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From The Post Reno Extends Investigation of Casino Rejection (Nov. 14) Chung Visits Described as 'Nuisance' (Nov. 14) FBI Overlooked Key Files in Chinese Probe By Bob Woodward Washington Post Staff Writer Friday, November 14, 1997; Page A01 The FBI has acknowledged overlooking key intelligence information gathered as far back as 1991 that investigators believe shows further Chinese government efforts to buy political influence in the United States, senior U.S. government sources said yesterday. Attorney General Janet Reno learned of the new evidence on the night of Nov. 5. A senior Justice Department official said Reno was "livid" at the FBI foul-up and two days later apologized to Sen. Fred D. Thompson (R-Tenn.) for failing to disclose information that was germane to Senate hearings into campaign fund-raising abuses. Thompson had suspended his committee's hearings Oct. 31. FBI Director Louis J. Freeh, who also apologized to Thompson, has replaced the senior FBI official overseeing the bureau's investigation into suspected Chinese influence buying, officials said. The newly discovered intelligence, much of it culled from electronic surveillance conducted by the FBI and other U.S. agencies over the past six years, includes evidence of the magnitude and means by which Beijing hoped to influence U.S. elections, several officials said. The evidence also shows links between the Chinese government and several U.S. citizens, including a Democratic fund-raiser in Los Angeles whom several officials characterize as an "agent" for the Chinese. Officials would not provide details of the highly classified intelligence. These developments come only two months after Reno, vowing "to make sure that no stone is left unturned," ordered a major Justice Department shake-up and replaced the head of a department task force looking into campaign finance violations. The continuing series of Justice missteps demonstrates "remarkable incompetence," one senior government official said, and is likely to increase Republican pressure on Reno to seek the appointment of an independent counsel to run the politically sensitive investigation. "This is another `Oh my God!' " a senior Justice official said yesterday. Some officials played down the significance of the new evidence and noted that the information was gathered by the FBI as part of a counterintelligence function designed to keep tabs on foreign governments and protect U.S. national security. Such information is rarely used in prosecuting criminal cases, largely because of government reluctance to reveal sensitive eavesdropping methods and other intelligence sources. Justice officials said internal problems of miscommunication and excessive compartmentalizing have become so serious that Reno has directed her inspector general to determine why critical information in FBI counterintelligence files failed to reach the task force or Senate committee. Reno also placed Deputy Attorney General Eric H. Holder Jr. in charge of supervising the task force with instructions to determine whether additional undisclosed intelligence information remains in FBI files. The belatedly discovered files indicate that Maria Hsia -- a Taiwanese American immigrant who for a decade has raised money for Democratic causes -- was "doing the bidding" of Beijing as a Chinese agent, a senior official said. Hsia became significantly involved in Democratic Party fund-raising in 1988 with James Riady, a wealthy Indonesian businessman who once lived in California and whose Lippo Group has been at the center of inquiries over the past year into campaign finance irregularities. Hsia, 46, set up an Asian American fund-raising group called the Pacific Leadership Council with Riady and John Huang, later a Democratic National Committee fund-raiser. The two largest recipients of PLC money in the 1990 election cycle were then-Sens. Albert Gore Jr. (D-Tenn.) and Paul Simon (D-Ill.). In a 1988 interview with the National Journal, Hsia explained her political activism: "The Jews have a very strong voice, and they talk about Israel. I feel like the Asian community doesn't have a voice." Hsia worked closely with Huang and was co-chair with him of an April 1996 luncheon attended by Vice President Gore at the Hsi Lai Buddhist temple in California. The event raised about $140,000 for the DNC, but investigators subsequently concluded that much of the money was donated through straw donors used to disguise the origin of the money. Nancy Luque, Hsia's attorney in Washington, said yesterday, "It is absolutely not true and even ludicrous to suggest she is or was an agent of the Chinese government in any way, shape or form." Since news reports early this year first disclosed a Justice Department investigation into suspected Chinese influence buying, officials in Beijing have repeatedly denied -- both publicly and in private talks with U.S. officials -- any effort to funnel campaign contributions into American political races. Federal law prohibits donations from foreign sources. President Clinton last weekend said Chinese President Jiang Zemin "emphatically denied to me personally that their government had tried to do anything to influence the outcome of this election." The Hsia evidence came to light only after Freeh canvassed all FBI field offices in September and ordered a "meticulous review of all file holdings in the FBI's possession that bear on attempts by the PRC [People's Republic of China] to influence U.S. political elections." Last night, the FBI issued a statement saying that FBI counterintelligence files are "voluminous," consisting of "raw, uncorroborated intelligence that requires significant analysis before the information is appropriate for dissemination." Freeh's order turned up other previously undisclosed leads from FBI files, including reports considered reliable but unconfirmed that Huang, while serving as a senior Commerce Department official in the Clinton administration, passed a classified document to the Chinese government. Huang has previously denied any improper links to the Chinese government or other foreign capitals, and officials said the FBI has been unable to find a copy of the document or even confirm its existence. Freeh's directive also produced intelligence that the Chinese government planned to use joint business ventures with U.S. companies and others to raise money that could be funneled into U.S. political campaigns. Other newly uncovered reports also suggest that the Chinese government planned to spend more than the previously reported $3 million to influence U.S. political campaigns, according to U.S. officials. Fragmentary intelligence also indicated that the Chinese wanted to funnel money directly to the Clinton-Gore campaign, which legally could receive only contributions from U.S. citizens of $1,000 or less, officials said. Officials this week were quick to point out that the new discoveries will not necessarily lead to criminal charges. Nor have investigators established whether Chinese money was actually funneled to specific political campaigns. The most likely immediate fallout from the discoveries appears to be further erosion of Justice Department and FBI credibility. Although Reno has repeatedly pledged over the past year that the campaign finance investigation would be comprehensive and aggressive, the probe has been marked by embarrassing fits and starts. On Sept. 3, for example, Reno began a preliminary investigation of Gore's telephone solicitations for campaign money, but only after learning from a newspaper that federally regulated money had been raised in the calls. On Sept. 16, she replaced the task force chief after the FBI failed to report intelligence it had in its files for two years to the Senate committee. That intelligence said that Los Angeles businessman Ted Sioeng was a suspected agent of the Chinese government, a charge that Sioeng has denied through a lawyer. Last night, White House counsel Charles F.C. Ruff said he was unaware of any new discoveries in FBI files or of Reno's apology to Thompson. "The story is news to me on every front," Ruff said. In an interview last night, Thompson said he had accepted the apologies from Reno and Freeh. He said his committee would retain jurisdiction on the Chinese connection and continue investigating vigorously. But he declined to say whether public hearings will resume. Upon opening his Senate Governmental Affairs Committee hearings in July, Thompson publicly charged that China had planned to buy influence in U.S. elections, although he noted that the information came from sensitive intelligence which might never be revealed. Subsequently, Democratic members of the committee acknowledged that sensitive intelligence showed a Chinese plan in 1995 and 1996 to buy influence in U.S. congressional races through campaign contributions. After Thompson announced two weeks ago that he was suspending his public hearings, officials said, the FBI obtained intelligence showing that the Ministry of State Security in Beijing -- the Chinese equivalent of the CIA -- boasted it had been successful in "thwarting" the congressional inquiry. Staff writer John F. Harris and researcher Jeff Glasser contributed to this report. © Copyright 1997 The Washington Post Company Back to the top Go to Campaign Finance Report | Go to National Section