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Democrats Take Offensive in Campaign Fund Hearings

By Edward Walsh
Washington Post Staff Writer
Thursday, July 24, 1997; Page A06

Senate Democrats got their chance to explore Republican fund-raising practices yesterday as they traced the route of $1.6 million from a Hong Kong corporation, through a GOP think tank and into an account at the Republican National Committee during the crucial days just before the 1994 election.

Haley Barbour, who at the time was chairman of both the RNC and the think tank, the National Policy Forum, is the central figure in the transaction, which Democrats argued yesterday was a "sham" designed to funnel illegal foreign money into U.S. campaigns. They contended that the NPF was virtually "a division" of the RNC, a convenient conduit that could legally accept foreign money and then immediately transferred the $1.6 million to the RNC, which is barred by U.S. election laws from accepting foreign contributions.

But Republicans argued that the $1.6 million was simply the repayment of a loan to the NPF from the RNC, a "commercial transaction" that had nothing to do with the 1994 campaign. Michael E. Baroody, a former NPF president, told the Senate Governmental Affairs Committee that "the notion that [NPF] operated as a money laundry for the party is laughable" because the organization was constantly in debt to the RNC.

Building a case that Barbour knew the source of the funds was a foreign corporation, and not the U.S. subsidiary of Young Brothers Development of Hong Kong, Democrats on the committee yesterday released a deposition from Hong Kong businessman Ambrous Tung Young, who controls the firm. Young told committee investigators that when Barbour first asked for financial help for the NPF in August 1994, he told Barbour he needed more information to present to his company's "Hong Kong board of directors."

They also released a letter from Young to Barbour a short time later in which Young said he was willing to consider guaranteeing a bank loan to the NPF that "you have expressed to me is urgently needed and directly related to the November election."

As Democrats took the offensive for the first time in the investigation into campaign fund-raising improprieties, the first witness was Benton L. Becker, a lawyer for Young. He told the committee that Young also told Barbour of the money's Hong Kong origin in the summer of 1995, when Barbour asked him to forgive the remaining indebtedness. Young refused, explaining that his Hong Kong corporation was subject to regular government audits there, Becker said.

The NPF eventually defaulted on the bank loan, and Barbour failed to fulfill his promise to Young to have the RNC repay the debt in such an event, Becker said. He said that after a settlement with the NPF, Young's corporation ended up losing $700,000.

Barbour has always denied that he knew the loan guarantee funds for NPF came from Hong Kong, an assertion reiterated yesterday by his spokesman, Ed Gillespie. "His belief at the time was that it was American funds from an American corporation," Gillespie told reporters.

After two weeks of hearings that focused on controversial Democratic fund-raiser John Huang and Democratic fund-raising transgressions in 1996, yesterday's session produced a sharp role reversal between the committee's Republicans and Democrats. It was the Democrats who acted as the prosecutors, while GOP committee members suggested a benign interpretation of the complex financial transaction.

According to documents the Democrats have produced, shortly after the NPF transferred the $1.6 million to the RNC, the national party provided a comparable amount to state parties and other GOP organizations in 15 states where Republicans were engaged in close contests. It was a crucial election in which the GOP captured control of the House for the first time in 40 years.

The money was part of a $2.1 million commercial bank loan to the NPF that had been guaranteed by certificates of deposit purchased with funds provided to Young Brothers' U.S. subsidiary by the parent company in Hong Kong. Democrats also zeroed in on the fact that while the bank loan was available on Oct. 13, 1994, the NPF asked that delivery of the funds be delayed until Oct. 20, the day after a deadline that would have required NPF to report its transfer of the money to the RNC to the Federal Election Commission.

Baroody was questioned about a resignation memorandum he sent to Barbour in June 1994 in which he complained that "it has become increasingly difficult to maintain the fiction of separation" between the NPF and the RNC.

Baroody said the two organizations did have separate functions, but that management responsibilities overlapped enough that it would jeopardize NPF's attempt to gain tax-exempt status, which eventually was rejected by the Internal Revenue Service.

But Baroody insisted that "far from being a `front' for the RNC," the NPF was a legitimate grass-roots policy development organization.

"It was open. It was serious. It was real," he said.

© Copyright 1997 The Washington Post Company

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