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Johnny Chung (AP File Photo)

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Chung Makes Deal With Prosecutors (Washington Post, March 6)

Key Player: Johnny Chung

Chung Ties Funds

By Roberto Suro and Bob Woodward
Washington Post Staff Writers
Saturday, May 16, 1998; Page A01

Democratic fund-raiser Johnny Chung has told Justice Department investigators that a Chinese military officer who is an executive with a state-owned aerospace company gave him $300,000 to donate to the Democrats' 1996 campaign, according to federal officials who said that financial records back up key aspects of his account.

Chung's allegations, first reported in the New York Times yesterday, are being treated by the Justice Department as a major development in its 18-month investigation of whether the Chinese government attempted to influence the 1996 election with illegal campaign contributions, the officials said. For the first time, investigators have what appears to be a direct money trail from the Chinese government to Democratic campaign coffers, but the officials emphasized that numerous questions about Chung's activities remain unanswered.

Once depicted as a "hustler" by an official at the National Security Council, Chung visited the White House 49 times between 1994 and 1996 and attended numerous Democratic fund-raising events, sometimes accompanying Chinese business executives who were photographed with President Clinton or first lady Hillary Rodham Clinton. He donated $366,000 to the Democratic National Committee for the 1996 election, all of which has since been returned.

In March, Chung reached a plea bargain with federal prosecutors in which he admitted to making illegal campaign contributions and began cooperating with investigators. The officials said he subsequently claimed he received the $300,000 for Democratic campaigns in the summer of 1996 from Liu Chao-Ying, an officer in China's People's Liberation Army and executive with China Aerospace, Beijing's state-run rocket manufacturing company. It is unclear, however, how much of that money actually went toward campaign contributions. Sources note that the alleged payments from Liu to Chung appear to have come after he had made many of his donations to the DNC.

The Justice Department investigation has no evidence suggesting that any officials either at the White House or the DNC were aware of the source of Chung's money or that Chung ever explicitly attempted to influence any administration policy decisions, investigators said.

"We had no knowledge about the source of Mr. Chung's funds or the background of Liu Chao-Ying," White House spokesman Jim Kennedy said yesterday. He said he was not aware of any contact between Chung and anyone in the White House regarding Liu.

Election records show that Chung made contributions totaling $100,000 to the DNC and $14,000 to other Democratic committees between June and September of 1996. On July 21, 1996, Liu and Chung attended a Los Angeles fund-raiser where Liu was photographed with Clinton, as is common practice with guests at such events.

Liu and Chung set up a business, Marswell Investment Inc. in Torrance, Calif., together on Aug. 9, 1996, and according to sources familiar with their dealings, it was at that time that substantial amounts of money were transferred from Liu to Chung. Only $47,000 of Chung's campaign donations were made after they set up their company, according to election records.

Liu is the daughter of a powerful, now-retired general in the Chinese army, Liu Huaqing, and exercised considerable influence herself as an executive of the state-owned company that sells and launches rockets and satellites.

Chung's revelations have added new fuel to the Justice Department inquiry into the alleged plan by China to influence U.S. elections and revived demands by Republican leaders for an independent counsel investigation of the campaign finance scandal.

On Capitol Hill, Sen. Fred D. Thompson (R-Tenn.), who denounced alleged Chinese involvement in the U.S. election but was unable to bring out direct evidence of it during hearings last year by his Senate Governmental Affairs Committee, claimed vindication in the news of Chung's charges.

"The new information shows that the 'China Plan' the committee investigated last year was carried out in some form," said Thompson, who along with other senior legislators was briefed by the FBI on Chung's allegations this week.

"This really is a very big matter. The need for an independent counsel to investigate the campaign finance scandal has been clear for some time, and this puts the icing on the cake," said Sen. Arlen Specter (R-Pa.), who is a member of the Senate Judiciary Committee.

Since 1996 federal law enforcement and intelligence agencies have been investigating intercepted communications and other indications that Chinese government officials conceived a plan to spend at least $2 million to influence U.S. elections, allegedly by channeling the money through foreign corporations into political campaigns.

When Thompson earlier this year issued a report on his committee's investigation, Chung was not cited among the Democratic fund-raisers who were suspected of acting as conduits for Chinese government money, and officials familiar with Chung's account note that he did not make the allegations involving Liu in his initial plea deal with the Justice Department two months ago.

As they have analyzed Chung's account in recent days, Justice Department officials have urgently queried the CIA and the National Security Agency to comb their records for any information regarding Chung that might have been overlooked.

Officials familiar with the evidence in Chung's case said that neither Chung nor Liu had been major figures in the "China plan" investigation, but that the information Chung is now providing tended to corroborate certain evidence already gathered in the probe.

Chung's attorney, Brian Sun, had no comment yesterday regarding Chung's communications with the Justice Department.

© Copyright 1998 The Washington Post Company

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