February 11, 1998
Republicans Fail to Find China Ties to 'Illegal Gifts'
Excerpts From a Chapter in the Senate Governmental Affairs Committee Report Coverage of Political Fund-Raising Debate
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By DAVID E. SANGER and DON VAN NATTA JR.
ASHINGTON -- Illegal campaign contributions to the Democratic National Committee in the 1996 election originated in bank accounts in "the greater China area," according to the final report of Republican senators investigating campaign finance abuses.
But the committee, in a declassified 13-page chapter obtained by the New York Times, says it could not establish that the Chinese government "funded, directed or encouraged the illegal contributions." The chapter is circulating among member of the committee and the nation's intelligence agencies.
Although the report draws many connections between Chinese interests and various Democratic donors and fund-raisers, it fails to provide evidence that China's government succeeded in funneling money into national campaigns or in influencing policy decisions in Washington.
Yet the report asserts that there is plenty of evidence that Chinese officials intended to do so. It concludes that President Jiang Zemin approved the creation of a Chinese government lobbying group to influence the U.S. Congress. Such lobbying would have been legal if China's representatives had been registered with Congress. The committee concluded that China was chiefly motivated by its desire to match the sophisticated efforts of Taiwan and other major governments.
The report goes on to say that China's zeal quickly resulted in a range of covert activities "designed to influence elections in this country." It also cited a "fragmentary" report that China attempted to influence the 1996 presidential election.
The so-called China chapter of the 1,500-page final report represents the final conclusions of the Senate Committee on Governmental Affairs, led by Sen. Fred Thompson of Tennessee. In July, Thompson opened the committee's hearings with the assertion that there was "a Chinese plan to subvert our election process."
After nearly a year of investigation here and in Asia, and after 32 days of hearings that were televised last summer and fall, the committee "still cannot determine conclusively whether the P.R.C. funded, directed, or encouraged the illegal contributions" to the Democratic National Committee.
The report describes a wealthy Hong Kong contributor as a man who "reported to and was briefed by Chinese Communist Party officials," but it traces only one donation from the Chinese Consulate in Los Angeles. It went to a Republican who ran for the California State Assembly in 1996.
The committee was blocked in determining the origins of several million dollars in Democratic contributions because they could not get access to overseas banking records, including in China and Macao.
The report is a distillation of intelligence reports and other evidence collected by the committee. But the committee's effort to publish more detail touched off a struggle with the FBI and the CIA over what material could be released without compromising secret sources of information.
As a result, the report hat offers few specific examples. It leaves unanswered a number of the crucial questions that arose from the committee's inquiry and the flood of telephone logs, memorandums and intelligence data -- much of it still secret -- that emerged last year.
It never addresses the motives of all of the main players in last year's campaign finance scandal and cites no instances in which they tried to influence government policy toward China or any other country.
It makes no reference, for example, to the annual congressional debate over renewal of China's most-favored-nation trade status, nor China's effort, still unsuccessful, to be admitted to the World Trade Organization, a move that the Clinton administration has blocked pending a series of concessions by China to open its markets.
In addition, the report cites no sources for its main assertions, but alludes to information that clearly came from intelligence intercepts, including conversations intercepted by the National Security Agency.
For example, the committee report asserts that John Huang, the former Commerce Department employee who became a prolific fund-raiser for the Democratic National Committee, "may possibly have had a direct financial relationship with the P.R.C. Government."
But the report attributes that assertion to "a single piece of unverified information" shared with the committee by intelligence agencies. It draws no conclusion about whether Huang passed on to any third parties the classified information about China and other Asian nations that he received in more than 30 briefings at the Commerce Department.
Similarly, the report concludes that Mochtar Riady and his son James, who control the vast Indonesian conglomerate called the Lippo Group, "have had a long-term relationship with a Chinese intelligence agency," information that was made available to the committee in November, only after its last hearing. But it cites no source for that information and describes contacts between Clinton's Indonesian friends and the Chinese that seemed to mix investing with intelligence gathering. Before working at the Commerce Department, Huang ran Lippo's operations in the United States.
"The relationship is based on mutual benefit," the report concludes, "with the Riadys receiving assistance in finding business opportunities in exchange for large sums of money and other help." It adds that the Chinese intelligence agencies seek to develop relationships with "persons with close connections to the U.S. Government." James Riady got to know Clinton in Little Rock when he was governor of Arkansas, and the Riadys owned a small bank in the state.
The committee concludes that Maria Hsia "has been an agent of the Chinese Government." Ms. Hsia helped arrange a visit by Al Gore to Taiwan in 1989 when he was a senator from Tennessee and organized his visit to the Hsi Lai Temple in Southern California in April 1996 when he was vice president, for a luncheon that the committee concludes was held to raise campaign money.
The report never addresses the question of why a Chinese agent would arrange for an American senator to visit Taiwan, which China regards as a rogue province that is secretly plotting to achieve independence from the mainland.
Ms. Hsia's lawyer, Nancy Luque, denied the accusation on Tuesday.
"The report, unsupported by any evidence whatsoever, recklessly calls into question the loyalty and patriotism of a U.S. citizen," Ms. Luque said. "The selective leaking of these materials has done irreversible damage not only to Ms. Hsia, but to ideals of due process in fair play that brought her to this country in the first place. Those who would adopt the language of this report are the real villains here."
The spokesman for Senate committee's Democrats, James Jordan, said on Tuesday that the Republican report was "thin, murky, ambiguous and far too insubstantial to support the conclusions offered by the majority." But a leading Democratic member of the committee, Sen. Joseph Lieberman of Connecticut, said he thought that the Republican tone was about right.
"The evidence is troubling, suspicious, but in the end highly circumstantial," Lieberman said on Tuesday evening.
He noted, for example, that the intelligence provided to the committee showed that President Jiang "gave overarching approval" for the creation of a "Central Leading Group for U.S. Congressional Affairs," as the Chinese government called its lobbying effort. But there was "no affirmative evidence that tied him to continuing involvement," Lieberman said.
The committee reported that China's plan to influence American elections was driven in part by the visa the Clinton administration granted to the president of Taiwan, Lee Teng-hui, in May 1995. That decision took the Chinese leadership by surprise and underscored its failings in Washington, where Taiwan spends millions in a complex, subtle and well-organized lobbying effort.
The report asserts that while some of China's reaction to that event were public and legal, others were covert.
"Secretly, Beijing worked to prevent similar diplomatic surprises from occurring in the future," the report stated, echoing a statement made by Thompson at his hearing's first session on July 8, 1997. "After President Lee's visit, high-level P.R.C. Government officials devised plans to increase China's influence over the U.S. political process and to be implemented by P.R.C. diplomatic posts in the U.S."
In its summary, the report states that "illegal foreign contributions" made to the Democratic National Committee were "facilitated by individuals with extensive ties" to China.
"The original sources of many of these contributions were bank accounts in the Greater China area," the report says.
Some of those accounts were controlled by Ted Sioeng, a businessman in Hong Kong who bought a pro-Taiwan newspaper in Los Angeles in 1995 and, the committee says, re-oriented it toward Beijing. It notes that Sioeng and his family and businesses spent over half a million dollars on political campaigns in 1995 and 1996, including $400,000 to the Democratic National Committee, and $50,000 to the National Policy Forum, a Republican nonprofit organization.
"The committee has traced much of the money for these contributions to bank accounts in Hong Kong but no further," the report concludes. "Hence, the committee does not know whether these contributions derived from or were directed by the P.R.C. Government."
An official of the Democratic National Committee said on Tuesday that his group had no knowledge of the source of the money at the time it received it.
"If such a plan existed, the DNC had no knowledge of it, nor of any other effort whatsoever to make illegal contributions to the D.N.C," said the official, Steve Grossman.
Finally, the Republican staff members who wrote the report were highly critical of the FBI and the Justice Department, saying in at least two instances that officials from those two entities had failed to alert the committee of "crucial information located in FBI field office files, information months and sometimes years old."
"By the time the information was surfaced and passed along," the report concluded, "some or all of it might have grown stale.".