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Chung Ties Funds To DNC (Washington Post, May 16)

GOP Leaders Demand Satellite Export Data (Washington Post, May 12)

Money Talks: Loral's Bernard Schwartz and Other Top Soft Money Givers

Justice Dept. Investigates Satellite Exports

By Roberto Suro
Washington Post Staff Writer
Sunday, May 17, 1998; Page A01

The Justice Department's campaign finance task force has begun to examine whether a Clinton administration decision to export commercial satellites to China was influenced by contributions to the Democratic Party during the 1996 campaign, department officials said.

The inquiry is at a preliminary stage and has yet to determine whether there are grounds for a criminal investigation, the officials said. The task force is looking at allegations by congressional Republicans that the administration issued a disputed waiver for a satellite deal with China to a U.S. aerospace company because its chief executive is a major Democratic contributor.

GOP leaders have already started investigations into the matter in both the House and Senate and are attacking the administration in increasingly heated terms for what they describe as a possible betrayal of national interests. The administration insists that policy on technology transfers was not influenced by politics.

The same task force is also pursuing information suggesting that a Chinese state-owned aerospace company funneled illegal contributions to Democratic coffers in 1996. Investigators say there is no evidence linking those alleged contributions to the satellite deal.

At the center of the new line of inquiry are two U.S. aerospace companies, Loral Space and Communications Ltd. and Hughes Electronic Corp., that have sought to save time and money by having their commercial satellites launched atop Chinese missiles. Since U.S. sanctions were imposed against China after the 1989 crackdown in Tiananmen Square, the president has been required to grant waivers of export controls for the satellite deals to go through.

After a rocket carrying a $200 million Loral satellite crashed in 1996, scientists from the two companies allegedly advised the Chinese on how to improve their guidance systems by sharing technology that had not been cleared for export. Critics, supported by a Pentagon study, contend that the technology could be used by the Chinese to improve the accuracy of their military missiles.

The Justice Department subsequently started a criminal investigation to determine if there had been an illegal technology transfer. That investigation was still underway in February when Hughes and Loral asked the administration for a waiver to conduct another launch. The Justice Department objected, arguing that its ability to pursue its investigation would be severely hindered if the government allowed the companies to go back to China under the same kind of arrangement that they had allegedly abused two years earlier.

But the White House overrode the Justice Department and allowed the companies to return to the Chinese launching pads, and authorized the type of technology transfer for which the firms were under investigation.

"That just about killed a major investigation involving a very sensitive national security issue," said an official familiar with the case. "On the one hand you have investigators and prosecutors needing to be taken seriously so they can gather information, and then on the other hand the White House is saying that suspicions . . . are not serious enough to keep these companies from going back and doing it all over again."

The campaign finance task force is trying to determine whether there is evidence that the decision to grant the second waiver may have been influenced by campaign contributions. Loral's chief executive officer, Bernard L. Schwartz, was the single largest donor to Democratic Party in 1996. According to the Center for Responsive Politics, Schwartz gave $632,000 in "soft money" donations in advance of the 1996 elections. Loral and Hughes have denied any wrongdoing.

Eric Rubin, a spokesman for the National Security Council, said, "It is absurd to suggest that there was political or any other influence on the shaping of U.S. policy on this issue."

Investigators both at the Justice Department and on Capitol Hill are also examining a so far unrelated allegation that also involves campaign contributions and an apparent link to Chinese aerospace interests.

Johnny Chung, a Democratic fund-raiser, who pleaded guilty to campaign-related charges last March, has told federal investigators he received $300,000 in the summer of 1996 from an senior executive in one of China's state-run aerospace companies with the understanding that the money would be used to make contributions to Democratic Party campaigns, according to officials familiar with his disclosures. The executive, Liu Chao-Ying, is a military officer and the daughter of an influential retired army general. She accompanied Chung to a Los Angeles fund-raiser in July, 1996, and was photographed with President Clinton.

Chung gave a total of $366,000 to the Democratic National Committee for the 1996 election, all of which was returned after the DNC determined it could not vouch for the money's origins. About $100,000 of Chung's donations came between June and August 1996, the period when he and Liu were setting up a business partnership in California. It is not known how much of the alleged payment from Liu might have ended up in DNC coffers.

After nearly two years of probing intercepted conversations indicating that some Chinese officials had a plan to make illegal campaign donations to U.S. campaigns, investigators said Chung offered what appears to be the first money trail leading from China to the Democrats. However, there is no evidence that Chung sought favors on Liu's behalf from U.S. officials, a lawyer close to the case said.

Liu's firm, China Aerospace Corp., had a direct interest in launching commercial satellites for firms in the United States and other countries, but officials familiar with the case said there did not appear to be any direct connection between Liu's alleged efforts to make campaign contributions through Chung and the disputed waivers granted to Loral and Hughes.

© Copyright 1998 The Washington Post Company

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