Taiwan, in Courting U.S. Officials, Reflects Yearning for Recognition

Liu Tai-ying is the rare species of political tycoon who manages the riches of the world's richest political party, the Kuomintang. On any certain day, he sets the course of a $3 billion business empire -- KMT Inc. -- that provides work for thousands of Taiwanese and income for the party's candidates and bureaucracy.

On Sept. 21, 1995, Liu dropped everything and flew to San Francisco for the sole purpose, he says, of thanking President Clinton for allowing Taiwan's president to visit Cornell University, his U.S. alma mater. A guest of former White House aide Mark E. Middleton, Liu met Clinton in a fund-raiser receiving line at the Fairmont Hotel.

Lui's long journey for what amounted to a presidential handshake shows that KMT leaders will go some distance to cultivate U.S. ties. The question now, amid the controversy over improper foreign political donations to the Democratic Party, is how far they did go -- and whether Democratic fund-raisers went too far in tapping Taiwanese political or business leaders to finance Clinton's reelection campaign.

Liu denies a widely reported account that before his California trip, he promised Middleton he would donate $15 million to the Democrats, which would have been illegal. Middleton denies any offer or solicitation, and there is no evidence that any money changed hands.

Whatever the case, there is no doubt Taiwan is fertile ground for anyone who can demonstrate the remotest connection to U.S. leaders. The world's most prosperous pariah, this industrious little island is cut off from international society by the KMT's historic rivals in China. The anomaly drives Taiwan's foreign policy and creates such a yearning for recognition, especially from the United States, that even people like Middleton who are bit players in Washington can gain access to the power elite here.

Taiwan was clearly one place where Democrats hoped to find political cash. John Huang, a top Democratic National Committee fund-raiser who is at the center of the controversy over donations, came here in May prospecting for donors. Charlie Yah-Lin Trie, a Chinese American businessman who twice traveled here with Middleton in 1995, passed out cards identifying himself as a member of the DNC's national financial board of directors. The DNC said Middleton promised to raise money after he left his mid-level White House job in February 1995, although it added that he raised none; his lawyer said he never solicited funds in Taiwan.

The master of a Buddhist sect in Taiwan, who is a member of the KMT's central advisory committee, attended a DNC fund-raiser last April at one of his temples near Los Angeles. Some of the $140,000 netted came from monks and nuns with questionable means to afford contributions as high as $5,000.

Some Taiwanese businessmen are legal residents of the United States who travel back and forth between the two countries, and so would be legally able to donate to the DNC. But Liu, who has no green card, would not be able to donate even a small sum in his own name, and it would be illegal for a foreign government or political party to funnel money to a U.S. candidate. Nor would it be proper, according to the White House, for James Wood Jr., the Clinton administration's top liaison to Taiwan, to have pressured local businessmen for donations, as he has been accused of doing.

The U.S. connection is vital in a nation so orphaned internationally that it cannot fly its flag at the Olympics. Only 22 countries have diplomatic relations with Taiwan, many of them tiny African nations that switched allegiance from Beijing in return for generous foreign aid. With nearly $90 billion in foreign currency reserves, the world's third-largest amount, Taiwan spares little expense to end its outcast status. Its free-spending "checkbook diplomacy," as it has come to be known, has extended from a $1 billion offer for membership in the United Nations to a $10 million contribution to Nelson Mandela's African Nationalist Party.

Most of its diplomatic capital is spent on Washington, where the Taiwan lobby has a storied past and still rivals all but the Israelis for effectiveness. Without healthy U.S. relations, the KMT would fail a major stewardship test. But the ultimate payoff is diplomatic. Washington set the two-track policy for dealing with China and Taiwan: recognition for Beijing and cultural and economic ties for Taipei. U.S. leadership is believed to be the only way Taiwan can broaden its role internationally while keeping China at bay.

"The United States is the number one nation," said Yu-ming Shaw, director of the Institute for International Relations. "To get invited to the White House is different from eating a McDonald's hamburger."

Liu Tai-ying is a central but shadowy figure in the struggle for U.S. favor.

A man with no formal diplomatic credentials, he has as chairman of KMT Inc. (a conglomerate of more than 100 major corporations) the money and network to launch extra-diplomatic missions, political sources said.

He was an obvious choice to meet Middleton, said Chen Chao-ping, a Taiwan consultant who was Middleton's escort. Liu had already delved in Washington politics, hiring the lobbying firm of Cassidy & Associates to arrange permission for the 1995 Cornell University visit of President Lee Teng-hui. Two days after Middleton arrived on July 30, 1995, and told the consultant that he wanted to raise campaign funds, Chen said, they went to visit Liu.

As Chen tells it, Middleton opened with an offer to help Taiwan establish a more direct line to the White House. Liu spoke of a visa for President Lee to visit New York during the U.N.'s 50th anniversary. He asked why Middleton was in Taiwan. The American demurred on the visa idea, then mentioned his fund-raising pursuit, and Liu volunteered $15 million.

It is impossible to know whose account is accurate -- Chen's or the denials of both principals. A fourth witness said he was in and out of the meeting. But Taiwan officials who know Liu cite his orchestration of the Cornell visit to show how far he will go to influence U.S. policy. The effort began in late 1994 when Cornell alumni in Taiwan gave the school $2.5 million for a chair in world affairs named for Lee. Liu, who attended Cornell with Lee in the late 1960s, raised the money, said former KMT vice chairman Hau Pei-tsun in an interview.

Cornell followed up with an invitation to Lee to address a weekend reunion in June 1995. No Taiwan head of state had been permitted into the United States since it recognized Beijing as the legitimate government of China in 1979.

But Liu had a strategy. In June 1994, he signed a $4.5 million contract with Cassidy, a Democratic firm in what was then a Democratic-run town. Although the contract ran for three years, Cassidy got quick results when Congress turned Republican in 1995. Taiwan has long been a favorite of conservative Republicans. Both houses voted overwhelmingly to grant Lee a visa and Clinton reluctantly agreed.

The Cassidy fee was much higher than Taiwan had ever paid for lobbying services, and it was of questionable origin.

In its foreign agent registration, Cassidy lists the Taiwan Research Institute as its client. Liu, a noted economist, founded the institute in February 1994 as a private nonprofit group to investigate economic issues and recommend policy.

The institute's mission statement includes no lobbying goal, and an interview with executive secretary Liang Rong-hui further clouded the sourcing issue. He said the institute is funded by corporate donors who have given about $4 million since it opened 30 months ago -- which is less than the amount of Cassidy's fees for roughly the same period.

Liang denied knowledge of the Cassidy account, which he said is handled by Liu, the institute president.

Liu, 60, a stooped, bespectacled man, would not answer a reporter's questions in the lobby of his sprawling offices in the Central Insurance Building here. His spokesman, Grace Fong, said in response to written questions that the institute is "self supporting," its expenses paid by government agencies that assign its projects.

Fong said that Cassidy was paid by a separate stream of donations raised by Liu from about two dozen major Taiwan corporations. She could not explain why money contributed for research would be funneled into lobbying activities.

A Cassidy spokesman said that Liu is "widely respected" here and in the United States, and that the firm was "well aware of his high standing when we began discussions of working together."

Hau, a former Taiwan premier who ran against the Lee ticket in last year's presidential election, said Liu's management of KMT income has always been mysterious: "Where the money went, nobody knows," said Hau. "I was vice chairman of the party, and I didn't know. . . . It's a black-box operation."

Another high-ranking official was more philosophical: "For Taiwan, foreign relations is like a jungle war," he said. "If we all go by the rules, we won't even have a battleground."