Wednesday, November 7, 2007


Democratic Fundraiser Norman Hsu Indicted on Federal Fraud Charges
Norman Hsu Accused Of Cheating Investors, Making Illegal Donations to Clinton, Others

Tuesday, December 04, 2007
Associated Press

(AP) A federal grand jury on Tuesday indicted Norman Hsu, a top Democratic fundraiser and former fugitive accused of cheating investors of at least $20 million and using some of the money to make illegal donations to political candidates including Hillary Rodham Clinton

In the 15-count indictment returned in U.S. District Court in Manhattan, the government accused the 56-year-old clothing-industry entrepreneur of duping investors nationwide with a massive Ponzi scheme.

The government said Hsu also violated federal campaign finance laws by making contributions to various political candidates in the names of others. A message left with a lawyer for Hsu was not immediately returned.

Federal prosecutors said Hsu hoped his lavish campaign contributions would help draw money to his scheme by raising his public profile. To achieve his aims, prosecutors said, Hsu pressured many of his victims to contribute thousands of dollars to various candidates for president and Congress.
Hsu was once a valued supporter of Clinton, raising more than $1.2 million for her and other Democratic candidates in recent years. He turned into a scandal when it was revealed he had been hiding from the law in plain sight.

He had been wanted in California since 1992, when he fled after pleading no contest to grand theft charges in a fraudulent clothing import business. He posted $2 million bail in August, and his lawyer said his fugitive status was just a misunderstanding. But Hsu missed a court date Sept. 5, fled by train and was arrested at a Colorado hospital after attempting suicide.

Hsu's work on Clinton's behalf has been an embarrassment for her presidential campaign, which has returned more than $800,000 to donors whose contributions were linked to him.

The indictment said Hsu from 2000 through August 2007 convinced his victims to invest at least $60 million in companies that supposedly extended short-term financing to businesses.

It said Hsu used the money instead to further his fraudulent aims, sometimes paying the large interest gains he had promised to those who had invested earliest in the scheme. Prosecutors said he eventually cheated the investors out of at least $20 million.

The government said he broke election laws by reimbursing donors to federal candidates in 2005, 2006 and 2007. The indictment said Hsu asked individuals to make contributions totaling more than $25,000 to designated federal candidates and then reimbursed them from his fraud proceeds. Federal election law requires that donors give their own money, for which they cannot be repaid; in addition, an individual can only give up to $25,000 in total contributions to federal candidates in a calendar year.

U.S. Attorney Michael Garcia has said there was no evidence that the campaigns were aware of the scheme or acted criminally. He said the Clinton campaign was cooperating with the investigation.

Hsu faces six counts of mail fraud, six counts of wire fraud and three counts of violating the Federal Election Campaign Act.

If convicted, he faces a maximum penalty of 20 years in prison on each of the mail and wire fraud charges, and five years on each of the federal campaign finance charges. He also could face millions of dollars in fines.

Hsu is in custody in California on unrelated charges and was expected to appear in federal court in Manhattan in several weeks, prosecutors said.

Clinton campaign returning $850,000 in donations
By JoAnne Allen
ReutersTuesday, September 11, 2007; 12:01 AM

WASHINGTON (Reuters) - Democratic presidential hopeful Sen. Hillary Clinton is returning about $850,000 in campaign contributions from a fundraiser who was arrested last week after trying to escape sentencing on a decade-old criminal charge, the campaign said on Monday.

"In light of recent events and allegations that Mr. Norman Hsu engaged in an illegal investment scheme, we have decided out of an abundance of caution to return the money he raised for our campaign," spokesman Howard Wolfson said in a statement.

The campaign is refunding about $850,000 to some 260 donors this week, Wolfson said.
The Washington Post characterized the refund as one of the largest in political history.
Hsu was convicted of fraud in 1992. He had evaded authorities for years, spending time in Asia before emerging in recent years in the United States as a generous donor to Democrats, including Clinton presidential rival Sen. Barack Obama of Illinois .

FBI agents arrested Hsu on federal charges of unlawful flight on Thursday evening at a Grand Junction , Colorado , hospital. He had failed to appear at a hearing in California on Wednesday.
"Hsu donated to numerous charities and more than two dozen candidates and committees. Despite conducting a thorough review of public records, our campaign, like these others, were unaware of Mr. Hsu's decade-plus-old warrant," Wolfson said.

Wolfson said the campaign was tightening its vetting procedures for fundraisers who solicit donations, including criminal background checks, to guard "against this type of situation in the future."

California Attorney General Jerry Brown's office said last week that Hsu would be returned to the state to face sentencing for his conviction arising from a business scheme that bilked about 20 investors of approximately $1 million.

When Controversy Follows Cash

Some Fundraisers With Legal Issues Slip Through Campaigns' Vetting

By John Solomon and Matthew Mosk, Washington Post Staff WritersMonday, September 3, 2007; Page A01

Sant Singh Chatwal, an Indian American businessman, has helped raise hundreds of thousands of dollars for Sen. Hillary Rodham Clinton's campaigns, even as he battled governments on two continents to escape bankruptcy and millions of dollars in tax liens.

The founder of the Bombay Palace restaurant chain, Chatwal is one of a growing number of fundraisers in the 2008 presidential campaign whose backgrounds have prompted questions about how much screening the candidates devote to their "bundlers" while they press to raise record amounts.

Chatwal's case reached from his native India to New York City. The IRS pursued him for approximately $4 million in unpaid business taxes, while New York state placed a lien seeking more than $5 million in taxes. He forfeited a building to New York City on which he was delinquent on property taxes and was sued by federal regulators seeking to recoup millions of dollars in loans from a failed bank where he served as a director.

Across the ocean, three Indian banks forced him into U.S. bankruptcy, and he was charged with bank fraud. He was out on bond when he showed up in India in 2001 during a visit by his longtime friend Bill Clinton.

Yet none of the legal and financial woes -- occasionally touched on in American or Indian newspapers or highlighted by political opponents -- raised red flags inside Hillary Clinton's fundraising operation. Chatwal recently said he plans to help raise $5 million from Indian Americans for Clinton 's presidential bid.

Asked whether anything in Chatwal's background caused concerns about his activities on behalf of the campaign, Clinton spokesman Phil Singer answered, "No." He declined last week to be more specific, saying only that major fundraisers are routinely vetted "through publicly available records."

Rajen Anand, a longtime friend of Chatwal and another Clinton fundraiser, said the campaign encourages strict vetting for fundraisers. "They advise me to be very careful not to associate the campaign with people where there is something wrong," he said.

Anand said, however, that Chatwal may have slid through any vetting, no matter how vigorous, because of his longtime friendship with the Clintons . The Clintons maintained a close association with Chatwal; both attended one of his sons' weddings in 2002, and the former president attended another son's wedding in 2006.

While Chatwal raised money for Hillary Clinton's Senate and presidential campaigns and Bill Clinton's charitable efforts, he settled the regulatory and tax cases one by one, mostly by working out plans to pay portions of the debts. He resolved the last of them this spring.

"The man came to this country, accumulated an empire, lost it during the time of real estate [softness], and has struggled and worked to try to pay off his debts," said A. Mitchell Greene, Chatwal's lawyer for 25 years. "It has been a long battle, but he has cleared up all of his obligations, and in the process he is trying to accumulate his wealth again."

Ordinarily, campaigns have their legal, finance or research staffs run the names of major fundraisers -- also called "bundlers" because they deliver checks to candidates in bunches -- through public records such as newspaper clips, court filings and government databases to identify problems. Some controversies still slip through.

Former senator John Edwards (D-N.C.) faced such questions last week when federal prosecutors in Michigan indicted Geoffrey Fieger, the lawyer famous for defending assisted-suicide advocate Jack Kevorkian, accusing him of channeling $127,000 in illegal contributions into Edwards's 2004 presidential campaign. Edwards's aides said, and prosecutors confirmed, that the activity was concealed from Edwards and that the candidate cooperated once he learned of problems.

Similarly, Sen. Barack Obama (D-Ill.) gave to charity more than $30,000 in donations from Illinois fundraiser Antoin "Tony" Rezko and his associates after Rezko was indicted in a federal corruption case. "We do our best to go through the hundreds of thousands of people who give to make sure there aren't problems," Obama spokesman Bill Burton said. "I wouldn't say it's a perfect process, but we are as vigilant as possible."

On Friday, another major 2008 Clinton fundraiser generated fresh headlines: Norman Hsu surrendered to authorities in San Mateo, Calif., on an outstanding warrant in a 15-year-old California criminal case involving allegations of grand theft. A judge ordered him held on $2 million bail until a hearing next week. On Wednesday, Clinton 's campaign gave to charity $23,000 in donations from Hsu himself, though not the $96,000 or more he had raised for the candidate.

The Clinton campaign relied on the businessman to raise money and said it had no way of knowing about the warrant, which was not listed in publicly accessible records.

Chatwal, after making his millions in the restaurant business, saw his fortunes sour when he began dabbling in New York real estate just as the market softened.

He was forced into bankruptcy in 1995 by three Indian banks that claimed he owed them millions from business loans. During the 1990s, the IRS and New York City and state tax authorities also pursued liens, and Chatwal worked out deals to pay them back. When the rents from one apartment building he bought no longer covered the real estate taxes, Chatwal turned over the building to New York City to resolve a reported $2 million tax lien, his lawyer said.

In 1997, the Federal Deposit Insurance Corp. sued Chatwal over his role as a director and a guarantor of unpaid loans at the failed First New York Bank for Business. The government alleged that his loans had "resulted in losses to the bank in excess of $12 million," and it questioned his claims that he could not repay the debts.

The regulators also questioned why Chatwal continued to rent a spacious penthouse apartment in New York in the midst of his financial turmoil. "The debtor has managed to continue living in luxurious style in the same penthouse apartment he resided in at a time he claimed a net worth of tens of millions of dollars without adequate explanation of how his family's limited income is able to support such a lifestyle," the government said in a 1997 filing.

In September 2000, Chatwal hosted a half-million dollar fundraiser at that Upper East Side penthouse for Hillary Clinton's Senate campaign. A few months later the FDIC abruptly settled the case, agreeing on Dec. 18, 2000, to let Chatwal pay $125,000 for the loans that it had said caused at least $12 million in losses. (closing hours of Bill Clinton Presidency, Bush had already been declared Elected)

Greene, Chatwal's lawyer, said he believed that the actual losses caused by the loans were smaller but agreed that the bankruptcy resulted in a much smaller settlement. "He fully intended to pay the bank until the Indian banks involuntarily forced him into bankruptcy," Greene said.

The lawyer also said there was nothing wrong with Chatwal raising political money even as he worked to clear up the legal and financial matters. "I see no reason why an individual cannot support a political campaign in which he believes," Greene said.

Just as Chatwal's U.S. cases were being resolved, Indian authorities in December 2000 charged him with bank fraud. On April 30, 2001, he appeared in a Mumbai court and posted a $32,000 bond, according to court officials there. Chatwal was not under travel restrictions, though, and he went back to New York .

He returned to India a month later and made headlines in Indian newspapers by appearing with Bill Clinton during a visit with earthquake victims. The trip was underwritten by the American India Foundation, where Chatwal's son was a board member. Aides to the former president said Chatwal was one of about 100 members of the Clinton delegation. Eventually, Indian authorities "discharged" Chatwal from the bank case and closed the matter, Greene said.

Chatwal's allegiance to the Clintons never wavered. Earlier this year, he promised to raise $5 million for Hillary Clinton's 2008 presidential bid, creating a group called Indian Americans for Hillary 2008. Donors who gathered at least $25,000 were promised a "private VIP meeting" with the candidate, fundraising letters show.

Research editor Alice Crites and special correspondent Indrani Ghosh Nangia contributed to this report.

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