By Edward Walsh
Washington Post Staff Writer
Friday, July 25, 1997; Page A01

A combative Haley Barbour, the former Republican National Committee chairman, yesterday denounced what he said were "inaccurate, incomplete" and "outright false claims" that illegal foreign campaign contributions were passed through a party organization that he controlled.

As the Senate hearings on campaign finance abuses shifted focus to the Republicans, Democrats said Barbour had steered $1.6 million from a Hong Kong corporation to the RNC just before the 1994 election. The money went to the National Policy Forum in what Democrats have called a "sham" transaction.

Democrats have introduced GOP documents to bolster their claim that the NPF is little more than an arm of the RNC, a convenient "front" that was used to funnel illegal but desperately needed money to the GOP that helped the party gain control of Congress, including its first House majority in 40 years.

With nine lawyers and aides arrayed around him as he faced the Senate Governmental Affairs Committee, Barbour went immediately on the offensive.

"I have to tell you I don't appreciate the way some people have decided their interests are served by attempting to run down the Republicans and by trying to smear me," he said, responding to weeks of news accounts and Democratic criticism.

Barbour, an affable Mississippian, was alternately folksy and pugnacious as he faced questions from committee members, including some testy ones from fellow Republican and committee chairman Sen. Fred D. Thompson (Tenn.). But Barbour did not budge from previous Republican assertions that the NPF was a legitimate policy organization, not an arm of the RNC, and that as a nonprofit group it could legally accept funds from a foreign source.

Noting that the NPF, where he was also the chairman at the time of the controversial transaction, still owes the RNC $2.5 million, Barbour said, "The fact is NPF was not a funnel to the RNC; instead, it was a siphon."

"When you understand the facts, you see how baseless – how goofy the idea is that NPF was a funnel," he added.

Barbour was called to testify by committee Democrats who are focusing attention on a deal, brokered by Barbour and other GOP officials in the fall of 1994, in which money was transferred from Young Brothers Development of Hong Kong to the firm's U.S. subsidiary and was then used as collateral for a $2.1 million commercial bank loan to the NPF. The same day it received the loan, NPF gave $1.6 million of it to the RNC, which then provided a comparable amount to state Republican parties and other GOP organizations in 15 states during the crucial closing weeks of the 1994 election.

Taking on the heart of the Democratic case against him and the transaction, Barbour said the $1.6 million was a partial repayment of a loan that the RNC had made to the NPF. He said the party did not need the money to finance its last-minute blitz in the 1994 campaign. Asserting that the RNC had $3.4 million available in addition to the $1.6 million from the NPF, Barbour said, "The RNC did not need any of the NPF money to do what it did in the 1994 campaign. . . . If the NPF had repaid nothing – not one dime – the RNC had the resources available to pay for everything it did."

Outside the hearing room, Alan I. Baron, the committee's chief Democratic lawyer, disputed this. He said that while the RNC may have had other money available, the $1.6 million went into an account for the support of state parties that had a balance of only $713,738 on the day of that crucial infusion.

In a sharp exchange with Barbour, Sen. Robert G. Torricelli (D-N.J.) said the Young Brothers money "carried the Republican Party into Election Day 1994." Without it, he said, the account that supplied most of the national party's contributions to state parties would have had a deficit on some days just before the election.

"You are wrong in the facts and wrong in the effect," Barbour retorted. He said the RNC raised money from other sources every day leading to the election and also had a line of credit that could have been used if necessary.

Thompson questioned Barbour about his failure to make good on a promise to Ambrous Tung Young, the Hong Kong businessman who owns the development company, that the RNC would repay the loan if NPF defaulted on it. NPF did default and Barbour put such a repayment request to the RNC board, but it was shunted aside and Young's corporation ended up losing $700,000.

Thompson said the RNC had a "moral obligation" to make good on Barbour's pledge and suggested that he should call on the committee to do so. "It looks to me like we owe him some money," he said.

Thompson also said that because of the close ties between the RNC and the NPF, including Barbour's dual chairmanships, it was a "valid question" to ask just how independent the NPF was. Those close ties "would make any appearance of foreign money that much more radioactive, even though it was legal," Thompson said.

Earlier yesterday, Frederick W. Volcansek, who had been a fund-raising consultant for the NPF, told the committee that he informed Barbour and other GOP officials about the Hong Kong origin of the money for the loan guarantee before the loan was made. But questioned about this by Baron, Barbour stuck to his previous assertions that he did not learn that it was Hong Kong money until earlier this year.

"Fred may be right and I may not have heard it because it was irrelevant," he said. Both Barbour and Volcansek argued that it did not matter that the loan guarantee originated in Hong Kong because as a tax-exempt nonprofit organization the NPF could legally accept foreign contributions.

At the time, the NPF, which is now defunct, was seeking tax-exempt status as a nonpartisan policy organization. However, the Internal Revenue Service rejected the tax exemption application, ruling that the NPF was "a partisan, issues-oriented organization" that was "designed to promote the Republican Party." Barbour also said that he either did not hear or did not understand two references to the Hong Kong origin of the loan guarantee money that Young has said he made to Barbour before this year.