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FBI Warned 6 on Hill About China Money

By Brian Duffy and Bob Woodward
Washington Post Staff Writers
Sunday, March 9 1997; Page A01

The FBI last year warned six members of Congress, including Sen. Dianne Feinstein (D-Calif.), that they had been targeted by China to receive illegal campaign contributions funneled through foreign corporations, according to U.S. government officials.

The unusual warnings, delivered in individual classified briefings, were based on what the officials called "specific and credible" intelligence information. The FBI briefing materials, the officials said, included this statement: "We have reason to believe that the government of China may try to make contributions to members of Congress through Asian donors."

The identities of the other members of Congress warned by the FBI could not be confirmed.

A spokesman for Feinstein, who sits on the Foreign Relations Committee, said she received the FBI briefing on June 14. Bill Chandler, the spokesman, declined to provide further information, but said Feinstein decided on Friday to return approximately $12,000 in campaign contributions from donors associated with the Lippo Group, an Indonesian banking and real estate conglomerate with extensive business interests in China. It is not clear whether those contributions are linked to the suspected Chinese government operation.

A Justice Department task force created late last year to investigate fund-raising activities during the 1996 campaign has found no evidence that Feinstein or any other member of Congress knowingly received illegal payments from the Beijing government, officials said.

But investigators have obtained what the officials termed "conclusive evidence" that Chinese government funds were funneled into the United States last year, although it remains uncertain whether any of the money ended up in congressional or presidential campaign coffers. Such contributions would violate federal law, which prohibits foreign individuals, corporations and governments from donating to U.S. political campaigns.

"There is no question that money was laundered," said one official.

"Laundering" is a technique sometimes used by intelligence agencies or criminals to route money through banks, corporations or individuals to conceal its source. It could not be learned who received the Chinese government funds or how much has been traced by government investigators.

Evidence of Chinese efforts to influence congressional races was first discovered by U.S. intelligence agencies in the spring of 1995, officials said, as Congress prepared to vote on renewal of China's most-favored-nation status, a U.S. government designation providing substantial trade benefits.

Then, in December 1996, the Justice Department task force discovered a second aspect of Chinese attempts to influence U.S. elections. Two weeks after the task force was created, investigators studying the role of John Huang – a former Lippo Group executive and Commerce Department official who had become a top fund-raiser for the Democratic National Committee during the presidential campaign – began systematically analyzing a large volume of sensitive foreign intelligence information that had previously been collected but not carefully scrutinized.

The review showed that in the early weeks of 1995, Chinese representatives developed what U.S. officials described as "a plan" to spend nearly $2 million to buy influence not only in Congress but also within the Clinton administration. The alleged Chinese effort to funnel money into congressional and presidential campaigns is now considered the most serious aspect of the task force investigation, officials said.

A spokesman for the Chinese Embassy has categorically denied allegations that Beijing attempted to influence U.S. elections.

Last June, after the FBI received the information about the attempts by Chinese representatives to direct illegal campaign contributions to the six members of Congress, Justice Department officials informed National Security Council staff workers about the matter. The staff members, who have responsibility for counterintelligence matters, were not given the names of the lawmakers, officials said.

A White House official said last week that neither President Clinton nor senior policymakers were briefed on the intelligence about China's congressional efforts. Yesterday, a senior White House official said the White House was unaware of alleged Chinese efforts to funnel money into presidential campaigns until reading news accounts last month.

"Our goal is to maintain substantial distance from the Justice Department investigation," the White House official added.

The official also expressed relief that the investigation is centering on the Chinese connections rather than the many controversial fund-raising activities of Clinton, Vice President Gore and the DNC. That accounts, in part, for the president's calm, self-confident demeanor during Friday's news conference, which focused almost exclusively on fund-raising issues, according to two White House officials.

U.S. government officials said some Chinese government funds were directed to the United States through companies either wholly or partly owned by China. Justice Department investigators are trying to determine whether any of those funds were received by Huang or by two other prolific DNC fund-raisers, Charles Yah Lin Trie and Pauline Kanchanalak, the officials added.

The three have emerged as the principal figures in the task force investigation into campaign fund-raising irregularities, although their roles in the Chinese efforts now under investigation remain unclear. Huang, Trie and Kanchanalak have declined to comment publicly, but friends and colleagues of the trio maintain they have done nothing improper.

Huang served as the senior Lippo executive in charge of its U.S. operations and received $788,750 in severance pay when he left the company in 1994 to take a position in the International Trade Administration at the Commerce Department, where he specialized in Asian business affairs. He left the department in December 1995 to join the DNC.

Kanchanalak is a Washington lobbyist and consultant who represents several Thai businesses with large investments in China. A regular visitor to the White House during the presidential campaign, she also sought Huang's help while he was at the Commerce Department in 1994 to obtain an unusual presidential endorsement of the U.S.-Thailand Business Council, which she founded. Last June, Kanchanalak escorted two officials from the council and three executives from a huge Sino-Thai conglomerate to a White House coffee hosted by Clinton. That same day, Kanchanalak and a relative donated $135,000 to the DNC.

Trie is a former Little Rock restaurateur and friend of the president's who escorted a Chinese arms merchant to a White House coffee Clinton attended last year. The president later termed the meeting "inappropriate." Trie's business partner is Ng Lap Seng, a Macao property developer and Chinese government official who serves as a member of a "political consultative conference" in the southern city of Guangzhou.

The DNC has returned $3 million in campaign contributions because the money came from questionable or improper sources. Most of the returned money was raised by Huang, Trie and Kanchanalak. In addition, Clinton's legal defense fund returned $639,000 raised by Trie because the sources of the money were not identified.

U.S. officials said the Justice Department task force has not determined precisely what the Chinese government hoped to achieve in attempting to funnel campaign contributions into congressional and presidential races. But the timing of the FBI warnings to members of Congress appears to be significant because of the 1996 vote on China's most-favored-nation trade status.

Feinstein sits on the East Asian and Pacific affairs subcommittee of the Foreign Relations Committee, which oversees U.S. relations with China. Concerned about congressional opposition to renewing China's special trade status, Feinstein wrote an article in mid-May for the Los Angeles Times urging permanent MFN status for Beijing. She argued that tying the trade status to improved performance on human rights issues would be "ineffective at best and counterproductive at worst."

Clinton announced May 20 that he would support renewal of MFN. The House voted on June 27 to defeat a joint congressional resolution that would have ended China's MFN status or attached conditions to its renewal.

The vote was a significant victory for Beijing, which long had trailed Taiwan in efforts to court influence on Capitol Hill and had recently sought to improve ties with members of Congress. In late 1995, the Chinese government created a "Central Leading Working Group on the U.S. Congress." The group, which reports directly to President Jiang Zemin, is reportedly charged with studying and understanding a variety of congressional issues affecting China.

The national security aspects of the task force investigation have intensified recently as investigators delve more deeply into the activities of Huang, Trie and Kanchanalak. But officials cautioned that the inquiry is still at an early stage, with more questions than answers.

Huang was born in China and raised in Taiwan before coming to the United States. For five months while he was still employed at Lippo Group, before he joined the Commerce Department, Huang received a top-secret security clearance that could have allowed him to review classified U.S. intelligence documents, although not the most highly classified ones.

During his 18 months at the department, records show, Huang received 37 intelligence briefings on issues relating to China, Vietnam and other matters of potential interest to Lippo, which has headquarters in Indonesia and investments across Asia.

Kanchanalak's activities raise other concerns, officials said. During several White House visits, she had access to National Security Council staffers, a White House official said.

The task force is also investigating the activities of several of Kanchanalak's foreign clients. On Friday, a grand jury reviewing evidence gathered by the task force began examining more than a half-dozen boxes of records from the U.S.-Thai Business Council. To date, a Justice Department official said, more than 800,000 documents have been logged into the task force's computers.

As for Trie and Chung, another official said concerns about their activities boil down to a single question: "Where did they get the money, and whose was it?"

Staff researcher Jeff Glasser contributed to this report.

© Copyright 1997 The Washington Post Company

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