1996 United States campaign finance controversy

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Bill Clinton with fund-raiser Charlie Trie

The 1996 United States campaign finance controversy was an alleged effort by the People's Republic of China to influence domestic American politics during the 1996 federal elections.

The issue first received public attention in early 1997, with news that a Justice Department investigation had uncovered evidence that agents of China sought to direct contributions to the Democratic National Committee (DNC) in violation of U.S. laws regarding foreign political contributions. While the Chinese government denied all accusations, twenty-two people were eventually convicted for fraud or for funneling Asian funds into the United States elections.

Background

According to the United States Senate report Investigation of Illegal or Improper Activities in Connection with 1996 Federal Election Campaigns, prior to 1995 China's approach to promoting its interests in the United States was focused almost exclusively on diplomacy, including summits and meetings with high-level White House officials. In these meetings, Chinese officials often negotiated with the United States government by using the appeal of their huge commercial market.

Around 1995, according to the Senate report, Chinese officials developed a new approach to promote their interests with the United States government and to improve China's image with the American people. The proposals, dubbed the "China Plan", were prompted by the United States Congress's successful lobbying of the president to grant a visa to Taiwan President Lee Teng-Hui. United States Secretary of State Warren Christopher had previously assured his Chinese counterpart Qian Qichen that granting a visa would be "inconsistent with [the United States'] unofficial relationship [with Taiwan]" and the Clinton Administration's acquiescence to the Congressional resolutions led China to conclude that the influence of Congress over foreign policy was more significant than it had previously determined. When formulating the so-called plan, Chinese officials acknowledged that, compared to other countries, it had little knowledge of, or influence over, policy decisions made in Congress, which had a sizeable pro-Taiwan faction under the influence of a more established "China Lobby" run by the Kuomintang.

The plan, according the Senate report, instructed Chinese officials in the U.S. to improve their knowledge about members of Congress and increase contacts with its members, the public, and the media. The plan also suggested ways to lobby United States officials.

Over the years, China has repeatedly denied these lobbying efforts involved financial contributions of any kind:

[S]ome people and media in the United States speculated… about so-called participation by Chinese individuals in political donations during the U.S. elections. It is sheer fabrication and is intended to slander China. [China] has never, nor will we ever, use money to influence American politics — China's Foreign Ministry spokesman, May 1998.

Major fund-raising figures

Charlie Trie

The most significant activity by Trie was a $450,000 attempted donation by Yah Lin "Charlie" Trie to Clinton's legal defense fund, which Trie delivered in two envelopes each containing several checks and money orders. The fund immediately rejected $70,000 and deposited the remainder, but ordered an investigation of the source. The investigation found that some of the money orders were sequentially numbered made out in different names but with the same handwriting. The fund then rejected the donation entirely, and returned the deposited funds two months after the initial contribution.

Born in Taiwan, Trie emigrated to the U.S. in 1974. He eventually became an American citizen and co-owner of a restaurant in Little Rock, Arkansas where he befriended then Governor Clinton. In addition to the attempted donation to Clinton's defense fund, Trie and his immediate family donated $220,000 to the DNC which was also later returned.

Immediately after the donation to Clinton's defense fund, Trie sent a letter to President Clinton that expressed concern about America's intervention in tensions arising from China's military exercises being conducted near Taiwan. Trie told the President in his letter that war with China was a possibility should U.S. intervention continue:

...[O]nce the hard parties of the Chinese military incline to grasp U.S. involvement as foreign intervention, is [sic] U.S. ready to face such [a] challenge[?]... [I]t is highly possible for China to launch [sic] real war based on its past behavior in [sic] Sino-Vietnam war and Zhen Bao Tao war with Russia — Charlie Trie in a letter to President Clinton, March 21, 1996

After Congressional investigations turned to Trie in late 1996, he left the country for China. Trie returned to the U.S. in 1998 and was convicted and sentenced to three years probation and four months home detention for violating federal campaign finance laws by making political contributions in someone else's name and for causing a false statement to be made to the Federal Election Commission (FEC).

Johnny Chung

Born in Taiwan, Chung went from being the owner of a "blastfaxing" business (an automated system that quickly sends out faxes to thousands of businesses) in California to being in the middle of the Washington, D.C. elite within a couple weeks of his first donations to the Democratic Party. Called a "hustler" by a U.S. National Security Council (NSC) aide,

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Johnny Chung (far left) with the Clintons

Chung made forty-nine separate visits to the White House between February 1994 and February 1996. During one of the Commerce Department trade missions to China, Chung befriended former Chinese Lt. Col. Liu Chaoying, then an executive at China Aerospace Holdings (China's main satellite launching company) and daughter of former General Liu Huaqing.

Between 1994 and 1996, Chung donated $366,000 to the DNC. Eventually, all of the money was returned. Chung told federal investigators that $35,000 of the money he donated came from Liu Chaoying and, in turn, China's military intelligence.

Specifically, Chung testified under oath to the U.S. House Committee investigating the issue in May 1999 that he was introduced to Chinese Gen. Ji Shengde, then the head of Chinese military intelligence, by Liu Chaoying. Chung said that Ji told him: "We like your president very much. We would like to see him reelect [sic]. I will give you 300,000 U.S. dollars. You can give it to the president and the Democrat Party." Both Liu and the Chinese government denied the claims.

Chung was eventually convicted of bank fraud, tax evasion, and two misdemeanor counts of conspiring to violate election law. Chung asserts that, after his guilty plea, the Chinese government attempted to assassinate him with "hit squads" three times, but the efforts were foiled by the FBI.

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John Huang (center) with Bill Clinton, James Riady (right), and Clinton aide Mark Middleton (with back to camera) in the Oval Office

John Huang and James Riady

John Huang (pronounced "Hwä[ng]"), was another major figure convicted. Born in 1945 in Nanping, Fujian, Huang and his father fled to Taiwan at the end of the Chinese Civil War before he eventually emigrated to the United States in 1969. A former employee of the Indonesian company Lippo Group's Lippo Bank and its owners Mochtar Riady and his son James (whom Huang first met along with Bill Clinton at a financial seminar in Little Rock, Arkansas in 1980), Huang became a key fund-raiser within the DNC in 1995. While there, he raised $3.4 million for the party. Nearly half had to be returned when questions arose regarding their source during later investigations by Congress.

According to U.S. Secret Service logs, Huang visited the White House 78 times while working as a DNC fund-raiser. James Riady visited the White House 20 times (including 6 personal visits to President Clinton).

Immediately prior to joining the DNC, Huang worked in President Clinton's Commerce Department as deputy assistant secretary for international economic affairs. His position made him responsible for Asia-U.S. trade matters. He was appointed to the position by President Clinton in December 1993. His position at the Commerce Department gave him access to classified intelligence on China. While at the department, it was later learned, Huang met 9 times with Chinese embassy officials.

Huang eventually pleaded guilty to conspiring to reimburse Lippo Group employees' campaign contributions with corporate or foreign funds. James Riady was later convicted of campaign finance violations relating to the same scheme as well. Shortly after Riady pledged $1 million in support of then-Governor Clinton's campaign for the presidency, contributions made by Huang had been reimbursed with funds wired from a foreign Lippo Group entity into an account Riady maintained at Lippo Bank and then distributed to Huang in cash. Also, contributions made by Lippo Group entities operating in the United States were reimbursed with wire transfers from foreign Lippo Group entities.

An unclassified U.S. Senate Committee on Governmental Affairs report issued in 1998 stated that both James Riady and his father Mochtar had "had a long-term relationship with a Chinese intelligence agency." According to journalist Bob Woodward, details of the relationship came from highly classified intelligence information supplied to the committee by both the CIA and Federal Bureau of Investigation (FBI).

The most well-known of John Huang's fund-raisers involved Vice President Al Gore, Maria Hsia, and the Hsi Lai Buddhist Temple in California.

Maria Hsia

Taiwan-born Maria Hsia (pronounced "Shyä"), a business associate of John Huang and James Riady since 1988, allegedly facilitated $100,000 in illegal Democratic campaign contributions through her efforts at Hsi Lai Temple, a Chinese Buddhist temple in California. Hsia was eventually convicted by a jury in March 2000.

The Democratic National Committee eventually returned the money donated by the Temple's monks and nuns. Twelve nuns and employees of the temple, including the temple's abbess, refused to answer questions by pleading the Fifth Amendment when they were subpoenaed to testify before Congress. Two other Buddhist nuns admitted destroying lists of donors and other documents related to the controversy because they felt the information would embarrass the Temple. A Temple-commissioned videotape of the fund raiser also went missing and the nuns' attorney claimed it may have been shipped off to Taiwan.

The Temple event became particularly controversial, because it was attended by the Vice President Gore. He later stated

I did not know that it was a fund-raiser. But I knew it was a political event, and I knew there were finance people that were going to be present, and so that alone should have told me, 'This is inappropriate and this is a mistake; don't do this.' And I take responsibility for that. It was a mistake — Vice President Al Gore on NBC TV's Today show, Jan. 24, 1997.

The Hsi Lai Temple in Hacienda Heights, California

In response, the U.S. Senate Governmental Affairs Committee that investigated the controversy said:

The Vice President's staff... 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 founder of the temple, 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'.

Additionally, a memo written by John Huang to Vice President Gore's assistant Kimberly Tilley specifically mentioned the Temple meeting was a fund-raising event. It is illegal for religious organizations to hold political fund-raising events in the U.S. due to their tax-exempt status.

The Senate Governmental Affairs Committee also said they learned that Hsia had served as an "agent" of the PRC government. Hsia denied the claim.

Ted Sioeng

Another notable figure involved in the affair was Ted Sioeng, an Indoenesian entrepreneur, who illegally donated money to both Democrats and Republicans. Suspect contributions associated with Sioeng include $250,000 to the DNC, $100,000 to Republican California State Treasurer Matt Fong, and $50,000 to a Republican think tank. All the money was eventually returned.

Sieong sat with Bill Clinton or Al Gore at three fund-raising events. Sioeng also joined Fong at a meeting with then Republican House Speaker Newt Gingrich in mid-1995. Gingrich called the meeting a "photo-op". Gingrich was the guest of honor at a Sioeng-organized luncheon the day after a Sioeng family company gave the $50,000 think-tank donation, solicited by a Gingrich adviser.

Attorney General Janet Reno and the directors of the FBI, CIA and National Security Agency (NSA) told members of the Senate committee they had credible intelligence information indicating Sioeng acted on behalf of China. A spokesman for Sioeng denied the allegations.

Department of Justice investigation

Attorney General Janet Reno

In late 1996, the Justice Department opened a task force to investigate allegations of illegal donations to the Clinton/Gore re-election campaign and to Clinton's legal defense fund. Clinton announced in February 1997 that he thought there should be a "vigorous" and "thorough" investigation into reports that China tried to direct financial contributions from overseas sources to the DNC. "[O]bviously it would be a very serious matter for the United States if any country were to attempt to funnel funds to one of our parties for any reason whatever," Clinton said. Both FBI Director Louis Freeh and Justice Department task force head Charles La Bella unsuccessfully argued for appointment of an independent counsel."

Ultimately, Justice Department prosecutors secured the conviction of several fund-raisers for various offenses. John Huang served 500 hours of community service and paid a $10,000 fine. Johnny Chung served 3000 hours of community service. Charlie Trie served four months of in-home detention. Maria Hsia served 90 days of home detention and paid a $5,300 fine. Indonesian billionare James Riady was fined $8.6 million. Ernest Green served three months home detention. Michael Brown served 150 hours of community service and paid a $5000 fine. In all, the Justice Department task force secured criminal convictions against 22 people by 2001.

Congressional investigations

Representative Dan Burton (Republican-Indiana)

A House investigation, headed by Republican Dan Burton focused on allegations of campaign finance abuse, including the contributions channeled through Chung, Huang, and Trie. The investigation was lengthy, spanning both the 105th and 106th Congresses, and according to a Democratic report had cost over $7.4 million as of August 31 1998, making it the most expensive Congressional investigation ever (the Senate Watergate investigation cost $7 million in 1998 dollars).

The Burton investigation itself was controversial. A New York Times editorial in March 1997 characterized the committee's investigation as a "travesty" and a "parody". A Washington Post editorial in April 1997 called the House investigation "its own cartoon, a joke, and a deserved embarrassment". Norman Ornstein, a Congressional expert at the American Enterprise Institute said in May 1998,

"Barring some dramatic change, I think the Burton investigation is going to be remembered as a case study in how not to do a congressional investigation and as a prime example of investigation as farce."

The U.S. Senate Committee on Governmental Affairs also held public hearings into the campaign finance issues from July to October 1997. During the hearings, there was considerable acrimony between the chair Fred Thompson and the ranking minority member John Glenn, which reached a level of public disagreement between the two leaders of a Congressional committee seldom seen in recent years. The Thompson committee adopted a Republican written final report on a straight party-line 8-7 vote in March 1988. Thompson described the findings as "There's not any one real big thing. It's a lot of things strung together that paint a real ugly picture."

The Democrats on the Senate committee published a minority report dissenting with most of the conclusions of the final report, stating the evidence "does not support the conclusion that the China plan was aimed at, or affected, the 1996 presidential election."[1] In particular, it stated

One of the most disturbing aspects of the Majority Report is that it suggests, on the basis of inconclusive evidence, that certain named individuals were spies or foreign agents. These serious charges are supported solely by weak circumstantial evidence and speculation — as acknowledged by the Majority's use of phrases like "may" and "if true."

Congressional investigators said that the investigations were hamstrung due to lack of co-operation of witnesses. Ninety-four people either refused to be questioned, pled the Fifth Amendment against self incrimination, or left the country altogether.