07/24/97 - 01:07 PM ET - Click reload often for latest version

Barbour contradicted on Hong Kong loan

WASHINGTON - Flatly contradicting former GOP chairman Haley Barbour's testimony, a fund-raiser told Senate investigators Thursday that he informed Barbour in 1994 that a Hong Kong company would provide the source of a loan guarantee that ultimately assisted the Republican Party.

In a deposition obtained by The Associated Press, Barbour told investigators last weekend that this year was "the first time I ever received any information that I considered credible" that the source of the loan guarantee money was foreign.

But Frederick Volcansek, a Houston businessman who helped arrange the $2.1 million loan guarantee for Barbour's nonprofit National Policy Forum, testified today at the Senate campaign finance hearings that Barbour was told back in 1994 before the complex transaction occurred.

"The answer is, yes, I remember telling him but I also said to you we didn't think it was an important part of this issue," Volcansek testified.

Volcansek tried to downplay Barbour's testimony, saying "it doesn't surprise me" that Barbour didn't remember being told of the source because it was perfectly legal for the policy forum to accept foreign donations.

Barbour was expected to testify at the hearings later Thursday, where Democrats were expected to focus on several contradictions between his account of events and other's testimony and documents.

Barbour has told Senate Governmental Affairs Committee investigators he's eager to tell his side of the story.

At issue is $2.1 million in collateral that Hong Kong businessman Ambrous Tung Young provided to guarantee a loan that went to Barbour's NPF in fall 1994. Young's Hong Kong company loaned the money to a Florida subsidiary, which put it as collateral for the NPF loan.

NPF immediately took the loan proceeds and gave $1.6 million to the Republican Party to repay part of an earlier debt - money that the party put into campaigns on the eve of the GOP's historic election victory that gave it control of Congress.

Minority Democrats are trying to build a case that Republicans were just as culpable as the Democratic Party in allowing foreign money to finance election campaigns.

Asked when he learned that money to guarantee the loan was wired from Hong Kong in 1994, Barbour said he did not learn about the Hong Kong source of the money until earlier this year when documents from NPF were subpoenaed for the hearings, now in their third week.

"As they were reviewed, there was in the loan documents some sort of record. I don't recall exactly what it is, but there was a reference in the loan documents," Barbour said.

Barbour, who headed the Republican National Committee and the think tank at the same time, acknowledged that he received a letter on Sept. 17, 1996, that mentioned the foreign money. But he said he discounted the letter, written by one of Barbour's predecessors as Republican chairman, because it was filled with inaccuracies.

The think tank could legally receive contributions from overseas businesses, but the RNC could not. However, Democrats contend the National Policy Forum was inseparable from the party organization - a view that Barbour hotly denies.

Volcansek, who helped raise money for NPF, testified today how he assisted the policy forum in 1994 to reach the loan guarantee agreement with Young's company. He said the transactions was extensively vetted by lawyers to ensure it was legal.

"I was absolutely convinced at the time and remain convinced today that this transaction was legal, ethical and proper in every respect," Volcansek said.

Volcansek said he later assisted the forum in negotiating a settlement with Young's company after the money it put up for collateral was seized by the bank that made the loan because the forum defaulted on its payments. Under the settlement, the RNC paid Young's company $800,000.

Volcansek also criticized Democratic investigators on the committee for seeking a "worldwide request" for records about his tenure as a Commerce Department official in the Bush administration. He such information was "far outside the committee's mandate" to investigate 1996 election abuses.

In another development, Attorney General Janet Reno told reporters the Justice Department was considering waiving a 10-day waiting period to enable the Senate panel to quickly get testimony from five witnesses given immunity.

In his deposition, Barbour found himself at odds with:

-Young's sworn statement, describing his first meeting with Barbour at a Washington dinner in August 1994, when Barbour brought up the need for a loan. The businessman told investigators that he told the Republican chairman he needed time, "so that we can present it to YBD (Young Brothers Development) Hong Kong board of directors for further consideration."

-Young's description of a conversation with Barbour in the summer of 1995 in Hong Kong. Young testified he told Barbour he could not forgive the loan as Barbour desired.

-A document entitled "National Policy Forum Proposal For Ambrous Young, Monday August 15, 1994." The document said that if there was any default in loan payments by the policy forum, Barbour would authorize the RNC to guarantee the loan. Barbour contended the document was incorrect. "The RNC was never going to guarantee a loan," he said.

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