Clinton May Revisit Donors Whose Funds Were Returned

By Matthew Mosk
Washington Post Staff Writers
Thursday, September 13, 2007

Sen. Hillary Rodham Clinton (D-N.Y.) left open the possibility yesterday that her presidential campaign may get new donations from the 260 people whose contributions are being returned because they were raised by Norman Hsu, the political donor whose business dealings are being examined by law enforcement agencies on both coasts.

"I believe that the vast majority of those 200-plus donors are perfectly capable of making up their own minds about what they will or won't do going forward," Clinton said in a conference call with reporters -- her first public comments on the fallout of Hsu's arrest and her decision to return the $850,000 he collected for her presidential bid.

"It was very difficult for us to make any decision other than returning the contributions that were in any way connected to him, and that is what we decided to do," she said.

Over the past two weeks, Hsu's reputation has been transformed from that of an unassuming, valued and highly prolific "bundler" of funds for the Clinton campaign into a political pariah caught trying to outrun an arrest warrant stemming from a 15-year-old theft conviction in California. Hsu's private business dealings, a mystery to the politicians who accepted more than $1 million from Hsu and his associates, now have the attention of criminal investigators.

New York District Attorney Robert M. Morgenthau confirmed yesterday that he has opened an investigation into $40 million in business deals Hsu has signed in recent years with a 100-person investment group run by financier Joel Rosenman. A spokesman for Morgenthau said he has transferred into escrow a $2,000 political contribution he received from Hsu in March.

Under Hsu's agreement with the group Source Financing Investors, which was reported yesterday in the Wall Street Journal, Hsu said he would use Rosenman's money to help manufacture apparel in China for Gucci, Prada and other private labels, yielding a 40 percent profit. When Source Financing recently attempted to cash checks from Hsu's company, the investors say they were told the account held insufficient funds.

Seth L. Rosenberg, a New York attorney for the investment group, said the money may be gone, and he is asking politicians to hold on to any checks they collected from Hsu. "We want to be sure that any candidates who received money from Mr. Hsu act responsibly with those contributions so they may be returned to the victims of Mr. Hsu if indeed they are the source of those funds," Rosenberg said.

The New York investors are not alone. People alleging that they were victims of Hsu's phony investment proposals have emerged on both coasts. The FBI has opened an inquiry into allegations it has received about Hsu's business dealings in Southern California. And the California attorney general's office is not finished pursuing a case it brought against Hsu 15 years ago related to an investment plan that prosecutors called a Ponzi scheme.

Robert H. Emmers, a Los Angeles publicist hired by Hsu's attorney, said Hsu is not responding to the allegations against him. "There's a lot of speculation out there," Emmers said. "Mr. Hsu is not in a position to defend himself right now, so that needs to be taken into account."

Colorado authorities took custody of Hsu last night and initiated plans to extradite him to California.

Hsu was released from a Grand Junction, Colo., hospital, where he had been treated for undisclosed injuries suffered during his flight from prosecution last week while on an Amtrak train bound for Chicago. He was booked into the Mesa County jail at 6:30 p.m. and has been segregated from other inmates because of the high-profile nature of his case, sheriff's department spokeswoman Heather S. Benjamin said. Hsu is to be arraigned through a video hookup today.

The Clinton campaign has severed ties with Hsu, who was one of its top 15 national fundraisers.

© 2007 The Washington Post Company