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Senate Panel Finds 1st Direct DNC Link To Foreign Funding

By Edward Walsh
Washington Post Staff Writer
Wednesday, July 16, 1997; Page A01

The Senate Governmental Affairs Committee yesterday established the first direct link between foreign money and a contribution to the Democratic National Committee.

The $50,000 donation was paid for by the Lippo Group, an Indonesian conglomerate, after being made by one of its U.S. holding companies. The company, Hip Hing Holdings, was managed by John Huang, a senior Lippo executive who later became an official in the Clinton administration and a DNC fund-raiser.

The contribution was made in 1992, not during the 1996 election cycle that is the focus of the Senate's investigation into campaign finance improprieties. The DNC announced yesterday that the money would be returned.

Also yesterday, the committee revealed documents showing that Hong Kong businessman Eric Hotung and his American wife, who pledged a $100,000 donation to the DNC, obtained a 1995 meeting with President Clinton's top national security advisers to discuss U.S. policy on Hong Kong, Taiwan and China.

Huang and the Jakarta-based Lippo Group are central focuses of the committee's investigation. The panel is particularly interested in close and growing ties between Lippo and the government of China.

In August 1992, Huang, then an active Democratic fund-raiser in the California Asian American community, sent a memo to Lippo headquarters asking the company to "please kindly wire" $146,500 to Hip Hing to cover various business expenses. Among them: a $50,000 "DNC Victory Contribution."

"Here's a clear trail of foreign money coming into U.S. elections," said Sen. Joseph I. Lieberman (D-Conn.).

Republicans on the committee are attempting to establish that substantial amounts of illegal foreign money flowed into Democratic coffers for the 1996 campaign through Huang, the Lippo Group and its subsidiaries, and that some of the money may have come from the Chinese government. American subsidiaries of foreign corporations may make legal contributions out of revenue generated in this country, but direct contributions from foreign governments, companies or individuals without permanent resident status here violate U.S. election laws.

Huang left Lippo in 1994 to become a Commerce Department official. In late 1995, he joined the DNC, where he was credited for raising about $3 million in campaign contributions. About half of that money has been returned by the DNC because of questions about its source.

At the beginning of a second week of public hearings, yesterday's committee session demonstrated that the investigation is likely to be an incremental and at times tedious search for the source of illegal cash in the 1996 campaign, with the definition of illegal often a matter of dispute over the interpretation of arcane sections of federal election laws.

Democrats did not dispute the illegality of the $50,000 contribution from Hip Hing, and DNC officials later said that it would be returned.

But they did dispute an attempt by the committee's Republican counsel, Michael J. Madigan, to label as illegal three contributions of $15,000 each in 1993 by Hip Hing and two other California subsidiaries of Lippo – San Jose Holdings and Toy Center Holdings. Madigan noted that the three companies all reported that they lost money in 1993 and that therefore they could not have had any domestically generated revenue left over to donate to the DNC. Hip Hing, whose only asset Madigan said is a vacant parcel of land in Los Angeles that includes a parking lot, reported an operating loss of $493,802 in 1993.

Democrats said the three companies had earned enough to make legal contributions even though they had net operating losses for the year. Committee Chairman Fred D. Thompson (R-Tenn.) cited a 1992 advisory opinion by the Federal Election Commission that such contributions must come from "net profits," but his interpretation of the ruling was challenged by the committee's Democratic counsel, Alan I. Baron.

Madigan made his assertion while questioning Juliana Utomo, who worked in Los Angeles with Huang. Utomo confirmed that the checks had gone to the DNC but otherwise provided little information. She said that until recently she did not know what the letters DNC meant.

Republicans yesterday also tried to tie the Lippo Group more closely to China and to tie Huang, after he had moved to the Commerce Department and the DNC, to Lippo.

Thomas Hampson, a Chicago-based business intelligence specialist hired by the committee, testified that in the last five years Lippo has shifted its attention to China, transforming itself from "a family-controlled entity to a joint venture with the Chinese government."

Hampson said the Lippo has done this chiefly through a close association with China Resources, a huge trading company that he said is involved "in everything from peanuts to property development."

China Resources, which is a wholly owned wing of China's Ministry of Foreign Trade and Economic Cooperation, has invested about $26 million in an ailing Lippo property development in Indonesia. Lippo and China Resources also have joint ownership of the Hong Kong Chinese Bank and China Resources has large financial stakes in a number of other Lippo enterprises, according to analysts in Hong Kong and Jakarta.

According to one document released yesterday by the committee, Huang, while a director at LippoBank in Los Angeles, escorted the chairman of China Resources, Shen Jueren, to a Sept. 24, 1993, meeting at the White House with Jack Quinn, then chief of staff and counselor to Vice President Gore.

In an Oct. 7, 1993, letter on Lippo Group stationery, Huang thanked Quinn "for having taken time out of your busy schedule" to meet with him and the Chinese official. "We fully believe that relationship can be built and nourished through frequent contacts by high level people," Huang wrote.

The letter also refers to a separate meeting on Sept. 27 in Los Angeles, where Huang said that "Vice President Gore was just super." It was not clear from the letter whether Gore had also met with the Chinese official. Nor was the substance of discussions in either meeting made clear.

Harold Arthur, chairman of LippoBank in California, was also questioned by the committee yesterday about Lippo's interests in the United States. Lieberman said Lippo subsidiaries, affiliates and executives had made about $800,000 in contributions to the Democrats – including state Democratic parties – over three years and asked why an organization with relatively small economic interests in this country would be so generous to one political party.

"Friendship," Arthur replied, adding that James T. Riady, whose family controls the Lippo Group and who at one time had handled Lippo business in Arkansas, had become a friend of President Clinton's when Clinton was Arkansas governor.

In one of the 1995 documents released yesterday, then-DNC Chairman Don Fowler referred to Eric Hotung as someone who could "provide insight into U.S.-China relations." Hotung is a British citizen who lives in Hong Kong and heads an institute that promotes better U.S.-China relations. His wife, Patricia Anne Shea, a U.S. citizen, and her Denver-based real estate company have contributed nearly $300,000 to the Democrats since 1988.

On Oct. 4, 1995, Hotung met for about five minutes with then-deputy national security adviser Samuel R. Berger in Berger's White House office in an apparent response to his request for a discussion of Hong Kong, Taiwan and China. Hotung had longer meetings in March 1996 with Robert Suettinger, head of the National Security Council's Asian division, White House sources said. Neither Berger, who is now national security adviser, nor Suettinger could recall precisely what was discussed.

White House officials described Hotung as a legitimate person of means who offered an interesting perspective. White House spokesman Lanny J. Davis denied suggestions that the meeting went ahead in exchange for campaign contributions.

Staff writers Lena H. Sun and John Mintz contributed to this report.

© Copyright 1997 The Washington Post Company

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