Ms. Clinton's $850,000 Bundle

Wednesday, September 12, 2007

NORMAN HSU may turn out to be the best thing that's happened to campaign finance reform in years. The Hsu episode illuminates how the current system produces bad results and why changes need to be made.

Mr. Hsu is a Democratic fundraiser who collected $850,000 for Hillary Rodham Clinton's campaign and hundreds of thousands more for other Democrats. He is also, it turns out, a crook: He pleaded no contest to grand theft in an investment fraud scheme and failed to turn up for sentencing in 1992. The FBI is investigating whether Mr. Hsu, who tried again to flee last week when his fugitive status was revealed, was engaging in similarly shady investment activities even as he became one of Ms. Clinton's biggest financial backers. The Clinton campaign, after initially returning Mr. Hsu's $23,000 in direct donations but saying it saw no reason to return the contributions he solicited, plans to toss back the entire bundle now that it has become a political hot potato.

The first lesson of the Hsu episode is one that all candidates -- especially candidates named Clinton -- ought to have learned after the fundraising scandals of the 1996 presidential campaign: Beware of fundraisers bearing big bundles. To some extent, all candidates are at the mercy of their financiers, taking it on faith that the contributions being solicited are not the product of under-the-table, and illegal, reimbursement schemes. But the bigger the bundle, the more diligence is due in checking out the bundler, especially one like Mr. Hsu, whose source of wealth was not obvious, and whose listed occupation changed from one filing with the Federal Election Commission to another.

The Clinton campaign's failure to discover the fugitive warrant for Mr. Hsu is disturbing; its reported rebuff of warnings about Mr. Hsu is inexcusable. "I am more than ever convinced that a man claiming to be a big fundraiser for Hillary Clinton is running a Ponzi scheme," a California businessman, Jack Cassidy, wrote to the Clinton campaign's finance director for Western states, according to e-mails obtained by the Los Angeles Times. The finance director, Samantha Wolf, no longer with the campaign, dismissed those concerns, asserting, "He is COMPLETELY legit."

The second lesson is that campaign disclosure rules are woefully inadequate because they do not require any disclosure of bundlers. (The exception is registered lobbyists, whose help will have to be reported under the lobbying reform bill awaiting the president's signature.) Any reporting now is voluntary and sketchy; the Clinton campaign, like others, does not make clear which bundlers have raised $100,000 and which brought in $850,000. Illinois Sen. Barack Obama, a presidential rival of Ms. Clinton, last week introduced a measure to require that congressional and presidential candidates release the names of their bundlers and the amounts raised. This proposal deserves the backing of all presidential candidates. In the meantime, Mr. Obama says a more detailed accounting of his bundlers is forthcoming.

The third lesson is the need to fix the broken presidential campaign financing system. Bundlers will always be important, but campaigns' reliance on them is exacerbated by the need to collect ever-increasing amounts. If the system of providing candidates with federal matching funds for their primary campaigns and full financing for the general election were overhauled to make participation more attractive, candidates would limit the amounts they spend -- and have less need for the Hsus of the world.

© 2007 The Washington Post Company