republic of China has been the subject of press speculation
since early 1997.\3\ Based on its own investigation, as
discussed more fully elsewhere in the report,\4\ the Committee
has learned that Sioeng worked, and perhaps still works, on
behalf of the Chinese government. Sioeng regularly communicated
with PRC embassy and consular officials at various locations in
the United States, and, before the campaign finance
investigation broke, he traveled to Beijing frequently where he
reported to and was briefed by Chinese communist party
officials.
---------------------------------------------------------------------------
\3\ See, e.g., Mark Hosenball, ``On the Trail of a `China
Connection' '' Newsweek, March 10, 1997, p. 30 (noting Sioeng's
``close'' connections to the PRC consulate in Los Angeles); Daniel
Klaidman and Mark Hosenball, ``The Feds Explore a China-California
Money Trail,'' Newsweek, April 28, 1997, p. 40 (``The Sioeng money
transfer is the first `verifiable, direct link to the People's Republic
of China,' one investigator told Newsweek.''); K. Connie Kang and David
Rosenzweig, ``Entrepreneur Formed Ties to China, then Politicians,''
Los Angeles Times, May 18, 1997, p. A1 (discussing Sioeng's business
and political ties to China in context of allegations that he is
``working as Beijing's political operative in the United States'');
Daniel Klaidman, ``Cracking a Chinese Code,'' Newsweek, June 9, 1997,
p. 46 (citing information from ``federal investigators'' that Sioeng
was chosen as the ``West Coast Representative'' in the U.S. by the
Chinese communist party).
\4\ See the chapter of this report entitled ``The China
Connection.''
---------------------------------------------------------------------------
The Sioeng story is a microcosm because it is a tale of
foreign money and, possibly, foreign influence. One familiar
refrain encountered by the Committee during its efforts to
uncover the Sioeng story was a series of obstacles separating
investigators from the truth behind Sioeng's political
activities. Most of what the Committee has learned about Sioeng
derives from bank records the Committee subpoenaed, an
interview with Sioeng's daughter, Jessica Elnitiarta,
information provided to the Committee by Sioeng's attorneys,
and references to Sioeng in other documents produced to the
Committee. The investigation, though, has been hampered by the
unavailability of witnesses and their unwillingness to speak to
Committee staff. As noted, Sioeng and most of his family have
left the country. Elnitiarta has remained behind but has
asserted her Fifth Amendment privilege, as have the two
Democratic fund-raisers, Huang and Hsia, with apparent ties to
the family. Moreover, business associates of Sioeng generally
proved unhelpful. Early in the investigation, Committee staff
spoke to Sioeng's friend and business associate Kent La,\5\ but
he also would not appear voluntarily for a deposition. The
Majority attempted to compel La's testimony, but the Minority
objected to the subpoena. For months, Sioeng's attorneys held
out the promise that Sioeng would agree to be interviewed at a
location outside the United States. That promise was not kept.
---------------------------------------------------------------------------
\5\ Memorandum of Interview of Kent La, May 14, 1997.
---------------------------------------------------------------------------
The balance of this section is divided into two parts. Part
II discusses Ted Sioeng, his family, and his business
interests. Only those activities relevant to the Committee's
investigation are discussed. Part III examines the major
political contributions made by Sioeng, his family, and his
business interests during the 1996 election cycle. Through an
analysis of bank records produced to the Committee, an attempt
is made to trace the origins of these various contributions.
One conclusion the Committee has drawn is that much of the
money contributed by Sioeng and his family is traceable to
foreign sources--pecifically, bank accounts in Hong Kong. This
is significant because such contributions are illegal.\6\ Most
of these contributions were to the DNC, which purported to
investigate the same and concluded the contributions were legal
and proper.\7\
---------------------------------------------------------------------------
\6\ See 2 U.S.C. Sec. 441e.
\7\ DNC spokeswoman Amy Weiss Tobe was reported as saying the party
decided not to return the Sioeng family contributions because Jessica
Elnitiarta is a legal permanent resident of the United States and that
Sioeng himself had not contributed to the DNC. Paul Jacobs and Dan
Morain, ``State Treasurer Sends Back Campaign Contributions that May
Have Originated in China,'' Los Angeles Times, April 23, 1997, p. A3.
---------------------------------------------------------------------------
Part II. Sioeng's Activities Here and Abroad
A. Sioeng and his businesses
Ted Sioeng, originally from Indonesia, is a citizen of
Belize who splits his time between Singapore and Hong Kong.
Sioeng's daughter, Jessica Elnitiarta, is a permanent resident
alien who came to the United States in 1986.\8\ Most of her
family (excluding her father) are now permanent resident
aliens. Other family members once or currently in the United
States are her sisters Laureen, and Sandra, her brothers Yopi
and Yohan, and her mother.\9\ The Sioeng/Elnitiarta family
speaks Chinese (Mandarin and Cantonese), Bahasa, and some
English.
---------------------------------------------------------------------------
\8\ Unless otherwise indicated, the information contained in Part
II of this discussion derives from an interview of Jessica Elnitiarta
conducted by the Committee on June 19, 1997. See Memorandum of
Interview of Jessica Elnitiarta, Sept. 18, 1997.
\9\ The Committee has learned that all of Sioeng's family has left
the country except Jessica and possibly Yopi. The others have gone to
Hong Kong. Parenthetically, the family uses Elnitiarta, not Sioeng, as
its surname. Elnitiarta is the mother's maiden name.
---------------------------------------------------------------------------
Through the marriage of his daughter, Ted Sioeng's family
is related to the Tanuwidjajas, a family with substantial
business interests in Indonesia.10 Sioeng's
daughter, Laureen, married Subandi Tanuwidjaja, son of Susanto
Tanuwidjaja, in March 1996. Subandi has been identified as ``an
Indonesian menswear manufacturer.'' 11 John Huang, a
self-professed friend of the Tanuwidjaja family, asked the
White House for a letter congratulating Laureen and Subandi on
the occasion of their marriage.12 Huang may have
become acquainted with the Tanuwidjaja's when he worked with
Susanto Tanuwidjaja at the Lippo Bank's San Francisco
office.13
---------------------------------------------------------------------------
\10\ Although the Committee knows little about the Tanuwidjaja's
business holdings, here or elsewhere, FEC records indicate that Subandi
Tanuwidjaja is an architect in Diamond Bar, CA and Suryanti is a
writer/producer in La Habra Heights, California.
\11\ George Archibald, ``Democrats Disclose Big Contributors,''
Washington Times, October 30, 1996, p. A13.
\12\ Facsimile from John Huang to Anne Edder, March 6, 1996. (Ex.
2).
\13\ See Deposition of Diane Poon, April 30, 1997, p. 25.
---------------------------------------------------------------------------
Sioeng's business empire is centered in Asia. Most of the
businesses are in greater China, Macao, and Cambodia. The
family has owned or currently owns several businesses in the
PRC, including a beer factory, a rebuilt machinery factory, and
a portion of a hotel (in the Yunnan province). Currently, the
family's main business is a cigarette manufacturing and
distribution operation in Singapore, which is run by Chinois, a
partnership between Sioeng, Hong Kong businessman Bruce Ceung,
and several companies. Chinois manufactures and distributes Red
Pagoda Mountain (``Hong Ta Shen'') cigarettes. It holds
manufacturing and distribution rights granted by the PRC
government, and is obligated to purchase raw materials for the
cigarettes from a government factory in Yu Xi, located in the
Yunnan province.
The family has a growing U.S. business presence presided
over by Jessica Elnitiarta. The family holdings and interests
include:
International Daily News, a Chinese language daily in
Los Angeles. The paper is discussed in more detail in
the section that follows;
Metropolitan Hotel, a hotel and restaurant
in Los Angeles;
Pacific Motel, a modest establishment in the
Los Angeles area;
Panda Estates, a real estate firm that owns
Doheny Estates, comprised of luxury rental townhouses
in Beverly Hills. The family purchased Doheny in 1993
in a foreclosure sale, and completed construction on
the townhouses in 1995;
Panda Industries, an import export business;
Loh Sun International, a company that
distributes Red Pagoda Mountain cigarettes in the
United States. Jessica Elnitiarta told the Committee
that the family does not ``control'' Loh Sun, but
simply does business with it. However, in a brief phone
interview conducted in May 1997, Loh Sun's president
and registered agent, Kent La, indicated that Jessica
Elnitiarta is his supervisor; 14 and
---------------------------------------------------------------------------
\14\ The Committee staff's telephone interview with Kent La took
place on May 13, 1997. During the interview, La indicated Jessica
Elnitiarta is his boss.
---------------------------------------------------------------------------
Grand National Bank, located in Alhambra,
California. Jessica, Sandra, and Laureen Elnitiarta are
investors in the bank and own approximately 19 percent
of its outstanding stock. Jessica first purchased Grand
National Bank stock in 1992 and owns 100,000 shares.
Laureen and Sandra each own 45,000 shares, which they
purchased in November 1995. It appears that most of the
family's business and personal accounts are held at the
Grand National Bank.
Sioeng provides the working capital for all of his U.S.
businesses, which receive regular cash infusions through
transfers of funds from overseas accounts. Jessica told the
Committee that the sources of Sioeng's funds are his businesses
abroad. The cash infusions typically originate in Hong Kong,
where funds are wired to the Grand National Bank account of
Sioeng's sister, Yanti Ardi. The money is then distributed to
various business or family accounts as necessary. Jessica, who
holds power of attorney for Yanti Ardi's account, controls
distribution of the money. Sioeng regularly provides such
funds, although Panda Estates and Metropolitan Hotel have
generated a non-trivial amount of cash flow.
B. International Daily News
In October 1995, Sioeng and his family contracted to
purchase the International Daily News, a Chinese-language
newspaper in Los Angeles. They paid between $3 and $4 million
for the paper, making payments over the next several months.
The purchase was consummated on July 1, 1996.
The paper was paid for largely through checks written on
one of Yanti Ardi's accounts at the Grand National Bank.
Between October 1995 and July 1996, some $2,590,000 was
transferred from Ardi's account to the International Daily News
and C. International Publications, the company that owns the
paper itself. Almost all of the purchase money appears to
derive from businesses located in Hong Kong. These businesses,
Victory Trading Company, Pristine Investments Limited, and R T
Enterprises Limited, also funded some of the Sioeng family's
political contributions, as is discussed below.
It is not entirely clear why the Sioeng family purchased
the paper. Jessica recounted that buying the paper was Sioeng's
idea (in consultation with Jessica, who ended up overseeing
it). Sioeng had been a significant advertiser for the paper and
was close to the former owner (Chen), who started lobbying
Sioeng to buy it back in 1993. According to Jessica, Sioeng
purchased the paper because (i) it would enhance the family's
standing in the local community, (ii) it was cheap, and (iii)
there were tax advantages to assuming the paper's debt.
Another explanation is that Sioeng purchased the paper with
the approval of or otherwise to please the Chinese government.
Prior to its purchase, the International Daily News was a pro-
Taiwan publication. According to Newsweek, ``Now the paper is
breathlessly pro-Beijing.'' 15 Newsweek goes on to
report from its sources that Sioeng's purchase of the paper may
have been encouraged or even bankrolled by the
PRC.16 In any event, since the purchase, the paper
has consistently lost money and is subsidized by Sioeng with
funds from overseas.
---------------------------------------------------------------------------
\15\ Daniel Klaidman and Mark Hosenball, ``Connecting the Dots,''
Newsweek, April 28, 1997, p. 40.
\16\ Id.
---------------------------------------------------------------------------
In a June 1996 letter to Sioeng, President Clinton praised
the International Daily News for ``faithfully report[ing] both
local and international issues'' and for being ``part of the
lasting heritage of the Chinese-American community.''
17 John Huang arranged for the letter at Jessica's
request.
---------------------------------------------------------------------------
\17\ Letter from President Clinton to Ted Sioeng, June 20, 1996.
(Ex. 3).
---------------------------------------------------------------------------
The Committee has learned that the Sioeng family owns the
International Daily News through a series of companies. The
newspaper is owned by Chen International Publications (U.S.A.),
Inc., a California company in turn owned by Sioeng's Group,
Inc. Sioeng's Group, Inc. was described by Sioeng's attorneys
as a holding company owned by Jessica Elnitiarta, her four
siblings, and their mother. Jessica holds the largest share and
is the sole director and officer of the company. Jessica also
serves as the Secretary and CFO of Chen International. Sieong
Fei Man is the newspaper's general manager.
In addition to purchasing the paper, Sioeng, it appears,
supplements its operations with cash infusions. While it is not
clear whether the International Daily News generates a
substantial cash flow for Sioeng, it is apparent he has
supplemented its income and that he has done so with money
transferred from Hong Kong accounts.
C. Sioeng's political contributions
Since 1992, but starting in earnest during the 1996
election cycle, Sioeng and his family have become prolific
political contributors. The Committee has been able to
determine that Sioeng, his family, and his business interests
have made the following contributions to political candidates,
parties, and affiliated non-profit entities: 18
---------------------------------------------------------------------------
\18\ There may be other contributions about which the Committee is
unaware.
----------------------------------------------------------------------------------------------------------------
Date From To Amount
----------------------------------------------------------------------------------------------------------------
3/23/92.................................. Sioeng San Wong \19\........ Friends of Bonnie Wai....... $500
\19\ Sioeng San Wong is another version
of the name ``Ted Sioeng.''
5/12/92.................................. Sioeng San Wong............. A. Yung Hsiang Wu........... 10,000
6/20/92.................................. Sioeng San Wong............. Alfred Y. Wu................ 1,500
6/20/92.................................. Sioeng San Wong............. Yung Hsiang Wu.............. 5,000
3/25/93.................................. Jessica Elnitiarta.......... Mike Woo for Mayor.......... 1,000
5/27/93.................................. Jessica Elnitiarta.......... Mike Woo for Mayor.......... 1,000
6/4/93................................... Sioeng San Wong............. Michael Woo for Mayor....... 2,500
9/11/93.................................. Jessica Elnitiarta.......... California Republican Party. 2,000
1/26/94.................................. Sioeng San Wong............. Friends to Elect Sam Kiang.. 1,000
4/16/94.................................. Sioeng San Wong............. Friends of Michael Woo...... 1,000
9/28/94.................................. Jessica Elnitiarta.......... Matt Fong for Treasurer..... 2,000
3/11/95.................................. Sioeng San Wong............. Friends of Norman Hsu....... 7,500
3/25/95.................................. Sioeng San Wong............. Comm. to Elect Miu Mey Chang 1,500
4/20/95.................................. Sioeng San Wong............. Matt Fong for State 20,000
Treasurer.
4/28/95.................................. Sioeng San Wong............. Matt Fong................... 30,000
7/18/95.................................. Panda Industries, Inc....... National Policy Forum....... 50,000
12/14/95................................. Panda Estates Investment.... Matt Fong for State 50,000
Treasurer.
2/15/96.................................. Su/Sa/La Elnitiarta \20\.... Dr. Daniel Wong............. 5,000
\20\ These checks were written on an
account held jointly in the names of
Sundari, Sandra, and Laureen Elnitiarta.
2/19/96.................................. Jessica Elnitiarta.......... Democratic National 100,000
Committee.
7/12/96.................................. Panda Estates Investment.... Democratic National 100,000
Committee.
7/29/96.................................. Panda Estates Investment.... Democratic National 50,000
Committee.
7/29/96.................................. Loh Sun International....... Democratic National 50,000
Committee.
7/29/96.................................. Su/Sa/La Elnitiarta......... Gary Locke for Governor..... 1,100
7/29/96.................................. Jessica Elnitiarta.......... Gary Locke for Governor..... 1,100
9/9/96................................... Subandi Tanuwidjaja......... Democratic National 60,000
Committee.
9/16/96.................................. Suryanti Tanuwidjaja........ Democratic National 20,000
Committee.
9/19/96.................................. Subandi Tanuwidjaja......... Democratic National 20,000
Committee.
----------
Total..................... ............................ 593,700
----------------------------------------------------------------------------------------------------------------
While Sioeng made an impressive number of contributions
throughout the 1994 and 1996 election cycles, the table above
shows that Sioeng's largesse became far more prolific starting
in 1995. John Huang's influence clearly had something to do
with this. But whatever other influences motivated Sioeng
largely are unknown.
1. Contributions to the DNC
John Huang solicited all of the family's contributions to
the DNC. In total, Sieong's family and business interests
contributed $400,000 to the DNC in 1995 and 1996. Most of this
was given in connection with specific fund-raising events to
which Sioeng, his family, and business associates were invited.
These events provided Sioeng an opportunity to impress his
guests and to meet President Clinton or Vice President Gore.
The family put great value on such meetings and on having their
pictures taken with political leaders. Jessica considered the
family's attendance at such events a way to honor her father.
A member of the Chinese-American community in Los Angeles
first introduced Huang to the Sioeng family in 1995. According
to Jessica, Huang is not a close family friend, but instead a
prominent person in the Chinese-American community whom they
came to know reasonably well. Regardless, it is clear Huang was
treated by Sioeng's family with familiarity and respect. For
example, in correspondence relating to the Sheraton Carlton
fund-raiser Huang helped organize, Jessica referred to him as
``Uncle Huang.'' 21
---------------------------------------------------------------------------
\21\ Memorandum from Jessica to Uncle Huang, undated. (Ex. 4).
---------------------------------------------------------------------------
Huang first mentioned political fund-raising to Jessica in
January 1996, when he indicated that he could arrange for the
family to meet President Clinton at a fund-raiser in Washington
in February. This turned out to be a February 19, 1996 fund-
raiser at the Hay Adams Hotel. After some back and forth among
the family and with Huang, it was agreed that eight people--
family and business partners 22--would attend,
including Sioeng, who flew in from the Far East for the event.
Jessica Elnitiarta paid $100,000 (figured at $12,500 per
attendee, in accordance with the ``price'' of the event
described by Huang in advance) by personal check. Her sister
delivered the check to Huang at the event, making sure of the
correct amount with Huang before filling it in. All eight
attendees had their picture taken with President Clinton.
Because the family decided to attend so late, however, they had
poor seats for the dinner, a matter that caused Huang to
apologize afterwards. Jessica told the Committee that the
source of the contributions was revenue from Panda Estates. By
analyzing relevant bank records, the Committee determined that
Jessica's statement is incorrect, and that the $100,000 came
from an account in Hong Kong.23
---------------------------------------------------------------------------
\22\ The attendees were: Sioeng; Sandra Elnitiarta and husband;
Yopi Elnitiarta; Jimmy Tsang, a business partner, and his wife; Lie
Kwee Kei, a Hong Kong business partner; and Bruce Cueng, the Chinois
partner.
\23\ See discussion below on Jessica's $100,000 contribution to the
DNC of February 19, 1996.
---------------------------------------------------------------------------
Huang next contacted Jessica to see if the family would
like to attend the April 29, 1996 Hsi Lai Temple fund-raiser.
He made it clear that he would ``comp'' the family's attendance
as a way to make up for their poor seats at the Hay Adams event
in February. Jessica explained that one of her sisters is
Buddhist and was very excited at the prospect of meeting the
Venerable Master of the Temple; for the family, this was of
equal importance to meeting Vice President Gore. Sioeng again
flew from the Far East, and the family brought five attendees
to the event.24 Huang made sure that Sioeng sat next
to Vice President Gore, which the family considered a huge
honor. The family paid nothing to attend.
---------------------------------------------------------------------------
\24\ Sioeng and wife, Jessica Elnitiarta, Laureen Elnitiarta, and
Sioeng Fei Man, general manager of the International Daily News.
---------------------------------------------------------------------------
Huang later called in May 1996 about another event where
the family could see President Clinton. He explained that it
would be a small dinner in Washington, and asked whether the
family would like to participate. Jessica communicated this to
Sioeng, who was very excited, viewing it as a good opportunity
to impress some of his business partners from overseas. They
accepted, and in this case, Jessica sent Huang a list of
invitees in advance. The dinner was held on May 13, 1996, at
the Sheraton Carlton in Washington. The family's attendees
were:
Ted Sioeng;
Chio Ho Cheong, President, Ang-Du
International Corporation Ltd.;
Guo Zhong Jian, Deputy General Manager,
China Construction Bank, Hong Kong Branch;
Lin Fu Qiang, Managing Director, Everbrite
Asia Limited, Hong Kong;
Chan Elsie Y.Z., Managing Director, Ang-Du
International Corporation Ltd.;
Kent La, President, Loh Sun International;
and
He Jian Shan.25
---------------------------------------------------------------------------
\25\ Ex. 4.
---------------------------------------------------------------------------
It appears Sioeng met and spoke to President Clinton at the
Sheraton Carlton event. By letter dated May 28, 1996, the
President thanked Sioeng for attending the fund-raiser and,
more generally, ``for being there when you are asked to help.''
26 President Clinton noted that he had ``enjoyed
having the chance to talk'' with Sioeng, and expressed hope
that Sioeng would ``continue to share [his] advice and
insight.'' 27
---------------------------------------------------------------------------
\26\ Letter from Bill Clinton to Ted Sioeng, May 28, 1996. (Ex. 5).
\27\ Id. Note that Sioeng is not a citizen or legal permanent
resident of the United States and, therefore, he cannot legally
contribute to the DNC or any other national political parties.
---------------------------------------------------------------------------
Jessica told the Committee she knew that she would need to
pay for the May dinner, but Huang did not push her. He
invited--begged actually, as Jessica recalls--the family to
attend an additional event in July at the Century Plaza Hotel
in Los Angeles. The event, which was larger than the previous
dinners, was held on July 22, 1996, and Huang indicated that he
was having difficulty finding people to attend. He encouraged
Jessica to bring as many people as she would like. Sioeng flew
in for this event, bringing one business associate (Lam Kwok
Man, from Hong Kong), and the family came with approximately 48
local friends. Jessica Elnitiarta made a $100,000 contribution
to the DNC (from the account of Panda Estates) on July 12, 1996
to cover the seats for the May fund-raiser, figuring the price
at $12,500 per seat. Later, on July 29, 1996, Jessica wrote an
additional $50,000 check--also on the Panda Estates account--to
the DNC to cover the July Century City event. Jessica
considered the price-per-head for the Century City event
significantly less than that for the Sheraton Carlton fund-
raiser in May.
Jessica disclaimed any involvement in several other
contributions. One was a Loh Sun International contribution of
$50,000 to the DNC on July 29, 1996 (the same day as the
Century City fund-raiser and the $50,000 contribution from
Panda Estates to the DNC). Jessica stated that she knew nothing
about this until she read about it in the papers. Jessica's
seeming attempt to distance the Sioeng family from Loh Sun is
belied by the obvious financial relationship between them. As
described below, a wire transfer to Loh Sun from R T
Enterprises--one of the businesses that often wired funds from
Hong Kong to Sioeng family accounts in the United States--may
have funded some or all of Loh Sun's $50,000 contribution to
the DNC. In addition, a check signed by Kent La, Loh Sun's
president, was deposited into Sioeng's account and may have
been used to fund Panda Industries' 1995 contribution to the
National Policy Forum, also discussed in more detail below.
Moreover, in December 1995 and January 1996, Jessica wrote two
checks to Kent La totaling $58,000.28 In the memo
line of these checks is written, ``Hong ta Shan,'' the brand of
cigarettes Loh Sun distributes.
---------------------------------------------------------------------------
\28\ See December 1995 check to Kent La from Jessica Elnitiarta for
$50,000 (Ex. 6).
---------------------------------------------------------------------------
Other contributions Jessica disclaimed knowledge of were
made by the Tanuwidjajas, her family's in-laws, who wrote three
checks totaling $100,000 to the DNC in 1996. Jessica claimed to
know nothing about these contributions. However, the
Tanuwidjaja family attended at least one fund-raiser with
Jessica, and two of the three Tanuwidjaja contributions were
solicited by John Huang.29
---------------------------------------------------------------------------
\29\ Curiously, DNC check-tracking forms indicate that Huang
attributed three Sioeng-related checks to a small, July 30, 1996 dinner
at the Jefferson Hotel attended by President Clinton. A July 29, 1996
Panda Estates Investment check for $50,000 (Ex. 7), a September 9, 1996
Subandi Tanuwidjaja check for $60,000 (Ex. 8), and a July 29, 1996 Loh
Sun International check for $50,000, (Ex. 9), are all listed by Huang
as connected to the July 30, 1996 dinner. Among the intimate dinner's
attendees were President Clinton, Huang, DNC Chairman Donald Fowler,
James Riady, Taiwanese businessmen Eugene T.C. Wu and James L.S. Lin of
the Shin Kong Group, and Sen Jong ``Ken'' Hsui, a Taiwanese-American
businessman who is president of Prince Motors. See Alan C. Miller and
David Rosenzweig, ``Clinton Dinner Gives Probes Some Questions to Chew
On,'' Los Angeles Times, February 7, 1997, p. A1. No one from the
Sioeng or Tanuwidjaja families attended the dinner.
---------------------------------------------------------------------------
Huang called later in 1996 about other events in Chicago
and San Francisco, but by that time Jessica had lost interest
in the process. She felt she had adequately honored her father
and did not need to participate further.30
---------------------------------------------------------------------------
\30\ Jessica told the Committee she has spoken only once to Huang
since the campaign finance story broke in October 1996, and then only
in passing at a community event.
---------------------------------------------------------------------------
2. Contributions to Matt Fong
Sioeng and Panda Estates made three contributions to Matt
Fong in 1995, totaling $100,000. At the time, Fong was running
for Treasurer of the State of California. Sioeng contributed a
total of $50,000 in April 1995. Later, in December 1995,
Jessica Elnitiarta contributed $50,000 more through Panda
Estates.
According to Jessica, the contributions were the result of
some intense fund-raising appeals from Fong personally, and
others on his behalf. Faye Huang (a local activist not related
to John Huang) participated in a fund-raiser the Sioeng family
held for a local candidate (Julia Wu) at the Metropolitan Hotel
in 1994. Faye Huang subsequently approached the family for
contributions on behalf of Fong. She courted both Sioeng and
Jessica aggressively, and Sieong eventually made his
contributions in April 1995. The checks were filled out in part
by Faye Huang.
On April 22, 1997, after press stories had appeared linking
Sioeng to the campaign finance scandal, Fong returned the
contributions from Sioeng and Panda Estates. Fong had requested
that Sioeng and Jessica verify that the contributions were not
from foreign sources.31 When Sioeng and his daughter
failed to respond within a 24-hour deadline, Fong returned the
contributions, stating, ``I want absolutely no cloud, no
suspicion, no doubt about my campaign conduct or my performance
in public office.'' 32
---------------------------------------------------------------------------
\31\ See Paul Jacobs and Dan Morain, ``Fong Returns $100,000 in
Gifts,'' Los Angeles Times, April 23, 1997, p. A3.
\32\ Id.
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By letter dated May 27, 1997, attorneys for Jessica and
Panda Estates responded to Fong.33 The letter
criticizes ``Mr. Fong and his campaign [for joining] in the
shameful rhetoric directed at Asian-Americans.'' 34
It states further that Jessica relied ``upon the direct
representations made by the Fong campaign . . . that Panda
Estates could properly contribute to Mr. Fong's campaign.''
35 Although the letter notes that Panda Estates
operated the Doheny Estates condominium complex in Beverly
Hills, it does not represent--let alone prove--that the source
of the Panda Estates contribution to Fong was its domestically-
generated income. In fact, the Committee has determined that at
least a portion of one Sioeng contribution to Fong was made
with foreign money.
---------------------------------------------------------------------------
\33\ Letter from Mark J. MacDougall and Steven R. Ross to William
R. Turner, May 27, 1997. (Ex.10). The letter indicates that it was sent
after Fong's deadline because ``Ms. Elnitiarta was traveling at the
time [Fong's] letter arrived.''
\34\ Id.
\35\ Id.
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3. Contribution to the National Policy Forum
On July 18, 1995, Panda Industries made a $50,000
contribution to the National Policy Forum (NPF). Exactly how
this came about is uncertain, though it appears Sioeng's
acquaintance with the NPF began with Matt Fong. Perhaps in
gratitude for Sioeng's earlier contributions, Fong arranged in
June 1995 for Sioeng to have his picture taken with Speaker
Gingrich in Washington, DC. Later, Fong sent a letter in
support of a Los Angeles badminton tournament Sioeng
underwrote, and arranged for Gingrich to send a similar letter.
Around the same time, Sioeng and Elnitiarta took steps to
host a fall 1995 fund-raiser featuring Speaker Gingrich at
their Los Angeles hotel. They thought such an event would add
to the hotel's prestige. The fund-raiser ended up occurring at
another Los Angeles hotel, but Sioeng and family members
nevertheless attended the event. The July 18, 1995 contribution
of $50,000 to the NPF was solicited by a fund-raiser named
Steve Kinney. Elnitiarta characterized it as a gesture of
gratitude for the photo with the Speaker and also an attempt
(unsuccessful, as it turns out) to persuade people to hold the
fund-raiser at the family hotel.
Although discussed in detail elsewhere in the report,
36 some brief background information on the NPF is
warranted. The NPF was an independent 501(c)(4) organization
created by Haley Barbour to serve as a grass roots organization
for the Republican exchange of ideas. It had no PAC, donated no
money, and did not advocate the election or defeat of any
candidate. It was not legally prohibited from accepting foreign
money.
---------------------------------------------------------------------------
\36\ See the section of this report on the National Policy Forum.
See also infra note 84.
---------------------------------------------------------------------------
part iii. analysis of sioeng/elnitiarta/tanuwidjaja political
contributions made with foreign money: 1995-96
Ted Sioeng, Jessica Elnitiarta, the family's businesses,
and their in-laws, the Tanuwidjajas, made a number of
significant political contributions in 1995 and 1996. In total,
the Sioeng family and businesses spent over half a million
dollars on the 1996 elections.
The Committee has examined bank records relevant to most of
family's large political contributions and discovered a
recurring pattern: wire transfers from Hong Kong companies to
Sioeng & Co. accounts in the United States. Five companies--
Pristine Investments Limited, R T Enterprises Limited, Dragon
Union Limited, Mansion House Securities, and Victory Trading
Company--believed to be based in Hong Kong, are the apparent
source of funding for many of the Sioeng family's activities in
this country. In 1995 and 1996, these companies transferred
millions of dollars from Hong Kong banks into U.S. accounts
held by Sioeng's sister, Yanti Ardi.37 Jessica
Elnitiarta, who held a durable power of attorney over Ardi's
account,38 distributed money from the account to
other Sioeng family accounts and directly to Sioeng-related
businesses and interests. Funds from Ardi's account eventually
were used to make political contributions, to purchase and
subsidize the International Daily News, and to fund other
activities in this country.
---------------------------------------------------------------------------
\37\ The account in Ardi's name was not the only one used as a
conduit for foreign funds. On November 13, 1995, the Sioeng family set
up another such account at the Grand National Bank, this one in the
name of Nanny Nitiarta, an Indonesian citizen of unknown relation to
the family. Like Ardi's account, Nanny's appears to have been used to
shift money from overseas to various Sioeng-family accounts and
business interests. For example, on November 5, 1996, Nanny's account
was credited with a $700,000 wire transfer from a Hong Kong account
held by R T Enterprises Limited. (Ex. 11). A day later, Jessica wrote a
check on Nanny's account for $140,000 to the International Daily News.
(Ex. 12). The check was reversed because Jessica did not have signature
authority over the account (Ex. 13) (though she had signed other checks
and authorized other transfers that were not reversed). On November 8,
1996, $700,000 was transferred from Nanny's account to Yanti's. (Ex.
14). Jessica remedied the signature problem by executing a durable
power of attorney over Nanny's account on November 20, 1996. (Ex. 15).
Nanny's account was closed on March 14, 1997.
\38\ Grand National Bank Durable Power of Attorney to Jessica G.
Elnitiarta, December 20, 1995. (Ex. 16).
---------------------------------------------------------------------------
Jessica's use of Yanti Ardi's U.S. bank account as a
holding pen for funds wired in from Hong Kong raises questions
about the origins of the Sioeng family's money as well as its
intended use in the United States. As noted, the Committee has
discovered that millions of dollars were wired into the U.S.
from Hong Kong bank accounts held in the names of foreign
firms. Because of the Committee's inability to compel
production of bank records located outside U.S. borders, the
Committee cannot determine the source of the dollars wired into
Sioeng family accounts in this country.
The Committee's analysis of Sioeng family bank records
reveals that at least $200,000 in contributions to the DNC
derived from foreign sources. In addition, some $16,000 in
contributions to Matt Fong are linked to foreign money. The
Majority staff has determined that the following contributions
derive in whole or in part from foreign funds: 39
---------------------------------------------------------------------------
\39\ See chart listing the largest Sioeng family contributions (Ex.
17).
------------------------------------------------------------------------
Check
Account name Donee Check date amount
------------------------------------------------------------------------
Panda Estates Investment...... Matt Fong..... 12/14/95 $50,000
Jessica Elnitiarta............ DNC........... 2/19/96 100,000
Panda Estates Investment...... DNC........... 7/12/96 50,000
Subandi Tanuwidjaja........... DNC........... 9/9/96 60,000
Subandi Tanuwidjaja........... DNC........... 9/19/96 20,000
------------------------------------------------------------------------
Only the Fong contribution has been returned. The DNC has
refused steadfastly to give back any of the Sioeng family
contributions.
The sections that follow discuss in detail the Sioeng
family contributions listed on Exhibit 17. The discussion
largely revolves around bank records produced to the Committee
pursuant to subpoenas. The records support the conclusions
drawn above; namely, that a substantial portion of the Sioeng
family contributions were made with foreign money.
A. DNC contributions
1. 2/19/96; Jessica Elnitiarta; $100,000
On February 19, 1996, Jessica Elnitiarta wrote a check for
$100,000 to the DNC.40 A DNC check tracking form
indicates the contribution related to a dinner held on the same
date at the Hay Adams hotel.41 Although the $100,000
check is dated February 19, 1996, it was not paid until
February 26, 1996.42
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\40\ $100,000 check from Jessica G. Elnitiarta to the DNC, Feb. 19,
1996. (Ex. 18).
\41\ DNC Check Tracking Form for Jessica G. Elnitiarta (Ex. 19).
\42\ Grand National Bank account statement for account number
210473306, Feb. 1-29, 1996. (Ex. 20).
---------------------------------------------------------------------------
As of February 19, 1996, Elnitiarta's account carried a
balance of less than $10,000.43 However, on February
22, 1996, Elnitiarta transferred $200,000 to her account from
Yanti Ardi's.44 Days later, half of this money was
used to satisfy the check Elnitiarta wrote to the DNC on
February 19, 1996. The source of funds in Yanti Ardi's account
at that time appears to be a $518,433.56 wire transfer from an
account maintained at the Hong Kong branch of the Dutch ING
Bank by a company called Pristine Investments,
Ltd.45 The wire transfer took place on February 12,
1996. Prior to the transfer, Ardi's account carried a balance
of less than $3,000.46 There were no additional
deposits into Ardi's account between February 12 and 22, 1997.
---------------------------------------------------------------------------
\43\ Id.
\44\ Grand National Bank Funds Transfer Authorization, Feb. 22,
1996. (Ex. 21).
\45\ Grand National Bank Miscellaneous Credit form, Feb. 12, 1996.
(Ex. 22).
\46\ Grand National Bank account statement for account number
240417614, Feb. 1-29, 1996. (Ex. 23).
---------------------------------------------------------------------------
In short, bank records indicate that Jessica Elnitiarta's
February 19, 1996 contribution of $100,000 to the DNC was made
with substantially all foreign funds.
2. 7/12/96; Panda Estates (family business); $100,000
Panda Estates Investment Inc. contributed $100,000 to the
DNC on July 12, 1996 from an account the report will refer to
as ``Panda 801.''47 At the time, the Panda account
had a negative balance of $598.55.48 The check to
the DNC was paid on July 25, 1996, leaving the Panda account
with a negative balance of $100,124.75.49 On July
26, 1996, $100,000 was transferred from a second Panda account
(``Panda 814'') to Panda 801,50 bringing the balance
of Panda 801 to negative $2,351.29.51 Hence, the
Panda 814 account was the source of the contribution from Panda
801.
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\47\ $100,000 check from Panda Estates Investment, Inc. to DNC,
July 12, 1996. (Ex. 24).
\48\ Grand National Bank account statement for account number
200739801, June 29-July 31, 1996. (Ex. 25).
\49\ Id.
\50\ Grand National Bank Customer Authorization for Funds Transfer,
July 26, 1996. (Ex. 26).
\51\ Ex. 25.
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The sources of the funds for Panda 814's $100,000 transfer
to Panda 801 appear to be (1) rental income received by Panda
Estates and (2) a $60,000 transfer from Yanti Ardi's U.S.
account. On July 25, 1996, Panda 814 carried a balance of
approximately $50,000,52 or not enough to cover a
$100,000 transfer. On July 26, 1996, a $60,000 check from Yanti
Ardi was deposited in Panda 814--a check whose source appears
to be funds received by wire transfer from a bank in Hong
Kong.53 On June 28, 1996, Yanti Ardi's U.S. account
was credited with $1,652,479.98, which had been transferred by
R. T. Enterprises Ltd. from the ING bank in Hong
Kong.54 On June 27, 1996, Ardi's account balance was
under $5,000.55 After the large R. T. Enterprises
transfer, there were no additional deposits into Ardi's account
until after the July 26, 1996 $60,000 transfer to Panda
814.56
---------------------------------------------------------------------------
\52\ Grand National Bank account statement for account number
200739814, June 29-July 31, 1996. (Ex. 27).
\53\ $60,000 check from Yanti Ardi to Panda Estates Investment,
Inc., July 26, 1996. (Ex. 28).
\54\ Grand National Bank Miscellaneous Credit form, June 28, 1996.
(Ex. 29).
\55\ Grand National Bank account statement for account number
240417614, June 1-28, 1996. (Ex. 30).
\56\ Grand National Bank account statement for account number
240417614, June 29-July 31, 1996. (Ex. 31).
---------------------------------------------------------------------------
In short, at least $50,000 of Panda Estate's $100,000 July
12, 1996 contribution to the DNC can be traced to foreign
money.57
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\57\ Panda Estates Investment Inc. contributed $50,000 to the DNC
by check dated July 29, 1996 and drawn on the Panda 801 account. (Ex.
7). At the time the check was written, the Panda 801 account carried a
negative balance. (Ex. 25). The check was not paid until August 6,
1996, the same day two wire transfers totaling $50,000 were deposited
into the Panda 801 account. Grand National Bank Account statement for
account number 200739801, Aug. 1-Aug. 30, 1996 (Ex. 32). One transfer,
in the amount of $40,000, came from the Panda 814 account. Grand
National Bank Funds Transfer Authorization, Aug. 6, 1996 (Ex. 33). The
other transfer, this for $10,000, came from Code 3 U.S.A. Grand
National Bank account statement for account number 200739814, Aug. 6,
1996 (Ex. 34), which the Committee understands to be a gun shop run by
Elnitiarta's husband.
The $40,000 from Panda 814 was funded by a number of small
deposits, which appear to be rental payments made to Panda Estates.
Grand National Bank account statement for account number 200739814 (Ex.
35). The Committee does not know the source of the $10,000 wired from
Code 3. Hence, from the documents reviewed by the Committee, the July
29, 1996 Panda Estates contribution cannot be traced to foreign money.
3. 9/9/96; Subandi Tanuwidjaja; $60,000
9/19/96; Subandi Tanuwidjaja; $20,000
The Tanuwidjaja's contributed $100,000 to the DNC through
three checks dated in September 1996.58
Contributions dated September 9 and 19, 1996 and totaling
$80,000 were from Subandi Tanuwidjaja, son of Susanto
Tanuwidjaja, and the man who married Ted Sioeng's daughter,
Laureen. A contribution of $20,000 dated September 16, 1996 was
made by Suryanti.
---------------------------------------------------------------------------
\58\ $60,000 check from Subandi Tanuwidjaja to the DNC, Sept. 9,
1996. (Ex. 8). $20,000 check from Subandi Tanuwidjaja to the DNC, Sept.
19, 1996 and $20,000 check from Suryanti Tanuwidjaja to the DNC, Sept.
16, 1996. (Ex. 36).
---------------------------------------------------------------------------
The September 9 and 19 contributions from Subandi appear to
be covered by a $100,000 check from Susanto dated September 6,
1996,59 and a $20,000 wire transfer on September 18,
1996 from Dragon Union Ltd.'s account at the Hua Chiao
Commercial Bank Ltd. in Hong Kong.60 It is clear
from markings known as ``imad'' characters on the lower left of
the wire transfer report that the funds were, in fact,
transferred from Hua Chiao's Hong Kong branch.61
---------------------------------------------------------------------------
\59\ $100,000 check from Susanto Tanuwidjaja to Subandi
Tanuwidjaja, Sept. 6, 1996. (Ex. 37).
\60\ Reprint of Incoming Wire Traffic, Sept. 18, 1996. (Ex. 38).
\61\ Id.
---------------------------------------------------------------------------
On September 8, 1996, Subandi's account carried a balance
of less than $5,000.62 On September 9, 1996, the
$100,000 check from Susanto was deposited into Subandi's
account.63 On the same day, Subandi wired $38,000 to
a bank in Singapore,64 leaving a balance of
$66,049.99, or enough to cover Subandi's $60,000 check to the
DNC, also dated September 9, 1996.65 On September
18, 1996, Subandi's account was credited with the $20,000 wired
by Dragon Union Ltd, increasing the balance to
$86,039.99.66 Thereafter, the two DNC checks were
cashed; the $60,000 check on September 27 and the $20,000 check
on October 4, 1996.67
---------------------------------------------------------------------------
\62\ Western State Bank account statements for account number
033100-153947, Aug.-Oct. 1996. (Ex. 39).
\63\ Id.
\64\ Memorandum and report of outgoing wire traffic from Subandi
Tanuwidjaja to Western State Bank, Sept. 9, 1996. (Ex. 40).
\65\ Ex. 39.
\66\ Id.
\67\ Id.
---------------------------------------------------------------------------
The $100,000 check from Susanto to Subandi can be traced in
large part to a foreign source. Susanto's account carried a
balance of less than $3,000 68 when it was credited
with a wire transfer in the amount of $99,985 from an account
maintained by Subandi in Jakarta, Indonesia.69
Again, it is clear from the ``imad'' characters on the left
side of the wire transfer report that the funds were
transferred from Subandi's United City Bank account in
Jakarta.70 There were only two other deposits into
Susanto's account between August 22 and September 9, 1996--one
for $20,000 on August 30 and one for $10,000 on September 3,
1996.71 These two deposits, however, appear
connected to debits in similar amounts.72
---------------------------------------------------------------------------
\68\ Western State Bank account statements for account number
033200-055538, Aug.-Oct. 1996. (Ex. 41).
\69\ Report of incoming wire traffic, August 22, 1996. (Ex. 42).
\70\ Id.
\71\ Ex. 41.
\72\ Id.
---------------------------------------------------------------------------
In any event, it is clear that Subandi's $80,000 in
contributions to the DNC derived mostly--if not entirely--from
foreign funds.
The Majority staff has obtained corporate records for
Dragon Union Ltd. in Hong Kong and have attached them as an
exhibit.73 The records show that Subandi
Tanuwidjaja's links to the company; he was made a director of
Dragon Union on January 27, 1997. Subandi's connection to
Dragon Union would tend to suggest he may have been aware that
foreign money was being used to make contributions to the
DNC.74
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\73\ The Companies Ordinance of Dragon Union Limited, Dec. 11, 1996
(Ex. 43).
\74\ Two other large Sioeng-family contributions to the DNC bear
mention, although the Committee has not been able to determine whether
or not they were made with foreign money. By check dated September 16,
1996, (Ex. 36), Suryanti Tanuwidjaja contributed $20,000 to the DNC.
Suryanti's contribution to the DNC was not paid until September 30,
1996. Bank of America statement of Suryanti Tanuwidjaja, Oct. 30, 1996
(Ex. 44). On September 18, 1996, Suryanti's savings account was
credited with a $20,000 wire transfer from Dragon Union Ltd.'s account
at the Hua Chiao Commercial Bank Ltd. in Hong Kong. Funds Transfer
History, Sept. 18, 1996 (Ex. 45). On the same day, Suryanti transferred
$24,000 from her savings to her checking account at Bank of America.
Bank of America statement of Suryanti Tanuwidjaja, Sept. 27, 1996 (Ex.
46).
Although the timing appears suspicious, the Committee has not been
able to identify conclusively the $20,000 wire transfer from Dragon
Union as the source of Suryanti's contribution to the DNC in the same
amount. There were sufficient additional funds in Suryanti's savings
account to cover the $24,000 transfer to checking. (Id.). Likewise,
there were sufficient additional funds in Suryanti's checking account
to cover the DNC check on September 30, 1996, the day it was paid. (Ex.
44).
Loh Sun International, Inc. contributed $50,000 to the DNC by check
dated July 29, 1996 and signed by Kent La. (Ex. 9). The check was not
paid until August 5, 1996, at which point the Loh Sun account carried a
balance of more than $250,000. Union Pacific Bank Records for Loh Suh
International, Aug. 30, 1996 (Ex. 47). On July 24, 1996, the Loh Sun
account was credited with $97,555, which had been wired by R T
Enterprises Limited from an account at a Hong Kong branch of the Dutch
ING Bank. Union Pacific Bank records for Loh Suh International, Inc.,
July 31, 1996 (Ex. 48). Although this was the largest deposit made into
Loh Sun's account in 1996 and the only one that, on its face, clearly
was made with foreign funds, the Committee was unable to determine
whether the money wired to Loh Sun by R T Enterprises was used to make
the DNC contribution. There was simply too much other money in Loh
Sun's account.
---------------------------------------------------------------------------
B. Matt Fong contribution
12/14/95; Panda Estates (family business); $50,000
The Committee has determined that one of three Sioeng-
family contributions to Matt Fong was made, in part, with
foreign money. Fong returned all of the contributions in April
1997.
Panda Estates Investment Inc. contributed $50,000 to Matt
Fong for State Treasurer on December 14, 1995.75 The
check was signed by Jessica Elnitiarta and paid on December 18,
1995.76 The balance in Panda Estates' account at
that time was only $7,000, and the check to the Matt Fong (and
one other check) left Panda with a negative balance of
$43,888.55.77
---------------------------------------------------------------------------
\75\ $50,000 Grand National Bank check from Panda Estates
Investment Inc. to Matt Fong for State Treasurer, Dec. 14, 1995. (Ex.
49).
\76\ Grand National Bank account statement for account number
200739801, Dec. 1-29, 1995. (Ex. 50).
\77\ Id.
---------------------------------------------------------------------------
On December 19, 1995, $50,000 was transferred to the Panda
account from one of Yanti Ardi's Grand National Bank
accounts.78 On December 11, 1995, Ardi's account was
credited with a wire transfer of $150,000 from a Hong Kong
account maintained by Pristine Investments
Limited.79 At the time, Ardi's account carried a
balance of approximately $34,000,80 which, in turn,
was the remainder of a $562,500 deposit into Ardi's account on
November 15, 1995.81 The $562,500 deposit was from a
check written on an account held in the name of Sandra and
Laureen Elnitiarta,82 an account the Committee does
not have records for.
---------------------------------------------------------------------------
\78\ Grand National Bank Customer Authorization for Funds Transfer,
Dec. 19, 1995. (Ex. 51).
\79\ Grand National Bank Miscellaneous Credit form, Dec. 11, 1995.
(Ex. 52).
\80\ Grand National Bank account statement for account number
240979814, Dec. 1-29, 1995. (Ex. 53).
\81\ Grand National Bank account statement for account number
240979814, November 13-30, 1995. (Ex. 54).
\82\ $562,500 Grand National Bank check from Sandra and Laureen
Elnitiarta to Yanti Ardi, November 15, 1995. (Ex. 55). Laureen
Elnitiarta's signature appears on the check.
---------------------------------------------------------------------------
In sum, the records reviewed by Committee staff show that
at least $16,000 of the $50,000 contribution from Panda Estates
to Matt Fong derived from a foreign source.83
---------------------------------------------------------------------------
\83\ The Committee examined two other Sioeng-family contributions
to Fong that cannot be traced to foreign sources from the information
at hand. Sioeng San Wong (a.k.a. Ted Sioeng) contributed $20,000 to
Matt Fong by check dated April 20, 1995. Check 671 to Matt Fong for
State Treasurer from Sioeng San Wong, Apr. 20, 1995 (Ex. 56). The check
was paid on April 27, 1995. Grand National Bank account statement for
Sioeng San Wong, Apr. 1-Apr. 28, 1995 (Ex. 57). Two days earlier,
Sioeng's account carried a balance of near zero. It appears that the
Fong check was covered by a $30,000 transfer on April 26, 1995 from
Sundari and Laureen Elnitiarta. Statement of Transfer, Apr. 26, 1995
(Ex. 58). Referred to as a ``loan advance,'' the $30,000 transfer
represented the only funds in Sioeng's account at the time his check to
Matt Fong was paid. (Ex. 57). The Committee does not know the source of
the $30,000 transferred from Sundari and Laureen to Sioeng.
Sioeng San Wong wrote another check to Matt Fong--this one for
$30,000--on April 28, 1995. Grand National Bank check from Sioeng San
Wong to Matt Fong for State Treasurer for $30,000, Apr. 28, 1995 (Ex.
59). This check was paid on May 2, 1995. Grand National Bank account
statement of Sioeng San Wong, Apr. 29-May 31, 1995 (Ex. 60). At the
time, Sioeng's account still had roughly $10,000 left from Sundari and
Laureen's loan advance and an additional $30,000 from a check written
on the account of a Glenville A. Stuart. Grand National Bank check from
Glenville Stuart to Sioeng San Wong for $30,000, Apr. 28, 1995 (Ex.
61). The check was deposited on April 28, 1995. (Ex. 57).
Committee staff spoke to Mr. Stuart about the $30,000 check on
November 3, 1997. Stuart, who said he has known Ted Sioeng for ten
years, claimed the check was written in partial satisfaction of a loan
Ted Sioeng had extended to him. Stuart said no one gave him the money
to give to Sioeng and that he does not recall Sioeng asking him for it.
He said that Jessica Elnitiarta, however, may have asked him for the
money. Stuart declined to discuss what line of business he is in.
Committee staff asked Stuart about Sioeng and his family more
generally. Stuart characterized Sioeng as a kind, good-hearted, and
generous man with lots of friends from all over the world. Sioeng, who
Stuart knows as ``Sioeng San Wong,'' is frightened now, according to
Stuart, who has not seen Sioeng in quite some time. Stuart also knows
Jessica Elnitiarta, who he said handles the Sioeng family businesses in
this country.
---------------------------------------------------------------------------
C. Other contributions and questionable transactions 84
---------------------------------------------------------------------------
\84\ Note that the Committee could not determine whether Panda
Industries' $50,000 contribution to the National Policy Forum (NPF) was
made with domestic or foreign money. The Committee's analysis follows.
Panda Industries, Inc. contributed $50,000 to the NPF. Grand
National Bank check from Panda Industries signed by Jessica Elnitiarta
(Ex. 62). The check was paid on Aug. 3, 1995. Grand National Bank
statement of Panda Industries, Account number 240539301, Aug. 1-Aug.
31, 1995. (Ex. 63).
Because of multiple deposits into and withdrawals from the Panda
Industries account during the relevant time frame, the Committee has
been unable to pinpoint one particular source--domestic or foreign--for
Panda's contribution to the NPF. That said, there are two potential
sources of funds for the $50,000 contribution. On July 17, 1995, Panda
Industries deposited a $50,000 check written the same day on Sioeng San
Wong's account. Grand National Bank check from Sioeng San Wong to Panda
Industries, Inc. for $50,000 (Ex. 64). Prior to this deposit, the Panda
Industries account carried a balance of roughly $1,300. Grand National
Bank statement of Panda Industries, Inc. account number 240539301, July
1-July 31, 1995 (Ex. 65). Also on July 17, 1995, $70,000 was deposited
into Sioeng San Wong's account. The $70,000 derived from a check
written on Vinh B. La's account at the United Pacific Bank. United
Pacific Bank check written by Vinh B. La to Cash, July 17, 1995 (Ex.
66). This $70,000 appears to be the source of Sioeng's $50,000 transfer
to Panda Industries as, save for the $70,000, Sioeng's account carried
a balance of less than $5,000. Grand National Bank statement for Sioeng
San Wong, account 210459806, July 1-July 31, 1995 (Ex. 67).
It is difficult to trace the source of the $70,000 transferred from
Vinh La's account. On the day the check was paid (July 18, 1995), La's
account carried a balance of $101,326.93. United Pacific Bank Statement
of Vinh Binh La, account 001-017438, July 25, 1995 (Ex. 68). Half of
this amount is attributable to a July 14, 1995 deposit of $50,000
withdrawn from a savings account maintained by Loh Sun International at
the United Pacific Bank. United Pacific Bank deposit slip for account
of La Vinh Binh, July 14, 1995 (Ex. 69). The savings withdrawal request
was signed by Kent La, who later signed a contribution check from Loh
Sun to the DNC. Id.
The source of the $50,000 withdrawal from Loh Sun's United Pacific
Bank savings account appears to be a transfer from a Loh Sun checking
account maintained at the same bank. Loh Sun's savings account was
opened with a deposit of a $200,000 check, dated January 4, 1995,
written on Loh Sun's checking account. United Pacific Bank statement of
Loh Sun International, Inc. account 001-409204, Jan. 31, 1995 (Ex. 70).
An examination of the quarterly statements for Loh Sun's savings
account from the time it was opened until the $50,000, July 1-July 31,
1995 withdrawal was made on July 14, 1995 reveals that the withdrawal
derived from the $200,000 deposited on January 4, 1995. United Pacific
Bank statement of Loh Sun International, Inc., account 001-720-806,
Mar. 31, 1995 (Ex. 71). There were no other significant deposits made
into the account during this time period. Id. The Committee does not
know the source of the $200,000 transferred from Loh Sun's checking
account.
The second potential source of Panda Industries' contribution to
the NPF was an $80,000. telephone transfer into the Panda Industries'
account. The transfer was made on July 24, 1995 and increased the
balance in the account to $124,877.52. (Ex. 65). The Committee has
learned that the telephone transfer was requested by Jessica Elnitiarta
and made from another account maintained in the name of Panda
Industries (``PI 314''). Customer Authorization for Funds Transfer,
July 24, 1995 (Ex. 72). However, the Committee could not determine with
the information at hand the source of the $80,000 transferred from PI
314.
In sum, the Committee cannot determine whether any portion of Panda
Industries' $50,000 contribution to the NPF derived from a foreign
source.
---------------------------------------------------------------------------
PRC Consulate in Los Angeles--two $20,000 checks,
both dated November 15, 1996 and consecutively numbered, were
written on Jessica Elnitiarta's account to the PRC Consulate
General in Los Angeles.85 The checks were deposited
by the Consulate in its ``Education Section'' account; an
account that appears to have been opened with Elnitiarta's
money.86 The purpose behind these checks--and why
two were written instead of one--is not known.
---------------------------------------------------------------------------
\85\ Two $20,000 checks from Jessica G. Elnitiarta to the Consulate
General of the PRC (Education Section), November 15, 1996. Grand
National Bank check number 442 & 443 from Jessica G. Elnitiarta to
Consulate General of the PRC (education section) for $20,000, Nov. 15,
1996 (Ex. 73).
\86\ Bank of China account statement for account number 5011-
0600059-000, December 31, 1996. (Ex. 74). The two $20,000 checks were
credited to the L.A. Consulate's Education Section account as a $4,000
and a $36,000 deposit. A Bank of China representative could not explain
why the two checks were credited in that way.
---------------------------------------------------------------------------
Overseas Chinese Friendship Association--a $10,000
check was written on Sioeng San Wong's account to the ``O.C.
Chinese Friendship Ass.'' on April 15, 1995.87 The
memo line the check indicates that it was meant as a donation.
The Committee could not determine the nature of the donation.
The check may have been intended for an organization called the
Overseas Chinese Friendship Association. The association was
set up at the direction of the PRC's Communist Party apparatus,
specifically, the National Committee of the Chinese People's
Political Consultative Conference (``CPPCC''), and was meant to
forge and strengthen ties between the United Front Work
Department of the CPPCC Central Committee and overseas Chinese
in this country and elsewhere.88
---------------------------------------------------------------------------
\87\ $10,000 Grand National Bank check from Sioeng San Wong to the
O.C. Chinese Friendship Ass., April 15, 1995. (Ex. 75).
\88\ BBC Summary of World Broadcasts, January 20, 1995.
---------------------------------------------------------------------------
Dr. Daniel Wong--a $5,000 check was written to
Wong on the account of Sundari, Sandra, and Laureen Elnitiarta
on February 15, 1996.89 Wong is a Republican who ran
for the California State Assembly.
---------------------------------------------------------------------------
\89\ $5,000 Grand National Bank check from Sundari, Sandra, and
Laureen Elnitiarta to Dr. Daniel Wong, February 15, 1996. (Ex. 76).
---------------------------------------------------------------------------
Norman Hsu--a $7,500 check was written on Sioeng
San Wong's account to Friends of Norman Hsu on March 11,
1995.90 Hsu is a former president of the Chinese-
American Association.
---------------------------------------------------------------------------
\90\ $7,500 Grand National Bank check from Sioeng San Wong to
Friends of Norman Hsu, March 11, 1995. (Ex. 77).
---------------------------------------------------------------------------
PRC Consulate in Los Angeles to Hollywood
Metropolitan Hotel--a $3,000 check, dated March 22, 1996, was
written on the PRC Consulate's account at the Bank of China,
Los Angeles branch to the Hollywood Metropolitan Hotel, a
business owned and operated by the Sioeng family.91
Three days later, the check was deposited into a Grand National
Bank account maintained by Panda Hotel Investment,
Inc.92 Nothing on the check itself or told to the
Committee by Jessica helps explain the instrument's purpose.
---------------------------------------------------------------------------
\91\ $3,000 Bank of China check from the Consulate General of the
People's Republic of China to the Hollywood Metropolitan Hotel, March
22, 1996. (Ex. 78).
\92\ Id.
---------------------------------------------------------------------------
part iv. conclusion
The story of Ted Sioeng and his family is a fascinating
glimpse at how quickly an individual or family--even one with
markedly limited U.S.-based income and with the vast majority
of its wealth overseas--can become an influential figure with a
political party or in an election. In Sioeng's case, some
$400,000 in contributions to the DNC in 1995 and 1996 earned
him remarkable access to the President and Vice President of
the United States, and not just for him, but for his family and
friends as well.
The Sioeng story, though, has only been partially told by
the Committee. Still to be answered are many questions, among
them the following:
Was money sent by Sioeng from Hong Kong to the
United States for the express purpose of making political
contributions;
What was the ultimate source of the funds Sioeng
wired from Hong Kong to accounts in this country;
What was the nature of Sioeng's relationship with
the Government of China; and
Why did Sioeng and his family decide to start
making large political contributions during the 1996 election
cycle.
It is clear that Sioeng and his family became major
Democratic donors during the 1996 election cycle and that they
did so with money wired from overseas. The questions above take
the analysis to a new level--one that focuses less on the
Sioeng family's contributions and more on their motives for
making them. Until the questions are answered, Sioeng, like
Charlie Trie, John Huang, Maria Hsia, and others, will remain a
mysterious figure who was embraced all-too eagerly by a money-
hungry DNC.
John Huang's Years at Lippo
In the fall of 1996, John Huang was brought out of the
obscurity of the DNC fundraising operation and into the media
spotlight as a central character in the DNC fundraising
scandal. A prominent figure through the course of the
Committee's investigation, Huang appeared as a key player in
numerous questionable fundraising ventures, including the Hsi
Lai Temple fundraiser and the Yogesh Gandhi
imbroglio.1 Huang solicited approximately $1.6
million that has been returned to date by the DNC. Further,
Huang apparently violated the Hatch Act in that certain
solicitations were undertaken during his tenure at the Commerce
Department.
---------------------------------------------------------------------------
\1\ See the sections of this report on the Hsi Lai Temple
fundraiser and Yogesh Gandhi.
---------------------------------------------------------------------------
Huang's connections to his long-time patrons, the Riady
family, at Indonesia's Lippo Group linked his past with his
questionable fundraising practices. Two further discoveries
pushed an examination of the Lippo Group and its U.S.
activities to the top of the Committee's investigative agenda:
First, the Committee learned that Huang obtained a security
clearance in connection with his appointment to the Commerce
Department and received classified briefings on sensitive trade
issues of importance and value to Lippo, despite his
exceedingly modest policy portfolio.2 Second,
extensive evidence emerged of Huang's continuing contacts with
Lippo after he had left its employ. The following discussion
sets forth the Committee's findings concerning the history and
structure of the Lippo Group, Huang's role as the U.S.
representative of Lippo, and Huang's role in laundering Lippo
and Riady monies into the U.S. political system. In brief, the
evidence accumulated by the Committee establishes a pattern of
John Huang undertaking questionable and illegal activities in
the service of his Lippo Group sponsors.
---------------------------------------------------------------------------
\2\ See generally the section of this report on Huang's tenure at
Commerce.
---------------------------------------------------------------------------
the lippo group
The Committee heard expert testimony on the history and
structure of the Lippo Group from Thomas R. Hampson, an
investigator who specializes in advising U.S. corporations
considering international acquisitions and joint ventures.
Hampson, using publicly available sources as well as documents
produced to the Committee pursuant to subpoena, developed the
following profile of the Lippo Group, which was presented to
the Committee in public hearings held July 15,
1997.3
---------------------------------------------------------------------------
\3\ Testimony of Thomas R. Hampson, July 15, 1997, pp. 60-73.
Except as otherwise noted, the following background information on
Lippo is drawn from the Hampson's testimony.
---------------------------------------------------------------------------
The Lippo Group is a multi-billion dollar confederation of
companies controlled by the Riady family of Indonesia. Starting
from a retail banking base in Indonesia, the Lippo Group has
grown over three decades to encompass banking, finance,
insurance, property-development, and manufacturing interests
concentrated in Indonesia, China and the United States.
The Chairman of the Lippo Group is Dr. Mochtar Riady, an
Indonesian of Chinese descent. Today, Lippo Group is managed by
his two sons, Stephen and James. Stephen Riady is responsible
for Lippo Limited and the Hong Kong Chinese Bank Co., which are
based in Hong Kong and concentrate on banking and property
development in Hong Kong and mainland China. James Riady is
responsible for the flagship Lippo Bank of Indonesia, and he
also manages Lippo Land, a corporation constructing two new
cities on the outskirts of Jakarta. Throughout the 1980s and
early 1990s, John Huang was the chief representative of the
Lippo Group in the United States.
Over the past five years, the Lippo Group has shifted its
strategic center from Indonesia to the People's Republic of
China. Lippo is currently involved in dozens of large-scale
joint ventures in the PRC, involving the construction and
development of apartment complexes, office buildings, highways,
ports, and other infrastructure. Lippo's principal partner on
the mainland is China Resources, a company wholly-owned and
operated by the PRC government. The interrelationship between
Lippo and Chinese government-sponsored companies such as China
Resources (and China Travel, another Lippo partner) has grown
markedly in the last three years. Indeed, in the spring of
1997, Stephen Riady announced that the name of Lippo's Hong
Kong Chinese Bank would be changed to the Lippo China Resources
Bank, to reflect that China Resources is now an equal partner
with Lippo in the bank. Additionally, when Indonesia-based
Lippo Land faced a cash flow crisis that threatened a run on
Lippo Bank, China Resources injected tens of millions of
dollars into Lippo Land and became a substantial partner in
that entity as well.
Hampson testified that China Resources is widely reported
to be a corporate agent of economic and political espionage
serving the government of China. Intelligence officials have
confirmed in the press that the Chinese intelligence
establishment is heavily involved in the operation of China
Resources, and that China Resources selects overseas business
partners in part on the basis of their value as potential
intelligence gatherers.4
---------------------------------------------------------------------------
\4\ See, e.g., James Wood, ``Article Details Chinese Intelligence
Network in Hong Kong,'' BBC Summary of World Broadcasts, March 9, 1995,
p. 3.
---------------------------------------------------------------------------
lippobank california
In addition to heading-up Lippo Bank and Lippo Land, James
Riady owns 99% of LippoBank California, a federally insured
institution headquartered in Los Angeles. LippoBank is a small
California-chartered bank with less than one hundred million
dollars in assets. The bank has experienced chronic asset-
quality and management problems, and has been served with
numerous ``cease and desist'' orders by the F.D.I.C. The bank
has consistently generated losses. From 1986-1988, James Riady
served as the CEO of LippoBank. Although Riady continues to own
a house in Los Angeles, he moved back to Jakarta some time
before 1990.
The Committee heard testimony from Harold Arthur, a
director of LippoBank and its former CEO. Arthur testified that
the bank is part of the Indonesia-based Lippo
Group.5 James Per Lee, the current CEO, insisted in
deposition testimony that the relationship was limited to a
licensing agreement which allowed the bank to use the Lippo
name.6 James Alexander, another former CEO of the
bank, stated that the bank was not only part of the Lippo
Group, but was under the direct control of Indonesia-based
Lippo executives.7
---------------------------------------------------------------------------
\5\ Testimony of Harold R. Arthur, July 15, 1997, pp. 93-94.
\6\ Deposition of James Per Lee, May 2, 1997, pp. 11-19. Arthur was
called to testify at public hearings rather than Per Lee because the
focus of the Committee's inquiries was not the LippoBank per se, but
the activities of John Huang at the bank. Arthur worked directly with
Huang for more than five years.
\7\ Memorandum of Interview of James A. Alexander, July 7, 1997.
Per Lee's position that the bank is not part of the Lippo Group is
simply not tenable on the facts. In addition to the statements of
former CEOs Arthur and Alexander, the Committee found that (I)
LippoBank is listed as part of the Lippo Group in its promotional
materials, and even in the date book carried by Per Lee, see Per Lee
deposition, pp. 11-19; (ii) Per Lee and his predecessor CEOs attended
bi-annual Lippo Group meetings in Jakarta, see id.; (iii) Per Lee's own
appointment was announced in the Lippo Group Executive Express
newsletter, which holds itself out as a news source ``exclusively for
senior Lippo Group executives,'' see id.; and (iv) LippoBank receives
an annual budget for community and political affairs directly from the
Lippo Group in Jakarta, see Deposition of David Sugita, May 16, 1997,
pp. 30-33. The distinction is of import to regulators because it bears
on the veracity of representations which the bank has made to the
F.D.I.C. and state banking authorities, but also bespeaks the reach of
the Riady empire. Further, a true understanding of the relationship
between the LippoBank and the Lippo Group is necessary to a
consideration of the continuing communications between Huang and the
bank after he joined the Commerce Department. In a nutshell, calling
the LippoBank offices in Los Angeles--which Huang did hundreds of times
after he entered government service--was the functional equivalent of
calling Jakarta.
---------------------------------------------------------------------------
Huang at LippoBank
The Committee interviewed and deposed several of Huang's
LippoBank colleagues in an effort to gain an understanding as
to his activities and responsibilities while affiliated with
LippoBank.
Alexander told the Committee staff that Huang was James
Riady's ``man in America,'' and that he kept his activities
largely to himself.8 This latter assessment is borne
out by the testimony Arthur, who, although he worked in the
same office suite with Huang and claimed to have had a ``close
business relationship for many years,'' testified that he had
no idea how Huang passed his day.9 Per Lee, when
asked what Huang did, replied cryptically ``I don't know, I
don't know.'' 10 Despite the length of his
employment at Lippo, Huang's colleagues offered little insight
into his activities there and seemed to consider him something
of a mystery. The Committee has, however, been able to cast
some light into Huang's activities at LippoBank.
---------------------------------------------------------------------------
\8\ Alexander interview, p. 1.
\9\ Arthur testimony, p. 97.
\10\ Per Lee deposition, p. 34.
---------------------------------------------------------------------------
First, perhaps the most concise piece of evidence available
to the Committee as to John Huang's activities at Lippo was a
letter written by Maeley Tom, a Californian lobbyist and Lippo
consultant, to John Emerson, then the Deputy Director of
Presidential Personnel.11 In recommending Huang for
a position in the Administration, Tom opined that: ``John Huang
. . . is the political power that advises the Riady Family on
issues and where to make contributions. They invested heavily
in the Clinton campaign. John is the Riady family's top
priority for placement because he is like one of their own.''
12 This description is consistent with Alexander's
description of Huang as a ``fixer'' who operated in high
political circles.13
---------------------------------------------------------------------------
\11\ Letter from Maeley Tom to John Emerson, February 17, 1993 (Ex.
1).
\12\ See Ex. 1. As discussed below, the ``investments'' the Riady
family made in the campaign appear to have been funded with illegal
overseas monies laundered by Huang through U.S. holding companies.
\13\ See Alexander interview, p. 2. Alexander had left the bank by
the time Huang joined the Commerce Department. In discussions with a
director of the bank, Alexander was told about Huang's position and
that things were going well for the Riadys in Washington. The director,
apparently joking, said that Riady had ``his own office in the White
House.'' Id.
---------------------------------------------------------------------------
Second, Huang's activities can be reconstructed in part
through his correspondence, particularly a letter dated October
7, 1993 that Huang sent to the Office of the Vice President,
thanking the Vice President's Chief of Staff, Jack Quinn, for
meeting in the White House with Shen Jueren, the Chairman of
China Resources.14 China Resources, as discussed
above, is a PRC-owned entity widely reported to serve as a
front for Chinese intelligence services. China Resources is
also an important Lippo partner. It appears from Huang's
letter, as well as from a White House audio tape of the Los
Angeles function referenced in the letter, that Vice President
Gore may have met with Shen Jueren in the White House and also
exchanged words with him at a subsequent DNC
event.15 China Resources was no doubt impressed that
the Riady's ``man in America'' could gain an audience for its
Chairman with senior administration officials.16
Furthermore, as discussed later, it appears that Huang paid
Jueren's way into the White House with laundered Lippo Group
funds.17
---------------------------------------------------------------------------
\14\ Letter from John Huang to Jack Quinn, Oct. 7, 1993 (Ex. 2).
\15\ White House Communications Agency audio tape, Sept. 27, 1993.
See the section of this report on The Hsi Lai Temple Fundraiser and
Maria Hsia at notes 95-103 and accompanying text.
\16\ This was apparently not Huang's first connection with China
Resources, Alexander told the Committee that in 1991, Huang was sent to
Beijing to negotiate with China Resources over the Lippo proposal to
join forces to purchase the Hong Kong branch of B.C.C.I. See Alexander
interview, p. 2.
\17\ See footnote 31 infra.
---------------------------------------------------------------------------
Third, whatever the precise scope of Huang's services, it
is clear that he was well compensated for his achievements.
Like his salary, the generous severance payment Huang received
when he left Lippo's employ to join the Clinton Commerce
Department was paid through Hip Hing Holdings, Inc., a Riady
real estate holding company.\18\ Huang's total compensation for
1993-1994 was in excess of seven hundred and fifty thousand
dollars.19
---------------------------------------------------------------------------
\18\ Memorandum from Roy Tirtadji to John Huang, June 27, 1994 (Ex.
3).
\19\ Testimony of Juliana Utomo, July 15, 1997, pp. 15-19.
---------------------------------------------------------------------------
Finally, Huang's services for the Lippo Group clearly
extended beyond his formal period of employment. As is
discussed in detail elsewhere in this report, Huang had
hundreds of phone calls--well more than one per business day--
with Lippo-related persons and entities after he joined the
Commerce Department.20 LippoBank's CEO, Per Lee,
conducted his own inquiry after press reports of Huang's Lippo
contacts surfaced in the fall of 1996.21 To his
surprise, Per Lee found that his own secretary, Juwati
Judistira, was the originator of the bulk of the calls to Huang
from the bank. Per Lee was surprised because he had only talked
to Huang on one occasion to his recollection. Of note,
Judistira, who has left the United States and declined to speak
with the Committee staff, had never been Huang's secretary, but
rather she had been James Riady's secretary when he served as
President of the bank. Furthermore, when Per Lee asked
Judistira why she had placed so many calls to Huang, she said
she was ``relaying messages'' for him.22
---------------------------------------------------------------------------
\20\ See the section of this report on Huang at Commerce.
\21\ Per Lee deposition, pp. 93-97.
\22\ Id. at 97-99.
---------------------------------------------------------------------------
In sum, the evidence strongly suggests that Huang remained
in day-to-day contact with Lippo throughout his government
service.23 Because neither Huang nor virtually any
of the recipients of these calls has made themselves available
to answer the Committee's questions, the content of these
conversations and the information imparted therein remain
unknown.
---------------------------------------------------------------------------
\23\ Indeed, as discussed elsewhere in this report, Huang was cagey
in his efforts to hide his continued communications with Lippo, even
making use of a spare office at Stephens, Inc., across the street from
his Commerce Department office.
---------------------------------------------------------------------------
Huang was a long-standing and loyal emissary of the Riady
family, and was well compensated for his efforts. While his
undertakings cannot be catalogued in detail, he was responsible
for maintaining the political profile of his patrons. His
duties extended from shepherding China Resources' Chairman into
the White House, to positioning himself for an administration
position by becoming a player in Democratic politics. This last
effort involved using Riady money to fund favored candidates
and causes, and would appear to have accustomed Huang to the
use of foreign money in the domestic politics of the United
States.
Lippo and Riady Political Contributions
Huang was well versed in the ways of skirting United States
campaign finance laws before he joined the DNC, and, indeed,
before he had even left California. The Committee has
established that Huang funneled foreign-source monies through
three different Riady-controlled entities to the DNC during
1992 and 1993. The facts and documents underlying these
violations were presented during the Committee's public
hearings on July 15, 1997.
Juliana Utomo, a former colleague of Huang's, appeared
before the Committee and testified that Hip Hing Holdings,
Inc., and San Jose Holdings, Inc., are real estate holding
companies owned and/or controlled by James Riady and managed by
Huang.24 Utomo worked for Hip Hing Holdings and San
Jose Holdings from 1988 through late 1996. Utomo testified that
Huang made all decisions regarding political contribution
expenditures, and that Huang likewise approved all requests
which were made to the Lippo Group in Jakarta for operating
funds and expense reimbursement. Requests for funds were
frequent, typically monthly, because the expenses of the Hip
Hing entities generally exceeded their income.25
---------------------------------------------------------------------------
\24\ Utomo testimony, pp. 14-15.
\25\ Id.
---------------------------------------------------------------------------
Utomo identified three (and the records in total show four)
DNC contributions which were funded with monies from Indonesia
at Huang's direction.
The first contribution was evidenced by a $50,000 Hip Hing
Holding check dated August 12, 1992, made payable to the ``DNC
Victory Fund.'' 26 In a memorandum to the Lippo
Group dated August 17, 1992, Huang requested reimbursement for
the contribution, and several weeks later a wire transfer was
received from LippoBank Jakarta in the amount requested in the
August 17 memorandum.27 In 1992, the year of the
$50,000 DNC Victory Fund contribution, Hip Hing Holdings
actually lost $482,395.33.28 Utomo testified that
the entire shortfall was made up with funds transferred to the
United States from Jakarta.
---------------------------------------------------------------------------
\26\ $50,000 check from Hip Hing Holdings to DNC Victory Fund,
August 12, 1992 (Ex. 4).
\27\ Memorandum from John Huang & Agus Setiawan to Ong Bwee Eng,
August 17, 1992 (Ex. 5).
\28\ Hip Hing Holdings 1992 Earnings Statement (Ex. 6).
---------------------------------------------------------------------------
The second overseas-funded contribution was evidenced by a
Hip Hing check, dated September 23, 1993, for $15,000 made
payable to the DNC.29 Huang's signature, as well as
that of Hip Hing's Comptroller, Agus Setiawan, appears on the
check. In 1993, Hip Hing Holdings actually lost
$493,809.93.30
---------------------------------------------------------------------------
\29\ Composite of checks from Hip Hing Holdings, San Jose Holdings,
and Toy Center Holdings (Ex. 7).
\30\ Composite of 1993 Earnings Statements of Hip Hing Holdings,
San Jose Holdings, and Toy Center Holdings (Ex. 8).
---------------------------------------------------------------------------
Third, Utomo also identified a $15,000 check written on the
San Jose Holdings account and made payable to the ``DNC'' dated
September 27, 1993.31 In 1993, San Jose Holdings
lost $65,177.32.32
---------------------------------------------------------------------------
\31\ See Ex. 7.
\32\ See Ex. 8.
---------------------------------------------------------------------------
A fourth check, dated September 23, 1993, from another
Riady company, Toy Center Holdings, Inc., was also drawn
payable to the DNC in the amount of $15,000.33 In
1993, Toy Center Holdings lost $26,886.67.34
---------------------------------------------------------------------------
\33\ See Ex. 7.
\34\ See Ex. 8. Thus, Huang drew two checks for a total of $30,000
on September 23, 1993, and a check for $15,000 on September 27, 1993.
See Ex. 7. It cannot escape notice that on September 24, 1997, Huang
brought China Resources Chairman Shen Jueren to the White House, as
discussed above, and on September 27, Huang and Shen Jueren attended a
DNC event in Los Angeles. See Ex. 2.
---------------------------------------------------------------------------
In the course of the Committee's July 15, 1997, hearing,
the Minority attempted to downplay the significance of these
foreign contributions, claiming that so long as U.S. income
(rather than profits) was sufficient to cover the
contributions, such contributions were legal, regardless of
reimbursement from overseas.35 This position simply
mis-states the law. In order for the subsidiary of a foreign
corporation to make legal political contributions, the funds
must be derived from U.S. profits. As the FEC opined in June
1992: `'The domestic subsidiary of a foreign corporation may
make political contributions even though it receives subsidies
from its foreign parent if the contributions are made from
domestic profits.'' 36
---------------------------------------------------------------------------
\35\ Comments of Minority Chief Counsel Alan I. Baron, July 15,
1997, pp. 35-38.
\36\ See Federal Election Commission Advisory Opinion 1992-96:
Contributions by Domestic Subsidiary of Foreign National, June 26, 1992
(emphasis added) (Ex. 9).
---------------------------------------------------------------------------
The information developed by the Committee relating to
these contributions constitutes a compelling case that Huang
broke the law in furtherance of the Riadys' political agenda.
Certainly in the case of Hip Hing's $50,000 contribution, there
could be no more compelling evidence than Huang's own
memorandum request for reimbursement from overseas. To the
knowledge of the Committee, the Department of Justice has not
pursued these apparent violations, and, indeed, the Department
may have allowed the statute of limitations to lapse on at
least one of the illegal contributions identified by the
Committee.
In addition to the four Lippo holding company contributions
discussed above, the Committee also identified a large number
of 1992 contributions from James Riady and his wife, Aileen, to
the DNC and various Democratic state party
organizations.37 The checks total $465,000 and were
produced pursuant to a Committee subpoena from the files of Hip
Hing Holdings, suggesting that Huang may have directed these
contributions as well. Notably, while Riady has claimed in the
press that he possesses a green card and was thus eligible to
make contributions in the 1992 election cycle, it is
uncontested that he moved back to Indonesia in 1990, and has
not been a resident of the United States since that time.
Because Riady declined the Committee's invitation to explore
these and other issues when Committee staff were in Indonesia,
the Committee has been unable to reach a final determination.
The legality of these contributions remains in doubt.
---------------------------------------------------------------------------
\37\ Composite of checks from James & Aileen Riady to various
Democratic state party organizations (Ex. 10).
---------------------------------------------------------------------------
Conclusion
The record developed by the Committee establishes that
Huang was well accustomed to the use of political giving--and
the laundering of funds--to further the interests of the
Riadys. The Riadys and their Lippo empire, in turn, have become
increasingly intertwined with Chinese government-owned
enterprises. In the case of Shen Jueren's White House visit,
Huang's value to Lippo was demonstrated by the combination of
money laundering and political string pulling--all for the sake
of the president of China Resources, the Riadys' business
partner. As discussed in detail in other sections of this
report, the evidence uncovered by the Committee pertaining to
Huang's tenure at the LippoBank California, and his political
activities there, set a pattern which was often repeated.
John Huang at Commerce
Throughout the Committee's investigation, John Huang has
persisted as one of the most central figures in the campaign
finance scandal. Huang's involvement was evident from the
earliest inkling that there was systematic illegality in the
way the DNC raised money during the 1996 election cycle. The
first sign was a Los Angeles Times story about an illegal
$250,000 contribution to the DNC from Cheong Am America. Mr.
Huang raised that money. Huang proved to be a prodigious fund-
raiser for the DNC in 1996, bringing in $3.4 million to DNC
coffers. Nearly half of that amount has been returned to date,
and there are serious questions about much of the balance not
returned.1
---------------------------------------------------------------------------
\1\ See, for example, the report section regarding DNC
contributions raised by Huang from Ted Sioeng, Sioeng's family, and his
businesses, totaling $400,000. The DNC has not returned these
contributions.
---------------------------------------------------------------------------
Huang is linked through his fund-raising activities to many
other important figures in the scandal, including Maria Hsia,
Ted Sioeng, Charlie Trie, Mark Middleton, Pauline Kanchanalak,
Antonio Pan, and Huang's patrons and former employers, the
Riadys. Before he went to the DNC, Huang worked as a political
appointee at the Department of Commerce. The press has written
often about Huang's activities at Commerce, including how he
got a job there, what security clearances he held, what
classified or other sensitive information he had access to in
the course of his employment, whether he leaked or mishandled
any such information, and whether he engaged in political fund-
raising there.
In an effort to address questions regarding Huang's
activities at Commerce, the Committee held hearings on July 16
and 17, 1997. The hearings were the culmination of intense
investigative work performed by Committee staff, which
conducted dozens of interviews and depositions and reviewed
hundreds of thousands of documents in connection with this
phase of the hearings. Although its work was complicated by
Huang's refusal to cooperate, the Committee received excellent
cooperation from the Commerce Department. The Department
appears to have undertaken a diligent and thorough search for
materials responsive to the Committee's subpoena. The
Department also made employees readily available for interviews
and depositions.2 For the most part, the Committee's
dealings with Commerce were free of the problems encountered
with the White House and the DNC.3
---------------------------------------------------------------------------
\2\ The Committee notes in particular the efforts of Kent Hughes,
Associate Deputy Secretary of Commerce, and Susan Truax, Office of
General Counsel, in accommodating the Committee's many requests for
information.
\3\ Other sections of this report detail the Committee's
frustrating dealings with the White House and DNC.
---------------------------------------------------------------------------
What emerges from the Committee's investigation is a
picture of Huang both complex and vexing, which raises as many
questions as it answers. He was a valuable fundraiser for the
1992 and 1996 Clinton campaigns and a ``must hire'' candidate
who knew President Clinton personally, yet he obtained only a
mid-level appointment in the Administration. Despite his modest
position and the fact that he was purposely excluded from any
real policy work at Commerce, Huang received classified
intelligence briefings, and he appears to have met often with
high ranking White House officials, including, on occasion, the
President himself. In addition, he met with various Chinese
diplomatic officials with some frequency, even though he was
suppose to be ``walled off'' from substantive China policy at
Commerce.
While at Commerce, Huang maintained constant contact with
representatives of his former employer the Lippo Group, and his
patrons, the Riadys, and was often in contact with other
leading figures in the campaign finance scandal. It seems clear
that he engaged in political fund-raising in violation of the
Hatch Act, working closely with DNC officials to do so. The
illegality of his fund-raising was compounded by the fact that
at least some of the money Huang raised while at Commerce was
foreign.
I. Huang's Appointment to Commerce
On his way from Lippo to the DNC, Huang made an eighteen-
month stopover at the Department of Commerce. The Committee
examined the circumstances surrounding Huang's arrival at
Commerce, seeking answers to two principal questions in that
regard: How did Huang secure an appointment in the Clinton
administration, and why at Commerce? The Committee found only
partial answers to each.
Huang was a prominent Democratic fundraiser and activist in
the Asian-American community during the 1992 election. His
efforts were focused largely in California. Through them, Huang
forged significant ties to the DNC and other Democratic groups;
ties he would rely on later for help in securing an appointment
with the Clinton administration.
Before joining Commerce, Huang was employed by the Lippo
Bank. Located in Los Angeles, the Lippo Bank is a wholly-owned
subsidiary of the Riady-controlled Lippo Group, which is based
in Jakarta, Indonesia. At the Lippo Bank, Huang participated in
many fund-raising activities, both independently and on behalf
of the Riady family. For example Huang, together with Maeley
Tom, formed the Asia/Pacific Leadership Council, a political
fund-raising group that raised thousands of dollars for the
Clinton/Gore campaign.4 Although the extent to which
Huang's fund-raising activities facilitated his appointment to
Commerce is not clear, it is certain that they played a role.
---------------------------------------------------------------------------
\4\ Maeley Tom, who, like Huang, is Chinese by birth, has spent two
decades in Democratic politics in Sacramento, California. She served as
a part-time consultant for the Lippo Bank while John Huang worked
there. In 1994, Tom was an active fund-raiser in the Asian-American
community in California and a contributor to the Democratic party.
---------------------------------------------------------------------------
After the 1992 election, Huang became interested in a
position with the Clinton administration. His name first came
to the attention of the White House Priority Placement Office
in 1992 when he was placed on a ``must-consider'' list compiled
by the DNC.5 Michael Whouley, who received the
``must consider'' list, was the head of White House Priority
Placement at the time, and it was Whouley's job to sort through
various candidates who received particularly strong support,
and to determine which of these candidates would then be
considered a priority for the administration.6 Huang
was placed on this list as a ``must-consider'' candidate for
several positions, including ``Under or Assistant Secretary for
International Affairs'' at the Department of Treasury,
``Undersecretary for International Trade'' at the Department of
Commerce, and a ``sub-cabinet'' position at the Department of
State.7 Huang's resume was also submitted to the
White House Personnel Office.8
---------------------------------------------------------------------------
\5\ Interoffice Memorandum from Paul Carey and Rick Lerner to
Michael Whouley, December 21, 1992, pp. 5, 11 (Ex. 1).
\6\ Testimony of Gary Christopherson, July 16, 1996, p. 14.
\7\ Id.
\8\ Resume of John Huang, undated (Ex. 2).
---------------------------------------------------------------------------
Over the course of the next few months, several letters
were submitted on Huang's behalf. These letters included
recommendations from Senators Paul Simon, Tom Daschle, and Kent
Conrad, California State Treasurer Kathleen Brown,9
and lobbyist and Asian-American fundraiser Maeley Tom.
---------------------------------------------------------------------------
\9\ Letters of recommendation for John Huang, December 1992-
February 1993 (Ex. 3).
---------------------------------------------------------------------------
Maeley Tom's letter, written to Deputy Director of
Presidential Personnel John Emerson, is remarkable in the way
it touts several Asian-Pacific Americans (``APA'') for
administration positions.10 In her letter, Tom
adopts a very personal, emotive tone in imploring Emerson and
the administration to ``use this window of opportunity to
cultivate (recruit) [the APA] community's loyalty by
demonstrating that the true party of inclusion is the
Democratic Party,'' and, more specifically, by appointing those
Tom recommended.11 Although the recommendations were
clearly hers and, purportedly, those of the APA community, Tom
wrote on the stationery of her boss, David Roberti, President
Pro Tempore of the California State Senate.
---------------------------------------------------------------------------
\10\ Letter from Maeley Tom to John Emerson, Feb. 17, 1993 (Ex. 4).
Two versions of Tom's letter to Deputy Director of Presidential
Personnel John Emerson were produced to the Committee by the White
House. The first version is heavily redacted and bears a handwritten
notation on the cover page indicating it was copied to Bruce Lindsey
who was then Director of Presidential Personnel at the White House. The
cover page of the second version contains a different handwritten
notation--``Asian Appointments.'' Otherwise, the two versions appear
identical.
\11\ Id. at p. 1.
---------------------------------------------------------------------------
Tom's letter is heavily salted with references to political
fund-raising and Democratic party-building efforts. Her
recommendation of Huang relies mainly on Huang's connection to
the Riadys, major Democratic donors. Tom's letter characterized
Huang as ``the political power that advises the Riady Family on
issues and where to make contributions.'' 12 She
wrote, ``[The Riady's] invested heavily in the Clinton
campaign. John is the Riady Family's top priority for placement
because he is like one of their own. The family knows the
Clintons on a first-name basis. . . .'' 13
---------------------------------------------------------------------------
\12\ Id. at p. 6.
\13\ Id.
---------------------------------------------------------------------------
After being labeled ``high priority'' by the White House
Priority Placement office, Huang's file was sent over to the
Personnel office and placed in a job bank.14 Here,
Huang's application foundered for several months, until his
name eventually came to the attention of Gary Christopherson,
who served as the Associate Director of the White House Office
of Presidential Personnel from May 1993 to September
1994.15 It was Christopherson's responsibility to
recruit candidates for the administration, and then match
people with positions.16
---------------------------------------------------------------------------
\14\ Deposition of Gary A. Christopherson, June 4, 1997, pp. 25-26.
\15\ Id. at p. 14.
\16\ Id. at p. 12.
---------------------------------------------------------------------------
According to Christopherson, Huang was raised as a ``high
priority placement'' candidate by various members of the Asian-
American community.17 The Asian Outreach section
18 within the Personnel Office also weighed in on
Huang and advocated his placement because it would represent an
``important symbol to the Asian community.'' 19
---------------------------------------------------------------------------
\17\ Id. at p. 41.
\18\ Christopherson testified in his deposition that the White
House Personnel Office had ``outreach'' groups advising the staff and
providing them with names of candidates for administration jobs. Huang
was identified by the Asian Outreach group as a priority. This group
included Maria Haley, Martha Watanabe, Melinda Yee and Ginger Lew. (Id.
at p. 40).
\19\ Christopherson testimony, p. 8.
---------------------------------------------------------------------------
Huang was on the priority list for a ``good period of
time.'' 20 White House Personnel was having
difficulty in placing Huang in an appropriate position because
Huang was considered lacking in the necessary qualifications
for higher level posts.21 When the Deputy Assistant
Secretary position at the Department of Commerce became
available, Christopherson felt that he had finally found an
acceptable match.22
---------------------------------------------------------------------------
\20\ Christopherson deposition, p. 49.
\21\ Id. at p. 42.
\22\ Id. at p. 51.
---------------------------------------------------------------------------
Christopherson drafted a ``decision memo'' recommending
Huang for an appointment as Principal Deputy Assistant
Secretary for International Economic Policy.23 This
recommendation was sent to Bruce Lindsey for final
review.24 Christopherson's memorandum to Lindsey
stated, among other things, that ``John Huang has been a major
Democratic supporter and expert in banking policy. He was
extremely active in the Clinton/Gore campaign. . . .''
25 In addition, the letter noted that Huang had been
recommended by Senators Paul Simon and Kent Conrad, and Maria
Haley.
---------------------------------------------------------------------------
\23\ Id. at p. 32. See also Decision Memorandum from Gary
Christopherson to Bruce Lindsey, Dec. 6, 1993 (Ex. 5).
\24\ Christopherson testimony, pp. 12-13.
\25\ Ex. 5 at p. 1.
---------------------------------------------------------------------------
Christopherson remembered speaking to someone at the
Commerce Department regarding Huang's placement
there.26 Although he was unable to recall specifics,
Christopherson concluded that during this time, he would have
been in regular contact with the White House Liaison Office at
Commerce, which would have received the John Huang decision
memo approved by Bruce Lindsey.27 Christopherson's
recollection of the specifics of Huang's placement was vague.
He speculated that Huang's placement was routine and uneventful
and that as a result, the events did not stand out in his
memory. According to Christopherson, there was little
disagreement between the White House or Commerce regarding
Huang's placement within Commerce.28
---------------------------------------------------------------------------
\26\ Christopherson deposition, p. 49.
\27\ Id.
\28\ Id.
---------------------------------------------------------------------------
The Committee found scant indication that the White House
personnel office vetted Huang before sending its recommendation
over to Commerce. According to Christopherson, Presidential
Personnel essentially left the due diligence work on Huang to
the Commerce Department. The personnel office's decision to
place Huang at Commerce was based solely upon Huang's resume
and his status as a priority placement for the APA
Community.29 Once Presidential Personnel made what
it considered to be an appropriate fit, vetting the applicant
and reviewing his credentials and experience fell to the
individual department--in this case, Commerce.
---------------------------------------------------------------------------
\29\ Id. at pp. 54-55.
---------------------------------------------------------------------------
Christopherson testified as to why Presidential Personnel
relied so heavily on the receiving agencies to vet appointees.
He explained that the office was ``incredibly busy at this
time,'' and that, ``by the time we got around October of 1993,
we were running a very streamlined, thin process and were very
much more depending on the agencies to play roles there. . .
.'' 30 In short, Christopherson relied on Commerce
to identify problems with the Huang appointment.31
---------------------------------------------------------------------------
\30\ Id. at p. 63.
\31\ Id. at pp. 63-64.
---------------------------------------------------------------------------
Vetting aside, the Committee determined that Huang's fund-
raising efforts on behalf of the DNC and the Clinton campaign
were important factors in Huang's placement on the priority
list.32 In his deposition, Bruce Lindsey testified,
``I think we always had a preference to appoint people who were
supportive of the campaign, either financially or because they
worked, you know, but there was always a preference if two
people were qualified to take someone who had been active and
involved in the campaign at one point or the other.''
33
---------------------------------------------------------------------------
\32\ Deposition of Bruce Lindsey, July 1, 1997, p. 62.
\33\ Id. at p. 62.
---------------------------------------------------------------------------
In Huang's case, the fund-raising continued right up until
his appointment and beyond. Indeed, once Huang had finally been
matched to an appropriate position, Christopherson's notes
reflect that the appointment was delayed in order that Huang
could participate in a fund-raising dinner held on December 4,
1993 in California.34 The delay was needed since
Huang would be a political appointee and thus prevented from
fund-raising after his appointment to Commerce.35 As
Christopherson put it, ``Once you become a political appointee,
you stay out of the fund-raising part of the business,
period.'' 36
---------------------------------------------------------------------------
\34\ Christopherson deposition, p. 101. Memorandum from Gary
Christopherson to Bruce Lindsey, Oct. 18, 1993 (Ex. 6).
Christopherson's notes on the memo stated as follows: ``Check Ethics
with Bueno re. fund-raiser on December 4th. Check proximity of job
decision in fund-raiser . . . Draft with Bruce to discuss timing.''
\35\ Christopherson deposition, p. 101.
\36\ Id.
---------------------------------------------------------------------------
In late 1993, Huang's name was sent over to Commerce along
with several other candidates by the White House Personnel
Office. This list was sent to Jeffrey Garten, who was the
Undersecretary of Commerce for International Trade during most
of Huang's tenure there. Once Garten received the list, he
forwarded it to the assistant secretaries below him at the
International Trade Administration (ITA), including Charles
Meissner.37 Meissner, the Assistant Secretary for
International Economic Policy, made the decision to hire Huang
as his principal deputy. According to Garten, ``Meissner came
to me and said here's what I would like to do, and he wanted
to--he was suggesting that we hire Huang, and I think the major
reason was that Secretary Brown was quite adamant that we have
ethnic diversity.'' 38 According to Garten, the
White House Liaison list contained two Asian-Americans, and
Garten and Meissner discussed where these candidates would best
fit within the structure at Commerce.39 The two
``jointly came up with the idea that Huang ought to be [the]
principal deputy, because of the two, we felt Huang was the
least qualified to do something substantive, and therefore, we
felt we could make that an administrative position so that we
could satisfy Brown's objective--it wasn't just Brown; I
supported it, too--of having some ethnic diversity but at the
same time, not putting somebody in a position of policy
responsibility that [he wasn't] qualified for.'' 40
---------------------------------------------------------------------------
\37\ Deposition of Jeffrey Garten, May 16, 1997, p. 12.
\38\ Id. at p. 14. It should be noted that according to Meissner's
administrative assistant Halina Malinowski, Meissner did not want to
hire Huang but felt that he had no choice.
\39\ Id. at p. 16.
\40\ Id. at p. 16.
---------------------------------------------------------------------------
Garten concluded that Huang lacked the professional
qualifications to handle substantive trade and export policy,
and reached an agreement up front with Meissner that Huang's
responsibilities would be confined to administrative matters.
Huang was to act as an administrative assistant to Meissner.
According to his agreement with Meissner, Garten understood
``that Huang had no--was to have no policy responsibilities. .
. . To the best of my knowledge, he had no responsibility for
any policy, and he was there to handle administrative issues.''
41 As a result of this decision, Huang ultimately
joined the Department of Commerce as the Principal Deputy
Assistant Secretary (PDAS) for International Economic Policy on
July 18, 1994.
---------------------------------------------------------------------------
\41\ Id. at pp. 25, 28.
---------------------------------------------------------------------------
II. Huang's Job Responsibilities and Performance at Commerce
It is fair to say that from the perspective of his
contributions to policy and administrative matters at Commerce,
Huang was very nearly an invisible man. In his eighteen months
as Principal Deputy Assistant Secretary for International
Economic Policy (IEP), he left virtually no mark. Indeed, in
interviews and depositions conducted by the Committee, many of
Huang's subordinates, colleagues, and supervisors were at a
loss to explain what occupied his time, apart from routine
bureaucratic meetings and some light administrative work.
Huang served as the Principal Deputy Assistant Secretary
for IEP at Commerce from July 18, 1994 until December 3, 1995,
when he left to join the DNC.42 Huang's office, IEP,
fits within Commerce's ITA. Huang's immediate supervisor was
Charles Meissner, the Assistant Secretary for IEP; Meissner's
immediate supervisor was Garten. Meissner died in the April
1996 plane crash that took the lives of Secretary Brown and
other Commerce officials.
---------------------------------------------------------------------------
\42\ It appears that Huang remained a Commerce employee on leave
without pay from December 4, 1995 through January 17, 1996. Interview
of Elizabeth Stroud, June 11, 1997.
---------------------------------------------------------------------------
ITA was perhaps the most high profile organization at
Commerce while Huang was there. Its primary function--to
promote the export of American goods and services abroad--was
the cornerstone of a Clinton administration initiative to make
America's economic interests an important consideration in our
foreign policy. Garten was appointed Undersecretary in order to
invigorate the ITA and make it a significant player in the
commercial diplomacy effort envisioned by the Clinton
administration. By many accounts, the activity level and
profile of ITA picked up significantly during Garten's tenure.
One thing Garten did at ITA was to ignore organizational
charts, instead selecting ITA officials who he thought were
best able to complete various tasks. This caused some friction,
as described below.
When Huang was at Commerce, IEP was one of the four
operating units that comprised ITA. 43 IEP was
arranged geographically. Assistant Secretary Meissner sat atop
IEP's structure; beneath him were four deputy assistants with
responsibility for different regions of the world; beneath them
were ``country desks'' staffed primarily by career officials.
Huang, as Meissner's principal deputy, had no specific
geographical responsibility.
---------------------------------------------------------------------------
\43\ The others were Trade and Development, the U.S. and Foreign
Commercial Service, and the Import Administration. IEP has since been
reorganized and is now called MAC, or Market Access and Compliance.
---------------------------------------------------------------------------
When occupied by Huang's predecessors, the PDAS position
had three basic job functions. First, it was designed to be a
day-to-day manager for IEP, handling administrative matters--
personnel, budget, space and office resources, and parking--on
behalf of the Assistant Secretary. Second, the PDAS was also
intended to fill in for the Assistant Secretary when that
person was away from the office. Third, the PDAS carried a
policy portfolio, which varied from one Assistant Secretary to
another. Huang's immediate predecessor, for example, was the
lead official at Commerce staffing the United States's
involvement in the Asian-Pacific Economic Cooperation forum.
44
---------------------------------------------------------------------------
\44\ Interview of Rick Johnston, June 12, 1997.
---------------------------------------------------------------------------
By all accounts, the initial agreement about Huang reached
by Garten and Meissner stuck. Throughout his Commerce tenure,
Huang was never trusted to handle substantive policy
responsibilities, and he had none to speak of. This reflected
not personal animus--Huang was remembered as a kind and
deferential colleague 45--but instead a widely-held
assessment of Huang's inability to handle substantive policy in
a reenergized ITA. From the start, for example, Garten had
misgivings about Huang. ``I was uncomfortable with Huang,
because one doesn't have a lot of time in these situations, but
my instinct, as someone who had lived and worked in Asia, was
that he wasn't the kind of person who ought to represent the
American government.'' 46 Garten considered Huang
``totally unqualified, in my judgment, for the kind of Commerce
Department that we were establishing.'' 47
---------------------------------------------------------------------------
\45\ See Deposition of Alan Neuschatz, May 22, 1997, p. 22;
Deposition of David Rothkopf, June 2, 1997, p. 34.
\46\ Deposition of Jeffrey Garten, May 16, 1997, p. 17.
\47\ Testimony of Jeffrey Garten, July 16, 1997, p. 125.
---------------------------------------------------------------------------
Garten considered certain policy areas to be of sufficient
priority that he brought them into the Undersecretary's office
and ran them himself through hand-picked ITA officials.
48 Several of these involved ``big emerging market''
countries in Asia. This, combined with Garten's broader
decision to ignore the bureaucratic structures within ITA in
tasking out important work, led to some disagreements between
Garten and Meissner. Meissner wrote Garten a memo in September
1994, complaining about the situation and offering that Huang
and another deputy assistant secretary at IEP could handle
Asia. Garten's response was blunt: ``John Huang and Nancy Linn
Patton [the other deputy assistant secretary] 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. . . . I can
tell you one thing: neither John Huang nor Nancy Linn Patton
are up to handling Asia in any way, shape or form at this
time.'' 49 Eventually, one exception was permitted,
and Huang took on a very modest policy role assisting Meissner
with Taiwan.50
---------------------------------------------------------------------------
\48\ David Rothkopf, Garten's deputy, described this as a process
where the top ITA officials decided to create a ``company within a
company'' on certain issues instead of attempting a wholesale
reformation of ITA and IEP.
\49\ Memorandum from Jeffrey Garten to Charles Meissner, October 4,
1994, pp. 1, 3 (Ex. 7).
\50\ Garten deposition, May 16, 1997, p. 28.
---------------------------------------------------------------------------
Garten's view that Huang could not handle substantive
policy matters was widely shared at ITA. Tim Hauser, a Garten
deputy and the top career official at ITA, recalls ``a general
view across the senior management ranks'' that Huang lacked the
necessary attributes for substantive policy work.51
Garten's other deputy, David Rothkopf, while more diplomatic,
likewise ``was not particularly struck by [Huang's]
effectiveness.'' 52 Career officials shared these
sentiments.53
---------------------------------------------------------------------------
\51\ Deposition of Timothy Hauser, May 22, 1997, p. 39.
\52\ Rothkopf deposition, p. 34.
\53\ E.g., Interview of Don Forest, April 29, 1997. Alan Neuschatz,
the Director of Administration, observed that Huang was ``as uninvolved
a player as [he] had seen in ten years at ITA.'' Neuschatz deposition,
p. 17.
---------------------------------------------------------------------------
In light of his frequent access to classified information
relating to China, the Committee paid particular attention to
whether Huang held any policy responsibility regarding that
country, and if not, why. As it turns out, Huang was
specifically walled off from China because his superiors
concluded he was not capable of doing the work. Garten, who
handled China in large measure himself, remembered, ``Well,
generally, I didn't want Huang working on anything, and since
China was such a high priority, there was no chance that, with
my knowledge, he would have gotten close to it.'' 54
A second reason Garten walled Huang off was Garten's sense that
for diplomatic reasons, you ``did not mix people'' working on
Taiwan and China.55
---------------------------------------------------------------------------
\54\ Garten deposition, May 16, 1997, pp. 35-36; see also Garten
testimony, p. 126.
\55\ Garten deposition, May 16, 1997, p. 36.
---------------------------------------------------------------------------
Although he was permitted, and indeed expected, to handle
administrative matters at IEP, Huang's colleagues held a
similarly dim view of his abilities in that regard. Alan
Neuschatz, ITA's Director of Administration, interacted
frequently with Huang on administrative matters, finding Huang
unsure of himself even as to routine decisions and
``requir[ing] constant reinforcement.'' 56
Neuschatz would have given Huang a grade of ``low C'' as an
administrator and noted that Huang was ``fortunate'' to have an
``experienced and energetic and capable'' career assistant,
Halina Malinowski, to help him.57
---------------------------------------------------------------------------
\56\ Neuschatz deposition, p. 22.
\57\ Id. at p. 80.
---------------------------------------------------------------------------
On the whole, the image developed of Huang is that of a
shy, kindly, somewhat reclusive ``light weight'' who was out of
his depth at Commerce. The only piece of evidence found by the
Committee running counter to this image is a favorable job
performance for Huang prepared by Charles Meissner. Meissner's
October 1995 appraisal scores Huang a possible 485 out of 500,
and grades him as ``outstanding.'' 58 Yet according
to the witnesses with whom the Committee spoke, the appraisal
is meaningless. Garten recounted: ``This document has no
significance in my mind. All of these reports are totally
inflated. Reports written on political appointees are not worth
the paper they are written on.'' 59 When asked why
Meissner would write such a positive review for someone not
held in high professional esteem, Garten surmised, ``My guess
is that he felt sorry for Mr. Huang because I had so clearly
eclipsed any role that [Huang] could have, and he wrote the
report knowing that it really made no difference. He couldn't
promote Mr. Huang. He couldn't expand his range of policy
responsibilities. . . . So under those circumstances, the more
friendly thing to do was to give him a high rating.''
60
---------------------------------------------------------------------------
\58\ Classification and Performance Management for John Huang,
October 1995 (Ex. 8).
\59\ Garten testimony, p. 135.
\60\ Id. at p. 138. Others shared Garten's view that Huang's job
appraisal was an innocuous--and meaningless--gesture of kindness by
Meissner. Tim Hauser, for example, considered the appraisal ``more
inflated'' (Hauser deposition, p. 42) than his view of Huang, noting
that political appointees almost always get high ratings. Id. at pp.
47-50. Rothkopf was unfamiliar with Huang's specific appraisal but
observed that ``generally [ ] these things are baloney. . . . [The
genre] is not high in nutritive content.'' Rothkopf deposition, p. 109.
Neuschatz noted that Meissner was ``extremely nurturing,'' and
supportive of all of his subordinates; he was also ``an easy grader.''
Neuschatz deposition, pp. 19-20.
---------------------------------------------------------------------------
Much of the media coverage that preceded the Committee's
hearings suggested Huang had an active hand in directing
Commerce's international trade policy. The Committee's
investigation indicates that this was not so. Huang was
inconsequential at Commerce, and he was precluded from having
much of a role in substantive policy. He was specifically
prohibited from handling matters involving China. That said,
Huang nevertheless had frequent access to classified and
proprietary information relating to trade policy that was
valuable to companies and foreign governments. He received much
of that information notwithstanding the fact that he lacked a
``need to know'' it, in violation of a bedrock principle for
controlling the dissemination of classified information. Why
that happened, and what he might have done with that
information, are discussed below.
III. John Huang's Security Clearances
Since his name first appeared in media accounts regarding
the campaign finance scandal, there has been enormous public
interest in the security clearance Mr. Huang held at Commerce,
including questions regarding why he was granted a clearance,
how long he held it, and whether an adequate examination of his
background was conducted before its issuance. This section
examines the security clearances Huang was granted prior to and
during his tenure at the Commerce Department.
In connection with his appointment to Commerce, Huang was
granted a top secret security clearance. More precisely, Huang
was issued three security clearances in succession, each at the
top secret level. Although Huang's first day at Commerce was
July 18, 1994, he was granted his first security clearance in
January 1994. During that month, the DOC Office of Security
(OS) conducted preliminary records checks on Huang and, on
January 27, 1994, granted him an interim top secret clearance.
On August 9, 1994, approximately three weeks after Huang joined
Commerce, the Office of Security sent Huang's file to OPM for
it to conduct a full background investigation. OPM reached a
favorable determination on October 18, 1994; the Office of
Security concurred seven days later and Huang's final top
secret clearance was granted.
Huang's top secret clearance was taken from him on January
25, 1996, shortly after he left for the DNC. However, on
December 14, 1995, he already had been granted his third
clearance, a top secret consulting clearance, by the Defense
Industrial Security Clearance Office (DISCO) in connection with
an unsuccessful effort to make Huang a consultant to the
Department while he worked for the DNC. Huang's DISCO clearance
was not taken away until December 1996.
Huang's first clearance, his interim top secret, was
granted by Commerce's Office of Security on January 27, 1994.
At the time, Huang was still Vice Chairman of the Lippo Bank,
and he would remain at Lippo until July 1994. Huang received
the interim clearance based on a records check alone and no
interviews or other investigation of his background. Why was
Huang granted a top secret clearance six months before he began
at Commerce? Since shortly after the campaign finance scandal
broke, the press has provided ample speculation, but no
answers.61 The Committee has found no evidence that
Huang actually saw classified materials before joining the
Department. That possibility, however, was not ruled out by
witnesses with whom the Committee spoke. For example, Joe
Burns, an information specialist in the OS who worked directly
on Huang's clearance, said Huang may have been granted access
to classified information based upon his representation that he
held a clearance. ``They may say, hey, I'd like you to see
this; by the way, do you have a clearance? If you say yes, they
[may] take you at face value.'' 62
---------------------------------------------------------------------------
\61\ See, e.g., Brian Duffy & Bob Woodward, ``FBI Warned 6 on Hill
About China Money; Officials Say Lawmakers, Others Targeted in $2
Million Plan to Buy Influence,'' Washington Post, March 9, 1997, p. A1
(``For five months while he was still employed at Lippo Group, before
he joined the Commerce Department, Huang received a top-secret security
clearance that could have allowed him to review classified U.S.
intelligence documents. . . .''); James Adams, ``Chinese Spies Had Open
Door to Oval Office,'' Sunday Times, November 10, 1996 (noting that
Huang's interim clearance ``gave him access to vital American
intelligence''); Bill Gertz, ``Huang Frequent White House Visitor; Also
Got Unusual Security Clearance Waiver,'' The Washington Times, October
31, 1996, p. A1.
\62\ Deposition of Joseph J. Burns, May 23, 1997, p. 115.
---------------------------------------------------------------------------
The answer to why Huang was granted a clearance prior to
joining the DOC appears to lie in a policy set in place during
the changeover of administrations in early 1993. In past
administrations, Commerce followed a policy under which a
political appointee's supervisor had to demonstrate the
appointee's ``need to know'' and ``critical need'' for
classified information before an interim clearance would be
granted.63
---------------------------------------------------------------------------
\63\ This point was circuitously made by Paul Buskirk during the
Committee hearing of July 16, 1997. Buskirk testified that, under pre-
1993 policy, (and under the policy in place as of March 1997), OS would
not issue an interim clearance ``until management justifie[d] the need-
to-know classified information,'' (Testimony of Paul Buskirk, July 16,
1997, p. 71) and again, that ``before 1993, if a position required
access to classified information, what we required was that there be a
justification for a clearance. Otherwise, if that request came in, they
were requested to wait until the background investigation was completed
before the clearance was issued.'' Buskirk testimony, p. 65. Joe Burns
told the Committee it was the employee's supervisor who had to
demonstrate the requisite need to know. Burns deposition, p. 16.
---------------------------------------------------------------------------
The Clinton Administration ushered in a new policy at
Commerce. Under the new policy, all political appointees at
Commerce were granted interim top secret clearances after a
short series of pre-appointment checks. All appointees were
later subjected to full field investigations, but that was
because the Clinton Administration eliminated the requirement
that management justify each appointee's ``need to know'' prior
to the granting of an interim clearance. The new policy was,
``everybody gets one.''
This policy change is itself an interesting story. It was
effected in early 1993 to accommodate the roughly 200 political
appointees who soon would be joining the
Department.64 The idea was to design a system that
would allow appointees to have access to classified information
the day they walked into the Commerce Department. While meeting
that goal, the system was beset by a variety of problems.
Perhaps the most significant stemmed from the government
requirement that interim clearances can only be granted where
there is a ``critical need'' for one. An interim clearance is
granted only after a determination is made to waive the normal
background checks that precede the granting of a ``final''
clearance. For a waiver to be granted, a particularized
determination must be made of a ``critical need'' for the
person in question to have access to classified information in
short order.65 In the Clinton Commerce Department,
hundreds of waivers were granted--and interim top secret
clearances conferred--without particularized determinations of
critical need. As noted earlier, under prior policy, interim
clearances were granted only for those employees whose
supervisors specifically requested such action.
---------------------------------------------------------------------------
\64\ Deposition of Steve Garmon, May 23, 1997, p. 26.
\65\ Id. at p. 45.
---------------------------------------------------------------------------
Stephen Garmon, the former Director of Commerce's OS,
claims much of the responsibility for the system put in place
in January 1993. Faced with a flood of new Commerce appointees,
Garmon had to figure out what to do, how to ``facilitate the
institutionalization . . . of a new administration.''
66 As he put it:
---------------------------------------------------------------------------
\66\ Id. at p. 34.
So I suggested very pointedly that we treat them all
as candidates for top secret clearances, and with that
as a decision as sort of a bottom line, we'd give them
the full blast as far as investigations were concerned,
and then it would not make that much difference who was
going to be in what position on any given day. The
powers that be, whoever they may have been didn't
resist that and accepted it, and we proceeded on that.
The intention was to sort of back out of that once they
got enough people in key positions that they could
operate with any sort of effectiveness, and the
unfortunate part is we didn't turn the spigot off
probably as fast as we should have within security.
That's one of those things that happens. You just don't
do it.67
---------------------------------------------------------------------------
\67\ Id. at p. 27.
Garmon recalls that he proposed his idea in a January 1993
meeting with the DOC's Director of Human Resources and two
presidential transition team members, one of whom, Carol Darr,
``was part of the Democratic National Committee.''
68 Garmon called the two transition team members
``emissaries from the administration.'' 69 Garmon
received what he recalls to be ``a nod of approval'' from
them.70
---------------------------------------------------------------------------
\68\ Id. at p. 30.
\69\ Id.
\70\ Id. at p. 31.
---------------------------------------------------------------------------
One of the reasons Garmon conceived of the ``everybody gets
one'' system and ran it by representatives of the Clinton
administration was to pre-empt pressure from the administration
to grant its appointees access to classified material. Garmon
testified, ``My experience . . . had been such that I was
sensitized to the fact that if I didn't find some way to
expedite this activity, I was going to feel that pressure. I
was trying to be on the front end of it, if you will, and avoid
the pressure by taking care of it before it arose as an
issue.'' 71
---------------------------------------------------------------------------
\71\ Id. at p. 34.
---------------------------------------------------------------------------
The system Garmon conceived was implemented soon
thereafter. The most obvious problem with the system was its
evisceration of the mandated ``critical need'' standard. No
particularized determination of ``critical need'' was
undertaken for the Clinton Administration's appointees to
Commerce.72 OS assumed that a ``critical need''
existed for all political appointees to receive a background-
check waiver by virtue of the fact ``they were coming on
board.'' 73 Commenting that he knew of no other
agency that granted an interim secret clearance to each
political appointee, Joe Burns testified: ``I don't think that
anyone did it quite the way we did, which was the blanket
boilerplate.'' 74
---------------------------------------------------------------------------
\72\ Id. at p. 40.
\73\ Id. at p. 45.
\74\ Burns deposition, p. 36.
---------------------------------------------------------------------------
When the 1993 change was put in place, it was meant to last
only until a ``critical mass'' of Commerce appointees were in
the door and could access classified information, at which
point OS would return to the more particularized, involved
process. But this is not how things worked out. The 1993 policy
change lived on for four years; Commerce Secretary Daley put an
end to the practice in early 1997 as a result of the
Committee's investigation.75 Paul Buskirk, who
became Acting Director of the OS when Garmon retired, believes
the policy instituted by Secretary Daley--the same policy in
place before the Clinton administration--``clearly is
preferable.'' 76 Joe Burns agrees: ``I can
understand why we went the way we did based on the possibility
[of] facing an onslaught of hundreds of people, a lot of chaos
going on with trying to process everybody and making sure that
everybody had a clearance who needed one. But, in retrospect, I
think the way we're doing it now is the best way, which is
you've got to justify each person.'' 77
---------------------------------------------------------------------------
\75\ See Deposition of Paul Buskirk, June 3, 1997, pp. 25-26.
\76\ Id. at p. 27.
\77\ Burns deposition, pp. 35-36.
---------------------------------------------------------------------------
Reverting to the old clearance process was not the sole
course of action pursued by Secretary Daley on the subject. In
response to the Committee's investigation, he also created a
security task force to study the Department's handling of
security clearances and classified information.78
The task force's recommendations on the granting of security
clearances emphasize the inadequacy of the procedures set in
place in 1993 and suggest even stricter controls than those
reinstituted by Secretary Daley.
---------------------------------------------------------------------------
\78\ The task force's recommendation and Secretary Daley's
instructions to implement them are attached as an exhibit to this
report. See Memorandum from William M. Daley to Raymond G. Kammer, Jr.,
June 27, 1997 (Ex. 9).
---------------------------------------------------------------------------
Several aspects of John Huang's case are typical of
clearances issued by the Clinton Commerce Department. In early
January 1994, OS was notified Huang would be hired by the
Department. Shortly thereafter, pursuant to the procedures in
place at the time, Joe Burns made a standard series of pre-
appointment checks on Huang. The checks, documented on an OS
form referred to by Burns as a ``case cover sheet,''
79 were made largely over the course of one
day.80 Essentially, they entailed checking various
computer databases for information on Huang. Hence, Burns ran a
National Crime Information Center (``NCIC'') check, a credit
check, and checks utilizing OPM and Department of Defense
databases.81 Through all but the NCIC check, Burns
found no adverse information on Huang.
---------------------------------------------------------------------------
\79\ Burns deposition, p. 53.
\80\ Case Coversheet [title derived], file no. 207, 427, undated
(Ex. 10).
\81\ The Defense Department database is known as the Defense
Central Investigations Index.
---------------------------------------------------------------------------
The NCIC check revealed that Huang had been arrested or
detained by INS agents in Baltimore in 1972.82 No
follow-up work was done to determine the nature of the arrest
or detention or its resolution prior to granting Huang his
interim clearance.83 Instead, OS officers assumed
the incident was insignificant based on Huang's representation
(on his SF-86) that he became a U.S. citizen four years later.
Specifically, when he was notified that an NCIC check revealed
a ``hit'' for John Huang, Burns went to see Paul Buskirk for
guidance. Buskirk told him not to do any follow-up work and to
grant the interim clearance.84 Looking back, Burns
thinks OS probably should have followed up on the NCIC hit to
determine the nature of the immigration action.85
---------------------------------------------------------------------------
\82\ NCIC report, Jan. 13, 1994 (Ex. 11).
\83\ Garmon deposition, p. 48.
\84\ Burns deposition, p. 56.
\85\ Burns deposition, p. 67.
---------------------------------------------------------------------------
Huang was granted an interim top secret clearance on
January 27, 1994, some six months before he joined the DOC.
Whether Huang was notified at the time that he had been granted
an interim clearance is not certain. A notification letter,
dated January 27, 1994,86 and informing Huang that
he has been granted an interim top secret clearance, is
unsigned but initialed by Burns.87 Both Burns and
Buskirk (the author listed in the letter) are reasonably
certain Huang was never sent or shown a copy of the
letter.88
---------------------------------------------------------------------------
\86\ Letter to John Huang from Paul A. Buskirk, Jan. 27, 1994 (Ex.
12).
\87\ Burns deposition, p. 69.
\88\ Id., p. 70; Buskirk deposition, pp. 44-45.
---------------------------------------------------------------------------
According to Burns, the letter would have been sent to
Huang only when Huang entered into service at the Department
and was ``briefed in''; that is, provided instructions
regarding the handling of classified information and shown and
made to sign a non-disclosure agreement (SF-312).89
The ``briefing in'' process is supposed to occur before actual
access to classified information is granted.90
However, once an interim clearance has been granted, the DOC
Office of Personnel is notified and OS updates its computer
system to reflect the occurrence.91 Hence, while it
is unlikely that Huang became aware that he received an interim
clearance around the time it was granted, it is ``possible''
that he did.92 As Garmon put it, ``I do not know
that he was [notified of his clearance]. I do not know for
certain that he was not. I am reasonably comfortable that he
wasn't, but there's no guarantee.'' 93 It should be
noted that, in terms of access to classified information, there
is no difference between an interim and a final
clearance.94
---------------------------------------------------------------------------
\89\ Burns deposition, pp. 70, 75-76. The Committee never received
from Commerce a dated and signed copy of Exhibit 12, the letter
notifying Huang of his interim top secret clearance. Such a letter, if
it exists, falls clearly within the scope of the Committee's subpoena
to the DOC.
\90\ Id.
\91\ Id., pp. 72-73.
\92\ Id., p. 72.
\93\ Garmon deposition, p. 52.
\94\ Id., p. 35.
---------------------------------------------------------------------------
In order to issue Huang an interim top secret clearance,
the Office of Security had to grant him a background
investigation waiver. This was done by a waiver memorandum in
January 1994.95 The memo states that Huang was
granted a waiver of background investigation ``due to the
critical need for his expertise in the new Administration for
Secretary Brown.''
---------------------------------------------------------------------------
\95\ Memorandum from Paul Buskirk to H. James Reese, Jan. 31, 1994
(Ex. 13).
---------------------------------------------------------------------------
It is clear that this ``critical need'' language, and, for
that matter, language concerning Secretary Brown's purported
involvement in the decision to grant Huang the waiver, is a
misleading by-product of the Commerce Department's clearance
process. Burns characterized this language as ``boilerplate,''
observing, ``Take out Huang's name, and if Mr. Burns was a new
political, you put in Burns' name. I mean, you just--it was
boilerplate. Every political waiver is going to look like
this.'' 96 According to Steve Garmon, neither
Secretary Brown nor anyone in his office notified OS that the
Secretary had a ``critical need'' for John Huang's expertise
such that he needed an interim top secret
clearance.97 Paul Buskirk has a similar
recollection. Buskirk testified no one in Secretary Brown's
office informed OS that the Secretary had a critical need for
Huang's expertise.98 Buskirk was not aware of anyone
within the Department who had a critical need for Huang's
expertise that would require Huang to have immediate access to
classified information.99 Indeed, in January 1994,
Buskirk ``didn't know where Huang was going to be assigned.''
100
---------------------------------------------------------------------------
\96\ Burns deposition, p. 46.
\97\ Garmon deposition, p. 41.
\98\ Buskirk deposition, p. 38.
\99\ Id.
\100\ Id.
---------------------------------------------------------------------------
The six-month lag between the granting of an interim top
secret clearance to Huang and his entering into service at the
Department is difficult to understand. Back in 1994, when Huang
joined the Department, it was not uncommon for an interim top
secret clearance to be issued weeks before an appointee
started. Huang's six-month lag, however, was
unusual.101
---------------------------------------------------------------------------
\101\ Burns deposition, p. 42. As Burns told the Committee, ``[I]f
Personnel says to do this waiver, [we just assume] that they want it
done because the person's coming on board fairly quickly. Why it took
six months for Huang to come on board, I don't know.'' Id.
---------------------------------------------------------------------------
After Huang's arrival at Commerce, the DOC Office of
Security granted him his second successive clearance, a final
top secret clearance, on October 25, 1994.102 The
final clearance was not based on a background investigation
conducted by OS. Rather, as was its custom, OS farmed that task
out to the Office of Personnel Management (``OPM''), which
conducted what is known as a Special Background Investigation
on Huang. Once OPM had completed its investigation, OS reviewed
the results, 103 and Buskirk then issued the final
top secret clearance, which states that it is ``valid only
while Huang occupies the position [of Deputy Assistant
Secretary within the International Trade Administration].''
104
---------------------------------------------------------------------------
\102\ Ex. 10.
\103\ Certification of Investigation, Oct. 25, 1994 (Ex. 14).
\104\ Id.
---------------------------------------------------------------------------
The OPM commenced its background investigation of John
Huang on August 9, 1994, completing it on October 18, 1994. In
the course of the investigation, OPM decided not to conduct an
overseas background check on Huang despite Huang's years
abroad. OPM claims that its guidelines neither required nor
precluded such an investigation in Huang's case.105
The Committee interviewed Scott Kaminski, a former investigator
reviewer at OPM, about Huang's case.106 Kaminski
reviewed the background investigation of Huang before
forwarding the completed report to the DOC. Kaminski told the
Committee that under OPM rules then in existence, overseas
investigative coverage was only required if the appointee lived
overseas more than six months in the three years prior to being
appointed to a government agency. After reviewing Huang's OPM
file, Kaminski concluded that Huang had not lived overseas in
the previous three years and decided, within his discretion,
not to schedule an overseas investigation.
---------------------------------------------------------------------------
\105\ In his October 30, 1996 letter (Ex. 15) to Representative
Larry Combest, James King, Director of OPM, claimed that the
investigation of Huang ``met the coverage standards for the type of
investigation conducted.''
\106\ Memorandum of Interview of Scott Kaminski, May 12, 1997.
---------------------------------------------------------------------------
Kaminski did identify a potential security issue with
Huang, however, and he communicated it to Commerce. Kaminski
told the Committee that when he learned Huang still traveled
frequently to Asia and had a number of contacts there,
including at least one bank account, he made a character level
``E'' notation on his reviewer action sheet for Huang. The
``E'' notation signified a potential security problem and was
used to alert Commerce OS officials, who nevertheless failed to
act upon it.107
---------------------------------------------------------------------------
\107\ Id.
---------------------------------------------------------------------------
After the OPM report was forwarded to Commerce, neither
Burns nor Buskirk returned the file to OPM to request an
overseas check. Hence, the overseas check did not happen, and
Huang was granted a final top secret clearance on October 25,
1994.
Buskirk knew at the time that OPM did not do an overseas
background check on Huang.108 That did not trouble
him then, but it does now. ``Because now we have an issue that
if we had gone to Hong Kong and done the neighborhood checks,
we probably would have picked up or possibly would have picked
up some issues that we didn't pick up in the investigation.''
109 The issue for Buskirk: ``Was [Huang] an agent
for Chinese intelligence?'' 110 That issue was not
resolved to Buskirk's satisfaction.111
---------------------------------------------------------------------------
\108\ Buskirk deposition, p. 60.
\109\ Id. at p. 60.
\110\ Id. at p. 61.
\111\ Id. at p. 62.
---------------------------------------------------------------------------
Shortly before Huang left Commerce, an effort was
undertaken to make him a consultant to the Department
notwithstanding the fact that he was leaving to join the DNC as
a political fund-raiser. As part of the consulting arrangement,
Huang was to have been granted the third of his top secret
clearances, this one reflecting his status as a Commerce
consultant. Although, ultimately, Huang was not made a
consultant, he was nevertheless granted a top secret consultant
clearance by DISCO in December 1995.112 This
clearance was not taken away for a year, or long after Huang
had departed Commerce for the DNC. As far as Buskirk knows, no
other consultant on the DOC payroll was ever granted a top
secret security clearance.113
---------------------------------------------------------------------------
\112\ DISCO clearance, Dec. 14, 1995 (Ex. 16).
\113\ Buskirk deposition, pp. 66-67.
---------------------------------------------------------------------------
Garmon testified to the process through which Huang was
granted a top secret clearance by DISCO. According to Garmon,
DISCO granted the clearance based on the fact that Huang, at
the time, held a top secret clearance at Commerce. DISCO did
not conduct a separate background investigation of
Huang.114 OS was notified by DISCO that Huang had
been granted a clearance but failed to tell DISCO that Huang
would not become a consultant (i.e., that no clearance was
needed for Huang). According to Garmon, ``My office can be
faulted.'' 115 As a result of the snafu, OS changed
its procedures so that now, all requests to DISCO for
clearances must go through OS.116
---------------------------------------------------------------------------
\114\ Garmon deposition, p. 66.
\115\ Id. at p. 66.
\108\ Id. at p. 68.
---------------------------------------------------------------------------
Though not directly involved with the granting of a
consulting clearance to Huang, Buskirk and Burns both of OS
became aware that the clearance had been issued. Buskirk told
us that the request for Huang's consulting clearance was
handled by the ITA security office, not OS.117
Specifically, Bob Mack, an ITA security officer, submitted the
paperwork to DISCO.118 Buskirk recalls a
conversation he had with Mack in which Mack told him that
Halina Malinowski, Meissner's administrative assistant, pushed
him to secure a top secret consulting clearance for Huang.
Buskirk recalls the conversation as follows: ``What Bob Mack
told me was, because I am asking him if he remembers John
Huang, he goes, no, I don't remember John, but I remember
Halina calling me saying this guy needs a clearance, and no is
not an acceptable answer.'' 119 The Committee
interviewed Mack, who denied that Malinowski applied undue
pressure on him. For her part, Malinowski clearly recalls that
Meissner wanted Huang to get the clearance. In fact, she told
the Committee that Meissner pushed for the consulting
arrangement, and a consulting clearance, as a favor to Huang.
---------------------------------------------------------------------------
\117\ Buskirk deposition, p. 65.
\118\ Id. at pp. 65-66.
\119\ Id. at p. 68.
---------------------------------------------------------------------------
Burns testified that he became aware Huang held a DISCO top
secret clearance in December 1996, during a conversation Burns
and Buskirk were having with ITA security officer Bob Mack. As
Burns puts it, ``Bob Mack and Buskirk and I were having a
conversation, and Huang's name came up, nothing to do with him
having a consultant clearance, and Mack said, `you know, he
still has a DISCO T[op] S[ecret],' and Buskirk's eyes got wide
as saucers and [he said]--`What?' So it caught us off guard.''
120 Burns testified that OS ``screwed up'' by not
entering Huang's DISCO clearance on its database.121
As with his interim top secret clearance, it is unclear whether
Huang was notified of the DISCO clearance issued in December
1995.122
---------------------------------------------------------------------------
\120\ Burns deposition, p. 86.
\121\ Id. at p. 87.
\122\ When asked in his deposition whether Huang was notified of
his DISCO clearance, Steve Garmon replied, ``I don't know that he was
not.'' Garmon deposition, p. 84.
---------------------------------------------------------------------------
The more important question is whether Huang had access to
classified information during the periods when he held a top
secret clearance but did not work at the DOC. Although the
Committee found no evidence that Huang did, in fact, secure
such access to classified information, opportunities to do so
may well have existed. When asked whether Huang had access to
any classified information at Commerce between January 1994,
when he received his interim clearance, and July 1994, when he
started work, Buskirk observed, ``I don't know the answer to
that, but it would have been a breach if someone had given him
access.'' 123 As for access after leaving Commerce,
although John Huang began working at the DNC on December 5,
1995, he did not turn in his Commerce ID, keys, and passcard
until January 22, 1996. Huang therefore had unfettered access
to the building for almost two months after he left the
Department.124 In addition, Buskirk testified that
Huang visited Commerce headquarters four or five times in the
period February-May 1996.125
---------------------------------------------------------------------------
\123\ Buskirk deposition, pp. 45-46.
\124\ Id. at pp. 73-74.
\125\ Id. at p. 74.
---------------------------------------------------------------------------
IV. The Effort to Make John Huang a Consultant
The effort to make Huang a Commerce Department consultant
after he had announced his departure for the DNC is perhaps the
most mysterious aspect of the Department's experience with
Huang. It appears that Charles Meissner and, presumably, Huang,
were behind the effort, but it is not clear why either wanted
this done. What is clear is that Meissner signed off on
paperwork to (1) place Huang on leave without pay starting
December 4, 1995 and (2) make him a consultant effective
December 3, 1995. In addition, Meissner directed his
administrative assistant, Malinowski, to request Huang's third
top secret clearance, which was granted by DISCO on December
14, 1995.
The paperwork requesting Huang be made a consultant
contains a statement concerning why Commerce purported to need
Huang. It reads, ``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.'' 126 The forms further represent
that Huang was needed to fill a position ``requiring a high
degree of expertise not available from the regular work force''
and that ``Huang's expertise on the Asia Pacific region will be
used by IEP in commercial policy formulation.'' To put it
mildly, these representations are at odds with the negligible
policy role Huang played as Principal Deputy to Meissner.
---------------------------------------------------------------------------
\126\ Request for Approval of Advisory and Assistance Services,
undated (Ex. 17).
---------------------------------------------------------------------------
The effort to make Huang a consultant entailed more than
paper shuffling. Meissner met with at least three Commerce
officials to enlist their support. In early December 1995,
Meissner walked down the hall at Commerce headquarters to
Deputy Undersecretary Tim Hauser's office and found Hauser and
ITA's Director of Administration, Alan Neuschatz. Meissner
pitched his idea to Hauser and Neuschatz, who, at this point,
were aware of Huang's impending move to the DNC. Bemused,
Hauser and Neuschatz told Meissner they thought making Huang a
consultant was a terrible idea and unsupportable. Undeterred,
Meissner informed Hauser and Neuschatz that he might raise the
issue to a higher level, which he did.
Sometime in early December 1995, Meissner also paid a visit
to Will Ginsberg, who was then Secretary Brown's Chief of
Staff. As Ginsberg recalls, Meissner raised several issues, one
of which was adding John Huang to the ITA consultant's list.
Ginsberg remembers asking whether the move would be politically
sensitive. He also asked why Meissner wanted to make Huang a
consultant. Ginsberg's notes from the meeting reflect
Meissner's reply: to ``keep his [Huang's] security clearance.''
127
---------------------------------------------------------------------------
\127\ Notes of William Ginsberg, week of Dec. 6, 1995 (Ex. 18).
---------------------------------------------------------------------------
On the effort to hire Huang as a Commerce consultant, the
Committee deposed several of Huang's former colleagues at
Commerce. The perspectives of those we spoke to, as discussed
below, were largely consistent. In short, those who became
aware of the proposal to make Huang a consultant were at a loss
to understand--given Huang's move to the DNC and his
inconsequential performance at Commerce--why such an effort
would be undertaken.
Tim Hauser, a career civil servant, served as Deputy
Undersecretary for International Trade. Huang's boss, Meissner,
reported to Hauser. In early December 1995, Meissner strolled
into Hauser's office, where Hauser was talking to Neuschatz,
ITA's Director of Administration. According to Hauser, the
conversation went as follows: ``Meissner said, you know John
Huang is leaving. I said, yes, I had heard that. He said he
would like to keep him on as a consultant.'' 128
Hauser had the impression that Meissner was seeking permission
from him and Neuschatz,129 although Meissner did not
bring any documents for Hauser and Neuschatz to
sign.130 At the time of this proposal, Hauser was
aware that Huang had already accepted a fund-raising position
with the DNC.131
---------------------------------------------------------------------------
\128\ Hauser deposition, p. 59.
\129\ Id. at p. 61.
\130\ Id. at p. 66.
\131\ Id. at pp. 59-60.
---------------------------------------------------------------------------
Hauser made clear to Meissner that the idea of retaining
Huang as a consultant was ``unnecessary and inappropriate''
132 because Huang was going to the DNC
133 and because Huang's expertise and knowledge of
the Asia Pacific region were not unique.134 Hauser
testified, ``I felt the organization could survive Mr. Huang's
departure.'' 135 What Hauser thought, though, and
out of respect for Meissner, did not say, was that the proposal
was ``lunacy.'' 136 Meissner did not have the
authority on his own to make Huang a consultant. Hauser
believed that, because Huang was a political appointee, the
chief of staff (Ginsberg) would have had to authorize Meissner
to make such a decision.137 When Hauser told
Meissner that he could not support bringing Huang on as a
consultant, Meissner said that he might ``want to talk to the
people upstairs;'' 138 Hauser understood this to
mean Meissner might speak Ginsberg.139
---------------------------------------------------------------------------
\132\ Id. at p. 59.
\133\ Id. at pp. 59-60.
\134\ Id. at p. 65. Although Garten was unaware at the time of
Meissner's proposal to retain Huang as a consultant, he shares Hauser's
view that hiring Huang would have been a waste. ``Huang was so totally
ineffective, in [my] view.'' Garten deposition, May 16, 1997, pp. 40-
41. Garten went on to state, ``[l]ooked at rationally, Huang made
virtually no contribution that I can think of to national policy, and
so, I would consider it totally irrational to want to keep him on.''
Id. at p. 40.
\135\ Hauser deposition, p. 61.
\136\ Id. at p. 63.
\137\ Id. at pp. 58-59.
\138\ Id. at p. 60.
\139\ Id. The paperwork requesting Huang's consulting state in
part, ``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.'' Ex. 17, p. 1.
In his eighteen years of employment at the Department of Commerce,
Hauser was unaware of any occasion where a Department employee was made
a consultant to ease the transition of the person taking over for him
or her. Hauser deposition, p. 64. Hauser further testified that he was
unaware of any employee who was made a consultant upon leaving the
Department, and he characterized Meissner's request as ``unusual'' in
that sense. Id. at p. 112.
---------------------------------------------------------------------------
The consulting paperwork represented that Huang would be
assuming a consulting position ``requiring a high degree of
expertise not available from the regular work force.''
140 Hauser was not aware of any expertise John Huang
had that was shared by no one else in the Commerce work force
141 and stated that he believed Huang did not serve
a significant role in any policy matters.142
Moreover, Hauser characterized the principal deputy position
held by Huang as ``perhaps an unnecessary layer of
management.'' 143
---------------------------------------------------------------------------
\140\ Ex. 17, p. 2.
\141\ Hauser deposition, p. 65.
\142\ Id. at p. 23.
\143\ Id. At the bottom of Ex. 17 is a box to be signed by the
``certifying official.'' Although his title was typed in the box and
there is a blank line for his signature, Hauser was never asked to sign
this document and would not have signed it had he been asked. Hauser
deposition, pp. 18-22, 23, 66.
---------------------------------------------------------------------------
The Committee also spoke about the proposed consultancy to
Neuschatz, who recounted that he and Hauser were ``somewhat
surprised and a little aghast'' by Meissner's suggestion;
neither saw the necessity of such a move and both were
concerned that Huang was going to the DNC.144
Neuschatz recalled telling Meissner ``it would be a Hatch Act
violation'' for Huang to work at the DNC and remain a Commerce
consultant.145
---------------------------------------------------------------------------
\144\ Neuschatz deposition, p. 42.
\145\ Id. Neuschatz confirmed Hauser's recollection that Meissner
said he needed Huang in order to ease the transition period that would
result from his departure and that Meissner believed Huang going to the
DNC did not matter. Id.
---------------------------------------------------------------------------
After striking out with Hauser and Neuschatz, Meissner was
true to his word and, in early December 1995, ``took the matter
upstairs,'' meaning to Will Ginsberg, Secretary Brown's chief
of staff. Meissner visited Ginsberg's office to discuss, among
other things, Meissner's desire to make Huang a consultant. At
that time, Ginsberg had never met Huang. Meissner did not ask
Ginsberg to take any action in this regard; rather, Meissner
was ``simply seeking to make [Ginsberg] aware of [his plan].''
146 Ginsberg later learned that Meissner had already
approached Hauser and Neuschatz about making Huang a consultant
and ``the idea was not being greeted warmly. . . . It basically
wasn't going anywhere.'' 147
---------------------------------------------------------------------------
\146\ Deposition of William Ginsberg, June 17, 1997, p. 65. One of
Ginsberg's duties as chief of staff was overseeing personnel issues for
the Department of Commerce's political appointees. Id. at p. 91.
\147\ Id. at p. 59.
---------------------------------------------------------------------------
Although Ginsberg does not specifically recall a discussion
about Huang with Meissner, his notes reflect that Huang was
discussed.148 Ginsberg believes that the three lines
highlighted in his notes refer to Meissner's proposal to make
Huang a consultant.149
---------------------------------------------------------------------------
\148\ Id. at pp. 45-47. During his tenure at the Department of
Commerce, Ginsberg took some twelve volumes of notes, four while he was
Chief of Staff. Ginsberg's notes are organized chronologically.
According to Ginsberg, ``[t]he purpose of the notes was to remind
myself of anything that I needed to know. . . . These were all memory
joggers in one sense or another.'' Id. at p. 29. The Department
produced portions of Ginberg's volumes including entries from the week
of December 4-8, 1995, which is where the notes of the Meissner meeting
are found. See Ex. 18.
\149\ Id. at p. 52. See Ex. 18.
---------------------------------------------------------------------------
The second line of the highlighted portion of Ginsberg's
notes read, ``political sensitivity?'' According to Ginsberg,
the notation reflects his conclusion that it would be
problematic to make Huang a consultant because he was going to
the DNC.150 Ginsberg had learned that Huang was
going to the DNC either prior to or during his meeting with
Meissner,151 and it struck him as odd that Huang, a
Commerce employee he had heard ``almost nothing about'' was
being placed in a high-level position at the DNC.152
---------------------------------------------------------------------------
\150\ Id. at p. 54.
\151\ Id. at p. 55.
\152\ Id. at p. 57.
---------------------------------------------------------------------------
On the third line of Ginsberg's highlighted notes, he wrote
``why? keep his security clearance.'' In his deposition
Ginsberg stated, ``I take that to mean that I asked Chuck
Meissner why he wanted Huang to be on the ITA consultants list
and that he said to keep his security clearance. He may have
said other things as well, but he said that at least part of
the reason was so that Huang could keep his security
clearance.'' 153 Ginsberg's general impression is
that Meissner was seeking to make Huang a Commerce Department
consultant as a favor to Huang.154
---------------------------------------------------------------------------
\153\ Id. at pp. 55-56.
\154\ Id. at p. 66.
---------------------------------------------------------------------------
v. huang's access to classified and other sensitive information
ITA's senior officials regularly receive classified
information about political and economic developments abroad.
The information comes from CIA materials, State Department
cables, and working papers and reports that contain classified
information. In addition, those officials have access to
proprietary information about American trade policies and
individual business deals. Public officials, including ITA
officials like Huang, are supposed to receive classified
information only if they hold the requisite clearances and only
if they have a ``need to know'' the information. The Committee
has found no evidence that Huang received information for which
he did not hold the proper clearance, but there is significant
evidence that Huang had no need to know, and indeed had no
business receiving, whole areas of classified information made
available to him.
Expecting that Huang's marginalized policy role would have
greatly limited his access to classified information, the
Committee was surprised to learn that Huang enjoyed frequent
and routine access to such information. In fact, Huang's
virtual freeze out from substantive matters did not hinder his
ability to see that information at all. In summary, the
Committee determined that Huang obtained classified and other
sensitive information routinely from the following sources:
First, he received regular intelligence
briefings from a CIA detailee who worked in Commerce's
Office of Intelligence Liaison (OIL).155
Between October 1994, when they began, and November
1995, when they ended, Huang received a total of 37
one-on-one briefings.
---------------------------------------------------------------------------
\155\ After Huang left Commerce, the Office of Intelligence Liaison
was renamed the Office of Executive Support. For clarity's sake, in
this report we will refer to the office by its former name, OIL.
---------------------------------------------------------------------------
Second, Huang received a flow of classified
and unclassified cables from foreign diplomatic posts
relating to trade and economic matters.
Third, by virtue of being Meissner's
principal deputy, Huang had routine access to reports
and briefing materials that would have contained
classified and other sensitive information.
Because much had been written in the press about whether
Huang had received intelligence briefings at Commerce, the
Committee examined that issue in detail. The topic involves the
Commerce Department's Office of Intelligence Liaison. Owing to
the nature of the topic, much of the Committee's work is
classified. However, in the interest of making as much
information as possible available to the public, an
unclassified version is provided below.
As the Committee learned, OIL is Commerce's window to the
intelligence community. It ``provides information on foreign
governments to the Secretary and his senior executives,'' and
much of [that information] is classified.'' 156
OIL's main responsibility is to review classified material and
then provide regular briefings to senior Commerce
officials,157 doing so through a small cadre of
officials drawn from Commerce and other government agencies.
Those OIL officers are assigned particular Commerce officials
to brief and then establish ``client'' relationships with them,
attempting to tailor the classified information available to
OIL to a particular ``client's'' job responsibilities.
---------------------------------------------------------------------------
\156\ Deposition of Robert P. Gallagher, May 30, 1997, p. 5. The
Committee deposed Gallagher and Dickerson on May 30, 1997, bifurcating
each deposition into unclassified and classified portions. In the case
of Gallagher, the Committee has obtained declassification of excerpts
of his previously-classified testimony. In order to keep references to
Gallagher's deposition testimony precise, subsequent citations to
Gallagher's deposition will distinguish between the ``unclassified''
and ``declassified'' portions.
\157\ Id.
---------------------------------------------------------------------------
Huang was one such OIL client. Robert Gallagher, the head
of OIL, assigned Huang to John Dickerson, one of Gallagher's
OIL officers. Dickerson was in fact an employee of the Central
Intelligence Agency (CIA) detailed to OIL. Dickerson was
undercover at Commerce, posing as a Department of Energy
official, so Huang thus would not have known of Dickerson's CIA
affiliation. Because Dickerson's cover was compromised in 1997
by media coverage of a FOIA lawsuit involving the Commerce
Department, the CIA decided to roll back his cover. Dickerson
testified before the Committee as an openly-acknowledged
employee of the CIA.
Although Huang started at Commerce in July 1994, he did not
have his first contact with OIL until early October 1994, when
Gallagher and Dickerson first approached him.158 At
the time, Dickerson was providing classified briefings to
Meissner, Huang's supervisor. Meissner mentioned to Dickerson
that Huang should be receiving such briefings as well.
Dickerson discussed the matter with Gallagher, and they agreed
that Dickerson should start briefing Huang.159
Notwithstanding Meissner's request that they brief Huang, the
ultimate decision regarding the scope of his briefings resided
with OIL. As the holder of the classified information to be
imparted, OIL has a ``fair amount of autonomy'' in deciding
which areas briefings for particular officials would
cover.160
---------------------------------------------------------------------------
\158\ Id. at p. 6.
\159\ Deposition of John H. Dickerson, May 30, 1997, p. 5.
\160\ Gallagher unclassified deposition, p. 11.
---------------------------------------------------------------------------
In his deposition Gallagher recalled the process for
deciding the scope of Huang's briefings in some detail,
possibly because Gallagher remembered Huang fitting an OIL
briefing void so neatly. At the time, no senior official at
Commerce was receiving and digesting the full range of
intelligence available regarding the greater China
area.161 Gallagher perceived that such a person was
needed to provide ``steady, continuous executive following'' of
that information.162 Gallagher and Dickerson
identified Huang as a good candidate to provide that coverage,
to serve as a ``safety net'' on China,163 and they
decided to shape his intelligence briefings accordingly to
focus on the greater China area.164 They did not
consult his personnel file in making this decision, instead
relying on ``getting a feel from him'' in person 165
and also relying on their own experience in such
matters.166
---------------------------------------------------------------------------
\161\ Gallagher declassified deposition, p. 34.
\162\ Id.
\163\ Id.
\164\ Id. at p. 37.
\165\ Id. at p. 36.
\166\ Gallagher unclassified deposition, pp. 10-11; see also
Gallagher declassified deposition, p. 34. Dickerson believed that
Meissner mentioned to him that Huang ``would be his Asia specialist and
I assumed that I should bring him intelligence in that area.''
Dickerson deposition, pp. 5-6. At the hearing, both Dickerson and
Gallagher testified that they briefed Huang on Asia because Meissner
specifically directed them to do so. Testimony of John Dickerson, July
16, 1997, p. 218.
---------------------------------------------------------------------------
What drew them to Huang still stands out in Gallagher's
mind. Huang had ``an obvious cultural background. There was a
sensibility about things Chinese that you just don't get even
if you're a Chinese scholar from Yale.'' 167 Huang
``would go into interesting vignettes about how people have to
got to understand how to deal with the Chinese.''
168
---------------------------------------------------------------------------
\167\ Gallagher declassifed deposition, pp. 36-37.
\168\ Id. at p. 35.
---------------------------------------------------------------------------
Having thus determined for itself the appropriate scope for
Huang's briefings, OIL commenced Huang's briefings. As
Dickerson and Gallagher explained, the briefing process
consisted of one-on-one meetings in Huang's office, where
Dickerson would take intelligence materials to Huang, Huang
would read them, and the two would occasionally discuss the
significance of particular documents.169 Dickerson
typically called Huang to arrange their briefings; Janice
Stewart, Huang's secretary, noted that he treated these as
important meetings.170
---------------------------------------------------------------------------
\169\ Gallagher unclassified deposition, pp. 5-7.
\170\ Deposition of Janice Stewart, May 16, 1997, p. 48.
---------------------------------------------------------------------------
Dickerson briefed Huang a total of 37 times. Dickerson
estimated that he showed Huang between 10 and 15 pieces of
intelligence per briefing. Thus, the best estimate of how many
separate pieces of intelligence Huang saw was between 370 to
550.
The great bulk of materials Huang saw was ``field
reporting,'' or raw intelligence, that is considered more
sensitive--largely because it may contain information about
sources and methods of intelligence gathering--than other kinds
of classified information. The field reports Dickerson took
Huang were sufficiently sensitive that Huang was forbidden from
keeping the materials or taking notes about them. Likewise,
owing to the sensitivity of the material, after a briefing
Dickerson would destroy the materials shown
Huang.171 Thus, for nearly all of what Huang saw
there is no record, apart from what Dickerson (and, presumably,
Huang) can reconstruct from memory.
---------------------------------------------------------------------------
\171\ Dickerson testimony, July 17, 1997, p. 160.
---------------------------------------------------------------------------
Consistent with OIL practice, however, Dickerson wrote down
any substantive comments Huang made on the field reporting that
Dickerson showed him. There are 15 field reports total that
reflect Dickerson's transcription of Huang's
comments.172 Of that 15, three bear the special
designation ``MEM DISSEM,'' which according to a CIA
representative who testified at the hearing, reflects ``an
exceptionally sensitive bit of information or an exceptionally
sensitive source. . . . [T]he MEM DISSEMS are much more
sensitive than our ordinary field reporting.'' 173
---------------------------------------------------------------------------
\172\ Dickerson testimony, p. 158; Gallagher deposition, p. 11.
\173\ Testimony of William H. McNair, July 17, 1997, p. 171.
---------------------------------------------------------------------------
On occasion, in addition to the field reports, Dickerson
would provide Huang with ``analytical'' classified reports on
various topics, which Huang could retain. Under OIL protocols,
Huang had to sign receipts for those materials if they were
classified at a secret level or higher. Records reflect that he
received 12 such ``finished'' intelligence
reports.174 There are receipts for 10 of the 12
documents.175 The other two, which are classified as
``confidential,'' a level below secret, are known only because
they were found in Huang's safe after he left
Commerce.176
---------------------------------------------------------------------------
\174\ Gallagher unclassified deposition, p. 11.
\175\ Classified Material Receipts, various dates (Ex. 19).
\176\ Memorandum from Robert P. Gallagher to John Sopko, June 24,
1997 (Ex. 20).
---------------------------------------------------------------------------
Owing to classification restrictions, the Committee could
not elicit public testimony regarding the specific documents or
briefing areas covered with Huang. However, in a series of
hypotheticals, Dickerson recounted the kinds of information
that the CIA might have shared with Huang, assuming for the
sake of the questions that the CIA even possessed it:
Q: If you had information on economic issues which
confronted Taiwan and China, is that the sort of information
that you might have given to Mr. Huang?
A: Again, hypothetically, if the CIA had information on
these issues, I might have made that available to him.
Q: And, hypothetically, if you had information on
investment opportunities in China, is that the sort of
information that you might have made available to Mr. Huang?
A: If--again, hypothetically, if the CIA had information on
this issue, I might have made that available to Mr.
Huang.177
---------------------------------------------------------------------------
\177\ Dickerson testimony, pp. 164-165.
* * * * *
---------------------------------------------------------------------------
Q: Again, hypothetically, Mr. Dickerson, if you had
information on the assessment of action by China to assure
continuing investment by Taiwan in China, is that the kind of
information that you might have made available to Mr. Huang?
A: Yes, if the CIA had--hypothetically had such
information, I might have made that available to Mr.
Huang.178
---------------------------------------------------------------------------
\178\ Id. at p. 167.
The Committee was struck by how little the OIL
representatives knew about the true nature of Huang's job
responsibilities. As former Undersecretary Garten testified,
Huang was walled from China policy specifically, and had very
little policy responsibility at all. When Garten learned for
the first time during his Committee deposition that Huang was
provided information on China by OIL, he was surprised: ``I
certainly didn't know it was happening. . . . He was in a
position where he had the right to access and what I didn't
realize, if what you're saying is right, the indiscriminate
nature of the way the intelligence was passed around. . . it
was clearly a mistake.'' 179 Garten would have
``preferred for [Huang] not to receive intelligence briefings
that touched on the general topic of the People's Republic of
China.'' 180
---------------------------------------------------------------------------
\179\ Garten deposition, June 3, 1997, pp. 73-74.
\180\ Id. at p. 74.
---------------------------------------------------------------------------
Just as Garten had no idea that OIL was briefing Huang on
Asia with emphasis on China, Gallagher and Dickerson were
ignorant of Huang's exceedingly modest policy role. Neither
Huang nor Garten (nor, apparently, Meissner) ever described
Huang's actual policy portfolio to them. In his deposition,
when he first heard about Huang's actual job responsibilities,
Gallagher became visibly annoyed. ``If any of them had it
probably definitely would have changed the way--I mean it would
have been nice if Jeff [Garten] had communicated such a policy
to us. I mean I can't read minds.'' 181 Although
Dickerson was more measured, he, too, was unhappy: ``At a
minimum, I would have sat down with Mr. Garten and asked him
exactly why he was doing this or at least said to Mr. Garten,
``Mr. Garten, are you aware that we are briefing Mr. Huang on
China?'' In fact, this is the first I've heard of that.''
182 Gallagher agreed that there was a ``disconnect''
between Huang's policy responsibilities and his intelligence
briefings.183 As for Huang's input, Gallagher only
recalled Huang telling Gallagher and Dickerson of his interest
in China.184 Gallagher could not remember whether
Huang ever indicated that he had a policy portfolio relevant to
China.185
---------------------------------------------------------------------------
\181\ Gallagher unclassified deposition, p. 19.
\182\ Dickerson deposition, p. 13.
\183\ Gallagher unclassified deposition, pp. 19-20.
\184\ Gallagher declassified deposition, p. 36.
\185\ Id.
---------------------------------------------------------------------------
The upshot of the ``disconnect'' between Huang's job and
his intelligence briefings is that in all likelihood, Huang saw
significant amounts of intelligence information that he lacked
a need to know. Gallagher and Dickerson defended the nature of
the OIL briefings to Huang, with Gallagher opining that OIL was
``100 percent correct in what we showed him.'' 186
However, the simple facts about Huang's actual policy
responsibilities reflect otherwise. A clear mistake was made in
briefing Huang on China and probably other areas as well.
---------------------------------------------------------------------------
\186\ Testimony of Robert P. Gallagher, July 16, 1997, p. 224. As
mentioned previously, Dickerson recalls that Meissner told him Huang
would be his Asian specialist and that therefore Dickerson should brief
him. (E.g., Dickerson testimony, p. 180). At the Committee's hearings,
both Dickerson and Gallagher clung to this remark as a justification
for providing Huang with so much briefing on matters he did not need to
know. There two problems with the comment as offered. First, it is
contradicted by Gallagher's recollection--at his deposition and earlier
interview--that he and Dickerson decided for themselves the appropriate
scope of Huang's briefings, making the call that Huang should serve as
the China ``safety net.'' Second, the remark attributed to Meissner
makes no sense in light of events at the time. Meissner already had an
``Asia specialist'' in Nancy Linn Patton, the Deputy Assistant
Secretary for Asia. More importantly, by this time Undersecretary
Garten had made it clear to Meissner that neither Patton nor Huang were
to handle Asia policy. See Ex. 7. Regarding China in particular, Garten
made it exceedingly clear to Meissner that Huang was to have no role
whatsoever. Garten testimony, p. 126. Based on this unrefuted
testimony, it would defy logic for Meissner to then tell Dickerson and
Gallagher what they say he told them.
---------------------------------------------------------------------------
Apart from his intelligence briefings, Huang had frequent
access to other sources of sensitive and classified
information. First, he routinely received classified diplomatic
cables sent to Commerce through an electronic cable system
employed by the federal government. Commerce's access to the
cable system is maintained at ITA's Communication
Center.187 The center keeps ``reader profiles'' for
senior positions at Commerce, and through a program that
automatically reads and selects cables responsive to the
profiles, the center gathers and holds such cables for
distribution to appropriate officials.188
---------------------------------------------------------------------------
\187\ A limited number of cables with special dissemination
strictures are handled separately at Commerce by OIL.
\188\ Interview of Lewis Williams, June 11, 1997; Neuschatz
deposition, pp. 29-31.
---------------------------------------------------------------------------
Huang had a reader profile, which meant cable traffic was
automatically set aside for him by the ITA Communications
Center. Because the Communications Center only keeps records
for 90 days of which cables it distributes, there are no
records of the cables Huang saw.189 Thus, in the
absence of Huang's own recollection, no one will ever know what
exactly he saw. However, through the testimony of his former
secretary, Janice Stewart, the Committee has established a
fairly clear record of at least how often he received such
cables. Stewart recounted that she signed for Huang's cables
from the Commerce communication center each
morning.190 The cables Huang received often numbered
from about 25 to 100 per pick up.191 The cables were
classified as ``confidential'' and ``secret.'' Once Huang
finished a review of a cable, he would either direct Stewart to
file them in a safe maintained in Huang's office (or a similar
one for Stewart), 192 or dispose of
them.193 Stewart is sure Huang had her make copies
of classified cables for filing in her safe.194 She
cannot recall if Huang ever directed her to send copies of
cables or other classified information to others,195
but she is not confident Huang returned to her all of the
cables he received for either disposal or filing.196
---------------------------------------------------------------------------
\189\ Williams interview.
\190\ Stewart deposition, pp. 14-15.
\191\ Id. at p. 16.
\192\ Id. at pp. 22-23.
\193\ Id. at p. 21.
\194\ Id. at p. 28.
\195\ Id. at p. 18.
\196\ Id. p. 23.
---------------------------------------------------------------------------
In addition to cables, Huang routinely had classified and
sensitive briefing papers and memoranda cross his desk. Again,
Stewart provided the best informed account of how that worked
day-to-day. Stewart would sign ``classified material receipts''
for reports Huang received from the OIL,197 as well
as for secret level reports, briefing materials, and
correspondence received in the ordinary course of
business.198 In addition, Huang reviewed classified
materials sent to Charles Meissner,199 and could
keep copies of these documents if he chose to do so. Stewart,
however, does not recall if Huang ever requested such copies to
be made.200 Stewart's recollection that classified
information crossed Huang's desk frequently is borne out by the
general impressions of his other co-workers.201
---------------------------------------------------------------------------
\197\ Id. at p. 57.
\198\ Id. pp. 57-58.
\199\ Id. at pp. 39-40.
\200\ Id. at p. 40.
\201\ E.g., Interview of Don Forest, April 29, 1997; Neuschatz
deposition, pp. 28-34; Hauser deposition, pp. 5455.
---------------------------------------------------------------------------
An obvious question regarding Huang's access to classified
information is whether he mishandled or improperly disclosed
any of it. The press has reported on the prospect that Huang
might have shared such information
inappropriately,202 including with his former
employer, Lippo, which has extensive business interests
throughout Asia and thus might have found the information
useful.
---------------------------------------------------------------------------
\202\ According to one press account, ``reliable but unconfirmed''
FBI reporting indicates that Huang passed a classified document to the
Chinese government while he was at Commerce. Bob Woodward, ``FBI Had
Overlooked Key Files in Probe of Chines Influence,'' Washington Post,
Nov. 14, 1997, p. A1.
---------------------------------------------------------------------------
None of Huang's coworkers noticed anything unusual or
inappropriate in his handling of classified information. That
said, the Committee has found that Huang had ample opportunity
to mishandle that information if he chose to do so, including
significantly a secret office across the street from Commerce
at Stephens Inc. to which he frequently repaired. That access,
combined with Huang's unusually frequent contact with Lippo
officials worldwide while at Commerce, at a minimum raises the
threshold question of whether Huang passed along classified
information to those who should not have received it. The
Committee is unable to answer the question to its satisfaction.
On this key question, as on so many others, it would have been
extremely helpful to receive testimony from Huang himself.
As explained by Stewart, Huang had a safe in his office for
the storage of classified materials.203 Huang's
office suite (which he shared with Meissner and others)
contained 8 or 9 safes, and every morning each safe would be
opened by the secretaries for the day.204 Each safe,
at the end of the day, would be locked by the last secretary to
leave, unless a professional was still working with materials
from a personal safe.205 Huang would frequently stay
later than Stewart, and thus would be responsible for locking
his safe.206 Stewart recalls a few occasions when
Huang would be the last person in the office.207 In
addition, as one might expect, there were plenty of phones,
facsimile machines, and copiers in Huang's suite of offices to
which he had access.
---------------------------------------------------------------------------
\203\ Stewart deposition, pp. 25, 29.
\204\ Id. at pp. 26-27.
\205\ Id., p. 27.
\206\ Id. at pp. 27-28.
\207\ Id. at p. 34. According to the Department, there are no
surviving records reflecting occasions when the office suite safes,
including Huang's were opened and closed.
---------------------------------------------------------------------------
Much more striking than his Commerce facilities, however,
was the Committee's discovery that while at Commerce, Huang
maintained access to a separate office across the street at
Stephens, Inc. Huang used this office regularly, including its
phone and facsimile facilities, and he frequently received
packages at the office. No one at Commerce--not his secretary,
not his supervisors, not his coworkers, nobody--knew that he
had such an office.
VI. Huang and Stephens, Inc.
During his tenure at the Commerce Department, Huang made
frequent use of a second office across the street in the D.C.
office of the Arkansas-based brokerage house Stephens, Inc.
(``Stephens D.C.'') Huang's use of the office is cloaked in
mystery. The Committee knows he visited the office, but for
what purposes is unclear. He visited Vernon Weaver there, a
former Stephens official who is now U.S. Ambassador to the
European Union, but what they discussed is not known. Huang
received faxes and overnight packages at the office, but the
Committee doesn't know their substance or who sent them. Huang
sometimes appeared at Stephens carrying an envelope or small
briefcase, but the Committee does not know what they contained
and what Huang did with the contents. Finally, no one the
Committee spoke to at Commerce was aware of Huang's frequent
visits to the Stephens D.C. office. Indeed, Huang's secretary,
Janice Stewart, testified she had ``never heard of Stephens,
Inc.208
---------------------------------------------------------------------------
\208\ Stewart deposition, p. 83.
---------------------------------------------------------------------------
On July 17, 1997 the Committee heard the testimony of Paula
Greene, who, from early 1993 until January 1996, worked as an
administrative assistant and secretary at Stephens D.C.
Stephens, Inc. is Arkansas' largest brokerage firm and has
significant business ties to the Lippo Group and the Riady
family. During the time Greene worked there, its Washington, DC
offices were located on the 6th floor of the Willard Building,
1455 Pennsylvania Avenue, NW, just across the street from the
Department of Commerce.
Stephens D.C. maintained a spare office for use by friends
of the firm and visitors from out of town.209 Greene
testified that Huang infrequently used that office when he
worked for Lippo Bank in California and more often when he
moved to the Department of Commerce.210 When Greene
worked at Stephens D.C., the office included three other
employees: J.W. Rayder, Greg Eden, Vernon Weaver; later, Celia
Mata, a secretary and receptionist, joined the
staff.211
---------------------------------------------------------------------------
\209\ Testimony of Paula Greene, July 17, 1997, p. 12. A Committee
chart reflecting Mr. Green's recollection of the Stephens D.C. office
layout is attached as Ex. 21.
\210\ Id. at pp. 14-15.
\211\ Id.
---------------------------------------------------------------------------
Greene testified that Stephens D.C. made its spare office
available to visiting Stephens' employees, as well as to
friends of Weaver, Rayder, and Eden.212 Any visitors
using that office were also permitted to use the fax machine,
copier, and telephone, which had no special access or security
codes. There were no records kept of incoming or outgoing
faxes, nor of what copies were made and by whom.213
---------------------------------------------------------------------------
\212\ Deposition of Paula Greene, July 2, 1997, p. 18.
\213\ Greene testimony. p. 13.
---------------------------------------------------------------------------
While he worked at Commerce, Huang regularly received
faxes, packages, and correspondence at Stephens
D.C.214 Greene had specific instructions from
Ambassador Weaver to alert Huang when this occurred, and Huang
would routinely come by and pick these items up.215
Sometimes, Huang would show up at the Stephens office
unprompted by a call from Greene.216 Generally, when
documents or packages addressed to Huang were received in the
Stephens D.C. office, Greene placed those in an in-out box
located on the desk in the spare office, which she referred to
as ``Mr. Huang's desk.'' She then called Huang to let him know
something had arrived.217
---------------------------------------------------------------------------
\214\ Id. at app. 21, 36. We also know that Huang received faxes at
Stephens Inc. prior to joining the Commerce Department. See Facsimile
to John from the Committee of 100, a New York based group of Chinese
Americans who favor strong U.S. relations with China, May 5, 1994 (Ex.
22).
\215\ Greene testimony, p. 16.
\216\ Id. at pp. 21-22.
\217\ Id. at p. 21.
---------------------------------------------------------------------------
Greene testified that, while at Commerce, Huang used the
spare office more frequently than anyone other than visiting
Stephens, Inc. employees. Huang used the office ``perhaps two,
three times a week, . . . not every week, but sometimes it
would be two or three times.'' 218 When Huang
visited the office he would meet with Weaver if he was
around.219 Greene does not know what Huang and
Weaver discussed.220 Following these meetings, Huang
would walk back to the spare office. Huang made use of the
Stephens phones and copier machine as well.
---------------------------------------------------------------------------
\218\ Id.
\219\ Deposition of Celia Mata, August 1, 1997, p. 50; Greene
testimony, p. 18.
\220\ Greene deposition, p. 40.
---------------------------------------------------------------------------
Huang would not come to Stephens D.C. office empty-handed.
On this point the Committee deposed Celia Mata, who worked as a
Stephens D.C. secretary and receptionist.221 She
testified as follows:
---------------------------------------------------------------------------
\221\ Mata depositing, p. 6.
Q: What would John Huang bring with him to the
office, if anything?
A: He would have like a yellow envelope or a folder
sometimes or a very small, like a legal-size
briefcase.222
---------------------------------------------------------------------------
\222\ Id. at p. 52.
Mata does not know what Huang may have brought into the
Stephens office in the evelope or folder, or what he carried
out.\223\
---------------------------------------------------------------------------
\223\ Id. at p. 52.
---------------------------------------------------------------------------
Greene testified she was not able to see whether Huang used
the fax or copy machines when he visited the office, but, like
every other visitor, he was entirely permitted to do
so.224 Although from her desk she could not see
whether Huang used the telephone, Greene could tell he did so,
based on the phone lights at the receptionist's
desk.225
---------------------------------------------------------------------------
\224\ Greene testimony, pp. 13, 21.
\225\ Id. at p. 22.
---------------------------------------------------------------------------
Greene described an unusual set of instructions she was
given by Ambassador Weaver. Weaver, would ask Greene to call
Huang on his behalf, often to alert Huang that Weaver wanted to
speak or meet with him.226 Huang was the only person
Weaver asked her to call on his behalf. Greene understood that
Weaver asked her to do this because ``[h]e did not want his
name to appear on [Huang's telephone] logs very frequently.''
227 At the hearing, Greene responded to Senator
Collins' questioning as follows:
---------------------------------------------------------------------------
\226\ Id. at p. 18.
\227\ Id. at p. 19.
Senator Collins. Did Mr. Weaver also ask you on
occasion to call Mr. Huang and indicate that Mr. Weaver
wanted to speak with him?
Ms. Greene. Yes.
Senator Collins. And then would Mr. Huang meet on
occasion with Mr. Weaver at Stephens, Inc.?
Ms. Greene. Yes.
Senator Collins. Did Mr. Weaver also tell you he
wanted you to call Mr. Huang on his behalf? In other
words, Mr. Weaver didn't call directly very often. He
would ask you to call for him; is that correct?
Ms. Greene. Yes.
Senator Collins. Did he say why he wanted you to call
for him?
Ms. Greene. Yes, he did.
Senator Collins. Could you tell us why that was?
Ms. Greene. He did not want his name showing up on
the message logs very frequently.
Senator Collins. So he asked you to call for him
because he didn't want his name showing up on the
message logs of the Department of Commerce for Mr.
Huang; is that correct?
Ms. Greene. Yes, that's correct.228
---------------------------------------------------------------------------
\228\ Id. at pp. 18-19.
In addition, Weaver instructed Greene to speak directly
with Huang, and in the event that Huang was not available,
simply to leave a message for him to call her. She was
---------------------------------------------------------------------------
specifically instructed not to leave a detailed message:
Ms. Greene. As best as I remember, I was told that if
any faxes or anything came in for Mr. Huang, I was to
contact him directly . . . in regards to letting him
know that he had something to pick up at the office. If
he was not there, then I was just to leave a message
for him to call me.
Senator Collins. Did Mr. Weaver specifically instruct
you not to leave a detailed message with Mr. Huang's
secretary?
Ms. Greene. To my knowledge, yes.
Senator Collins. He did? He told you, in other words,
that if you couldn't talk to Mr. Huang directly, to
just leave your name and have him call back, to not
leave a message saying that there was a package for him
or he had received faxes, but just to leave your name.
Is that correct?
Ms. Greene. Yes, that's correct.
Senator Collins. In your experience in working with
Mr. Weaver, this was the one case where you were told
not to leave a detailed message?
Ms. Greene. Yes.229
---------------------------------------------------------------------------
\229\ Id. at pp. 16-17.
The Committee documented twenty-six messages left for Huang
at Commerce by either Weaver or Greene. Greene told the
Committee that each of these messages would have been left to
alert Huang that he had received a fax or a package or that Mr.
Weaver wanted to speak to him.230 The message slips
represent only unsuccessful calls, and thus do not tally all of
the calls to Huang.231
---------------------------------------------------------------------------
\230\ Id. at pp. 19-20. See also Chart of phone messages to John
Huang from Stephens, Inc. (Ex. 23).
\231\ Id. at p. 20.
---------------------------------------------------------------------------
Huang's purpose in visiting Stephens D.C. so regularly
remains a mystery. Any speculation that Huang faxed Commerce-
derived classified or proprietary materials from the Stephens
D.C. facsimile remains just that, speculation. Given that
proviso, attached as Exhibit 24 is a spreadsheet prepared by
the Committee listing by date (1) the 37 intelligence briefings
John Dickerson gave Huang, (2) the nine classified material
receipts covering ten pieces of finished intelligence receipted
to Huang, and (3) phone calls and facsimile transmissions from
Stephens D.C. to various Lippo entities.232
---------------------------------------------------------------------------
\232\ Committee spreadsheet, Calls and Fax Transmissions from
Stephens, Inc. and Receipt of Intelligence Information, October 1997
(Ex. 24). The spreadsheet also contains one phone call from Stephens
D.C. extension 6774 to Huang's home in Glendale, California. It appears
that 6774 is the extension of the visitor's office Huang used.
---------------------------------------------------------------------------
As one can see, there are no telephone or fax transmission
entries after January 1995. Counsel for Stephens has informed
the Committee that, some time in early 1995, Stephens D.C.
changed its long distance carrier, and the Committee could not
obtain records from the new carrier. The spreadsheet contains
no records of calls made after the change.
Although the Committee has no specific information about
the contents of Huang's communications from Stephens D.C. to
Lippo, a number of these communications took place in close
proximity to his intelligence briefings. Among the more notable
are the following:
On October 5, 1994 at 9:00 a.m., John
Dickerson briefed Huang. At 5:49 p.m. on the same day,
a fax was sent from Stephens D.C. to Lippo Ltd. in Hong
Kong. At 4:20 p.m. the next day, a fax was sent from
Stephens D.C. to the Director of Lippo Bank in
Indonesia;
On January 12, 1995 at 10:30 a.m., John
Dickerson briefed Huang. At 5:03 p.m. on January 16,
1995, a fax was sent from Stephens D.C. to Lippo
Pacific in Indonesia;
On January 25, 1995 at 11:00 a.m., John
Dickerson briefed Huang. At 5:21 p.m. on January 30,
1995, a fax was sent from Stephens D.C. to Lippo
Pacific in Indonesia.
Huang's primary professional contact at Stephens D.C.
appears to have been Vernon Weaver, who is now the U.S.
Ambassador to the Economic Union. In an effort to place that
relationship more fully into context, the Committee staff
interviewed Ambassador Weaver on June 10, 1997. Huang's
relationship with Ambassador Weaver has spanned a decade,
extending through Huang's tenure at Lippo, the Commerce
Department, and the DNC. Weaver met Huang for the first time in
the Spring of 1986 when they both attended a trade mission to
Hong Kong with a group from Arkansas.233 From that
time until 1989 or so, Weaver was in frequent contact with
Huang regarding Lippo matters. Weaver characterized Huang as a
``personal friend'' and noted their wives are friendly.
---------------------------------------------------------------------------
\233\ Memorandum of Interview of Ambassador Vernon Weaver, July 4,
1997. Unless noted otherwise, the following discussion is based on that
interview.
---------------------------------------------------------------------------
According to Weaver, Huang was involved in Lippo's ``day-
to-day'' activities ``but not the important stuff.'' Huang
served as an ``intermediary'' between the Riadys and Stephens.
Weaver did not recall how he first learned of Huang's
appointment to the DOC but noted, ``we have a lot of common
friends.'' He did not help Huang secure the Commerce
appointment. Weaver said that, after 1989, he ``had relatively
small amounts of dealings with John Huang.''
A review of documents obtained by the Committee shows that
Weaver and J.W. Rayder (a Stephens D.C. tax attorney) were in
contact with Huang in 1993, while Huang was at the Lippo Bank
in California. In September 1993, Weaver faxed Huang a report
on former President Carter's summer 1993 trip to
Africa.234 And some time in or before the same year,
Rayder sent Huang a handwritten note thanking him for attending
a meeting with California State Senator Roberti.235
---------------------------------------------------------------------------
\234\ Facsimile from Vernon Weaver to John Huang, Sept. 1, 1993
(Ex. 25).
\235\ Note from J.W. Rayder to John Huang, undated (Ex. 26).
Roberti was Maeley Tom's employer at the time.
---------------------------------------------------------------------------
Weaver could not explain fully the sixteen written phone
messages he left for Huang at Commerce. Weaver said he may have
called to congratulate Huang on his appointment and that he met
Huang ``for lunch and so forth, from time to time.'' Weaver
said he may have had ten lunches with Huang. Weaver never met
Huang at the DOC and does not recall meeting with Huang (while
Huang was at Commerce) for anything other than a meal. However,
Weaver did say Huang may have come to see him at Stephens D.C.
to ask about a business deal. Weaver does not know of any fund-
raising Huang may have done while he was at Commerce.
After Huang joined the DNC in December 1995, Weaver saw
Huang once or twice for lunch.236 The last time
Weaver recalled seeing Huang was on July 16, 1996, at Weaver's
ambassadorial swearing-in ceremony. Weaver said he doesn't know
why Huang left the DOC for the DNC.
---------------------------------------------------------------------------
\236\ Weaver's contact with Huang after he joined the DNC was not
limited to lunches. Among the documents produced to the Committee by
the DNC is a May 31, 1996 facsimile from Vernon Weaver to John Huang.
(Ex. 27). Pages 3 and 4 of the fax are copies of articles from the
South China Morning Post. There are two fax lines on each of these
articles: one from Stephens Inc. to Huang at the DNC; the other from
Lippo Hong Kong to the number 202/234-0015. We learned 202/234-0015 is
the fax number at the Sheraton Hotel on Woodley Road in the District.
Who was there to receive the fax is unknown.
Weaver told us he did not actually send the fax but that he
directed it be sent ``for Huang's information.''
---------------------------------------------------------------------------
Weaver recalled that when Huang worked at Lippo, he
sometimes used the Stephens D.C. guest office. Huang was
permitted to do so because he was a ``friend'' of Stephens.
Weaver was ``quite sure'' that Huang continued to use the guest
office after he joined Commerce. Weaver doesn't know what Huang
did during his visits from Commerce. Weaver's ``impression is
that [Huang] did not'' use the guest office after he joined the
DNC.237 However, Weaver never told Huang to stop
using the guest office.
---------------------------------------------------------------------------
\237\ Celia Mata has a different recollection. She recalls that
Huang continued to visit Stephens D.C. until early spring, 1996, or
around the time when Weaver made known his interest in the E.U.
ambassadorship. Mata deposition, pp. 40-43. Huang stopped calling the
office after Weaver moved to Belgium in July 1996. Id. at p. 40.
---------------------------------------------------------------------------
When asked why Paula Greene left a number of phone messages
for Huang at Commerce, Weaver said she was probably alerting
Huang he had received a fax or message at Stephens D.C. Weaver
``suppose[d], probably'' that Huang received faxes and messages
at Stephens D.C., an arrangement that was in place before Huang
joined the DOC.
Weaver's relationship with Huang was not a one-way street.
Indeed, it is clear that, while Huang was at Commerce, he did
at least one major favor for Weaver and Stephens, Inc. He
introduced Weaver to Matt Fong, who had recently been elected
California State Treasurer, helping Stephens obtain bond
business with the State of California. Before Fong became
Treasurer, Stephens, Inc. had been on California's ``bid list''
for bond issues and had received business from the State. Six
to eight months before Fong was elected, Huang told Weaver he
knew Fong and that he could introduce Weaver to Fong if Fong
won the election.
Huang arranged a meeting with Fong for January 20, 1995 at
1:30 p.m.238 The meeting which took place in Fong's
old office in Los Angeles, was attended by Fong, Weaver, Huang,
and perhaps J.W. Rayder.239 As a result of the
meeting and a follow up meeting, (on March 24, 1995 between
Weaver and Fong), Stephens ended up with bond work from the
State of California.
---------------------------------------------------------------------------
\238\ Note that, according to Huang's travel itinerary, he arrived
in Los Angeles on a flight from Tokyo on Friday, January 20, 1995 at
9:10 a.m. Huang was scheduled to take the red-eye from Los Angeles to
D.C. on Monday, January 22, 1995.
\239\ Memorandum from Paula Greene to Vernon Weaver, et al., Jan.
13, 1995 (Ex. 28).
---------------------------------------------------------------------------
vi. huang's fund-raising, white house access, and frequent contact with
lippo and others while at commerce
In light of unanimous testimony that Huang did little
substantive work at Commerce, and in light of early indications
that Huang might have engaged in political fund-raising on the
job, the Committee undertook an examination of what Huang
actually did at the Commerce Department. That examination was
substantially complicated by Huang's refusal to testify before
the Committee. However, the Committee was able to draw back the
curtain on at least some of his activities by reviewing phone
records, appointment books, work product, and other documents
that create a paper portrait of his actions. This paper trail,
when augmented by relevant testimony from officials at the DNC
and Stephens D.C., shows that much of what Huang did at
Commerce bore little relation to his job. Specifically, the
records and relevant testimony indicate that while at Commerce,
Huang probably raised political contributions illegally, stayed
in contact with Lippo officials to an extraordinary degree,
enjoyed frequent access to the White House unexplained by his
substantive job responsibilities, and had frequent contacts
with various foreign embassy officials, including PRC
officials.240
---------------------------------------------------------------------------
\240\ A description of the Committee's work on this project and
summaries of some of the information about Huang's activities were
presented during the Committee's July 17, 1997 hearing.
---------------------------------------------------------------------------
In compiling the paper record of John Huang's activities
from July 1994 to January 1996 (his period of service at
Commerce), the Committee relied on the following records
subpoenaed or voluntarily produced from the following sources:
long distance telephone records from Huang's
office at the Commerce Department;
international long distance records from a
calling card issued to Huang by the Commerce
Department;
handwritten telephone message slips
reflecting unsuccessful calls placed to Huang at his
Commerce Department office;
daily appointment calendars kept by his
Commerce secretary;
expense reports reflecting Huang's Commerce-
related travel;
long distance telephone records from Huang's
residences in Silver Spring, Maryland, and Glendale,
California;
call detail from his California cellular
telephone;
call detail from Huang's former employer,
Lippo Bank of California.
Secret Service WAVE and E-Pass records,
reflecting Huang's appointments and visits to the White
House compound; and
Records from the Financial Crimes Center
(FinCen), which track Huang's entry and exit history to
and from the United States during 1994 to 1996.
The Committee staff compiled the data of each of the
separate components into computer spreadsheets and, using
various software applications, sorted and searched the data to
provide ``snapshots'' of Huang's activities by day, by category
of activity, or by keyterm. The overall product of these labors
and a brief description of the methodology and work behind it
is attached as exhibits 29 and 30.241
---------------------------------------------------------------------------
\241\ These are two versions, one sorted chronologically and one by
field of information, that set forth all of the data on Mr. Huang's
activities revealed from the paper record. The voluminous back up
materials--hard copies of the message slips, phone records, and the
like--have been retained in the Committee's records.
---------------------------------------------------------------------------
A. Possible Fund-raising at Commerce
The Committee's analysis shows that while at Commerce,
Huang was in frequent contact with several DNC finance
officials, thus raising the threshold question of whether he
was involved in fund-raising on behalf of the DNC. Such fund-
raising would constitute a criminal violation of the Hatch
Act,242 which prohibits federal government employees
from soliciting or receiving political contributions. Huang's
message logs and telephone records indicate he spoke often with
David Mercer, Mona Pasquil, Marvin Rosen, Ari Swiller, David
Wilhelm, and Richard Sullivan, all prominent members of the
DNC's finance staff.243
---------------------------------------------------------------------------
\242\ 5 U.S.C. Sec. 7323.
\243\ Because local calls successfully placed between the DNC and
the Commerce Department would not appear on Commerce telephone records,
the Committee likely has an incomplete picture of how many calls there
were. Message slips and long distance calls alone, however, reveal
scores of calls between Huang and DNC officials. See Exs. 29 and 30.
---------------------------------------------------------------------------
The Committee was able to piece together sequences of
events surrounding four different DNC donors that suggest Huang
actively (and successfully) solicited each donor while he was
at Commerce. Described below are the four instances.
As a predicate to the four examples, it is important to
understand that more broadly, Huang seemed to discuss potential
donors and particular fund-raising events with DNC officials
when he was with Commerce. The DNC Deputy Finance Director,
David Mercer, testified to a standing arrangement between Huang
and him, that ``if you [Huang] know or if anybody that you know
is interested in attending or participating in the [fund-
raising] events, have them give me a call. I don't recall, you
know, specifically, you know, whether as a foreward (sic) or
follow up, people did or not. But in any event, that's the
nature of our contact.'' 244 Mercer recalled talking
to Huang a total of 10 to 15 times at Commerce.245
---------------------------------------------------------------------------
\244\ Deposition of David Mercer, May 14, 1997, p. 88.
\245\ Id. at p. 87. Mercer left Huang 17 phone messages at
Commerce. See Exs. 29 and 30.
---------------------------------------------------------------------------
Huang became involved while at Commerce in organizing a DNC
fund-raising apparatus, the Asian-Pacific American Leadership
Council (APALC), and apparently in soliciting contributions
through its auspices.246 It is unclear who at the
DNC recommended the creation of such a council, which according
to DNC staffer Mona Pasquil, was intended to track how much
money Asian-Americans were contributing to the
DNC.247 The kick-off event for APALC was a November
2, 1995 fund-raising dinner with Vice President Gore as the
featured guest. Pasquil was tasked with organizing the dinner.
Pasquil was not in the DNC's financial division and had not
organized a fund-raiser previously. Accordingly, the DNC tasked
a fund-raiser, Sam Newman, to help her.248 Newman
explained that in early October 1995, Richard Sullivan asked
Newman to ``help [Pasquil] set up the venue, help her produce
any sort of materials she needed, work with her to track the
contributions and to strategize about who to contact and, you
know, anything she needed.'' 249 Because Newman is
not Asian-American, the actual fund-raising calls were left to
Pasquil to make or to arrange through others in the Asian-
American community she knew.250
---------------------------------------------------------------------------
\246\ The contributions discussed below from the Wiriadinatas were
raised in connection with the APALC kick-off dinner on November 2,
1995.
\247\ Deposition of Mona Pasquil, July 30, 1997, p. 17.
\248\ Id. at p. 20.
\249\ Deposition of Sam Newman, July 17, 1997, p. 13.
\250\ Id. at p. 24-25; Pasquil deposition, pp. 23-24.
---------------------------------------------------------------------------
Pasquil encountered trouble raising money for the event,
and as a result, David Mercer stepped in to assist. So, too,
did Huang. Pasquil had lunch with Huang and Newman before the
November 2 APALC event. According to Newman, they discussed
particulars about the upcoming dinner, including the location,
price, and donors. Huang ``seemed interested'' in the APALC
dinner.251 Pasquil acknowledged that as of her lunch
with Huang, she was ``scared'' that despite her hard work, the
dinner ``might flop'' because few donors had expressed
interest.252 When she expressed her concerns to
Huang, he mentioned that he ``might be leaving Commerce and to
come work at the DNC and that he could be helpful once he came
over to the DNC.'' 253 As discussed further below,
Huang made himself ``helpful'' before leaving Commerce by
raising money for the event.
---------------------------------------------------------------------------
\251\ Newman deposition, p. 33.
\252\ Pasquil deposition, p. 86.
\253\ Id. at p. 45.
---------------------------------------------------------------------------
Huang also met with Mercer directly before and immediately
after the APALC dinner. Mercer provided evasive testimony
regarding the substance of the pre-event meeting, explaining
that he simply ``ran into [Huang] at the Willard Hotel'' and
did no more than exchange pleasantries.254 The
Committee is left to wonder whether Huang might have discussed
particulars about fund-raising with Mercer. Mercer's actions
after the meeting suggest that whatever was discussed, the
meeting was more than a chance encounter. He submitted a
Willard Hotel parking receipt, dated October 27, 1995, to the
DNC for reimbursement, providing as justification for the
expense a ``John Huang meeting.'' 255
---------------------------------------------------------------------------
\254\ Mercer deposition, May 14, 1997, pp. 115-16.
\255\ Id. at pp. 117-20.
---------------------------------------------------------------------------
Immediately after the November 2 dinner, Huang had dinner
with Mercer, Charlie Trie, and a fourth, unidentified person.
What was discussed at dinner presaged the foreign money
questions that would arise the next year:
To be honest, it was more in Chinese or Mandarin, or
whatever, to the point that I was focused on eating and
don't know really what subject matters were discussed.
And again, it was just a--for me at least, it was a
break after a long evening, and just sharing in the
breaking of bread with John and Charlie. . . . [M]ost
of the conversation that night was in
Chinese.256
---------------------------------------------------------------------------
\256\ Id. at pp. 47-48.
Perhaps Mercer, who does not speak Chinese, should have
wondered at that point about the possibility of foreign
contributions coming to the DNC, but he apparently did not.
1. Mi Ryu Ahn (Pan Metal)
Phone records and other documents suggest that John Huang
solicited a large DNC contribution from Pan Metal, Inc. Exhibit
31 summarizes contacts between Huang and the Pan Metal's
president, Mi Ryu Ahn.257 Huang's message logs and
telephone records indicate the following sequence of calls
between Huang and Mi Ryu Ahn as follows: On May 26, 1995, there
were 4 calls between Huang and Mi Ahn and, on June 5, 1995,
another message from Mi Ahn, which Huang later returned. Four
days later, on June 9, 1995, a message left for Huang at the
Commerce Department from Mercer reads: ``Have talked to Mi.
Thank you very much.'' Six days later, a $10,000 contribution
from Pan Metal was received by the DNC, for which ``Jane
Huang'' is listed as the solicitor.
---------------------------------------------------------------------------
\257\ Huang Fundraising at Commerce? Mi Ryu Ahn (Pan Metals) (Ex.
31).
---------------------------------------------------------------------------
What seems so apparent from the paper record--Huang
illegally raised $10,000 for the DNC from Mi Ahn and then the
DNC made a transparent attempt to disguise this by crediting
the donation to ``Jane Huang'' instead of John Huang as the
solicitor--was corroborated by David Mercer and Mi Ryn Ahn.
Mercer, told the Committee that Huang referred Mi Ahn to Mercer
for a contribution to the DNC.258 Mercer, however,
would not state ``for a fact'' whether Huang or his wife
solicited the Mi Ahn contribution, nor would he rule either of
them out.259 In an interview with the Committee, Mi
Ahn said that she could not recall ever speaking to Jane
Huang.260 Ahu did recall that John Huang asked her
to get involved with the DNC and to continue to be
supportive.261
---------------------------------------------------------------------------
\258\ Mercer deposition, May 14, 1997, pp. 210-213.
\259\ Mercer deposition, May 27, 1997, p. 9.
\260\ Memorandum of interview of Mi Ryu Ahn, July 1, 1997, pp. 2-3.
\261\ Id. at p. 5. A Los Angeles Times story cited Mi Ahn as saying
that Huang made this request as well as other similar ones, in the
spring and summer of 1995. Glenn Bunting and Alan Miller, ``Haung
Helped Raise Money While at Agency,'' Los Angeles Times, May 25, 1997,
p. A1. Mi Ahn affirmed that Huang made such a request in her interview
with Committee staff, but placed it after her June 1995 contribution.
Ahn interview; p. 5.
---------------------------------------------------------------------------
2. Kenneth Wynn, President of LippoLand Ltd.
Exhibit 32 summarizes several contacts between Huang and
Kenneth Wynn, President of a Lippo subsidiary, LippoLand.
During the month of August, 1994, records indicate 31 calls
between John Huang and the Lippo office where Wynn worked. On
August 18, 1994, Wynn and his wife contributed a total of
$15,000 to the DNC.262 ``Jane Huang'' was listed as
the solicitor of these contributions. Mercer admitted to
filling out the check tracking form that credited John Huang as
the solicitor, but he professed not to know that Huang was a
Commerce employee when the donation was made.263
---------------------------------------------------------------------------
\262\ Exhibit 32 understates the total contribution(s) by $5,000.
DNC records reveal three checks written by the Wynns on August 18,
1994, for a total of $15,000. See checks from Kenneth R. and A.
Sibwarini Wynn to the DNC, August 18, 1994, with DNC check tracking
form. (Ex. 33).
\263\ Mercer deposition, May 27, 1997, pp. 10-11, 14.
---------------------------------------------------------------------------
Similarly, between October, 1995 and November 1995, there
were 23 calls between Huang and the Lippo office where Wynn
worked.264 On October 12, 1995, Kenneth Wynn
contributed another $12,000 to the DNC, for which ``Jane
Huang'' was also listed as the solicitor.265 Mercer
confirmed that he also filled out the DNC check tracking form
for the November 1995 contribution, and credited Jane Huang
with the solicitation. Mercer could not recall why he listed
her so.266 Mercer observed that it was possible that
John Huang delivered the check to him.267 As with
the Mi Ahn solicitation, it is apparent to the Committee that
Jane was substituted for John in an effort to conceal John's
illegal role in soliciting the contribution.
---------------------------------------------------------------------------
\264\ The Committee cannot determine from phone records how many of
those calls were made to Wynn. Because the Wynns refused to meet with
Committee investigators, the Committee was unable to confirm a number
independently.
\265\ Check from Kenneth R. and A. Sihwarini Wynn to DNC, Oct. 12,
1995, with DNC check tracking form. (Ex. 34).
\266\ Mercer deposition, May 27, 1997, p. 17.
\267\ Id.
---------------------------------------------------------------------------
3. Arief and Soraya Wiriadinata
Exhibit 35 depicts a series of events between Huang and the
Wiriadinatas.268 On June 19, 1995, after Soraya's
father, Hashim Ning, a wealthy business partner of the Riady
family, had a heart attack, Huang helped to arrange a ``get
well'' note from President Clinton, which was hand delivered by
Mark Middleton. Between June and August 1995, Huang visited
Ning twice in the hospital and encouraged the Wiriadinatas to
donate money to the DNC. On November 5 and November 7, 1995,
Ning wired a total of $500,000 from Indonesia to the
Wiriadinatas' account in the U.S. The following day, November
8, 1995, Huang helped arrange for another get well note for
Ning from President Clinton. The day after that, November 9,
1995, the Wiriadinatas contributed $30,000 to the DNC. In 1995
and 1996, the Wiriadinatas contributed a total of $450,000 to
the DNC, all of which has been returned.
---------------------------------------------------------------------------
\268\ Huang Fundraising at Commerce? The Wiriadinatas (Ex. 35).
---------------------------------------------------------------------------
The Wiriadinatas, who returned to Indonesia in December
1995, corroborated the paper record during their interview with
Committee staff on June 24, 1997, in Jakarta, Indonesia. In the
interview, Arief Wiriadinata made clear that John Huang
directed all of their political contributions. Arief
acknowledged that Huang's solicitations began in 1995, when
Huang was still a Commerce official.269 In return
for contributions, Huang promised to introduce Arief to
prominent American businessmen, especially Asian-
Americans.270 In fact, Huang once arranged a meeting
between Arief and the Chancellor of the University of
California at Berkeley regarding Arief's fledgling computer
business.271
---------------------------------------------------------------------------
\269\ Memorandum of Interview of Arief and Soraya Winiadinata, July
13, 1997, p. 3.
\270\ Id.
\271\ Id.
---------------------------------------------------------------------------
Arief recounted that Huang solicited the November 9, 1995
contributions in connection with a Washington, D.C. fundraising
event. That event was the November 2 APALC dinner Huang had
helped plan with DNC officials. Moreover, on November 20, 1995,
both Arief and Soraya contributed $1,000 to the congressional
campaign of Jesse Jackson, Jr., again at the specific direction
of Huang.272 As for Jane Huang, the solicitor
credited on DNC check tracking forms for their November 1995
contributions, both Wiriadinatas denied ever meeting or
speaking to her.273
---------------------------------------------------------------------------
\272\ Id.
\273\ Id.
---------------------------------------------------------------------------
Mercer prepared the DNC check tracking for the
Wiriadinatas' November 1995 contributions that listed Jane
Huang as the solicitor.274 When asked why, Mercer
provided the following tortured response:
---------------------------------------------------------------------------
\274\ Mercer deposition, May 27, 1997, pp. 32-33.
Q: How did you know to credit this to Jane Huang as
solicitor?
A: Through an understanding prior of the Wiriadinatas
having association with the Huangs.
Q: How did that understanding come about?
A: I don't recall.
Q: But you understood that the Wiriadinatas and the
Huangs were associated. How did you understand that
they were associated?
A: I don't recall.
Q: Why didn't you put John Huang down as solicitor?
A: I don't recall why I--you know, I don't recall. I
didn't you know--I don't . . . 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.275
---------------------------------------------------------------------------
\275\ Id. at pp. 33-34.
In a fitting coda to the Wiriadinata contributions
solicited illegally by Huang, Arief appears in the videotape of
a December 15, 1995 White House coffee being greeted by
President Clinton. On the tape, Mr. Wiriadinata tells President
Clinton, ``James Riady sent me.'' The President responds ``Yes
. . . I'm glad to see you. Thank you for being here.'' Portions
of the tapes were presented at the Committee's hearing on
October 7, 1997.
4. Pauline Kanchanalak and the U.S.-Thai Business Council
Contacts suggesting that Huang solicited Pauline
Kanchanalak, then head of the U.S. Thai Business Council, are
detailed in Exhibit 37.276 Huang's Commerce message
logs indicate that Kanchanalak left five messages for Huang
between September 7, 1994 and October 21, 1994. On September
30, 1994, Huang wrote a memo to David Rothkopf, Deputy
Undersecretary for International Economic Policy, urging that
President Clinton host the U.S. Thai Business Council inaugural
at the White House.277 Seven days later, on October
6, 1994, the U.S. Thai Business Council inaugural was held at
the White House, attended by President Clinton and Thai Prime
Minister. Later that month, Huang attended a U.S. Thai Business
Council meeting. Two days following that meeting, Kanchanalak
contributed $32,500 to the DNC.
---------------------------------------------------------------------------
\276\ Huang Fundraising at Commerce? Pauline Kanchanalak (U.S.-Thai
Business Council) (Ex. 37).
\277\ Memorandum from John Huang to David Rothkopf, September 30,
1994 (Ex. 36). Huang's memo reads in part, ``My personal observation is
that President Clinton will be very upset if he finds out what's going
on behind the scene. It could really damage his personal relationship
between him and [Thai] Prime Minister Chuan; and the relationship
between U.S. and Thailand.'' In his Committee deposition, Rothkopf
testified to being bemused and puzzled by the memo: Huang had no policy
responsibility for Thailand; Rothkopf thought it odd that Huang would
send him such a document; and Rothkopf considered strange for Huang to
speak for how President Clinton might view the matter. Rothkopf
deposition, pp. 42-47. Nevertheless, over Rothkopf and Garten's
objections, the U.S. Thai Business Council held its inaugural ceremony
at the White House, with President Clinton and the Thai Prime Minister
in attendance.
---------------------------------------------------------------------------
Between November 1994 and December 1995, 17 messages were
left for Huang at the Department from Kanchanalak or her
office. Because calls between the two were local, the messages
likely reflect only a portion of the total calls placed between
them. In the 1995-1996 election cycle, Kanchanalak, who is now
in Thailand, and her business partners contributed $253,500 to
the DNC, all of which has been returned.
B. Huang's White House visits
One of the still unexplained aspects of Huang's tenure at
Commerce is the frequent access he enjoyed to the White House.
His access was unknown to his co-workers at the Commerce,
including his secretary and supervisors. White House ``WAVES''
and E-Pass records, which reflect appointments and entries into
the White House, show Huang went there at least 67 times while
he was at Commerce.278 The Committee was unable to
determine what happened during most of those meetings. The
officials Huang was scheduled to visit were varied, including
political affairs officials, National Security Council
employees, highly placed aides to President Clinton and Vice-
President Gore, and on at least one occasion, President Clinton
himself. Moreover, Huang's meetings were scheduled for many
different locations in the Old Executive Office Building, the
West Wing, and, at least once, the Oval Office.
---------------------------------------------------------------------------
\278\ The Secret Service has explained to the Committee that
``WAVES'' and E-Pass records are two parallel and separate systems for
tracking entry and exit from the White House complex. A visitor to the
White House might appear in either or both (or occasionally neither)
system, depending on the particulars of the visit. In tallying Huang's
visits, the Committee took this into account, and counted only once
multiple E-Pass and WAVES entries that might reflect a single visit.
Nor did the Committee count any visits unless there was confirmation
that Mr. Huang in fact entered into the White House complex. The WAVES
and E-Pass records have been retained in the Committee's files.
Nevertheless, when information was presented about Huang's White
House visits at the Committee's July 17, 1997 hearing, the White House
complained bitterly that the number of Huang's visits had been
overstated. In fact, quite the opposite is true. The Committee staff
used a conservative methodology to ensure that any miscalculation would
err on the side of understatement.
---------------------------------------------------------------------------
One such meeting was the intimate September 13, 1995
conversation, described more fully elsewhere, in the Oval
Office among Huang, President Clinton, James Riady, Joseph
Giroir, and Bruce Lindsey. At the meeting, Huang or Riady
requested of the President a ``transfer'' for Huang from
Commerce to the DNC, and President Clinton obliged the request.
The truth is, no one will ever know who Huang saw at the
White House or what matters he might have discussed there.
However, the September 13, 1995 meeting should suffice to make
the point that Huang had incredible access at the White House,
especially for a midlevel political appointee at Commerce with
no policy portfolio. Huang's WAVES entry that day nowhere
discloses that he sat in the Oval Office with President
Clinton, had a lengthy chat, and succeeded in securing a new
job at the DNC. Instead, the record simply recounts that Huang
had a 5:15 pm appointment that day in the West Wing. The
``visitee'' is listed as Nancy Hernreich; the requestor is
Rebecca Cameron, Hernreich's assistant. No one at Commerce had
the slightest idea that Huang had this sort of access.
C. Huang's contacts with Lippo employees, offices and consultants
Telephone records reviewed by the Committee show nearly
constant contact between Huang and Lippo officials, as well as
with several individuals who had close ties to Lippo and the
Riady family. Call detail records disclose approximately 232
calls between Huang and his former employer, Lippo Bank, during
the 18 months he worked at Commerce, and at least 29 calls or
faxes between Huang and Lippo's headquarters in Indonesia.
While the sheer volume of calls raises many concerns, the
situation invites further scrutiny given Lippo's generous
severance package just weeks before his arrival at Commerce,
Huang's access to classified and proprietary business
information, and the fact that the Riadys and Huang were major
donors and fund-raisers for the Democratic party.
Among those associated with Lippo with whom Huang had
frequent contact was a Lippo consultant, Maeley Tom. Records
reveal 61 calls that Huang placed during his Commerce
employment period to Tom. Tom wrote on Huang's behalf in 1993
to support his appointment.279
---------------------------------------------------------------------------
\279\ See Ex. 4.
---------------------------------------------------------------------------
Huang's telephone records also show 72 calls to Arkansas
lawyer and Lippo joint venturer C. Joseph Giroir. Giroir, a
former Rose Law firm partner and board member of the Worthen
Bank, was present at the small Oval Office meeting held on
September 13, 1995 attended by President Clinton, Huang, and
James Riady and at which the decision was made to move Huang
from Commerce to the DNC. According to former DNC Finance
Director Richard Sullivan, Giroir lobbied vigorously for
Huang's position at the DNC, particularly at a meeting between
DNC Chairman Don Fowler and Mr. Riady just prior to the White
House meeting with the President.280
---------------------------------------------------------------------------
\280\ Testimony of Richard Sullivan, June 4, 1997, p. 219.
---------------------------------------------------------------------------
Records also demonstrate Huang was often in contact with
other Lippo business associates.281 Huang had at
least 21 calls and one meeting with Mark Middleton, a former
White House aide who later became a Lippo business agent, 14
calls and 4 meetings with Mark Grobmyer, a Lippo attorney, and
10 calls and one meeting with Webster Hubbell, a former DOJ
official hired by Lippo.
---------------------------------------------------------------------------
\281\ In addition, Huang's telephone records show 4 calls placed by
Huang to David Chan, President of the Hong Kong Chinese Bank, an
interest jointly owned by Lippo and China Resources.
---------------------------------------------------------------------------
D. Huang's embassy contacts
Because calls to embassies or representative offices in
Washington are local, documents available to the Committee
regarding Huang's contact with embassies are incomplete since
there are no records that would reflect calls successfully
placed between Huang and such offices. Huang's message slips
and appointment calendars are the primary source of information
about his contacts with these offices. The documents reveal
that Huang received 35 calls from officials of the PRC, Korean,
Singapore embassies, that he visited the PRC embassy six times,
and that he met on three other occasions with PRC embassy
officials. Other records show that Huang visited other
embassies at least 15 times, and had 8 meetings with and 4
calls from representatives of Taiwan's unofficial embassy, the
Taiwan Economic and Cultural Representative Office.
When questioned about such contacts by Huang, Jeffrey
Garten was ``taken aback'' to learn that Huang ever dealt with
anyone from the PRC embassy, the White House, or Congress on
anything.282 ``There was nothing about him; there
was nothing he ever said; there was nothing that he ever did
that I saw or anyone told me that would have evidenced activity
in the White House, on the Hill or in the Embassy of China.''
283
---------------------------------------------------------------------------
\282\ Garten deposition, May 16, 1997, p. 42.
\283\ Id.
---------------------------------------------------------------------------
VII. Conclusion
Huang's stopover at Commerce lasted only eighteen months.
Looking at Huang's career to date, one might expect that this
period offered Huang a respite from political fund-raising and
a unique opportunity to shape U.S. international trade policy
from the inside. While, due to Huang's refusal to testify, it
is unclear why he sought the Commerce position, it was a sharp
diversion from both his prior years as an executive at a small
Los Angeles bank and his subsequent stint at the DNC. The two
constants in Huang's career at Lippo and forward were his
relationships with the Riadys and the Democratic party.
By all accounts, Huang and the International Trade
Administration were not a good match. Huang's tenure as a
political appointee at Commerce makes clear that he held a job
he was ill-prepared to handle and received it at least in part
because of his demonstrated fund-raising prowess. Huang was
shut out of substantive policy work and was specifically
prohibited from working in the area where he held the most
interest--China. As a result, there is little among the several
hundred thousand pages of documents produced by the Commerce
Department to the Committee that evidence Huang's mark on
policy matters. Likewise, Huang's colleagues in the ITA could
point to almost no policy matters on which Huang worked. As one
of them testified, Huang was ``as uninvolved a player'' as he
had seen in his ten years at the Department.284
Indeed, the clearest record of Huang's activity at Commerce
might well relate to his fund-raising. Information developed by
the Committee strongly suggests that Huang raised money for the
DNC at Commerce in violation of the Hatch Act.
---------------------------------------------------------------------------
\284\ Neuschatz deposition, p. 17.
---------------------------------------------------------------------------
Huang's job at Commerce included largely administrative
duties. But the ITA had an administrative office separate and
in addition to the departmental office of administration. And
the head of the ITA administrative office graded Huang's
handling of administrative matters a ``low C.''
What did Huang do at the Commerce Department? One answer
might provide a clue as to why Huang sought and took the
position. Huang saw a great deal of classified, business
proprietary, and other valuable material. From regular
intelligence briefings, to daily classified cables, to ITA
reports containing proprietary material on any number of
businesses, Huang had access to very sensitive information.
Although the Committee found no direct evidence that Huang
passed any such information to his former employers or anyone
else, he clearly had the opportunity to do so. Huang made
frequent use of a spare office at Stephens D.C., which was
located across the street from Commerce headquarters. There,
Huang had free and unmonitored access to a telephone, copier,
and fax machine. He also received mail and packages there, but
precisely what is not known.
At bottom, Huang's stint at Commerce is difficult to
understand. The Committee attempted meticulously to reconstruct
what Huang did there in the hopes of determining why he sought
the position and what he hoped to accomplish in accepting it.
Ultimately, and only after attempting to retain his top secret
security clearance, Huang quietly left Commerce for a position
more suited to his qualifications, at the DNC.
John Huang Moves From Commerce to the DNC
This section of the report summarizes John Huang's movement
from the Department of Commerce to the DNC. In examining the
hiring of Huang, at least three important themes arise that are
revisited later in the 1996 campaign fund-raising matter.
First, there is evidence that the President of the United
States personally played a central role. President Clinton not
only spoke to Huang and others about the potential of raising
money in the Asian-American community, but the President
recommended to the DNC that it hire Huang. Second, there is
evidence that even before his hiring, DNC officials were
concerned that Huang might not comply with federal campaign
finance laws, and thus they insisted on an unprecedented,
individualized training session with the DNC's general counsel.
These concerns may have been prompted, in part, by DNC
officials' probable knowledge that Huang had violated the Hatch
Act while he was an employee of the Department of
Commerce.1 Third, despite these concerns, the DNC
established a structure that could promote fund-raiser abuses,
in part by offering Huang an incentive bonus for raising large
amounts of money.
---------------------------------------------------------------------------
\1\ While Huang was still at the Commerce Department, he solicited
contributions for the DNC, thereby violating the Hatch Act. Recognizing
this violation of the law, the DNC tried to protect Huang by falsely
attributing contributions to his wife, Jane Huang. Certain DNC
officials, including Deputy National Finance Director David Mercer,
were probably aware of Huang's illegal fund-raising and helped conceal
it by using Jane Huang's name, rather than John Huang's, for tracking
DNC contributions solicited by John Huang. See the section of this
report concerning Huang's fund-raising at the Commerce Department.
---------------------------------------------------------------------------
In compiling information on this topic, the Committee's
task was made significantly more difficult by Huang's refusal
to cooperate. Without his testimony, the Committee has been
forced to piece together the specifics of Huang's move to the
DNC from various sources. Many of the witnesses provide only
partial information and claim not to have much recollection of
specific events or dates. Some of the witnesses provide
conflicting testimony. Moreover, there is very little
documentary evidence on this topic. The Committee has received
only a few relevant calendars or phone logs and a handful of
meeting notes.
The DNC Is Asked to Hire Huang
C. Joseph (``Joe'') Giroir has known the President and
First Lady since the mid-1970s, when Hillary Rodham Clinton
joined the Rose Law Firm in Little Rock, Arkansas.2
Giroir was the Managing Partner of the Rose Firm and was
credited with a great deal of its growth in the 1970s and
1980s.3 He was also one of the first securities
lawyers in Arkansas, and helped take public some of Arkansas'
best-known companies, such as Tyson Foods, Wal-Mart, Inc., and
Beverly Enterprises.4
---------------------------------------------------------------------------
\2\ Deposition of C. Joseph Giroir, Jr., April 30, 1997, p. 26
\3\ Id. at p. 11.
\4\ Id.
---------------------------------------------------------------------------
One of Giroir's biggest clients was Stephens Inc., a
prominent investment banking firm in Little Rock. It was
through Giroir's role as attorney for Stephens that he first
met Mochtar and James Riady.5 In 1978, Mochtar Riady
hired Stephens to assist in the Lippo Group's acquisition of an
American banking institution. In 1983, Giroir and Stephens
helped the Riadys acquire a controlling interest in Worthen
Banking Corporation, a bank holding company based in Little
Rock.6 As a result of that acquisition, Giroir and
Mochtar Riady became members of the board of directors of
Worthen Bank and James Riady was named the bank's
president.7 Giroir also first met John Huang during
this period, after James Riady hired Huang to serve as the
bank's vice president.8
---------------------------------------------------------------------------
\5\ Id. at p. 32.
\6\ Id. at pp. 33-34.
\7\ Id. at pp. 37-38.
\8\ Id. at p. 41.
---------------------------------------------------------------------------
Giroir's business association with the Riadys and the Lippo
Group ended in 1987 or 1988 after the Riadys sold their
interest in Worthen Bank and moved Lippo's banking operation to
the West Coast. Until early 1993, Giroir maintained a purely
social relationship with the Riadys and spoke to them only two
or three times a year.9
---------------------------------------------------------------------------
\9\ Id. at pp. 47-48.
---------------------------------------------------------------------------
Following the 1992 election of Bill Clinton, however,
Giroir and the Riadys became very close business partners. Even
though Giroir had never been an international businessman, he
and the Riadys established several joint ventures designed to
match Lippo with American companies that wanted to invest in
East Asia. The first of these joint ventures was Arkansas
International Development Corporation (``AIDC I''), which
Giroir incorporated in Arkansas on April 20, 1993.10
Giroir owned all of the stock of AIDC I, but the company was
merely a nominee for an operating entity named Arkansas Joint
Venture Company (``AJVC''). Giroir and P.T. Masindo, a
subsidiary of the Lippo Group, jointly owned AJVC.11
The Committee has learned that Lippo, acting through P.T.
Masindo, provided all of the $50,000 capitalization for
Giroir's company (AIDC I).12 In addition, between
1993 and 1995, Lippo funded all the developmental expenses for
the joint venture, including entertainment and travel expenses.
Giroir estimated that these expenses totaled $300,000 to
$400,000 in 1993, $400,000 to $600,000 in 1994, and $600,000 to
700,000 in 1995.13 Giroir testified that he also
performed services for Lippo for which he was compensated
outside of the joint venture. Giroir indicated that, in the
aggregate, he received roughly $500,000 per year in
compensation from Lippo.14
---------------------------------------------------------------------------
\10\ Id. at p. 15.
\11\ See Id. at pp. 16-20.
\12\ Id. at pp. 15-16.
\13\ Id. at pp. 15-19. Giroir testified that these developmental
expenses also included personal loans that he was authorized to take
from the joint venture and that the largest of these loans was
$350,000. He indicated that he has since paid the joint venture back
for those loans and currently owes approximately $50,000. Id. at p. 19.
\14\ Id. at pp. 17, 19.
---------------------------------------------------------------------------
In 1995, Giroir incorporated a second joint venture with
the Lippo Group in the Cayman Islands, Arkansas International
Development Corporation, II (``AIDC II'').15 P.T.
Masindo, the Lippo subsidiary, again provided essentially all
of the start-up capital for the joint venture. In exchange for
Giroir providing AIDC II all of his rights to the assets of
AIDC I, the Lippo subsidiary agreed to fund AIDC II with $1
million in 1995, $1 million in 1996 and $500,000 in
1997.16 AIDC II, and therefore Lippo, paid Giroir a
salary of $360,000 per year. In addition, Lippo gave Giroir the
authority to take a discretionary bonus whenever he
desired.17
---------------------------------------------------------------------------
\15\ Id. at p. 20.
\16\ Id. at pp. 20-21. Giroir testified that he contributed only
$30,000 to the initial capitalization of AIDC II. Id. at p. 20.
\17\ Id. at p. 21.
---------------------------------------------------------------------------
Through Giroir and AIDC II, Lippo attempted to gain
influence by hiring people with access to the Clinton
Administration. For example, on May 23, 1995, AIDC II hired
Paul Barry, an old friend of President Clinton's from Little
Rock, who was a registered lobbyist in Washington,
D.C.18 Giroir ostensibly hired Barry to ``seek out
and make preliminary investigations concerning business deals
that people he had contact with desired to enter into . . . to
enter the Asian market.'' 19 Giroir testified,
however, that AIDC II never entered a joint venture with a
company sponsored by Barry. Nevertheless, Lippo--through AIDC
II--paid Barry a $7,000 per month retainer from July 13, 1995
until January of 1997.20
---------------------------------------------------------------------------
\18\ Id. at p. 228.
\19\ Id. at p. 229.
\20\ Id. at pp. 229-31. In 1997, Giroir reduced Barry's retainer to
$2,000 per month. Id.
---------------------------------------------------------------------------
Similarly, in July 1995, Lippo hired--through AIDC II--Mark
Middleton.21 From January 1993 until February 1995,
Middleton served as Special Assistant to President Clinton and
Deputy to White House Chief of Staff, Thomas ``Mack'' McLarty.
After Middleton established his own international business
consulting firm, Commerce Corp. International, AIDC II hired
Middleton to perform the same prospecting function for which
Barry had been hired. Lippo paid Middleton a retainer of
$12,500 per month.22 As with Barry, AIDC II never
consummated a joint venture with any of the clients that
Middleton recommended.23
---------------------------------------------------------------------------
\21\ Id. at p. 232.
\22\ Id. at p. 234.
\23\ Id. at pp. 234-35.
---------------------------------------------------------------------------
During the summer of 1995, Huang spoke to Giroir about his
desire to become more involved in the fund-raising for the
Presidential campaign. Giroir summarized, ``I don't remember
the exact evolution of the conversation, but it was that he
[Huang] was unhappy, would like to be involved in the fund-
raising aspect of the campaign and thought that he would be
more effective, and either he asked or I volunteered to help
him try to make a move to an appropriate position.''
24
---------------------------------------------------------------------------
\24\ Id. at p. 76.
---------------------------------------------------------------------------
Giroir followed through, contacting his friend from
Arkansas, Truman Arnold. At that time, Arnold, who is a
successful businessman and longtime friend of President
Clinton, was the Finance Chairman of the Democratic National
Committee. During their meeting, which took place in June or
July 1995, Giroir recommended to Arnold that the DNC hire Huang
as a fund-raiser specializing in the Asian-American
community.25 Giroir told Arnold that there was a
``reservoir of support in the Asian American community . . .
[that] could also be translated into financial support'' and
that Huang was the person to coordinate it.26 Arnold
remembered the meeting differently, testifying that Giroir just
mentioned that Huang would be available to assist the DNC as a
volunteer, but saying nothing about fund-raising in the Asian-
American community.27 Regardless of whether the
Asian-American community was discussed, Arnold thought that it
was important enough to pass information about Huang on to Don
Fowler, National Chairman of the DNC, and Richard Sullivan,
National Finance Director of the DNC.28
---------------------------------------------------------------------------
\25\ Id. at p. 77.
\26\ Id.
\27\ Deposition of Truman Arnold, May 16, 1997, pp. 163-65.
\28\ Deposition of Richard Sullivan, June 4, 1997, pp. 216-17;
Arnold deposition, p. 166.
---------------------------------------------------------------------------
Giroir subsequently learned that Arnold had resigned his
DNC position, and in August 1995, he visited Fowler in
Washington, D.C.29 Giroir informed Fowler about his
previous discussion with Arnold, and requested to speak to the
new DNC finance chairman as soon as one had been
selected.30 During a 15 minute meeting with Fowler
and Sullivan in Fowler's office, Giroir pointedly advocated
that the DNC hire Huang as a fund-raiser, mentioning Huang's
successful fund-raising during the 1992 campaign.31
Sullivan had the clear sense that Giroir had come to Fowler's
office for the sole purpose of recommending that the DNC hire
Huang.32 Despite Giroir's presentation, Fowler did
not commit to hiring Huang and told Giroir that they would
think about it.33 Sullivan explained in his
deposition that Fowler's noncommittal response to Giroir's
proposal may have been motivated by Fowler's personal feelings
towards Giroir.34
---------------------------------------------------------------------------
\29\ Giroir deposition, p. 108.
\30\ Id. at pp. 108-109.
\31\ Deposition of Richard Sullivan, June 4, 1997, pp. 212-216.
\32\ Id. at pp. 213-214.
\33\ Deposition of Don Fowler, May 21, 1997, p. 170.
\34\ Deposition of Richard Sullivan, June 4, 1997, p. 219.
---------------------------------------------------------------------------
Sullivan's characterization of Fowler's reaction to Giroir,
while not particularly significant, is a good example of the
difference in tone and substance between Sullivan's deposition
testimony and his hearing testimony. In his deposition,
Sullivan testified that Giroir was ``too strong in his
recommendation, and it just rubbed Don the wrong way.''
35 Sullivan also testified that Fowler told him that
he did not like Giroir.36 However, in his hearing
testimony, Sullivan told a different story. Sullivan first
characterized Giroir's presentation as a ``soft sell'' rather
than a ``hard sell.'' 37 He then said that Fowler
took Giroir's presentation ``in stride.'' 38 Asked
directly if Fowler felt that Giroir was ``too strong in his
recommendation,'' Sullivan avoided giving a direct answer. He
testified,
---------------------------------------------------------------------------
\35\ Id.
\36\ Id.
\37\ Testimony of Richard Sullivan, July 9, 1997, p. 17.
\38\ Id. at p. 18.
He--I would say that he--he just wasn't enthu--he
just wasn't--wasn't enthusiastic. I wouldn't say that--
Mr. Giroir had a very direct manner about him, and I
think that I would characterize it as Mr. Giroir was
very direct and to the point. And that may have thrown
Chairman Fowler a little bit, but I wouldn't say that--
I would say that he was--I would just say that he took
it in stride and said we'll look into it.39
---------------------------------------------------------------------------
\39\ Id.
Later in his hearing testimony, Sullivan was confronted
with his deposition testimony. Only then did Sullivan
acknowledge that ``the pushing of Mr. Giroir in that meeting
was pretty strong.'' 40
---------------------------------------------------------------------------
\40\ Id. at p. 148.
---------------------------------------------------------------------------
On September 13, 1995, two important meetings occurred
regarding Huang moving to the DNC. In the morning, Giroir
hosted a meeting between James Riady, the head of Lippo Group,
and Fowler at Riady's suite at the Four Seasons Hotel in
Washington, D.C. Fowler was accompanied by Sullivan. There is
some disagreement about whether Huang attended. Giroir stated
that Huang was not at the meeting.41 However,
Sullivan believed that Huang was present, recalling that Huang
stood in the back of the room.42 Fowler concurred,
testifying that he was ``almost certain'' that Huang was
present.43
---------------------------------------------------------------------------
\41\ Giroir deposition, p. 135.
\42\ Deposition of Richard Sullivan, June 4, 1997, p. 241.
\43\ Fowler deposition, p. 186.
---------------------------------------------------------------------------
According to Giroir, the purpose of the meeting was for
Riady to ``get to know and intermix'' with Fowler.44
Sullivan testified that the meeting was ``clearly between Don
and James [Riady] . . . my interpretation was that James wanted
to get to know Don; that he thought Don was a player.''
45
---------------------------------------------------------------------------
\44\ Giroir deposition, p. 131.
\45\ Deposition of Richard Sullivan, June 4, 1997, p. 241.
---------------------------------------------------------------------------
While introductions may have been one purpose of the
meeting, much of the discussion in Riady's suite revolved
around fund-raising--both the need for the DNC to raise money
for its upcoming advertising campaign and about untapped Asian-
American support for the Democratic Party. Fowler indicated
that the DNC had ``an immediate need to raise money.''
46 Giroir recalled that Fowler mentioned a DNC
advertising campaign that was going to cost more than $5
million.47 In addition, Giroir testified that they
had a 15-20 minute conversation in which both he and Riady
expressed their view that ``there was a reservoir of support in
the Asian-American community, votes as well as financial
support, and that if they could focus their attention on that
reservoir, that it would be beneficial to the Democratic
Party.'' 48 Giroir told Fowler that he believed that
Huang would be the person best able to ``orchestrate'' the
Asian-American effort.49 Fowler did not recall much
about the meeting, except that it was a ``pleasant meeting''
and that Giroir expressed his desire that the DNC hire
Huang.50 Fowler testified that he was noncommittal
about hiring Huang, since the DNC did not have any openings at
that time.51
---------------------------------------------------------------------------
\46\ Giroir deposition, pp. 135-136.
\47\ Id. at pp. 136-37.
\48\ Id. at p. 97.
\49\ Id. at p. 98.
\50\ Fowler deposition, p. 170.
\51\ Id.
---------------------------------------------------------------------------
In the late afternoon of September 13, Giroir, the Riadys,
and Huang met with President Clinton and Bruce Lindsey in the
Oval Office.52 The meeting lasted for about 20
minutes.53 Giroir described the meeting as a social
call, and said that he could not recall any of the topics
discussed during the meeting.54 Giroir testified,
for instance, that he did not hear any discussion about DNC
fund-raising, but also acknowledged that the meeting was
``bifurcated [with] different people talking to different
people.'' 55
---------------------------------------------------------------------------
\52\ Deposition of Bruce Lindsey, July 1, 1997, pp. 106-107; Giroir
deposition, pp. 78-79. Giroir's unusual account of how he arranged this
meeting bears noting. According to Giroir, several days before the
meeting, he attended some White House event and, while shaking the
President's hand, informed him that James and Eileen Riady were part of
an Indonesian trade group that would be in Washington, and that the
President may want to visit with them. Clinton asked Giroir to call
Nancy Hernreich, the President's secretary, and schedule such a visit,
if possible. Giroir did so, and, on the day of Riady's visit to
Washington, was able to get a visit scheduled. Giroir then called the
Riadys, who was staying at the Four Seasons, and drove over to pick
them up for the meeting. John Huang just happened to be in the Four
Seasons' lobby, and he accompanied the group to the Oval Office
meeting. See Giroir deposition, pp. 79-86; 110-17.
\53\ Schedule of the President, September 13, 1995 (Ex. 1).
\54\ Giroir deposition, p. 87.
\55\ Id. at pp. 89-90.
---------------------------------------------------------------------------
Lindsey, who was the only other meeting participant deposed
by the Committee, stated that the only thing that he could
remember about the Oval Office meeting was that ``something was
said'' about Huang's desire to leave the Commerce Department
and move to the DNC.56 Either Riady or Huang
indicated that he thought that Huang ``could do a good job at
the DNC, [p]rimarily . . . working with the Asian-Pacific
American community.'' 57 Lindsey recalled that
during the discussion about Huang moving to the DNC, the
``President indicated that it sounded like a good idea to
him.'' 58
---------------------------------------------------------------------------
\56\ Lindsey deposition, p. 114.
\57\ Id. at p. 115.
\58\ Id. at p. 118.
---------------------------------------------------------------------------
Lindsey's recollection that Huang or Riady told the
President about Huang's desire to move to the DNC is backed up
by Huang himself. In October 1996, Huang had a conversation
with DNC General Counsel Joe Sandler about this September 13,
1995 White House meeting. Sandler testified, ``[Huang]
indicated to me that the basic purpose of the meeting was to
visit, social in nature, and that the main substantive point
that he recalled being discussed--he gave me the impression
that the point that Mr. Riady wanted to convey to the President
was . . . that Mr. Huang's abilities were being wasted at
Commerce. In effect, he [Riady] said something to the effect
that he was a pencil pusher and that he should be utilized in
some other way.'' 59
---------------------------------------------------------------------------
\59\ Deposition of Joseph Sandler, May 30, 1997, p. 21.
---------------------------------------------------------------------------
Either on his own, or prompted by the President, Lindsey
called Huang the next day. After asking Huang if he really
wanted to move to the DNC, Lindsey scheduled a meeting with
Huang for the following day, September 15.60 The
meeting occurred at the White House from about 11:00 to 11:30
a.m.61 Lindsey again asked Huang if he wanted to
leave Commerce and go to the DNC. Lindsey testified that
``[Huang] said yes. Well he said if that's where the President
thinks I would be the most good, you know, do the most good,
and I said well, John, that's not my question. I'm trying to
find out what you want, you know, where you want to go, and he
said yes, he did want to go.'' 62 Lindsey recalled
that ``John may have indicated at some point that he thought he
could raise money in the Asian-Pacific community . . . It was
just one of the talents he thought he had and one of the things
he thought he could bring to the DNC.'' 63 Lindsey
also said that he could not recall whether James Riady's name
came up, but opined, ``it's hard to imagine that somehow James'
name wouldn't have come up.'' 64 Before the end of
the meeting, Lindsey told Huang that he would mention this
conversation to White House Deputy Chief of Staff Harold
Ickes.65
---------------------------------------------------------------------------
\60\ Lindsey deposition, pp. 120-123.
\61\ Entry Report Electronic Mail to Bruce Lindsey, September 15,
1995 (Ex. 2).
\62\ Lindsey deposition, pp. 122-23.
\63\ Id. at p. 129.
\64\ Id. at p. 123.
\65\ Id. at p. 124.
---------------------------------------------------------------------------
Afterwards, Lindsey went to see Ickes and told him that
Huang ``had indicated an interest in going to the DNC.''
66 At the same time, Ickes was also hearing about
Huang's interest from the President. According to Ickes, at
around the same time, September 1995, the President
specifically mentioned that he had spoken to Huang. Ickes
remembered the President telling him that Huang was ``prepared
to go to work at the DNC or the Reelect, wherever the President
or any of his people felt that he could be best used.''
67 According to Ickes, the President then asked
Ickes ``to follow up on it with John Huang.'' 68
Following those instructions, Ickes called Huang and set up a
meeting at the White House for October 2, 1995.
---------------------------------------------------------------------------
\66\ Id.
\67\ Deposition of Harold Ickes, June 26, 1997, p. 115.
\68\ Id.
---------------------------------------------------------------------------
Meanwhile, Giroir continued to push for Huang's move to the
DNC. After learning that Marvin Rosen would be the new DNC
Finance Chair, Giroir had Middleton set up a meeting with
Rosen. Rosen recalled that Middleton called him and asked if he
``would meet with him and a person who was possibly interested
in helping the DNC raise some money.'' 69 They set
up a meeting for September 26, 1995.
---------------------------------------------------------------------------
\69\ Deposition of Marvin Rosen, May 19, 1997, p. 129.
---------------------------------------------------------------------------
In the afternoon before the Rosen meeting, Giroir made an
impromptu visit to the DNC to see Fowler.70 Fowler
had only a vague recollection of the meeting, stating that they
discussed ``the possibility of [Giroir's] making a
contribution, and while I have no specific clear memory, I
think we probably discussed Mr. Huang again.'' 71
Giroir's follow-up letter to Fowler mentions ``pending
matters'' and also assures Fowler that when Fowler's daughter
travels to Indonesia, the Riadys' Lippo Group ``would like to
host her and give her whatever assistance possible.''
72
---------------------------------------------------------------------------
\70\ Schedule for Don Fowler, September 26, 1995 (Ex. 3); Fowler
deposition, pp. 184-185.
\71\ Fowler deposition, p. 186.
\72\ Letter from Joseph Giroir to Don Fowler, September 27, 1995
(Ex. 4). Fowler did not remember talking with Giroir about the Lippo
Group. Fowler deposition, p. 182.
---------------------------------------------------------------------------
Later that day, Giroir, Middleton, and Huang met Rosen in
the lobby of the Willard Hotel in Washington D.C. At the
meeting, which Rosen said lasted about 15-20 minutes, Giroir
repeated his pitch about Huang.73 Rosen testified
that he was told, ``that [Huang] had been helpful in '92, and
that [he] had various connections in the Asian-American
community that he felt he could be very helpful in getting
money from.'' 74 Rosen recalled that Huang said very
little during this meeting.75 Giroir followed this
meeting with a letter, dated September 27, 1997, reiterating
his belief that Huang ``would be an excellent selection for an
assistant to you.'' 76
---------------------------------------------------------------------------
\73\ Giroir deposition, p. 103.
\74\ Rosen deposition, p. 134.
\75\ Id. at p. 135.
\76\ Letter from Joseph Giroir to Marvin Rosen, September 27, 1995
(Ex. 5).
---------------------------------------------------------------------------
On October 2, 1995, Ickes met with Huang at the White
House. While Ickes recalled that the meeting lasted ``at the
most 10 to 15 minutes,'' WAVES records show that Huang was in
the White House for about an hour, from 3:22 p.m. to 4:21
p.m.77 Ickes testified that Huang talked about his
background, and indicated that he would go to the DNC or the
Clinton/Gore campaign, whichever Ickes thought was best. Ickes
said that ``given the nature of the situation, it was probably
better for him to go to the DNC.'' 78 Ickes and
Huang also talked about Huang's current Commerce salary and the
fact that a DNC salary would be significantly lower. Huang,
according to Ickes, ``did not seem concerned about salary.''
79 Ickes testified that he had no recollection of
any discussion with Huang about a bonus for raising more than a
certain amount of money.80
---------------------------------------------------------------------------
\77\ WAVES records for John Huang, October 1995 (Ex. 6); Deposition
of Harold Ickes, June 26, 1997, p. 117.
\78\ Deposition of Harold Ickes, June 26, 1997, p. 118.
\79\ Id. at p. 120.
\80\ Id.
---------------------------------------------------------------------------
According to Ickes' notes of this meeting, Huang told him
that he had already met with Rosen.81 Huang was
likely referring to the September 26 meeting at the Willard
Hotel. Ickes explained to Huang that he would call both Rosen
and Fowler and tell both of them that Huang was interested in
coming to the DNC. Ickes testified that he is sure he spoke to
Rosen but cannot recall if he successfully reached Fowler.
According to Ickes, ``I am confident I talked to Marvin because
I think I recall Marvin saying to me that he knew John Huang
and thought that he would be a real asset in dealing with Asian
Americans, both from a political point of view as well as
raising money.'' 82 Rosen also remembers his
conversation with Ickes, stating, ``He [Ickes] asked me if I
would interview John Huang.'' 83 Rosen recalled that
Ickes might have indicated that he had already called Fowler
about Huang.84
---------------------------------------------------------------------------
\81\ Notes of Harold Ickes, October 2, 1995 (Ex. 7).
\82\ Deposition of Harold Ickes, June 26, 1997, pp. 125-26.
\83\ Rosen deposition, p. 138.
\84\ Id.
---------------------------------------------------------------------------
After his meeting with Huang, Ickes reported back to the
President. Ickes could not remember whether he made a ``formal
report,'' but he ``undoubtedly said to [the President], look I
met with John, he's interested in going over there . . . he's
working it out.'' 85
---------------------------------------------------------------------------
\85\ Deposition of Harold Ickes, June 26, 1997, p. 128.
---------------------------------------------------------------------------
During the latter half of October 1995, Rosen had a number
of conversations with Middleton about Huang. According to a
letter from Middleton to Giroir, dated October 19, 1995, Rosen
called Middleton on October 18 and asked about Huang's starting
date.86 In the letter, Middleton characterized his
conversation with Rosen as follows: ``In short, it appears that
the arrangement is moving forward and there is strong interest
in John becoming a part of the team.'' Middleton also informed
Giroir that he had relayed the inquiry to Huang, who was
``going to call Marvin.'' 87 A few days after that
conversation, on Monday, October 23, Middleton called Rosen at
the DNC, leaving a message that he would like to set up a
meeting between himself, Rosen, Giroir, and Huang.88
According to Rosen's DNC call sheet, the meeting was set for
Middleton's office on October 24.89 Rosen testified
that he recalled being in Middleton's office, but does not know
if it was for this meeting.90 Rosen also stated that
he does not remember meeting Giroir a second time and he is not
sure if he met Huang a second time before Huang's coming to the
DNC.91
---------------------------------------------------------------------------
\86\ Letter from Mark Middleton to Joe Giroir, October 19, 1995
(Ex. 8).
\87\ Id.
\88\ Rosen call sheet, October 24, 1995 (Ex. 9).
\89\ Id.
\90\ Middleton refused to cooperate with the Committee's
investigation, and asserted his Fifth Amendment privilege against self-
incrimination in refusing to testify, so his memory of events could not
be probed.
\91\ Rosen deposition, pp. 156-57.
---------------------------------------------------------------------------
By early November 1995, the DNC had still not hired Huang,
nor had Huang come to the DNC for any type of formal job
interview. That all changed very quickly. On November 8, 1995,
the DNC held a fund-raising event at the Historic Car Barn in
Washington D.C. During that event, President Clinton asked
Rosen about Huang's status.92 Rosen told the
Committee that when he responded to the President that the DNC
was in the process of interviewing Huang, the President said
something to the effect of ``good'' or ``Huang comes highly
recommended.'' 93 In his deposition, Rosen testified
that he had a brief conversation with the President about
Huang. Asked whether the President ``spoke approvingly about
Mr. Huang,'' Rosen replied, ``I believe as part of a
conversation, [the President said] something along the lines
that he come highly recommended or something, but I did believe
that it was an approving comment at the time.'' 94
Rosen immediately told Fowler and Sullivan about the
President's comment.95
---------------------------------------------------------------------------
\92\ Don Van Natta, ``President Is Linked to Urgent Enlisting of
Top Fund-Raiser,'' New York Times, July 7, 1997, p. A1. In his
deposition, Rosen could not recall exactly where the event was at which
the President inquired about Huang. Rosen deposition, p. 140.
\93\ Memorandum of Interview of Marvin Rosen, April 25, 1997, p.
10.
\94\ Rosen deposition, p. 141.
\95\ Deposition of Richard Sullivan, June 4, 1997, p. 222.
---------------------------------------------------------------------------
While the President had already mentioned Huang's hiring to
Lindsey and Ickes, this appeared to be the first time that he
had communicated directly with DNC officials. According to
Fowler, Rosen said that the White House was in favor of the DNC
hiring Huang.96 As would be expected, the
President's interest brought the immediate attention of
Sullivan and Fowler.97 Fowler instructed Rosen and
Sullivan to bring in Huang for an interview.98
According to Sullivan, this response from Fowler appeared to be
a change of heart from his earlier position with respect to
Huang. Sullivan described how when Rosen had previously brought
up Huang's name after Ickes had called, Fowler had said ``I
didn't like that guy Giroir.'' 99 Sullivan inferred
that Fowler had not wanted to hire Huang because he did not
like Giroir.100 That all changed after the
President's personal interest became even clearer.
---------------------------------------------------------------------------
\96\ Fowler deposition, p. 188.
\97\ Deposition of Richard Sullivan, June 4, 1997, pp. 222-223.
\98\ Id. at p. 223.
\99\ Id. at p. 222.
\100\ Id.
---------------------------------------------------------------------------
It appears that one day after the President made his
comment about Huang, Rosen called Huang to arrange an
interview. According to Rosens call sheets, Rosen received a
phone message from Huang on November 9, 1995.101
Rosen explained that he called Huang to set up an interview,
and that is what the November 9 phone call was probably
about.102 On November 13, 1995, Huang came to the
DNC and met with Rosen and Sullivan.103 Rosen
testified that the meeting lasted about a half
hour.104 When asked in his deposition what was said
at the meeting, Rosen responded, I don't recall specifically
what was said, but we went into the--Mr. Huang's coming to the
DNC and fund-raising for the DNC, and I believe what was said
to Mr. Huang was a reiteration that in mine and Mr. Sullivan's
mind that neither of us had the ability to offer him a job and
that decision had to be made by Mr. Fowler.'' 105
Rosen did not describe the meeting in any greater detail.
Fowler wasted no time following the interview. According to
Sullivan, Fowler made a decision on the same day, November 13,
1995, to hire Huang.106 Huang formally started at
the DNC about three weeks later.107
---------------------------------------------------------------------------
\101\ Rosen Call Sheet, November 9, 1995 (Ex. 10).
\102\ Rosen deposition, p. 153.
\103\ Testimony of Richard Sullivan, July 9, 1997, p. 101.
\104\ Rosen deposition, p. 141.
\105\ Id.
\106\ Testimony of Richard Sullivan, July 10, 1997, p. 108.
\107\ The precise date on which Huang started working for the DNC
is in dispute; in any event, it appears that Huang started working as a
fund-raiser for the DNC prior to leaving the Commerce Department's
payroll. See the section of this report on Huang's fund-raising at the
Commerce Department.
---------------------------------------------------------------------------
Even before Huang became a part of the DNC fund-raising
team, senior officials of the DNC had concern about Huang's
ability to understand and comply with the various fund-raising
guidelines. Sullivan traced his nervousness about Huang to a
few different factors. He recalled that in 1992, an Asian
individual had embarrassed the Republican National Committee by
borrowing $500,000 and then donating it to the RNC in order to
sit next to President Bush at an event.108 When
pressed during his deposition, Sullivan also stated that his
previous dealings with another Asian-American donor, Johnny
Chung, had made him ``nervous.'' 109 Sullivan
explained that in March 1995, Chung ``showed up at the DNC and
. . . said that he would make a contribution to us of $50,000
if I would get he and five members of his entourage into a
radio address with the President. They were all from China . .
. I had a sense that he might be taking money from them and
then giving it to us, you know. That was my concern. So I
said--I said--I said I wouldn't do it.'' 110
Sullivan linked the Chung incident to Huang, in part, because
Sullivan remembered that he had heard Chung mention Huang's
name and so he assumed that the two men knew each
other.111
---------------------------------------------------------------------------
\108\ Deposition of Richard Sullivan, June 4, 1997, p. 227.
\109\ Id. at p. 228.
\110\ Deposition of Richard Sullivan, June 4, 1997, pp. 228-29.
\111\ Id. at pp. 229-30.
---------------------------------------------------------------------------
In his deposition, Sullivan recounted that he rejected this
offer from Chung despite the fact that the DNC had previously
accepted, according to Sullivan, about $100,000 from Chung
during the past year.112 As is described in another
section of the report, Sullivan's principled stance regarding
Chung was fruitless, as Chung simply bypassed Sullivan and used
Chairman Fowler's office to get himself and his group into the
radio address. Chung contributed $50,000 to the DNC at the time
of the address, and ultimately contributed $366,000 to the DNC,
all of which has been returned.113
---------------------------------------------------------------------------
\112\ Id. at p. 228.
\113\ See the section of this report on Johnny Chung.
---------------------------------------------------------------------------
Sullivan apparently felt so strongly about his concerns
that he communicated them to Rosen even before the two of them
met with Huang. In his deposition, Rosen stated that he could
not recall the substance of his conversations about Huang, nor
did he identify any concerns about hiring him.114
Notwithstanding Rosen's purported lack of memory, Sullivan
recalled that Rosen himself enunciated another concern about
Huang--that he was coming from the Commerce Department.
According to Sullivan, ``Ron Brown was an aggressive Commerce
Secretary. There was always this criticism that we were getting
about, you know, the ties between the DNC and Commerce . . .
[M]y interpretation was Marvin had a sense that we need[ed] to
be careful with somebody coming from Commerce, also.''
115 Accordingly, Sullivan proposed, and Rosen
agreed, that Huang should have an extensive training session
with the DNC's general counsel, Joseph Sandler.116
---------------------------------------------------------------------------
\114\ Rosen deposition, pp. 141-43.
\115\ Deposition of Richard Sullivan, June 4, 1997, p. 235.
\116\ Id. at p. 230.
---------------------------------------------------------------------------
When Huang came to the DNC for his November interview,
Sullivan communicated this proposal to Huang. Sullivan
explained, ``In that very meeting, I also vividly remember--I
think I said, John, the first thing we want--if you should come
to work here, the first thing we want to do is sit down and
have an extended training and briefing period for a number of
hours with our counsel, Joe Sandler, as to what's right, what's
wrong, what's appropriate, what's inappropriate, what's legal,
what's illegal, and I want you to work with Joe to be careful
on that front.'' 117
---------------------------------------------------------------------------
\117\ Id. at pp. 226-27.
---------------------------------------------------------------------------
Sullivan further testified, ``We talked then and there
about it--if you [Huang] had any question, you know, please
work closely with Joe Sandler. I mean, Marvin and I both had a
sense that--that he needed to be trained well and needed to
be--you know, that an--Asian effort both made us a little
nervous at that point.'' 118 When asked in his
deposition, ``Was it unusual for you to make such a big point
about a new fund-raiser being--needing to have extensive
training and discussions with the general counsel?'' Sullivan
responded, ``Yes.'' 119
---------------------------------------------------------------------------
\118\ Id. at p. 227.
\119\ Id. at p. 228.
---------------------------------------------------------------------------
When asked about his concerns about Huang, Sullivan yet
again was much less forthcoming in his hearing testimony than
he had been in his deposition testimony. During his hearing
appearance, Sullivan stated that he was not concerned about
Huang's potential actions in raising illegal contributions, and
that his request for ``special training'' was motivated by
other reasons.120 Asked to describe those other
reasons, Sullivan simply stated that Huang did not have ``full-
time experience raising money on a professional level.''
121 It was only later in his testimony, after being
confronted with his deposition transcript, that Sullivan
acknowledged that he was concerned about Huangs understanding
of the law.122 Sullivan also admitted at that point
that the incident with Chung had played a role in his
insistence on training for Huang.123
---------------------------------------------------------------------------
\120\ Testimony of Richard Sullivan, July 10, 1997, p. 45.
\121\ Id. at p. 46.
\122\ Id. at p. 68.
\123\ Id. at p. 70.
---------------------------------------------------------------------------
In any event, Rosen and Sullivan then met with Fowler in
order to discuss the Huang situation. Once again, Rosen
testified that he could not recall the
conversation.124 According to Sullivan, the
conversation was primarily between Rosen and Fowler, with
Sullivan listening.125 Sullivan testified that Rosen
explained to Fowler that both Sullivan and he felt that it was
worth giving Huang ``a shot.'' 126 Rosen also told
Fowler that ``the first thing he wanted [Huang] to do was to
sit down and have an extensive training session with a lawyer,
lawyers.'' 127 Fowler, who according to Sullivan,
shared some of their concerns about Huang, agreed with that
idea.128
---------------------------------------------------------------------------
\124\ Rosen deposition, pp. 142-43.
\125\ Deposition of Richard Sullivan, June 4, 1997, p. 233.
\126\ Id.
\127\ Id.
\128\ Id. at p. 234.
---------------------------------------------------------------------------
Fowler met personally with Huang, and then told Sullivan
that the DNC should make the formal offer to
Huang.129 Once again, Huang came to the DNC to meet
with Rosen and Sullivan.130 At this meeting, the DNC
confirmed the specifics of Huangs compensation and title. There
was also more discussion about the need for Huang to meet with
Sandler. Sullivan testified that Rosen and he told Huang, ``We
want you to have extensive discussions as to what's legal and
what's illegal, what kind of legal contributions you can take
and what's illegal, what's appropriate, what's inappropriate.
And we want you to--anything--if there is any kind of--you
know, anything that has any possibility of a question to check
with Joe. 131 According to Sullivan, Huang
agreed.132
---------------------------------------------------------------------------
\129\ Id. at pp. 236-37.
\130\ Id. at pp. 237-38.
\131\ Id. at pp. 239-40.
\132\ Id. at p. 240. As will be discussed, Sullivan later confirmed
that this private session never took place. Sandler, however,
maintained that no one asked him to provide extensive training for
Huang, nor did he ever do so.
---------------------------------------------------------------------------
DNC Finance officials were harping on the need for Huang to
have special, extensive training with Sandler; however, they
also approved an arrangement that, at a minimum, encouraged
Huang to cut corners in raising money. That arrangement
included an incentive bonus if Huang was successful in raising
money. Besides the troubling nature of this compensation
package, the Committee finds it disturbing that no DNC official
mentioned the incentive until Sullivan's deposition in early
June 1997.
The Committee deposed Rosen on May 19, 1997,133
but Rosen said that he could not recall much of the substance
of his November interview with Huang. However, a few weeks
later, when the Committee took Sullivan's deposition, the
Committee learned additional facts about this meeting,
including details of Huang's compensation.
---------------------------------------------------------------------------
\133\ Rosen had been interviewed by the Committee on April 9, 1997.
---------------------------------------------------------------------------
In contrast to Ickes' testimony that Huang ``did not seem
concerned about salary,'' 134 Sullivan remembered
that Huang asked to be paid approximately what he was making at
the Commerce Department.135 In response, Rosen
offered Huang an incentive plan--that Huang would receive a
base salary and then a bonus payment based on his success at
raising money. Sullivan testified in his deposition:
\134\ Deposition of Harold Ickes, June 26, 1997, p. 120.
\135\ Deposition of Richard Sullivan, June 5, 1997, p. 6.
---------------------------------------------------------------------------
Somehow it was his salary, potential salary was
discussed, and Marvin came up with the idea that of--
John said that he wanted to be paid somehow, some way
be paid what he was making at Commerce. He didn't
mention exactly how much. Marvin said, well, what if
we--somehow they came to the consensus agreement that
he would be paid a salary of $60,000 and that if he
were successful at some point, he would be given a lump
sum payment of whatever needed to get him to his
Commerce Department salary.136
---------------------------------------------------------------------------
\136\ Deposition of Richard Sullivan, June 4, 1997, p. 226.
Sullivan understood that Huang was making between $80,000
and $120,000 at Commerce and so the difference between those
amounts and $60,000 (Huang's base DNC salary) would comprise
the incentive portion of Huang's DNC compensation
package.137 In other words, Huang would have an
incentive component ``somewhere in the $50,000 to $60,000
range'' if he was successful in raising money for the
DNC.138
---------------------------------------------------------------------------
\137\ Deposition of Richard Sullivan, June 5, 1997, p. 5.
\138\ Id.
---------------------------------------------------------------------------
Besides talking about salary, Rosen, Sullivan, and Huang
discussed other issues relating to Huang's employment with the
DNC at this November interview. Huang explained, for instance,
that he wanted a ``special title, given his status, age, unique
position.'' 139 Rosen testified that Huang ``felt he
needed some credibility.'' 140 After some
discussion, they all agreed that Huang would be the Vice
Finance Chairman, a title created for Huang that no other DNC
employee held.
---------------------------------------------------------------------------
\139\ Id. at p. 226.
\140\ Rosen deposition, p. 148.
---------------------------------------------------------------------------
Following this meeting with Huang, Rosen informed Fowler
about Huang's request for a special title and the details of
Huang's incentive compensation package. Fowler approved both
items.141 Sullivan admitted in his deposition that
he thought it was ``little odd'' that Fowler approved Huang's
compensation arrangement without any further
discussion.142 Nevertheless, Sullivan did not say
anything. He testified, ``It was above my head. I mean, what
was I to say.'' 143 Huang returned to the DNC again,
and the specifics of his compensation and title were
confirmed.144 Sullivan indicated that the incentive
portion of Huang's compensation package was never reduced to
writing.145
---------------------------------------------------------------------------
\141\ Deposition of Richard Sullivan, June 4, 1997, pp. 235-36.
\142\ Id. at p. 236.
\143\ Id.
\144\ Id. at pp. 237-38.
\145\ Deposition of Richard Sullivan, June 5, 1996, p. 8.
---------------------------------------------------------------------------
Confirmation of the existence of the incentive
arrangement--and its importance to Huang--is shown by what
occurred after Huang left the DNC. Even after the controversy
burst and accusations swirled around Huang, he still sought to
collect his lump sum payment. Sullivan testified, for instance,
that in the ``past couple of months'' (referring to the months
before Sullivan's June 1997 deposition), Sullivan heard from
his former assistant Scott Freda that Huang was asking for his
bonus payment. 146 Sullivan also recounted an
inquiry from B.J. Thornberry, the Executive Director of the
DNC, ``I remember her [B.J. Thornberry] calling down after John
sort of went into hiding or whatever you want to--went
underground--whatever you want to call it. She asked--I vaguely
remember her asking me was there an agreement where he would
get a--was there an agreement between he and Marvin where he
would get a lump sum payment after the election. I said, yes.''
147
---------------------------------------------------------------------------
\146\ Id. at p. 7. Freda still works at the DNC, and is currently
the Chief of Staff of its Finance Division.
\147\ Id.
---------------------------------------------------------------------------
Sullivan changed his testimony concerning Huang's
compensation between his deposition and his hearing appearance.
In his deposition, Sullivan emphasized just how unusual was the
incentive compensation arrangement. He volunteered that it was
``unprecedented.'' 148 In his hearing testimony,
however, Sullivan told a different story. First, he avoided
confirming that Huang was the person who asked for the
incentive arrangement, instead testifying that salary was not
an issue for Huang, and that Rosen simply volunteered it ``out
of respect to John's situation in life.'' 149
---------------------------------------------------------------------------
\148\ Deposition of Richard Sullivan, June 4, 1997, p. 230.
\149\ Testimony of Richard Sullivan, July 10, 1997, p. 64.
---------------------------------------------------------------------------
Sullivan then downplayed the significance of the
arrangement. He described it as ``merely that at some point
later in the year, if things were working out, the DNC would
pay him a share to get him up to whatever he was making at the
Commerce Department.'' 150 Asked what ``working
out'' meant, Sullivan avoided giving a direct answer. He
testified, ``I didn't--I didn't--I'm not sure. You should ask--
Marvin made the agreement with him. I was an observer, and I'm
not sure what exactly I [sic] meant.'' 151 Later,
when he was asked directly if the arrangement was ``unusual,''
Sullivan ducked the question. He answered, ``Senator, you have
to take it in larger context of which I touched upon, which was
that salary wasn't important to John.'' 152
---------------------------------------------------------------------------
\150\ Id. at p. 63.
\151\ Id.
\152\ Id. at p. 64.
---------------------------------------------------------------------------
During the hearing, Sullivan also minimized his reaction to
the salary structure. Asked if he was comfortable with the
compensation package, Sullivan replied, ``I was--sure. I mean,
it was not a common arrangement, but I was comfortable with
it.'' 153
---------------------------------------------------------------------------
\153\ Id. at p. 63.
---------------------------------------------------------------------------
Conclusion
The circumstances surrounding Huang's hiring by the DNC
were unusual. DNC officials were lobbied by close associates of
the President, such as Giroir and Middleton, to hire Huang.
Ultimately, the President himself intervened to help Huang move
from the Commerce Department to the DNC, after meeting with
Huang and James Riady, Huang's patron and long-time friend and
supporter of the President.
Top DNC officials were sufficiently concerned about the
possibility that Huang's fund-raising could run afoul of the
law that they requested special, individualized legal training
for Huang. Whether this training occurred is a matter of
controversy, as will be seen.
Although prudently directing that Huang be given special
training, DNC officials conferred an ``unprecedented''
incentive compensation package on Huang, one likely to
encourage aggressive fund-raising. As will be seen, Huang was
an extraordinarily aggressive fund-raiser who violated a
variety of federal laws.
John Huang's Illegal Fundraising at the DNC
This chapter covers a number of events that occurred during
John Huang's tenure at the DNC. It does not attempt to paint a
comprehensive picture of Huang's activities at the DNC; rather,
it illustrates some important points. First, as discussed
previously, DNC Finance officials were concerned enough about
Huang's potential to raise funds illegally that they insisted
that he receive a personal training session from DNC General
Counsel Joe Sandler. Although Richard Sullivan declares that he
was informed that such training occurred, Sandler claims that
no one ever asked him to provide such training, nor did he do
so. These contradictory accounts are typical of the confusion
and lack of responsibility or accountability in the DNC's fund-
raising operation.
Second, the concerns about Huang were not just theoretical,
but arose in reality as early as his first fund-raising event
in February 1996. At that time, DNC Treasurer Scott Pastrick
was concerned about foreign nationals at the event, and asked
Sandler to review checks from it. Subsequently, the DNC
returned two checks from the event in March 1996. These
returns--which stood out on the DNC's Federal Election
Commission report for the relevant time period--should have put
DNC officials on notice that their early concerns about Huang
had materialized quickly. Not only did the DNC ignore this
warning sign, but DNC officials also did not volunteer any
information about these early returns in this investigation. It
was not until a few days before the opening of the Committee's
hearings in July 1997--and months after the Committee had
served the DNC with its subpoena--that the Committee received
documentary evidence of the return of funds that Huang had
raised in February 1996. Until July 1997, none of the DNC
officials who had been deposed--such as Richard Sullivan,
Marvin Rosen, or Joe Sandler--had mentioned anything about
these returns.
Third, Huang's solicitation and collection of a $250,000
contribution from Cheong Am America in April 1996 should have
provided even more warning signs for DNC officials. It was
clear to anyone who cared enough to look that this contribution
was illegal. Nevertheless, DNC officials were so obsessed with
raising money that, at a minimum, they failed to ask obvious
questions about the source of the money collected. The story of
the Cheong Am contribution shows the unprofessional manner in
which Huang operated. It also demonstrates the shameless
selling of the President--as the DNC arranged a five minute
photo-op in exchange for a quarter million dollar contribution.
Fourth, DNC officials were uncomfortable with the guest
list for a July 30, 1996 event organized by Huang. The guest
list consisted of a small group of foreign nationals and the
President. Nevertheless, DNC officials allowed the event to go
forward. Only afterwards did they make the decision not to
allow Huang to organize any more fund-raising events attended
by the President.
Fifth, Huang attempted to launder political contributions
to the DNC. In August 1996, a time when there was significant
pressure on Huang to perform, Huang approached a Washington
area businessman and asked to use his organization to launder
contributions, the source of which was not disclosed. Although
Huang was rebuffed, and the deal was never consummated, the
incident demonstrates how far Huang would go to raise money for
the DNC.
Finally, even at the conclusion of this investigation,
there is still little known about what Huang did on a day-to-
day basis. The Committee deposed numerous people at the DNC,
including Huang's supervisors, co-workers, and office-mates.
These individuals claimed to have little or no interaction with
Huang, and in any event, shed little light on what he did every
day. Huang did not have an assistant or a secretary, nor did he
leave many documents at the DNC.1 As discussed,
Huang himself refused to speak to the Committee. Accordingly,
it is still not possible for the Committee to paint a
comprehensive picture of Huang's activities at the DNC.
---------------------------------------------------------------------------
\1\ Sam Newman, a DNC fund-raiser who shared an office with Huang
for a few months, testified that Huang sat at a desk, but did not use
any of the drawers, or any other space in the office, to maintain files
or documents. Newman stated that Huang recorded all his notes and
meetings in a bound writing tablet, which he carried with him.
According to Newman, when Huang left the office each day, he left
behind no notes, files, or any possessions whatsoever. Deposition of
Samuel Newman, July 17, 1997, pp. 111-122.
---------------------------------------------------------------------------
Contradictory Testimony on Whether Sandler Trained Huang
As described previously, DNC Finance Director Richard
Sullivan, among others, was concerned enough about John Huang
to insist on an individual training session between Huang and
DNC General Counsel Joseph Sandler. Sullivan also testified
that he was informed by both Huang and Sandler that such a
session took place soon after Huang began work at the DNC.
Nevertheless, Sandler insisted that such a session never
occurred.
According to Sullivan, immediately after Sullivan and Rosen
had interviewed Huang for the first time in November 1995,
Rosen asked Sandler to come to Rosen's office.2
Sullivan and Rosen informed Sandler that, pending Don Fowler's
approval, it looked like Huang would be coming to the DNC. They
explained to Sandler that they had told Huang that the first
thing they wanted him to do was to have an extensive training
session with Sandler, so that Huang would learn the rules
governing fund-raising.3 Sullivan explained, ``We
asked Joe [Sandler] to make sure that happened and expressed
our desire for that. Joe said certainly.'' 4
---------------------------------------------------------------------------
\2\ Deposition of Richard Sullivan, June 5, 1997, p. 24.
\3\ Id. at pp. 24-25.
\4\ Id. at p. 25.
---------------------------------------------------------------------------
A few days after Huang started at the DNC, Sullivan went to
Sandler's office and inquired whether Sandler had, in fact, sat
down with Huang and discussed fund-raising rules. According to
Sullivan, Sandler answered yes, and indicated that he had spent
an hour or two with Huang.5 Sullivan testified: ``He
[Sandler] said that he had had an extensive session with John;
that he felt comfortable with his knowledge of the rules; with
the way he described his future conduct and was comfortable
with his general knowledge of fund-raising rules and
regulations.'' 6 Asked whether Sandler provided any
more detail about his session with Huang, Sullivan responded,
``I believe that he [Sandler] mentioned that he had obviously
emphasized to him that the thing that you had to be careful
about was, the foreign subsidiary rule and just making sure
that you were not taking contributions from non-U.S. citizens
or green card holders.'' 7
---------------------------------------------------------------------------
\5\ Id. at p. 27.
\6\ Id. at p. 26.
\7\ Id. at pp. 26-27.
---------------------------------------------------------------------------
Sullivan heard about this training session from Huang as
well as from Sandler. Within a week after Huang started working
at the DNC in December 1995, Sullivan asked Huang if he had
already sat down with Sandler, whether Huang felt comfortable
with the rules as they related to foreign subsidiaries and non-
U.S. citizens, and whether Huang was comfortable in taking any
questionable contributions to the counsel's office for
review.\8\ Sullivan testified that Huang responded ``[v]ery
positively. He said, absolutely I had a great session. We got
along well. I feel very comfortable. I mean, John was not a man
of great words, but--I feel comfortable and I see no problem
with working closely with Joe to answer any questions that may
arise.'' \9\
---------------------------------------------------------------------------
\8\ Id. at pp. 27-28.
\9\ Id. at p. 28.
---------------------------------------------------------------------------
The uncommon nature of the individual training session
further enhanced Sullivan's memory about this issue. After
explaining that Huang was the only ``student'' in the training
session with Sandler, Sullivan remarked that it was ``very
uncommon'' for a fund-raiser to have a private training session
with the general counsel.\10\ Sullivan testified, ``I don't
remember anyone else ever having a private session with the
general counsel.\11\ Rosen also confirmed Huang's private
session with Sandler. Rosen testified, ``I knew that early on,
Mr. Huang had met with Mr. Sandler about the rules of getting
money from foreign owned corporations in the United States or
resident aliens or whatever.'' \12\
---------------------------------------------------------------------------
\10\ Id. at p. 29.
\11\ Id.
\12\ Deposition of Marvin Rosen, May 19, 1997, p. 268.
---------------------------------------------------------------------------
Sullivan testified that in the ensuing months, both Sandler
and Huang confirmed that they were following up on their
initial session. Sullivan testified that on ``random times'' in
the ``first couple months of [Huang's] employment,'' he asked
Sandler if Huang was vetting his checks with him, and Sandler
responded ``yes.'' \13\ Sullivan also stated that during that
same time period, he asked Huang on numerous occasions if he
was working with Sandler to vet all checks that were of
questionable legality. Huang responded affirmatively.\14\
---------------------------------------------------------------------------
\13\ Deposition of Richard Sullivan, June 5, 1997, p. 37.
\14\ Id. at p. 33. The issue of vetting at the DNC is fully
discussed in another chapter of this report. See the section of this
report on the DNC's dismantling of its vetting procedures.
---------------------------------------------------------------------------
Sandler told the Committee a completely different story.
During his deposition, Sandler was asked in seriatim whether
Richard Sullivan, Marvin Rosen, Don Fowler, or ``anyone else in
the world'' asked him to give Huang specialized or
individualized training at the time that Huang came to the DNC.
Sandler responded, ``no'' to each query.\15\ Sandler then
testified that regardless of whether anyone asked him to give
such training, he did not, in fact, conduct any specialized
training for Huang in the beginning of December 1995.\16\
---------------------------------------------------------------------------
\15\ Deposition of Joseph E. Sandler, August 21, 1997, pp. 13-14.
\16\ Id. at pp. 14-15.
---------------------------------------------------------------------------
When confronted with Sullivan's conflicting testimony,
Sandler's only explanation was that in February 1996 he met
with Huang and reviewed checks collected in connection with
Huang's first event, an Asian-American fund-raiser at the Hay-
Adams Hotel in Washington, D.C.\17\ Sandler explained that he
may have had a conversation with Sullivan following this
meeting with Huang. Sandler testified that he ``probably would
have referred to my feeling that Mr. Huang . . . seemed to
understand the rules applicable to fund-raising for the DNC, in
particular, in connection with issues of citizenship and
legality on contributions from U.S. subsidiaries of foreign
corporations or foreign-owned corporations.'' \18\ This
explanation, however, cannot resolve the discrepancy between
Sullivan and Sandler's accounts, as this February 1996 meeting
occurred nearly three months after Sullivan alleged that the
individual training session took place.
---------------------------------------------------------------------------
\17\ Id. at p. 15.
\18\ Id. at p. 17.
---------------------------------------------------------------------------
Not only is there a dispute about whether Huang received
any private training from Sandler, but the DNC general
counsel's office cannot even confirm that Huang received any
group training about fund-raising regulations and guidelines.
Neil Reiff, DNC deputy general counsel and the person who
organized group training for Finance Division employees,
testified, ``I can't recall ever being involved in a training
session with Mr. Huang. I couldn't even tell you whether he
attended one of our training sessions. I cannot tell you right
here I know that he ever participated in any training that I
was involved in.'' \19\ Sandler pointed to a copy of DNC fund-
raising guidelines found in Huang's files, but otherwise could
not confirm any training of Huang. He testified that he was not
aware of any particular training that Huang received.\20\
---------------------------------------------------------------------------
\19\ Deposition of Neil Paul Reiff, June 20, 1997, pp. 111-112.
\20\ Deposition of Joseph E. Sandler, May 30, 1997, p. 129.
---------------------------------------------------------------------------
Concerns about Huang Materialize: DNC Returns Checks from His First
Event
As mentioned above, Huang's first event was an Asian-
American fund-raiser at the Hay-Adams Hotel in Washington, D.C.
on February 19, 1996. The event raised a significant amount of
money (over $700,000, though budgeted for $500,000) and was
considered a success. Nevertheless, the event also raised early
warning signs which should have put DNC officials on notice
that their initial concerns about Huang were not misplaced.
First, a top DNC official not only noticed, but also expressed
concern about, this event's potential for producing illegal
contributions from foreign nationals to the DNC. Second, two
checks raised in connection with the event were returned a
month later, apparently because the checks were from foreign
sources and thus violated campaign laws.
Following this February event, DNC Treasurer Scott Pastrick
approached Sandler and requested that Sandler meet with Huang
to review checks from the event. Asked why Pastrick recommended
this meeting, Sandler testified, ``I think that he had some
concern to make about the foreign national--potential foreign
national issues in this group because it had not been well
known to the DNC.'' \21\ In his deposition, Pastrick never
mentioned anything about this conversation with Sandler or
about any concerns that he had about Huang. Asked if he
participated in or overheard any conversations regarding
concerns about Huang, Pastrick pointed to an ``odd'' comment by
Rosen in mid to late October 1996 that Huang's activities were
being checked by the DNC General Counsel's office.\22\
Otherwise, Pastrick testified, he had no other such
conversations.\23\
---------------------------------------------------------------------------
\21\ Id. at p. 101.
\22\ Deposition of Robert Scott Pastrick, May 7, 1997, pp. 97-98.
\23\ Id. at p. 98.
---------------------------------------------------------------------------
As for the actual meeting, Sandler explained that he sat
down with Huang for about 45 minutes and systematically
discussed the checks that Huang had brought with him. Sandler
stated that Huang had ``firsthand knowledge'' of the donors,
and so Sandler felt that there was no need to do any additional
review of the particular checks.\24\ Sandler said that he
relied on Huang's explanation about the citizenship status of
individuals or the ownership of a corporation.\25\ According to
Sandler, there was no request at that time for him to go over
general fund-raising gudelines with Huang, nor did he do
so.\26\ Sandler admitted that he took some notes of his meeting
with Huang, but stated that he had looked for the notes and
could not find them.\27\
---------------------------------------------------------------------------
\24\ Deposition of Joseph E. Sandler, May 30, 1997, pp. 102-103.
\25\ Id. at p. 103.
\26\ Deposition of Joseph E. Sandler, August 21, 1997, p. 19.
\27\ Deposition of Joseph E. Sandler, May 30, 1997, pp. 133-134.
---------------------------------------------------------------------------
Sandler testified that ``he could not recall any other
occasion where he [Huang] came to me with a group of checks.''
\28\ Sandler's testimony differs from the testimony of his
deputy, Neil Reiff, who explained that he passed by Sandler's
office ``on a couple of occasions'' in the spring of 1996, and
saw Huang meeting with Sandler.\29\ While Reiff did not
participate in these meetings, he understood them to be for the
purpose of reviewing specific contributions, ``because I saw
John with checks in his hands when I walked by Joe's office.
You could see him holding checks.'' \30\
---------------------------------------------------------------------------
\28\ Id. at p. 127.
\29\ Reiff deposition, p. 113.
\30\ Id. at p. 114.
---------------------------------------------------------------------------
In fact, the DNC soon returned checks that Huang raised
from the Hay-Adams event. A few days before the start of the
Committee's public hearings in July 1997, the Committee
received documents showing that some of the Huang-solicited
contributions had been returned as early as March 1996. The
documents received reflected that, in connection with the Hay-
Adams event, Huang had collected two separate $12,500 checks
made payable to the Democratic National Committee. Both checks
were dated February 26, 1996, and were written on an account at
General Bank in California. According to DNC check tracking
forms, which appear to have been filled out by Huang, one
contribution is attributed to Shu-Lan Liu and one is
attributable to Yun-Liang Ren. The address and telephone number
is the same for both: 410 S. San Gabriel Blvd. Suite 10, San
Gabriel, CA 91776 and (818) 821-5338.\31\
---------------------------------------------------------------------------
\31\ DNC check tracking forms for Shu-Lan Liu for $12,500 and Yun-
Liang Ren for $12,500 (Ex. 1).
---------------------------------------------------------------------------
About one month later, on March 26, someone at the DNC
filled out two expenditure request forms to have the DNC issue
checks refunding these contributions.\32\ While it is unclear
who actually filled out the forms, they indicate that the two
separate $12,500 expenditures were requested by Huang. On the
line for ``purpose of expenditure,'' the same description is
written for both--``Contribution Refund (see attached).'' \33\
It is unclear, however, what may have been attached to these
requests. Photocopies of the checks and check tracking forms
are numbered consecutively, but there also may have been a
written internal note or other document explaining why the
contributions were to be refunded.\34\ Nothing of the sort was
produced to the Committee. On the expenditure request for Ren,
there is a handwritten notation ``Neil'' which likely refers to
DNC deputy general counsel Neil Reiff. It is unknown who made
that notation, and, because the documents had not been produced
before Reiff's deposition, he was not asked about the forms.
---------------------------------------------------------------------------
\32\ DNC Expenditure Request Forms, March 26, 1996 (Ex. 2).
\33\ Id.
\34\ Id.
---------------------------------------------------------------------------
The Committee also obtained the relevant DNC report to the
Federal Election Commission. On the Itemized Disbursements
Schedule B page of the report, which was for the first quarter
of 1996, the DNC listed both of these returned
contributions.\35\ ``Contribution refund'' is listed as
``purpose of disbursement.'' However, there is no further
explanation. The DNC also listed seven other contribution
refunds on the Schedule. These two $12,500 refunds clearly
stand out from the seven other entries. One of the seven was
for $2,000 and the remaining were all for under $500.\36\
---------------------------------------------------------------------------
\35\ FEC Schedule B (Ex. 3).
\36\ Id.
---------------------------------------------------------------------------
The Committee learned that Ren and Liu are a married
couple, and that they run an international trading group based
in China. According to a family member in California, both Ren
and Liu are currently living in China. Attempts to reach them
by telephone in California and China were unsuccessful.
Until July 1997, the Committee was under the impression
that the first check raised by Huang and returned by the DNC
was the Cheong Am contribution, which was solicited in April
1996 and returned in September 1996. In its public statements,
the DNC had never made reference to any Huang-solicited
contributions that were returned earlier. Moreover, in all the
interviews and depositions conducted by the Committee until the
Committee's receipt of the documents--and these depositions
included almost all of the major DNC officials--no witness had
made any reference whatsoever to any Huang-solicited
contributions that were returned before the widely reported
return of the Cheong Am contribution.
During the first two sessions of Sandler's deposition in
May 1997, for instance, he described the meeting that he had
with Huang after Huang's first event. In his testimony, Sandler
explained that Huang had firsthand knowledge of the donors, and
Sandler did not ask Huang to return any of the checks that they
discussed. During those sessions of his deposition, Sandler did
not identify any contributions from the event that the DNC
returned before the Debevoise & Plimpton review of all DNC
contributions in the fall of 1996.\37\
---------------------------------------------------------------------------
\37\ Debevoise & Plimpton was the principal outside law firm
retained by the DNC to defend it in this investigation.
---------------------------------------------------------------------------
The Committee deposed Reiff on June 20, 1997, before the
Committee had received the Ren and Liu documents, so Reiff was
not asked directly about them; however, Reiff was asked
numerous questions about his interaction with Huang, and all of
his answers suggested that he had no involvement in the Ren and
Liu contributions. Reiff testified, ``Other than passing him
[Huang] in the hall politely, I had pretty much no interaction
with Mr. Huang direct [sic],'' and ``[o]ther than the social
interaction, I never provided any legal advice to Mr. Huang.''
\38\ Reiff also stated that he never participated in any
meetings with Huang, nor could he recall ever being involved in
a training session with Huang.\39\ Moreover, Reiff acknowledged
in his deposition that he had primary responsibility for the
final preparation of FEC reports.\40\ The fact that these two
contributions stand out on the FEC report and that Reiff's name
(``Neil'') is listed on the documents leave the Committee to
wonder what Rieff may have known about these returned
contributions.
---------------------------------------------------------------------------
\38\ Reiff deposition, p. 111.
\39\ Id.
\40\ Id. at p. 12.
---------------------------------------------------------------------------
During the third session of his deposition, which took
place on August 21, 1997, and thus after the Committee received
the documents, Sandler was confronted with the Ren and Liu
returned contributions. After acknowledging that he had
reviewed these particular documents in preparation for this
session of his deposition, Sandler testified, ``I don't know
much about the circumstances surrounding these, but it is
apparent that from the face of the documents that they were
checks that Mr. Huang attributed to the Hay-Adams event; that
they were initially deposited, but then within a month, maybe
three weeks, Mr. Huang requested that the checks be refunded.''
\41\
---------------------------------------------------------------------------
\41\ Deposition of Joseph E. Sandler, August 21, 1997, p. 23.
---------------------------------------------------------------------------
Asked whether the Ren and Liu checks were among the checks
that Sandler reviewed after the Hay-Adams event, Sandler
responded, ``I don't specifically recall. It's possible, but I
don't specifically recall. It's very possible that it was.''
\42\ Sandler also said that he did not remember whether Huang
had consulted with him in March 1996 about the Ren and Liu
contributions.\43\
---------------------------------------------------------------------------
\42\ Id. at p. 24.
\43\ Id.
---------------------------------------------------------------------------
While no one at the DNC admitted to having contemporaneous
knowledge of these returned contributions, the fact remains
that these Huang-solicited contributions were returned by the
DNC in March 1996, only a few months after Huang had arrived at
the DNC, and within a month of Huang's first fund-raising
event. Nevertheless, DNC officials did not institute any closer
monitoring of Huang's fund-raising, allowing him to continue to
raise money unabated until the fall of 1996. Because of the
intense pressure emanating from the White House to raise money,
the DNC ignored these early indications and failed to screen
subsequent Huang-solicited contributions until it was too late.
In fact, within weeks of the return of these contributions,
Huang solicited another illegal contribution--$250,000 from
Korean citizen John K.H. Lee, a topic that will be discussed
next.
Additionally, these Ren and Liu contributions tie into
another aspect of the Committee's investigation--the
coordination between the DNC and various nonprofit groups.\44\
The Committee subpoenaed bank records for Ren and Liu, which
show that on May 13, 1996, they jointly wrote a $25,000 check
to a non-profit group, Vote '96.\45\ It seems more than just
coincidental that the check is not only for $25,000, which is
the total of the two returned contributions, but it is dated
May 13, which is the date of Huang's second major fund-raiser--
an event at the Sheraton Carlton Hotel.
---------------------------------------------------------------------------
\44\ See the section of this report on misuse of nonprofit
organizations.
\45\ Check to Vote '96 from Shu-Lan Liu and Yun-Liang Ren, May 13,
1996 (Ex. 4).
---------------------------------------------------------------------------
The Return of the Cheong Am Contribution
On April 8, 1996, Huang collected for the DNC a $250,000
contribution from John K.H. Lee, a South Korean businessman.
The contribution technically came from Lee's newly incorporated
U.S. company, Cheong Am America, Inc. The intermediary between
Huang and Lee was Michael Mitoma, an international business
consultant and, at the time of the contribution, the mayor of
Carson, California.
After the Los Angeles Times inquired about the legality of
the Cheong Am contribution in September 1996, the DNC
acknowledged that it was illegal, and returned it. The return
of this contribution led to additional press attention, and is
generally noted as the beginning of the 1996 campaign finance
scandal that triggered the Committee's investigation.
The DNC has pointed to the return of this contribution as
an example of how it swiftly reacted to any indicia of illegal
contributions. At the time of the return, a DNC spokesperson
also explained the illegal contribution by commenting, ``Our
fund-raiser understood that the company had been in existence
in the U.S. for some time, and was led to believe that the
company's principals, including its chairman, were U.S.
citizens or permanent residents.'' \46\
---------------------------------------------------------------------------
\46\ Alan C. Miller, ``Democrats Return Illegal Contribution,'' Los
Angeles Times, September 21, 1996, p. A16.
---------------------------------------------------------------------------
The actual facts reveal a much different story. It was
obvious to anyone who cared to look that Cheong Am America,
Inc. was a newly-formed U.S. company with no current
operations. It was also obvious that the company's chairman,
John K.H. Lee, was a Korean citizen. Nevertheless, the
acceptance of this contribution, and the way the DNC both
solicited and vetted it, reveals the DNC's standard operating
procedure. In their zeal to raise money, DNC officials at best
neglected to ask the obvious questions, and at worst
deliberately looked the other way. Furthermore, the Cheong Am
contribution provides a good overview of the selling of the
President, as John Huang and his colleagues at the DNC
shamelessly arranged a photo-op with the President in exchange
for a $250,000 contribution from a foreign national.
This contribution had its genesis in the desire of an
elected official to provide economic development for his
community. In March 1996, Michael Mitoma heard from a friend
about a South Korean businessman who was thinking about opening
an electronics factory in California. As the mayor of Carson,
California, a small city located adjacent to Los Angeles,
Mitoma saw an opportunity to bring much needed jobs to his
city. Mitoma traveled to South Korea and met with the Korean
businessman, John K.H. Lee. According to Mitoma, Lee
``constantly talked about meeting the President, asked if I
knew the President personally, and if I could assist in
arranging a meeting between he and President Clinton.'' \47\
Mitoma needed an interpreter to speak to Lee, as Mitoma did not
speak Korean and Lee did not speak English.
---------------------------------------------------------------------------
\47\ Testimony of Michael Mitoma, September 5, 1997, p. 126.
---------------------------------------------------------------------------
Mitoma realized that successfully arranging a meeting with
President Clinton would enhance the chances of convincing Lee
to locate a factory in Carson. Accordingly, upon his return to
the U.S., Mitoma tried the direct approach. He called the White
House three times, but never received a return call.\48\ Faced
with this lack of response, Mitoma began to explore other
avenues. Mitoma explained, ``One of the suggestions was why
don't you talk to the DNC because there's a series of fund-
raisers that are being held, and that might be a way to meet
the President. So I did call the DNC to see about that
possibility.'' \49\ Mitoma was referred to Huang.
---------------------------------------------------------------------------
\48\ Id. at pp. 126-127.
\49\ Id. at p. 127.
---------------------------------------------------------------------------
Mitoma explained to Huang that he had a South Korean
businessman who was interested in meeting the President. Huang
responded by listing a ``menu'' of events, from large dinners
of several hundred people at $5,000 per person to ``exclusive''
dinners at ``$50,000 a plate.'' \50\ When Mitoma relayed this
information to Lee, Lee stated that he wanted to buy all the
seats, even at $50,000 each, so that he could have a one-on-one
dinner with the President.\51\ Huang rejected this proposal,
telling Mitoma that others would need to attend the dinner.\52\
At that time, Huang also explained that he was working on
setting up a small dinner and that there were five seats
remaining. After checking with Lee, Mitoma confirmed to Huang
that Lee would pay $250,000 for the five seats.\53\ Eventually,
Huang informed Mitoma that the date of the dinner would be
April 8, 1996.
---------------------------------------------------------------------------
\50\ Id. at p. 128.
\51\ Id. at p. 129.
\52\ Id.
\53\ Id. at pp. 129-130.
---------------------------------------------------------------------------
In early April, Huang asked for, and Mitoma sent him,
information on the five attendees.\54\ Besides Lee and Mitoma,
the other three attendees were Won Ham, Lucy Ham and Young
Chull Chung. Lucy Ham was the friend who had put Mitoma in
touch with Lee. She and her husband, Won, were both U.S.
citizens living in Los Angeles. Chung was Lee's partner and
lived in South Korea. Mitoma explained that he was concerned at
that time because he had received no written materials for this
event, and had also not been informed about the time, place, or
dress code.\55\ Since Lee was flying from Korea to Washington,
D.C. for the sole purpose of meeting the President, Mitoma
wanted to make sure that the event was actually going to
happen.\56\ Even without the final details or confirmation,
Lee, Chung, the Hams, and Mitoma all met in Washington, D.C. on
April 7, 1996. Mitoma finally succeeded in contacting Huang
during the morning of April 8, 1996, which was the same day as
the planned dinner. After telling Mitoma to be at the Sheraton
Carlton Hotel at 6:00 p.m., Huang began ``hedging on the
dinner'' and suggested that instead of dinner, Lee may just
have a private meeting with the President.\57\ In any event,
Mitoma, Lee, and the others arrived at the Sheraton Carlton at
about 5:45 p.m. There was no one there to greet them, nor were
there any signs announcing the event. Lee's group waited in the
lobby for over an hour, unclear about what was happening,
before Huang arrived to greet them.\58\ After some brief
pleasantries, Huang collected the $250,000 check and said that
he would return. About 15 minutes later, Huang brought over
Fowler, Sullivan, and Peter Knight to meet Lee.\59\ Lucy Ham
translated, as Lee spoke no English.
---------------------------------------------------------------------------
\54\ Faxes to John Huang from Michael Mitoma, April 3, 1996 (Ex.
5).
\55\ Mitoma testimony, p. 132.
\56\ See Fax to John Huang from Mike Mitoma, April 4, 1996 (Ex. 6).
\57\ Mitoma testimony, p. 134.
\58\ Id. at p. 137.
\59\ Id. at p. 138.
---------------------------------------------------------------------------
After another 15 minute wait, Lee's group was ushered into
a smaller room, and then, all of a sudden, the President
appeared.\60\ Mitoma testified, ``[The President] was being
briefed by John Huang and several other people. And then he
came over to our group and we chatted briefly with the
President. You know, I explained to him the same thing, you
know, that Chairman Lee is going to establish a factory . . .
in Carson.'' \61\ A photographer then took a series of
pictures.\62\
---------------------------------------------------------------------------
\60\ Id. at p. 139.
\61\ Id.
\62\ Id. at p. 140.
---------------------------------------------------------------------------
After the President moved along, Huang told Mitoma that
they had just had their private meeting with the President and
that there would be no dinner. As Mitoma explained, he was able
to convince Lee that ``it was not such a great idea to eat
American food and sit with a bunch of stuffy people for 45
minutes in a conversation that he would not understand.'' \63\
Mitoma, Lee, and the others left the hotel and went out for
dinner by themselves.
---------------------------------------------------------------------------
\63\ Id.
---------------------------------------------------------------------------
While Lee seemed content with his brief conversation and
picture with the President, Mitoma was deeply disappointed by
the way that he had been treated. He described the experience
to the Committee as ``the most unprofessional thing I've ever
seen,'' and added that he felt that Huang had been
``unscrupulous'' and had strung him along simply to get Lee's
$250,000 check.\64\
---------------------------------------------------------------------------
\64\ Interview of Michael Mitoma, September 4, 1997.
---------------------------------------------------------------------------
A review of relevant documents confirms Mitoma's view of
the haphazard nature of the Lee event. On April 8, the day of
the scheduled dinner, Huang faxed Sullivan two pages of
handwritten notes about Lee, Cheong Am, and the other
participants.\65\ Sullivan then wrote a memo from himself and
Huang to Doug Sosnik and Karen Hancox at the White House.
Sullivan wrote, ``Mayor Michael Mitoma, Mayor of Carson,
California, and the following would like to meet with POTUS
this evening before our first dinner.'' After identifying the
others and explaining that the purpose of the meeting was to
discuss the possibility of Cheong Am establishing a factory in
Carson, Sullivan concluded, ``Mayor Mitoma has requested five
minutes.'' \66\ In addition to demonstrating that the DNC was
aware that Cheong Am was merely considering establishing a
factory in the U.S., Sullivan's memorandum also shows that as
of the day of the ``dinner,'' the DNC had not even cleared any
meeting with the White House. Moreover, there is no mention of
an exclusive dinner with the President--there is just a request
for ``five minutes.''
---------------------------------------------------------------------------
\65\ Fax from John Huang to Richard Sullivan, April 8, 1996 (Ex.
7).
\66\ Memorandum to Doug Sosnik and Karen Hancox from Richard
Sullivan and John Huang, April 8, 1996 (Ex. 8).
---------------------------------------------------------------------------
It is also clear that the DNC simply tried to fit the Lee
meeting into a evening already crowded by two fund-raising
dinners. According to Fowler's schedule for April 8, 1996,
there were two scheduled dinners at the Sheraton Carlton that
night--an earlier Presidential dinner for Gala co-chairs and
vice chairs, and a later Presidential dinner with a smaller
group of contributors.\67\ The schedule allotted a ten minute
travel break, from 7:40 to 7:50 p.m., between the two
dinners.\68\ While Sullivan's memo asked for a meeting before
the first dinner, it appears that Mitoma and Lee were shoe-
horned into this ten minute period between the two dinners.
---------------------------------------------------------------------------
\67\ April 8, 1996 schedule of Donald L. Fowler, p. 3 (Ex. 9).
\68\ Id.
---------------------------------------------------------------------------
The Cheong Am contribution also demonstrates that Huang and
others at the DNC never raised any questions about the
contribution's foreign origin. Mitoma had explained to Huang
that Lee was a Korean businessman who was considering starting
a business in Carson. Mitoma explained further that his efforts
to arrange for a meeting between Lee and the President were
directly connected to his larger endeavor to secure Lee's
investment in Carson. Mitoma told the Committee that he was
certain that Huang understood that Lee was both a foreign
national and had not yet begun to conduct business in the
United States.\69\ Moreover, the information that Mitoma sent
to Huang on April 4, 1996, also should have cast doubt on the
legality of the contribution. While the information on Won and
Lucy Ham specifically indicates that they are American
citizens, Lee's resume gives a Korean address and makes no
mention of citizenship or U.S. immigration status.\70\ Huang,
however, raised no questions at the time.
---------------------------------------------------------------------------
\69\ Mitoma interview, September 4, 1997.
\70\ Ex. 5.
---------------------------------------------------------------------------
Huang's knowledge of Lees citizenship, and therefore his
inability to contribute legally to the DNC, is further
demonstrated by Huang's record keeping on the contribution. In
filling out the DNC's check tracking form for the $250,000
contribution, Huang does not include any reference to Lee,
despite the fact that Lee was clearly the principal of Cheong
Am, and signed the check to the DNC.\71\ Instead, Huang listed
Won Ham--someone he knew was an American citizen--as the
contributor.\72\
---------------------------------------------------------------------------
\71\ Copy of check and check tracking form for donation by Cheong
Am America to DNC, April 8, 1996, (Ex. 10).
\72\ Id.
---------------------------------------------------------------------------
Besides these indications, a simple check of the California
incorporation records would have shown that Cheong Am was
incorporated at the end of February 1996.\73\ Thus, even
without the bank records showing that the Cheong Am America
bank account was funded by a transfer of $1.3 million from
Korea on March 26, 1996,\74\ it was obvious that Cheong Am
America had not been in operation long enough to generate the
U.S. income needed to make a U.S. political contribution.
---------------------------------------------------------------------------
\73\ State of California Certificate of Incorporation for Cheong Am
America, February 28, 1996 (Ex. 11).
\74\ Assorted bank records of Cheong Am America. (Ex. 12). Bank
records reflect the following money trail: On March 26, 1996, Cho Hung
Bank in Seoul, South Korea wired $1.3 million to the California Cho
Hung Bank. On April 4 & 5, it appears that the $1.3 million was
deposited into a newly opened Cheong Am America, Inc. account at
California Cho Hung Bank. On April 5, $300,000 (minus a $3 service fee)
was wired into a new Cheong Am America, Inc. account at Hanmi Bank in
Los Angeles. The $250,000 contribution to the DNC, as well as other
related checks such as payment for the group's stay at the Four Seasons
and for photos, came from this account.
---------------------------------------------------------------------------
A few days after the April 8 event, Huang showed the
$250,000 Cheong Am check to Sullivan. Sullivan was surprised,
since he had been expecting personal contributions from the
Hams, who were American citizens, and not a corporate
check.\75\ Sullivan testified: ``I remember looking at it with
him [Huang] and saying, are you okay with this and have you
vetted this with Sandler and he responded, yes.'' \76\ In the
fall of 1996, after the news accounts of the Cheong Am
contribution broke, Sullivan called Huang again and asked him
the same question. According to Sullivan, Huang reiterated that
he had vetted the check with Sandler immediately after
receiving it in April 1996.\77\
---------------------------------------------------------------------------
\75\ Deposition of Richard Sullivan, June 5, 1997, p. 52.
\76\ Id.
\77\ Id. at p. 53.
---------------------------------------------------------------------------
Sullivan testified that he did not speak to Sandler about
the Cheong Am check in April 1996. It was not until November
1996 that Sullivan and Sandler discussed it. At that time,
Sullivan asked Sandler if he had vetted the Cheong Am check,
and Sandler responded no. Moreover, in something that Sullivan
``found odd,'' Sandler told Sullivan that he was not even aware
of the Cheong Am check.\78\ When Sullivan asked Sandler whether
he had seen the check on the FEC report, Sandler, in Sullivan's
words, ``just shorted it off. He [Sandler] said, you know, I
just don't recall ever knowing about Cheong Am . . . John never
brought it to my attention and I was never aware of Cheong Am
America, Inc.'' \79\
---------------------------------------------------------------------------
\78\ Id. at p. 54.
\79\ Id.
---------------------------------------------------------------------------
Asked whether he believed Sandler or Huang was telling the
truth, Sullivan was reluctant to accuse either one of lying.
``I'd rather not have to answer that question directly. . . .''
\80\ Without being direct, however, Sullivan did made it clear
which person he believed. He stated, ``I guess I want to think
about why John would lie at the time, given the concerns that
had been expressed earlier in the year. Let me state that. I
can't think of--I am also perplexed by why John would have lied
at the time. Let me also state that, I am perplexed why Joe
would not acknowledge the existence of this contribution, given
the fact that it was reported on the Federal Election Committee
report.'' \81\
---------------------------------------------------------------------------
\80\ Id. at p. 58-59.
\81\ Id. at p. 55.
---------------------------------------------------------------------------
July 1996--Even More Warning Signals
As with all DNC fund-raisers, there was constant pressure
on Huang to raise additional money. On July 4, 1996, Fowler
wrote a handwritten note to Huang, stating, ``John, We're
making progress, but we have to do better. Thank you for your
good work. Best Wishes, Don.'' \82\ In his deposition, Fowler
stated that he could not recall why he wrote this note to
Huang, and that the phrase ``we're making progress but we have
to do better'' was ``just a general admonition.'' \83\ Fowler
also maintained that it was not unusual for him to write this
type of note, and that at the time, he still believed that
Huang ``was better than an average fund-raiser for the DNC.''
\84\
---------------------------------------------------------------------------
\82\ Handwritten note from Don Fowler to John Huang dated July 4,
1996 (Ex. 13) (emphasis added).
\83\ Deposition of Don Fowler, May 21, 1997, p. 207.
\84\ Id. at p. 208; see also id. at p. 198.
---------------------------------------------------------------------------
During the month of July 1996, Huang was responsible for
organizing two different DNC fund-raising events--a July 22
event at the Century City Hotel in Los Angeles and a July 30
dinner at the Jefferson Hotel in Washington D.C. Neither of
these events turned out the way DNC officials had hoped. In
fact, DNC officials were so troubled by the latter event--
including the list of guests at the event--that they made a
decision not to give Huang any more events with the President.
The July 22 event was designed to be a large fund-raising
event with Vice President Gore as the featured guest. The
ticket price was approximately $500 or $1,000. Many of the
attendees were the same people who attended the Hsi Lai Temple
fund-raiser in April 1996. 85 Huang had predicted
that the event would raise about $1 million. In fact, in
response to Harold Ickes asking in late June how fund-raising
looked for July, Sullivan responded, ``We've got a couple of
things going. One of them is big. John Huang said that he's
real excited about raising $1 million through a big Asian
community event in Los Angeles.'' 86
---------------------------------------------------------------------------
\85\ Another chapter of this report provides a detailed discussion
of the Hsi Lai Temple event.
\86\ Deposition of Richard Sullivan, June 5, 1997, p. 88.
---------------------------------------------------------------------------
Despite Huang's predictions, the Century City event turned
out to be much less successful. According to Sullivan, by the
end of July, the DNC had only collected $200,000 to $300,000
from it. 87
---------------------------------------------------------------------------
\87\ Id. at p. 70.
---------------------------------------------------------------------------
Huang also had agreed to organize another fund-raiser
scheduled for July 30. Sullivan recalled that Karen Hancox of
the White House had called with some dates for fund-raising
dinners with the President, and Sullivan and Rosen approached
Huang. They asked him, ``Do you think you want to take on
another dinner? Do you think you can pull together another four
to 500 [thousand dollars]?'' 88 Huang replied that
he could ``do another dinner.'' 89
---------------------------------------------------------------------------
\88\ Id. at p. 66.
\89\ Id. at p. 67.
---------------------------------------------------------------------------
Based on his conversation with Huang, Sullivan expected a
dinner ``along the lines of [Huang's] previous ones, about
five, $10,000 a couple.'' 90 However, that is not
what occurred. A few days before the July 30 dinner, Huang gave
Sullivan the invitation list. Dismayed to see that it only
included a small group of people, many of whom appeared to be
foreign nationals, Sullivan showed the list to Rosen. According
to Sullivan, Rosen looked at the list and then stated, ``That's
fine. It's kind of too late to do anything else. Make sure you
send the list over to the White House.'' 91 It is
clear that, despite DNC officials' concerns about potential
illegalities, they opted to proceed with the Jefferson Hotel
dinner, apparently in the belief that raising some amount of
money was better than none. Sullivan recalled that there was
not enough time to cancel the Huang event and to organize
another event in its place.92 Apparently, White
House officials felt the same way. Sullivan recounted that he
did, in fact, send the attendee list to the White
House.93 Hancox then called Sullivan back and said
that the list was fine.94
---------------------------------------------------------------------------
\90\ Id.
\91\ Id.
\92\ Id. at p. 72.
\93\ Id. at p. 68.
\94\ Id. at p. 83.
---------------------------------------------------------------------------
While the Committee has not received copies of any
correspondence between the White House and the DNC with respect
to this event, the DNC has produced the list of attendees at
the event.95 Besides President Clinton and DNC
officials Fowler, Sullivan, Rosen, and Huang (and Mrs. Huang),
four businessmen and their families attended. They were Mr. Ken
Hsui, along with his wife Betty and daughter Dorothy; Dr. James
L.S. Lin, along his wife Zu-Ying and son Thomas; Mr. James
Riady and his wife Aileen; and Mr. Eugene Tung-Chin Wu, and his
wife Shirley.96
---------------------------------------------------------------------------
\95\ DNC list of attendees for July 30 event at The Jefferson Hotel
(Ex. 14).
\96\ Id.
---------------------------------------------------------------------------
Sullivan and Rosen both made brief appearances at the
dinner. Sullivan said that he went for about five minutes, said
hello to Huang, and made sure that everything was okay.
Sullivan believed that he may also have met James Riady at the
event.97 Rosen recounted that he also was introduced
to Riady at this event.98
---------------------------------------------------------------------------
\97\ Deposition of Richard Sullivan, June 5, 1997, p. 69.
\98\ Rosen deposition, p. 97.
---------------------------------------------------------------------------
Either the next day, or within a few days of the event,
Sullivan and Rosen discussed their displeasure with Huang.
First, they were upset because the dinner was not
``productive.'' 99 Instead of a larger dinner at
five or ten thousand dollars per couple, the Jefferson Hotel
event had been a private gathering that could not satisfy the
party's need for federal money. Sullivan explained, ``The fact
that it was a small dinner meant that it was our sense that
John would not produce a lot of--I didn't think a lot of
dollars were going to come out of that event anyway just by the
nature of who was there. It wasn't along the lines of what we
were really pushing for in July and August of 1996.''
100 Compounding their distress that the Jefferson
event simply would not generate enough money, Rosen and
Sullivan felt that Huang had let them down. Both men believed,
according to Sullivan, that ``John is not living up to what he
had voluntarily come to us and said he could do.''
101 Sullivan elaborated, ``[Huang's] about $700,000
down on what he said he'd do from Los Angeles . . . as the days
stretched on from that event and the funds didn't come in as
they normally do, I became more and more dubious as to whether
that would come anywhere near to what he said he could do.''
102
---------------------------------------------------------------------------
\99\ Deposition of Richard Sullivan, June 5, 1997, p. 70.
\100\ Id. at p. 60.
\101\ Id. at p. 73.
\102\ Id. at p. 72.
---------------------------------------------------------------------------
Second, Sullivan and Rosen were concerned by the actual
attendees at the dinner. As Sullivan explained, ``[W]e are not
all that pleased with the fact that he put a couple of foreign
nationals into a small dinner with the President . . . we were
not happy with that because of the possible perception. The
press has made a big deal about, oh, you know, why did you have
them in when you knew you weren't going to get money from them.
Well, we knew that too, but we were just worried about the
perception.'' 103 This was not the first time that
Rosen and Sullivan had such a discussion. Sullivan testified
that after Huang's second major event, the May 13, 1996 fund-
raising dinner at the Sheraton Carlton Hotel in Washington,
D.C.,104 Rosen and he had a conversation about the
fact that ``there may have been some foreign nationals in the
room.'' 105 According to Sullivan, ``I think there
was a little concern from the May dinner, but we said . . .
people have the right to bring a guest with them to the dinner
if they are making the contribution. The important thing is
that John is vetting his checks with Joe.'' 106
---------------------------------------------------------------------------
\103\ Id. at p. 73.
\104\ See the section of this report on Yogesh Gandhi.
\105\ Deposition of Richard Sullivan, June 5, 1997, p. 62.
\106\ Id. at p. 63.
---------------------------------------------------------------------------
In the light of these concerns, Sullivan said that Rosen
made the decision after the July 30 Jefferson Hotel event not
to give Huang any additional events with the
President.107 Rosen, who was deposed before
Sullivan, provided the Committee with much less detail about
the conversations surrounding the Jefferson Hotel event. While
he recalled having a conversation with Sullivan after the
dinner, Rosen did not mention any concern about foreign
nationals or any decision to stop giving Huang events with the
President. For instance, when asked if he recalled any concerns
being expressed before the dinner, Rosen said no. When asked if
he recalled any concerns after the event, Rosen stated that the
press coverage tended to ``cloud'' his memory. He then went on
to testify, ``I can remember discussing the fact that what
struck me at the event, there were a number of--two or three
young children there, and talking to Richard after the event
that we needed to reach out a little more and get more
involvement of various people and I remember that discussion.
That was the sum and substance of it.'' 108 Rosen
agreed with the metaphor that the DNC would have hoped to get
``more bang for the buck'' out of a fund-raising event attended
by the President.109
---------------------------------------------------------------------------
\107\ Id. at p. 70.
\108\ Rosen deposition, p. 98.
\109\ Id. at p. 99.
---------------------------------------------------------------------------
Huang Seeks to Launder DNC Contributions
It is unclear whether Huang knew that he was being
restricted from handling more Presidential events. It is
likely, however, that Huang knew at a minimum that his Century
City and Jefferson Hotel events were not generating the
predicted amounts of money. Accordingly, Huang either knew, or
could readily surmise, that his DNC superiors were not pleased
with his recent performance. Moreover, at this time period,
there was increasing pressure on DNC fund-raisers to raise hard
money. Without discussing the specifics of election financing,
the fact that it was getting closer to election day meant that
hard money was becoming much more valuable than soft money. DNC
staffers certainly knew about that priority. As Sullivan
explained, Huang was as ``aware as anybody on the staff about
our federal dollars, about our federal dollar push. Marvin and
I had held staff meetings and talked about it.'' 110
---------------------------------------------------------------------------
\110\ Deposition of Richard Sullivan, June 5, 1997, p. 67.
---------------------------------------------------------------------------
It is in this environment that Huang had lunch with Rawlein
Soberano, a Washington, D.C. businessman and the head of the
Asian American Business Roundtable (``AABR''), a group in
Washington that assisted Asian-Americans in procuring contracts
with the federal government. At a lunch in late July or early
August 1996, Huang asked Soberano to launder campaign
contributions through his association (and its members) in
exchange for a fifteen percent kickback. If successfully
laundered, these contributions could be turned into the much
desired hard money or federal contributions. In any event,
Soberano quickly terminated the conversation and never took up
Huang on his offer.
Soberano provided background in his testimony to the
Committee. He stated that he had met Huang on a few occasions
before 1996.111 Then, in late June 1996, at an
Organization of Chinese Americans conference in San Francisco,
Soberano saw Huang and learned that Huang had moved from the
Commerce Department to the DNC.112 During the summer
of 1996, Soberano was in the process of trying to identify
sponsors or people who could provide names of potential
sponsors for the upcoming AABR annual event.113 In
connection with that responsibility, Soberano called Huang and
set up a lunch with him at the Mayflower Hotel in Washington,
D.C. Soberano could not identify the exact date of the lunch,
but recalled that it was either the last week of July or early
August 1996. This range of dates is supported by Huang's travel
schedule. DNC records indicate that Huang was in California
from July 10 through July 23 and in New York City from August
10 through August 19.114 During the interim few
weeks, Huang was likely in Washington, D.C., especially since
he planned and attended the Jefferson Hotel event on July 30,
1996.
---------------------------------------------------------------------------
\111\ Testimony of Rawlein Soberano, September 16, 1997, p. 199.
\112\ Id. at p. 200.
\113\ Id. at p. 201.
\114\ DNC expense reports and receipts (Ex. 15).
---------------------------------------------------------------------------
Soberano testified that the conversation at the lunch
centered around the AABR. In response to questions from Huang,
Soberano described the organization's purpose and membership,
which at that time numbered approximately 360.115
Huang then asked about AABR's budget, to which Soberano
responded, ``[Y]ou won't believe this. We are on a shoestring
budget.'' 116 Soberano explained to Huang, for
instance, ``We really did not have a budget, per se, because we
all depended on the volunteer work of our membership. As a
matter of fact, the location of the organization moves
regularly on the generosity of the members to provide it
space.'' 117
---------------------------------------------------------------------------
\115\ Soberano testimony, pp. 202 & 225.
\116\ Deposition of Rawlein Soberano, May 13, 1997, p. 33.
\117\ Soberano testimony, p. 203.
---------------------------------------------------------------------------
Near the end of the lunch, Huang made his money laundering
proposal. Soberano testified, ``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 I 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.''
118
---------------------------------------------------------------------------
\118\ Id.
---------------------------------------------------------------------------
At first, Soberano testified, he thought that Huang was
kidding. But as Huang continued, and when Soberano told him
that the conversation never took place, Soberano saw Huang's
``face drop'' and knew that Huang was serious.119
Soberano explained to the Committee, ``In the Asian culture, we
have what we call the nonverbal communication, and sometimes--
and we are very concerned about people losing face. I made him
to lose face when I turned him down.'' 120 Soberano
and Huang had no further conversation about Huang's proposal
and they awkwardly ended the lunch a few minutes later.
Soberano has not spoken to Huang since their
lunch.121
---------------------------------------------------------------------------
\119\ Id. at p. 204.
\120\ Id.
\121\ Id. at p. 205.
---------------------------------------------------------------------------
Soberano cut off the conversation immediately, and thus he
never asked Huang to elaborate on his offer. In his deposition
and hearing testimony, Soberano resisted making any assumptions
about Huang's reference to ``we,'' particularly since Huang
never explicitly mentioned the DNC or the Democratic
Party.122 At the same time, however, Soberano
conceded the obvious. He testified, ``But when you look at it,
I mean I know what he meant, but I wouldn't want to put words
in his mouth.'' 123 Soberano acknowledged that he
knew that at the time of the lunch, Huang was working as a
``major fund-raiser'' at the DNC.124
---------------------------------------------------------------------------
\122\ Soberano deposition, p. 116.
\123\ Id.
\124\ Soberano testimony, pp. 200 & 225.
---------------------------------------------------------------------------
The fact that Soberano had lunch with Huang is corroborated
by Jerry Parker, the Vice-President of the PrinVest Corp.
During the relevant time period, Soberano was consulting for
PrinVest, and working in its office, which is located near the
Mayflower Hotel. During an interview with Committee staff,
Parker stated that there is no doubt in his mind that Soberano
walked by his office one day and mentioned a meeting with John
Huang. Parker was less sure about whether Soberano's comment
took place before or after the meeting with Huang, but he
thinks that it was before, and that Soberano said he was going
to a meeting with Huang. Soberano's comment stuck in Parker's
memory, because Parker knew Huang, having trained him at a
local Washington, D.C. bank during the 1970's.125
---------------------------------------------------------------------------
\125\ Interview of Jerry Parker, July 1, 1997.
---------------------------------------------------------------------------
conclusion
Huang's approach to Soberano should not be viewed with
surprise--it is the logical outgrowth of his fund-raising
odyssey. Huang came to the DNC amid curious circumstances, and
his tenure at the DNC was rife with warning signs--which were
recognized but then ignored. These signs were ignored because
DNC officials were consumed by raising an unprecedented amount
of money under pressure from the White House.
The evidence shows that at the same time that the President
of the United States was prodding DNC officials to hire Huang,
Huang was already raising money in violation of the Hatch Act.
DNC officials apparently recognized the illegality and took
steps to cover the paper trail by substituting Jane Huang's
name for John Huang's on DNC check tracking
forms.126 Moreover, DNC officials expressed concern
about Huang right from the start. They were nervous that Huang
did not understand, and would not comply with, the various
fund-raising laws. Accordingly, they insisted that he have a
private training session with DNC general counsel Joe Sandler.
Nevertheless, they also offered Huang an incentive arrangement
for raising money.
---------------------------------------------------------------------------
\126\ See the section of this report on Huang's fund-raising at the
Department of Commerce.
---------------------------------------------------------------------------
Once Huang arrived at the DNC, DNC officials continued
their schizophrenic behavior. On the one hand, they were
worried about the large number of foreign nationals that Huang
seemed to have at his events. On the other hand, they
recognized that Huang was raising a large amount of
contributions and so they were reluctant to take any actions--
until it was too late. The Cheong Am contribution is a good
example of how the DNC had to know that the contribution was
from a foreign source, and thus illegal, but still accepted it
because it was too easy to pass up--$250,000 for a five minute
photo-op with the President.
Finally, the Committee is troubled by the discrepancies in
testimony from DNC officials. Senior DNC officials directly
contradict each other on such important points as whether Huang
ever received individualized training. Moreover, there are
various examples, including the return of Huang-solicited
contributions in March 1996, where DNC officials did not
provide the Committee with highly relevant information in a
timely manner. Even recognizing that memories fade over time,
it would seem that DNC officials who were closely involved in
the events the Committee was investigating should have a
greater command of detail than they claim to have. Huang's
assertion of his fifth amendment privilege against self-
incrimination made the Committee's investigation of his
activities difficult, and this difficulty was magnified by DNC
officials' conflicting accounts and alleged failures of memory.