 | INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES
IN CONNECTION WITH 1996 FEDERAL ELECTION CAMPAIGNS
FINAL REPORT
of the COMMITTEE ON GOVERNMENTAL AFFAIRS
SENATE Rept. 105-167 - 105th Congress 2d Session - March 10, 1998 |
Preface
In mid-1995, the President and his strategists decided that
they needed to raise and spend many millions of dollars over
and above the permissible limits of the Presidential campaign
funding law if the President was going to be reelected. They
devised a legal theory to support their needs and proceeded to
raise and spend $44 million in excess of the Presidential
campaign spending limits.
The lengths to which the Clinton/Gore campaign and the
White House-controlled Democratic National Committee were
willing to go in order to raise this amount of money is
essentially the story of the 1996 Presidential campaign
scandal. The President and his aides demeaned the offices of
the President and Vice President, took advantage of minority
groups, pulled down all the barriers that would normally be in
place to keep out illegal contributions, pressured policy
makers, and left themselves open to strong suspicion that they
were selling not only access to high-ranking officials, but
policy as well. Millions of dollars were raised in illegal
contributions, much of it from foreign sources. When these
abuses were discovered, the result was numerous Fifth Amendment
claims, flights from the country, and stonewalling from the
White House and the DNC.
Over a brief period of three months of hearings, the
Committee was able to fulfill its responsibility in laying out
the available facts to the American people. A much clearer
picture of what happened during the 1996 Presidential campaign
has been developed and presented. However, many questions
remain unanswered. It is now the responsibility of the Attorney
General or, more appropriately, an independent counsel to take
these facts and aggressively pursue any and all indications of
criminal wrong-doing. Indeed, the three most important legal
developments to come out of the 1996 campaign finance scandal
are all attributable to the investigation conducted by the
Committee on Governmental Affairs. First, Yah Lin ``Charlie''
Trie, an associate of the President, has been indicted for,
among other things, obstruction of the Committee's
investigation. Second, Maria Hsia, a prominent Democratic
fundraiser, has been indicted for laundering campaign
contributions that were a focus of the Committee's inquiry.
Finally, the Attorney General has requested appointment of an
independent counsel to determine whether Secretary of the
Interior Bruce Babbitt lied to the Committee.
Procedural Background and Overview
introduction
In the wake of numerous revelations in the news media of
unusual, and possibly illegal, campaign contributions to the
Democratic Party during the 1996 presidential campaign, the
Senate Majority Leader announced during the first week of
December 1996, that the Committee on Governmental Affairs would
conduct an investigation on behalf of the Senate into
fundraising practices of the Democratic National Committee
(``DNC'') following the convocation of the 105th Congress in
January 1997. The Majority Leader determined to centralize all
aspects of the inquiry in the Governmental Affairs Committee
(hereafter referred to simply as ``the Committee''), which has
the broadest oversight jurisdiction and most extensive subpoena
authority of any committee of the Senate.
The investigation and its public hearings had three
fundamental and interrelated purposes, consistent with the
constitutional responsibilities of the Senate: informing the
public, examining the operation of the law and of government
officials, and developing a record to assist the Senate in
considering legislation.
The first of these purposes was to create a record of what
occurred during the 1996 election cycle to inform the American
people. A knowledgeable electorate is the cornerstone of
democracy, and the public has a right to know what went on
during the 1996 campaign. The people need to be informed of the
operations of their government and the effectiveness or
ineffectiveness of the laws in order to make informed judgments
at the polls. Because all else flows from the people in a
democracy, this purpose of informing the people must be ranked
as the primary purpose of the investigation. In this regard,
the Committee carried on the official inquiry, while the media
fulfill their similar, but unofficial role, of informing the
people of the facts. The Committee succeeded in laying before
the American people a great deal of information that would
never have become public in the absence of the Committee's
investigation. It was not always the Committee itself that
released the information, but it was the Committee that was
responsible for the release. For example, the White House
released a great deal of information to the media before
producing it for the Committee. None of that information would
have been publicly disclosed without the Committee's demands
for the information from the White House. Vindicating the
public's right to know, more than drawing its own conclusions
or achieving partisan political goals, was the paramount
purpose of the special investigation, and the Committee
succeeded in satisfying this first purpose.
A second purpose of the inquiry and hearings was to
scrutinize the operation of the current legal and regulatory
framework for federal elections. For Congress to legislate and
govern effectively, it must conduct routine oversight to learn
how the government is functioning. Congress also has a
responsibility to examine the operation of current laws on the
government and private parties. This Committee is particularly
well-suited to conduct such a broad oversight inquiry into the
multifarious elements of this scandal because it has the
broadest oversight jurisdiction in the Senate: ``to study or
investigate the efficiency and economy of operations of all
branches of the Government.'' 1
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\1\ S. Res. 54, Section 13(d)(1), 143 Congressional Record S1421
(daily ed. Feb. 13, 1997).
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The investigation reviewed the operations of a large number
of disparate agencies. From the Commerce Department, which
employed John Huang, to the Interior Department and the role of
campaign contributions on the approval of off-reservation
Indian casinos, to the Energy Department, senior officials of
which were caught up in Roger Tamraz's effort to buy access and
to secure a change in U.S. policy in return for political
contributions to the Democratic Party, to the White House staff
and its role in developing and implementing a scheme to evade
the campaign expenditure limits during the President's re-
election campaign, the Committee probed into the often-ignored
corners of government operations to shine light on the impact
political contributions may have on the formulation and
substance of government policy. The hearings informed the
Committee, the Senate, and the American people of these matters
and enhanced our knowledge, not always in a way that made us
proud, but hopefully in a way that will improve our government.
The third purpose of the hearings is the one on which the
Senate's ability to conduct this type of investigation is
founded, its constitutional role to legislate. The Senate
cannot legislate without knowing what is happening. How do the
laws the Congress passes work in the real world? What gaps
exist in their coverage? What gaps exist in the government's
enforcement capabilities? Are there situations where legal
proscriptions do not work? These are the types of questions
relevant to any congressional hearing, as they are central to
the role of Congress in our constitutional republic. The
Committee went forward always bearing in mind that its entire
authority was premised on the underlying legislative
responsibilities of Congress, even though the Committee itself
lacked legislative jurisdiction over many of the items at issue
in these hearings. For this reason, the Committee did not hold
hearings on particular legislative proposals; it never examined
what works and does not work with an eye towards developing and
recommending a legislative solution, which is typically the
responsibility of the legislative committee with legislative
jurisdiction conferred by Rule XXV of the Standing Rules of the
Senate. The hearings did, however, develop a factual record on
which other committees with such jurisdiction can rely in
formulating legislative proposals. Thus, it is the expectation
of the Committee that the facts developed by its investigation
and revealed in its hearings will be of use to the Committee on
Rules and Administration, when it considers legislation to
reform campaign finance laws, and to the other members of the
Senate. Other information developed by the Committee should be
relevant to other committees in the exercise of their
legislative and oversight responsibilities. Finally, some of
the issues investigated by the Committee touched on matters
within the legislative jurisdiction of the Committee, such as
potential violations of the Hatch Act.
This report should be considered an interim report to the
American people and the Senate on the results of the
Committee's investigation. Because the time allotted to the
Committee to conduct the inquiry was severely limited, the
Committee was unable to complete the inquiry, leaving a number
of questions unanswered. This report may serve as a starting
point for other Senate committees, the House of
Representatives, and the Department of Justice to continue the
investigations into the multifaceted aspects of the issues
broached by the Committee's investigation.
procedural chronology
When the 105th Congress convened in early January 1997,
Senator Fred Thompson (R-TN) was confirmed as the chairman of
the Committee. On January 7, 1997, Chairman Thompson named
Hannah Sistare as staff director of the Committee and hired
Michael J. Madigan, a partner in the Washington, D.C., law firm
of Akin, Gump, Strauss, Hauer & Feld, to serve as chief counsel
for the special investigation into campaign fundraising abuses
in the 1996 elections. Senator John Glenn (D-OH) was selected
as the ranking minority member of the Committee, and he named
former Senate Legal Counsel Michael Davidson to serve as
minority chief counsel for the special investigation.
Within a week of hiring Madigan, the Committee hired three
additional lawyers to serve as senior counsel to assist in the
supervision of the special investigation: Harold Damelin,
former chief counsel of the Permanent Subcommittee on
Investigations of the Committee on Governmental Affairs; J.
Mark Tipps, former chief of staff to Senator Bill Frist (R-TN);
and Harry S. Mattice, a partner in the Chattanooga, TN, law
firm of Miller & Martin. In the spring, after a resolution
providing additional funds to the Committee for the purpose of
conducting the special investigation had been approved, the
majority also hired Donald T. Bucklin, a partner in the
Washington, D.C. law firm of Squire, Sanders & Dempsey, as
senior counsel and promoted Tipps from senior counsel to deputy
chief counsel. While some additional staff were hired in
January and February, the hiring of most of the legal,
investigative, and support staff to conduct the special
investigation awaited the adoption by the Senate of a funding
resolution to provide the necessary resources.
On January 28, 1997, Chairman Thompson delivered his
initial statement to the Senate explaining the purposes of the
inquiry.2 The Chairman explained that the Committee
would not be engaged in ``a criminal investigation,'' which is
the constitutional responsibility of the executive. Chairman
Thompson identified two central purposes appropriate for
congressional committees, and these would set the parameters
and tone for the investigation. First, the Committee would
undertake an inquiry with a legislative purpose: to inquire
into and lay out the facts to help inform Congress of the
operation of the law and to assist the Senate in determining
whether relevant laws need to be changed or repealed or new
laws adopted. Second, the Committee would attempt to fulfill
what President Wilson called ``the informing function of
Congress,'' whereby the Committee would seek to find the facts
and reveal them for the American people, so that they can make
informed political choices.
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\2\ See 143 Congressional Record S 716-18 (daily ed. Jan. 28,
1997).
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The Chairman made it clear that the inquiry would not be a
partisan affair directed at the activities of only one
political party. As he informed the Senate, the Committee's
``work will include any improper activities by Republicans,
Democrats, or other political partisans.'' The goal was to
ensure that the American people perceive the investigation and
subsequent hearings ``as being fair and evenhanded.'' The
Chairman was clear, however, that a bipartisan investigation
would not be governed by the need ``to create some false
balance'' between the political parties. The investigation
would examine ``activities . . . not political parties'' and
the Chairman was prepared to let ``the chips fall where they
may.''
As the Committee sought to initiate its inquiry, three
central issues had to be resolved: what was the precise scope
of the inquiry; what resources were to be available to the
Committee; and what time period would be allotted to the
Committee to conduct its inquiry. These three issues consumed a
great deal of time, longer than was anticipated, and, in light
of the time limit ultimately imposed on the inquiry, the delays
in resolving these issues had a significant effect on the
conduct of the inquiry and the hearings.
After consulting with his colleagues in the majority and
reviewing the scope of similar inquiries, Chairman Thompson
proposed an investigation that would examine illegal and
improper campaign fund-raising and spending activities in the
1996 federal election cycle. Chairman Thompson wanted to ensure
that the investigation would not be tied up by partisan
politics, as had occurred when the minority was able to tie up
an extension in the authorization for the Senate Special
Committee to Investigate Whitewater Development Corporation and
Related Matters in the 104th Congress. He therefore sought a
budget that would permit the Committee to conduct a thorough
inquiry without requiring that the Committee seek additional
funds from the Senate while pursuing the investigation. He also
insisted that no deadline be imposed on the investigation,
consistent with the recommendations of former Senators George
Mitchell and Bill Cohen, which they developed in light of their
experience with the Senate's 1987 investigation of the Iran-
Contra affair.
On January 29, 1997, the Committee held its organizational
meeting for the 105th Congress. In addition to its regular
budget, Chairman Thompson proposed a budget of $6.5 million for
the special investigation, which he proposed would look into
illegal and improper activities during the 1996 elections. This
budget was proposed after consulting on January 28 with the
majority members of the Committee.3 No deadline on
the special investigation was proposed. While the minority
supported a broad scope for the investigation, it insisted on a
deadline and refused to support a budget that would allow the
Committee to carry on its work without coming back to the
Senate for additional funding. The minority countered with a
proposal that included a time-limited investigation with a
broad scope and a budget of $1.8 million, which it argued would
be adequate for commencing the inquiry, but which would clearly
be inadequate for completing the inquiry.
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\3\ The proposed $6.5 million budget was based on an evaluation of
the scope of the investigation the Committee was to pursue as well as
comparisons with other major Senate investigations. For example, a
review of the most analogous investigations showed that the 1973
Watergate Committee spent $6.9 million in 1997 dollars; the 1987 Iran-
Contra Committee (a joint Senate-House committee) spent a little over
$5 million in 1997 dollars; the 1995-96 Whitewater Committee spent $1.8
million (not counting Banking Committee resources known to have been
spent on that investigation). Other major congressional investigations
consumed far more than $6.5 million sought by Chairman Thompson (the
1975 Church Committee on the activities of the intelligence community
spent $8.66 million; the 1957 McClellan Committee on improper labor
activities spent $11.46 million; and the 1977 House Select Committee on
Assassinations spent $15.31 million (all figures are in 1997 dollars)).
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Due to the strong disagreement between the majority and
minority on the Committee, the Committee vote on the funding
resolution for the investigation was put over to January 30 to
allow members to try to work out a compromise, which proved
elusive. While the minority supported Chairman Thompson in
seeking a broad scope to the inquiry to allow investigation of
both illegal and improper activities, it was unwilling to pay
for such an expansive inquiry or allow sufficient time to
conduct one. The funding proposed by the minority was grossly
inadequate to support a thorough inquiry of the facts covered
by the broad scope the minority proposed.
When the Committee met on January 30, it unanimously
approved a broad scope to allow the Committee to investigate
illegal or improper activities in connection with 1996 federal
election campaigns. By a 9-4 vote, the Committee then approved
a proposed budget of $6.5 million for an investigation without
a deadline.4 The Committee voted to include within
the broad scope of its investigation:
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\4\ The three additional minority members of the Committee opposed
the resolution by proxy, but proxy votes are not counted on a motion to
report a measure to the Senate from the Committee. Rule 3C, Rules of
the Committee on Governmental Affairs. See 143 Congressional Record
S1195 (daily ed. Feb. 10, 1997) (reprinting the Committee Rules).
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Illegal or improper fund-raising and spending
practices in the 1996 federal election campaigns,
including but not limited to:
Foreign contributions and their effect on the
American political system;
Conflicts of interest involving federal
officeholders and employees, as well as misuse
of government offices;
Failure by federal government employees to
maintain and observe legal barriers between
fund-raising and official business;
The independence of the presidential
campaigns from the political activities pursued
for their benefit by outside individuals or
groups;
The misuse of charitable and tax-exempt
organizations in connection with political or
fund-raising activities;
Unregulated (``soft'') money and its effect
on the American political system;
Promises and/or the granting of special
access in return for political contributions or
favors;
The effect of independent expenditures
(whether by corporations, labor unions, or
otherwise) upon our current campaign finance
system, and the question as to whether such
expenditures are truly independent;
Contributions to and expenditures by entities
for the benefit or in the interest of public
officials; and
To the extent they are similar or analogous,
practices that occurred in previous federal
election campaigns.5
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\5\ See S. Rep. 105-7, Report of the Committee on Governmental
Affairs to Accompany S. Res. 39, p. 3.
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As provided by the Standing Rules of the Senate, the
proposed funding resolution was referred to the Committee on
Rules and Administration. Due to controversy over the scope of
the investigation, the amount of money being sought, and the
lack of a deadline, the Rules Committee decided to consider the
Committee's routine, recurring budget request with those of all
other committees and then consider the budget request for the
special investigation separately. On February 6, the
Committee's recurring budget was to be considered by the Rules
Committee, and the request for funding the special
investigation was specifically put off and was not to be
considered. On that date, Chairman Thompson testified in favor
of the Committee's recurring budget request, but Senator Glenn
opposed the request, arguing that the recurring budget for
normal Committee activities not be approved until the
disagreement over the funding for and scope of the special
investigation was resolved. Nevertheless, the Rules Committee
approved the Committee's recurring budget together with those
of all other Senate committees. This recurring budget was
adopted by the Senate in S. Res. 54.6
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\6\ S. Res. 54 was approved by the Senate by unanimous consent on
February 13, 1997. 143 Congressional Record S 1418 (daily ed. Feb. 13,
1997).
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Major issues surrounding the investigation's scope,
duration, and funding remained. While discussions among the
various parties were underway to resolve these issues, the
Committee initiated its investigation. In January, the small
majority staff of the special investigation started to put
together a list of the central figures in the scandal from news
media accounts in preparation for the issuance of subpoenas.
The minority was asked in January to develop its own list of
potential recipients of subpoenas. On February 7, 1997, the
majority staff provided copies of proposed subpoenas to the
minority staff pursuant to Rule 5C of the Rules of Procedure of
the Committee on Governmental Affairs.7 Additional
subpoenas were presented to the minority on February 10, 1997.
That same day, a list of all subpoenas proposed by the majority
was provided to all members of the Committee.
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\7\ See 143 Congressional Record S 1195 (daily ed. Feb. 10, 1997)
(reprinting the Committee Rules).
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On February 13, 1997, the Committee held a business meeting
to discuss the 54 proposed subpoenas. At that meeting, the
Committee approved the issuance of 44 subpoenas by unanimous
consent. The remaining 10 subpoenas were authorized to be
issued by a vote of the Committee, but their issuance was
deferred until February 19.
Despite the fact that the minority had been asked in
January to develop a list of individuals and groups it believed
ought to be subpoenaed, no such minority list was ready by
February 13. On that day, the minority directed its legal staff
to start the task which the majority had proposed to the
minority in January.
Additional subpoenas were proposed to the minority on
February 24, 1997, and the Committee staff moved ahead and
began interviewing relevant persons on February 25, 1997. The
next day, Michael Davidson was replaced as minority chief
counsel by Alan Baron, a partner in the Washington, D.C. law
firm of Foley, Hoag & Eliot.
While these steps towards initiating the investigation were
being taken, serious questions remained over whether the Senate
would even conduct the inquiry, despite the serious allegations
that had arisen in the media. On February 27, 1997, the Senate
Minority Leader announced that the minority would filibuster
the resolution to fund the special investigation unless
agreement were reached on the amount of funding and a cut-off
date for the probe and its scope. The Minority Leader also
insisted on a firm date for Senate consideration of campaign
finance reform legislation as a condition of allowing the
special investigation to go forward.
In an effort to move forward, on March 4, 1997, Chairman
Thompson reduced the budget request for the investigation to
$5.7 million, but continued to oppose the imposition of a
deadline on the investigation to avoid delaying tactics
designed to stretch the investigation out to the cutoff date.
The proposed funding resolution was to come before the
Rules Committee on March 6, 1997. While the Minority continued
to seek a cut-off date and limited funding to allow them to
control the investigation, many Republicans were concerned
about the broad scope of the inquiry, which allowed the
investigation to look into improper as well as illegal
activities. Many Republicans feared that if that broad scope
approved by the Committee were adopted, the investigation would
lose its focus on the more serious illegal activities during
the 1996 federal elections, and thus be sidetracked into
possible activities that were improper but not illegal. Thus,
as the Rules Committee moved to consider the issue, the
possibility was strong that no investigation would take place.
On March 5, 1997, the Majority Leader decided to strike
what he thought would be an appropriate compromise. Under the
Majority Leader's plan, the scope of the inquiry would be
narrowed to encompass solely illegal activities. This change
would meet Republican concerns. He also proposed a deadline of
December 31, 1997, a change that would meet the Democrats'
concerns. Finally, he proposed a budget of $4.35 million, an
amount he thought adequate to conduct the investigation through
the end of the year. Chairman John Warner (R-VA) of the Rules
Committee agreed to offer the Majority Leader's proposal as a
compromise.
On March 6, 1997, the Rules Committee heard testimony from
Chairman Thompson and Senator Glenn on the funding resolution.
Both Senators opposed the narrow scope of the proposed
compromise, and Chairman Thompson argued against imposing a
deadline on the inquiry. Nonetheless, Chairman Warner offered
the compromise amendment developed by the Majority Leader to S.
Res. 39, the funding resolution, which was approved by the
Rules Committee on a party-line 9-7 vote.
On March 10, 1997, the Committee filed its report, as
required by Rule XXVI.9(a) of the Standing Rules of the Senate,
justifying the Committee's request for non-recurring funding to
support the special investigation.\8\ The Senate took up the
funding resolution that day, and debate continued into March
11. During the debate, Senators from both the majority and
minority expressed concern over the narrowed scope of the
inquiry. To meet these concerns, Chairman Warner and the
Majority Leader offered an amendment that would have required
the Committee to refer to the Rules Committee any evidence of
improper activities in connection with the 1996 federal
elections.\9\
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\8\ See S. Rep. 105-7, Report of the Committee on Governmental
Affairs to Accompany S. Res. 39, Authorizing Expenditures by the
Committee on Governmental Affairs.
\9\ See Amendment No. 22, as modified. 143 Congressional Record
S2097 (daily ed. March 11, 1997).
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Because the distinction between what was illegal and what
was merely improper was vague at the time and has continued to
befuddle many acute observers, including the Attorney General
of the United States, some members of the Committee took the
position that this proposed amendment was not a satisfactory
resolution. The Majority Leader thus offered Amendment No. 23
for himself, Chairman Thompson, and Chairman Warner to amend S.
Res. 39 as reported by the Rules Committee to broaden the scope
of the investigation so that it would cover improper as well as
illegal activities.\10\ Amendment No. 23 was approved by a vote
of 99-0 with one senator voting ``present,'' \11\ and S. Res.
39 was also approved, as amended, by the identical vote.\12\
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\10\ See 143 Congressional Record S2109 (daily ed. March 11, 1997).
\11\ Id. at S2114.
\12\ Id. at S2125.
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Overview of the Investigation
With the approval of $4.35 million in funding for the
special investigation, the Committee was finally able to hire
staff to conduct the investigation. Only nine and a half months
remained for the Committee's investigation, which would now
cover a broad scope. Two months into the Congress, the real
work of the Committee could finally commence.
Scores of allegations of wrongdoing, either illegal or
improper activities, had been brought to the Committee's
attention, primarily through the news media. The Committee
staff had to analyze each of these allegations, prioritize them
for the investigation, investigate them, prepare for hearings,
and hold hearings all in the space of nine months.
The first task was to complete the hiring of necessary
staff. The majority staff eventually grew to include 23 lawyers
(including the chief counsel, deputy chief counsel, and three
senior counsel), two investigators, and necessary support
staff. In addition, the majority staff included an investigator
detailed from the General Accounting Office. The minority staff
included 14 lawyers (including the chief counsel and deputy
chief counsels), and necessary support staff. Both the majority
and minority were able to use jointly the resources of nine
special agents of the Federal Bureau of Investigation, who were
detailed to the Committee. The work of these agents proved of
invaluable assistance to the Committee, which could not have
undertaken the extensive investigation it was able to conduct
without these professional investigators, many of whom spoke
relevant foreign languages, notably Chinese.
Between March and the end of the year, a period of only
nine and a half months, after hiring staff, the Committee
conducted as thorough and complete an investigation as time
permitted. During that span, the Committee issued 427 subpoenas
requested by both the majority and minority either for
documents or for testimony. The Committee received in response
to its subpoenas over 1,500,000 pages of documents, all of
which had to be reviewed and the relevance of each assessed.
Committee staff took 200 depositions and conducted over200
witness interviews. The Committee held 32 days of hearings, taking
testimony from 72 witnesses. Finally, the Committee undertook to
prepare this report as directed by the Senate.
The Conduct of the Investigation
As the Committee started to hire staff, it also began in
earnest to pursue the investigation into illegal and improper
campaign fund-raising and spending activities during the 1996
election cycle. In addition to the first 54 subpoenas issued in
February, the Committee issued nine subpoenas on March 26,
1997.
Two weeks later, on April 9, 1997, the Committee issued
another 10 subpoenas, including the first six requested by the
minority. In doing so, the Committee demonstrated its
willingness to follow the Chairman's commitment to proceed in a
bipartisan manner to investigate illegal and improper
activities that may have been committed by supporters of either
political party.
Also on April 9, the Committee sent its initial request for
documents, video and audio tapes, e-mail, and other records to
the White House. This request had been discussed in advance
with the Counsel to the President and his staff to ensure
prompt compliance. It contained the first 28 specific document
requests the Committee would make of the White House.
Unfortunately, it also led the White House to begin in earnest
its efforts to obstruct and delay the investigation so as to
run the Committee up against the deadline imposed by the
Senate. The White House's production of records was so poor
from the earliest stages of the investigation that on May 13,
about one month after the first request was sent, Chairman
Thompson called Erskine Bowles, Chief of Staff to the
President, to express his concern over the slow pace of White
House document production. Although Bowles promised improved
performance, the White House's responses to the Committee's
document requests remained so poor as to force the Committee to
issue a subpoena to the White House on July 31 by unanimous
vote. Even after it received the Committee's subpoena, however,
the White House's production remained untimely and laggard,
culminating in the belated production in October of relevant
videotapes responsive to the Committee's April document
request. The White House's obstructionism in this investigation
brought discredit on the President and his staff.
The Committee issued its first 17 subpoenas for bank
records to seek to trace the source of political contributions
on April 15 and April 17, 1997. On May 22, 1997, the Committee
voted to issue 43 additional subpoenas, including one to the
American Federation of Labor-Congress of Industrial
Organizations (``AFL-CIO'') and several to individuals
associated with the National Policy Forum (``NPF''), a think-
tank founded by the Republican National Committee (``RNC''). An
additional 26 subpoenas, 23 of which were for bank records,
were issued on June 3, 1997. The final subpoenas for documents
and records issued by the Committee prior to the start of its
public hearings were approved on June 12, when the Committee
voted to issue 24 subpoenas.
The votes on May 22 to issue subpoenas marked the first
participation in the investigation by Senator Bob Smith (R-NH)
and Senator Robert Bennett (R-UT), who had been selected to
replace Senator Ted Stevens (R-AK) and Senator William Roth (R-
DE) on the Committee for the duration of the
investigation.13
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\13\ See S. Res. 89. 143 Congressional Record S4915 (daily ed. May
21, 1997).
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At the Committee business meeting on June 22, Chairman
Thompson announced that the public hearings would begin on July
8, despite the fact that the investigation had been ongoing in
earnest only for a little over three months. Nonetheless, the
existence of the December 31 deadline to complete the
investigation demanded the start of hearings this early,
particularly in the face of the upcoming August recess.
From the time the investigation was authorized, the
Committee was issuing subpoenas and receiving a large number of
documents from many parties. The Committee had also started
interviewing and deposing witnesses during the spring. The
investigation was proceeding with a broad focus because of the
large number of disparate allegations that had been raised
concerning possibly illegal or improper activities during the
1996 federal elections.
To conduct a thorough and comprehensive inquiry into both
illegal and improper activities, including the role of non-
profit groups in influencing federal elections, Chairman
Thompson indicated during the spring that the Committee's
inquiry would proceed in two phases. The first phase would
focus on illegal activities engaged in by candidates and
political parties. The emphasis of this first phase would be on
trying to determine the amount of foreign money contributed to
candidates and parties during the 1996 elections. An additional
area of focus of the first phase of the inquiry would be the
laundering of campaign contributions, as related to foreign
contributions, which were often laundered through those who
could lawfully contribute. Other areas of inquiry that would be
covered by the first phase were the sale of access and policy
decisions in return for political contributions. The second
phase of the investigation would focus on the role of non-
profit and issue advocacy groups and labor unions in the 1996
elections, particularly the issue of whether these groups
illegally coordinated their expenditures with the White House,
the parties, or particular candidates or otherwise engaged in
improper activity.
As the investigation proceeded and the Committee sought to
prepare for the start of public hearings, it encountered
significant obstruction to its inquiry from several sources.
Despite promises of cooperation, the White House continued to
produce little information, slowly, and what the White House
did produce to the Committee was often released first to the
news media, especially if the information was deemed
embarrassing to the President. The DNC, whose 1996 campaign
fundraising and spending practices had led directly to the
Senate authorizing the investigation, was similarly
recalcitrant in producing relevant documents in a timely
manner. Both the White House and the DNC, which acknowledged
acting in concert in formulating a strategy to respond to the
1996 campaign fundraising improprieties,14 appeared
to have developed a shared strategy based on the Senate's
decision to impose a deadline on the investigation: they would
produce information slowly, make any conceivable objection to
its production, and then produce only a portion of it after
requiring great exertion by the Committee in an effort to delay
the inquiry until it ran out of time.
---------------------------------------------------------------------------
\14\ The DNC even attempted to protect information by asserting the
attorney-client privilege both over document production and in
depositions based on discussions between the DNC witnesses and White
House officials, including White House lawyers. In a June 6, 1997
order, Chairman Thompson overruled the assertion of the attorney-client
privilege as to discussions between DNC officials and White House
lawyers.
---------------------------------------------------------------------------
Despite the delaying tactics of the White House and DNC,
the Committee developed a great deal of information in a
relatively short period of time. Large numbers of documents had
been received from many sources, and depositions and interviews
were being conducted. In addition, on June 6, 1997, three
members of the majority staff, two detailed FBI agents, and one
member of the minority staff undertook an investigative trip to
Hong Kong, Taiwan, Macao, and Indonesia to collect information
and interview witnesses.15
---------------------------------------------------------------------------
\15\ The Committee sought permission to send staff to the People's
Republic of China (PRC) to interview witnesses there, but the PRC
refused to issue visas to Committee staff for the purpose of conducting
fact-gathering within the PRC. Accordingly, no staff traveled to the
PRC.
---------------------------------------------------------------------------
Of perhaps equal importance to the information the
Committee was gathering, however, was the information the
Committee was unable to obtain. Thirty-five witnesses with
information relevant to the Committee's investigation asserted
the Fifth Amendment right against self-incrimination and
refused to testify and/or produce documents in response to a
Committee subpoena. In late June, the Committee began
considering whether to grant immunity to some of the witnesses
who had invoked their Fifth Amendment right. On June 27, the
Committee voted to confer immunity on four witnesses. On July
23, the Committee voted to immunize another five witnesses.
Thus, the Committee voted to immunize nine witnesses, five of
whom eventually testified in open session during the
Committee's hearings. An additional ten potential witnesses
fled the country and were beyond the Committee's ability to
issue legal process. The Committee was unable to contact any of
these individuals during the staff's foreign trip. While the
Committee was able to interview a number of foreign witnesses
during that trip, 12 potential foreign witnesses who were
contacted refused requests for interviews, among whom were some
of the most important, including James Riady and Ng Lap Seng.
In addition to Committee's struggle with the obstructionist
tactics of the White House and the DNC, it encountered
resistance from a number of non-profit organizations that
received subpoenas in July, when the Committee started planning
to conduct the second phase of its investigation. Many of the
non-profit organizations that refused to comply had reportedly
played significant roles in the 1996 elections. The Committee
was interested particularly in seeking to determine whether
these organizations, which had primarily engaged in making
allegedly independent expenditures to broadcast so-called issue
advocacy advertisements, had coordinated their activities with
candidates or political parties in violation of the Federal
Election Campaign Act. The Committee subpoenaed a total of 31
such organizations. Of these, a number refused to produce
documents to the Committee, asserting a variety of
constitutional objections, most of which were without any legal
foundation.
the impact of the deadline
The inability of the Committee to procure large amounts of
relevant information was largely attributed to the imposition
by the Senate of the December 31, 1997, deadline. This deadline
essentially invited witnesses and organizations to refuse to
comply with subpoenas. The deadline also encouraged other
witnesses and organizations, particularly the White House and
the DNC, to produce documents and videotapes responsive to
Committee subpoenas in a slow, drawn out manner in an effort to
run the clock out on the Committee's investigation.
Shortly after the Committee issued its first set of
document subpoenas, several recipients informed the Committee
that they were invoking their Fifth Amendment right against
self-incrimination and would therefore not produce responsive
documents. The Fifth Amendment privilege does not, however,
protect the contents of documents. It can protect the act of
producing documents when that act is itself testimonial (i.e.,
the act of production demonstrates the existence of a
particular document). This ``act of production'' privilege
under the Fifth Amendment only applies to personal documents;
it does not apply to the act of producing business records, for
example, that happen to be in the possession of the person
subpoenaed.
In the absence of the December 31 deadline, the Committee
could have sought a judicial determination as to the
appropriateness of various witnesses' efforts to assert broadly
their Fifth Amendment privilege against self-incrimination with
respect to all the documents in their possession. Due to the
December 31 deadline, however, the Committee was essentially
foreclosed at the outset from pursuing the routine course of
seeking a judicial determination as to the appropriateness of
the large number of Fifth Amendment claims. The deadline made
it unlikely the Committee would have ever received the
responsive documents in a timely manner. Had the Committee
sought to enforce its subpoenas against Huang, Webster Hubbell,
Yah Lin ``Charlie'' Trie, Mark Middleton, and the other central
witnesses who refused even to produce documents, it is likely
that the judicial subpoena enforcement actions would not have
been completed in time to receive the documents had it
prevailed in the enforcement actions. Even had the documents
been received prior to the expiration of the deadline, they
would have been received so late as to have been virtually
useless.
Had the Committee filed enforcement actions in April,
responsive pleadings would have been due in May. The district
judge would then have had to review the relevant documents in
camera, a time-consuming task. Even with an expedited decision,
the Committee staff determined it was unlikely to receive a
decision before July, and any decision rendered by a district
judge would have been subject to an appeal, which almost
certainly would have taken to close to the end of the year.
Because of this likely timeline, the Committee staff
determined not to expend resources to litigate enforcement
actions that would not benefit the investigation. Had the
Committee chosen to pursue enforcement actions, its staff would
have been expending its limited time on enforcement rather than
on the investigation itself. Such a diversion of resources was
not an option given the limited amount of time in which the
Committee had to conduct its investigation and hold hearings.
In effect, the Committee had no choice but to proceed without
all the documents or testimony relevant to the investigation,
or else it might have run out of time and could have conducted
no investigation at all.
The inability to pursue these initial enforcement actions
was due directly and solely to the deadline imposed by the
Senate on the duration of the investigation. Once the initial
pattern hadbeen set whereby the Committee did not seek to
enforce its lawful process, others were encouraged to flout the
Committee's subpoenas. Most troubling of all were the organizations
which had played significant roles and spent large sums of money during
the 1996 election cycle. As was already noted, the Committee issued a
subpoena to the AFL-CIO on May 22, 1997 requiring it to produce
responsive documents to the Committee by the middle of June. Over two
months late, on August 20, 1997, the AFL-CIO finally informed the
Committee that it would not produce any documents in response to the
subpoena, other than a few pages of documents that were already in the
public domain. Again, the deadline prevented the Committee from seeking
to enforce the subpoena.
On July 31, 1997, before the AFL-CIO expressed its contempt
for the lawful processes of the Senate, an additional 24 non-
profit organizations active in the 1996 federal election
campaigns were subpoenaed to permit the Committee to determine
whether these organizations had acted legally by making
independent expenditures or illegally by coordinating their
activities with candidates and political parties. With the
example of the AFL-CIO and the Committee's powerlessness to
proceed against the AFL-CIO set before them, a number of these
24 non-profit organizations informed the Committee in late
August and early September that they would not comply with the
subpoenas they had received. Among these organizations that
refused to comply was the Teamsters union, whose documents were
clearly relevant to the Committee's inquiry, as three of its
officials have pleaded guilty to a participating in a broad
criminal conspiracy that included contribution swaps between
the union and the DNC.16
---------------------------------------------------------------------------
\16\ The investigation into the Teamsters has broadened and media
reports indicate that the second-ranking figure of the AFL-CIO, Richard
Trumka, has invoked his Fifth Amendment right against self-
incrimination in response to the grand jury. Trumka simply ignored a
Committee subpoena seeking his deposition testimony, and the reason for
that is now obvious: he wanted to delay the embarrassment to organized
labor of having one of its most senior officials assert his Fifth
Amendment rights.
---------------------------------------------------------------------------
The deadline not only prevented the Committee from
enforcing its subpoenas, but also encouraged other subpoena
recipients to dribble documents out over months and months in
an effort to run out the clock on the Committee. The parties
that perfected this routine to a high art were the White House
and the DNC. The particulars of the delays practiced by these
entities are set out in detail in the body of the report.
Suffice it to say here that the White House continued the
pattern of delay, obstruction, and evasion that it had
practiced in the House Travel Office and Senate Whitewater
investigations. The DNC studied from the White House playbook
and apparently learned its lessons well.
It was not only these political entities that failed to
produce relevant information to the Committee in a timely
manner. Even though the possibility that foreign governments
may have sought to influence U.S. elections was a central focus
of the investigation, the FBI failed to find critical and
relevant information in its own files until well after the
hearings had started and, in one importance instance, not until
after the hearings had ended.
The deadline had one further important effect on the
investigation. Because the work of the Committee had to be
completed by the end of the year, the Committee was unable to
proceed in the most orderly fashion of conducting and
completing its investigation and then holding hearings to lay
the facts before the Senate and the American people. Instead,
the Committee had to begin holding hearings while the
investigation was still quite new and ongoing. Many of the
basic facts of several aspects of the investigation had not yet
been developed when the hearings commenced.
the hearings
Although its investigation had then been underway in
earnest--with Senate-approved funding and an adequate staff--
only for three and a half months, the Committee started holding
public hearings in July 1997. By the time public hearings had
concluded at the end of October, the Committee had held 32 days
of hearings at which 72 witnesses testified.17
---------------------------------------------------------------------------
\17\ The Committee heard from 70 different witnesses; two witnesses
appeared twice.
---------------------------------------------------------------------------
With jurisdiction encompassing such a broad range of
wrongdoing and with such little time available, the Committee's
selection of witnesses and subject matter for its public
hearings required making difficult choices. The choice of
subject matter for individual days and segments of hearings at
this early stage of the inquiry, as outlined by Chairman
Thompson in his ``two-phase'' approach, was dictated both by a
focus on campaign finance illegalities and by a process of
issue triage, whereby the Committee restricted itself to the
most serious matters it was capable of properly developing in
the time available.
Because much of the Committee's initial inquiry focused on
the most troubling issues of foreign contribution-laundering,
the first month of hearings focused largely on these matters.
Much information relevant to this aspect of the inquiry
remained unknown because of the large number of potential
witnesses who chose to flee the country or invoke their Fifth
Amendment rights. Furthermore, because it implicated sensitive
U.S. intelligence and counter-intelligence activities, much of
the relevant information was classified by executive branch
agencies and could not be disclosed in open session. While
Committee members obtained a picture of the U.S. intelligence
and law enforcement communities'' understanding of such issues,
it proved impossible for the Committee to convey more than the
mere outlines of the situation to the American people. The
Committee was able, however, to bring to light evidence that
foreign-source contributions to the DNC were laundered through
domestic ``straw donors'' during the 1996 election cycle.
In addition to illegal foreign contributions and the
laundering of such funds, the hearings focused on campaign
fundraising that took place on government property. The
Committee heard evidence, for example, of widespread
fundraising in the White House. It also heard testimony
regarding fundraising solicitations from government offices
using government telephones, in violation of 18 U.S.C.
Sec. 607. The hearings also inquired into whether the DNC,
particularly its fundraising and advertising activities, were
run out of the White House by federal employees.
The Committee uncovered a donation-laundering scheme
involving a prominent Democratic fundraiser and the
exploitation of a foreign religious institution that began at
least as early as 1993 and continued through the 1996 election,
the principal architects of which have reportedly been linked
to the intelligence service of a foreign government.
Having discovered that part of the scheme to raise large
contributions for the DNC involved the sale of access to senior
government officials--thereby also offering major donors the
concomitant opportunity to purchase policy concessions through
an implicit quid pro quo arrangement, the Committee also turned
its attention to these matters.
The Committee also held hearings to explore the legal
context in which the abuses of the 1996 elections occurred.
Although the Committee lacks legislative jurisdiction over
campaign finance reform legislation, its hearings had
established a record of the operation of current laws. The
Committee sought to explicate the legal and institutional
context in which the abuses and evasion of law which its
investigatory hearings were highlighting occurred, and it heard
from leading experts on campaign finance issues, who helped
explain what had gone wrong in 1996.American people. The
Committee was able, however, to bring to light evidence that foreign-
source contributions to the DNC were laundered through domestic ``straw
donors'' during the 1996 election cycle.
In addition to illegal foreign contributions and the
laundering of such funds, the hearings focused on campaign
fundraising that took place on government property. The
Committee heard evidence, for example, of widespread
fundraising in the White House. It also heard testimony
regarding fundraising solicitations from government offices
using government telephones, in violation of 18 U.S.C.
Sec. 607. The hearings also inquired into whether the DNC,
particularly its fundraising and advertising activities, were
run out of the White House by federal employees.
The Committee uncovered a donation-laundering scheme
involving a prominent Democratic fundraiser and the
exploitation of a foreign religious institution that began at
least as early as 1993 and continued through the 1996 election,
the principal architects of which have reportedly been linked
to the intelligence service of a foreign government.
Having discovered that part of the scheme to raise large
contributions for the DNC involved the sale of access to senior
government officials--thereby also offering major donors the
concomitant opportunity to purchase policy concessions through
an implicit quid pro quo arrangement, the Committee also turned
its attention to these matters.
The Committee also held hearings to explore the legal
context in which the abuses of the 1996 elections occurred.
Although the Committee lacks legislative jurisdiction over
campaign finance reform legislation, its hearings had
established a record of the operation of current laws. The
Committee sought to explicate the legal and institutional
context in which the abuses and evasion of law which its
investigatory hearings were highlighting occurred, and it heard
from leading experts on campaign finance issues, who helped
explain what had gone wrong in 1996.
On October 1, 1997, as these ``policy'' hearings came to a
close, the Committee learned that the White House had only
recently discovered a large number of video and audio tapes
responsive to requests for information the Committee had made
as early as April and called for in the July subpoena as well.
The story of the White House video tapes, the contents thereof,
and the White House's failure to produce them in a timely
manner would become a focus of the remaining month of public
hearings.
As the first phase of the Committee's hearings moved
towards completion, the Committee had to determine whether to
proceed with the second phase, in which it had intended to
focus on the political activities of various non-profit groups.
Because most of the significant non-profits groups had failed
to comply with the Committee's subpoenas, however, the
Committee had little information beyond that already in the
public domain. By October 1997, moreover, because of the
deadline the Committee had neither the time nor the recourse to
judicial proceedings that would have been necessary to acquire
more information. As a result of the poor compliance or non-
compliance from many of the non-profit groups it subpoenaed,
the Chairman decided not to hold hearings on the role of non-
profit groups, and it is accordingly inappropriate to reach
conclusions about their activities in the 1996
election.18 This phase of the investigation would
surely have added significantly to the Senate's and the
American public's understanding of campaign finance
illegalities and improprieties. Because of the December 31
deadline forced on the Committee, however, it was unable to
undertake this task.
---------------------------------------------------------------------------
\18\ Although investigative hearings on the political activities of
non-profit groups were not held, the activities of some of these groups
were outlined during the Committee's policy hearings in September.
---------------------------------------------------------------------------
The Committee closed its public hearings by examining one
particular quid pro quo, the clearest instance yet uncovered,
on which it could obtain witness testimony, of a change of
government policy undertaken in return for campaign
contributions: the denial of a license to three Indian tribes
in Wisconsin for an off-reservation casino. Secretary of the
Interior Bruce Babbitt was one of the witnesses who testified
on this matter. As a direct result of his testimony before the
Committee, at the time of this writing the Justice Department
is considering whether an independent counsel should be
appointed to investigate Secretary Babbitt's role in this
matter.
After 32 days of hearings in July, September, and October,
Chairman Thompson announced on October 31, 1997, that the
Committee was suspending public hearings, although continuing
its investigation through the end of the year. He determined
that the most important information obtained by the Committee
had already been the subject of public hearings, and that given
existing time constraints and the Committee's lack of judicial
recourse, the remaining material should not be pursued in
public hearings. The Chairman left open the possibility that
new hearings would be held if warranted by new information
developed during the remaining two months of the investigation.
Although certain investigative threads were followed during
November and December and interviews and depositions were
conducted, no additional public hearings were held. The
Committee continued to receive documents and videotapes in
December. The DNC's delivery of 15 boxes of documents on
December 22, 1997, about one week before the expiration of the
Committee's authority, marked the final production of
information to the Committee as officially constituted. In
January 1998, after its jurisdiction had expired, the White
House produced documents on Johnny Chung, which were responsive
to its April 1997 document request, to the Committee. Any
relevant information developed after the public hearings were
ended is included in this report.
the report
S. Res. 39 required the Committee to complete its
investigation by December 31, 1997, and to submit a report to
the Senate by January 31, 1998. This report fulfills that
directive. On March 5, 1998, the Committee held a business
meeting, at which it voted 8-7 to approve this report and file
it with the Senate. Voting with the majority were Chairman
Thompson, Senator Collins, Senator Brownback, Senator Domenici,
Senator Cochran, Senator Nickles, Senator Specter, and Senator
Smith of New Hampshire. Voting in the negative were Senator
Glenn, Senator Levin, Senator Liberman, Senator Akaka, Senator
Durbin, Senator Torricelli, and Senator Cleland. Senator
Bennett was not present for the vote but did submit additional
views.
Among the subjects aired at the hearings and detailed
within this report are the takeover of the DNC by the President
and his staff at the White House, who operated the party
apparatus as a slush-fund for the President's re-election
campaign. Along with that takeover went the dismantling of any
system of vetting contributions and contributors to the DNC to
ensure compliance with the law. The theory was to take in as
much money as possible to buy advertising and worry later about
the Federal Election Commission (FEC), whose meager resources,
in any event, were unequal to the task of policing wrongdoing
on the massive scale engaged in by the DNC during the 1996
election cycle. In effect, gripped by an overwhelming thirst
for money driven by the fear that the Republican victories in
the 1994 congressional elections presaged the defeat of
President Clinton in 1996, the Democratic Party and the
President stopped asking or caring about the sources of this
money.
The Committee's investigation explored the DNC's and the
President's enormous thirst for campaign contributions to
support the President's re-election bid and outlined the abuses
carried out in their pursuit, including selling access to the
President and senior officials through ``coffees'' and White
House ``overnights,'' and blatantly trading access to senior
officials in return for campaign contributions. New sources of
money had to be found. In this climate, the door was opened in
1996 to contributions from unsavory figures, from foreign bank
accounts, and possibly from foreign governments as well. The
Committee's hearings exposed a number of these sources,
particularly hitherto untapped foreign sources of money.
Summary of Findings
background and context
On November 8, 1994, Americans shifted control of both
houses of Congress to the Republican Party for the first time
in 40 years. For a time, the election rendered President
Clinton so weak in the polls that many experts questioned his
``relevance,'' suggesting that he might face a primary
challenge as he attempted to secure his re-election in 1996.
The election results spurred great concern among the
President's supporters that he might suffer a similarly
disastrous defeat in 1996.
In early 1995, the President began meeting with his closest
advisors to develop a plan to ensure his re-election by
``pulling out all the stops'' 1 in campaign
fundraising. At this time, in an atmosphere of abject political
desperation, the seeds were sown which would later grow into
the DNC's variegated fundraising scandals of 1996. The
President and his advisors determined that the key to their
success in the 1996 elections would be to wage immediately a
massive television political advertising campaign of
unprecedented cost.
---------------------------------------------------------------------------
\1\ George Stephanopoulos, ``The View From Inside,'' Newsweek,
March 10, 1997, at 27.
---------------------------------------------------------------------------
In the end, of course, their plan was an astonishing
success: the Democratic Party raised three times as much money
for the 1996 election as it had for the 1992 contest, and
President Clinton was re-elected. The President's success,
however, came at a steep price. In the frenzied drive to raise
such large amounts of campaign money, the Democratic Party
dismantled its own internal vetting procedures, no longer
caring, in effect, where its money came from and who was
supplying it. Worse, their campaign eviscerated federal
fundraising laws and reduced the White House, key
Administration offices, and the Presidency itself, to
fundraising tools.
This increasingly mercenary approach also led the
Democratic Party to view America's ethnic communities as
exploitable ``renewable resources'' for political fundraising.
The DNC's recklessness in raising money from their community
unfairly burdened Asian-Americans with the stigma of
lawbreaking by fundraisers such as John Huang, Charlie Trie,
and Maria Hsia.
For the U.S. political process as a whole, the DNC and
White House's reckless fundraising disregarded an obvious
risk--the danger that powerful foreign nationals, or even
governments, would attempt to buy influence through campaign
contributions. The result of all this was foreseeable,
including: the erosion of safeguards in U.S. election law
designed to guard against political corruption, and
unprecedented amounts of illegal foreign contributions making
their way into Democratic coffers. The Committee uncovered
strong circumstantial evidence that the Government of the
People's Republic of China (PRC) was involved in funding,
directing, or encouraging some of these foreign contributions.
President Clinton has attempted to distance himself from
these scandals by trying to distinguish his own ``official''
re-election campaign (Clinton/Gore '96) from the abuses the DNC
carried out. Based on the evidence compiled by the Committee,
however, this distinction is untenable. Indeed, no one has done
more to erode this very distinction than the President himself,
who with his staff effectively seized control of DNC operations
and ran all Democratic party campaign and fundraising efforts
out of the White House. During the 1996 campaign, the DNC was
the alter ego of the White House.
Deputy White House Chief of Staff Harold Ickes, for
example, ran the DNC on a day-to-day basis and presided over
weekly ``money meetings'' at the White House where he reviewed
the DNC's fundraising and expenditures before passing this
information along to the President and the Vice-President. This
White House control made the DNC's national chairman, Don
Fowler, in effect, subservient to Ickes. The Clinton/Gore and
DNC advertising campaigns were also virtually inseparable,
constituting a seamless web of White House-directed campaigning
that employed all the same consultants, pollsters, and media
producers. Ultimately, in fact, the President himself exercised
total control over the DNC advertising. Having reduced the DNC
into an arm of the White House, President Clinton and Vice
President Gore are responsible for the actions it undertook in
their names and at their direction.
Late in the 1996 presidential campaign, public reports
surfaced about foreign donations to the Democratic Party and
the DNC's improper provision of White House access to well-
heeled foreign nationals. The White House succeeded in
preventing the bubbling scandal from derailing the President's
re-election, but these efforts could not prevent an ever more
complex tale of campaign lawbreaking from coming to light, thus
sparking an ongoing series of Congressional and criminal
investigations that have so far involved the White House, the
DNC, several government agencies, hundreds of witnesses, and
several foreign countries. After the November 1996 elections,
the U.S. Senate determined to investigate allegations of
campaign finance wrongdoing. The resolution authorizing the
investigation contained a significant flaw, however--a deadline
set only nine months after the start of the investigation.
The imposition of the December 31, 1997 deadline virtually
invited witnesses to engage in obstructive tactics, perhaps
none more so than the DNC and the White House. This
obstruction, combined with the sheer complexity of the
investigation, made this deadline the single greatest obstacle
faced by the Committee's inquiry. Moreover, more than 45
witnesses either fled the country or refused to cooperate by
citing their Fifth Amendment privilege against self
incrimination. Despite the Committee's request for help,
President Clinton took no action whatsoever to persuade such
individuals to cooperate. Nevertheless, the Committee was able
to answer many important questions and to uncover evidence that
strongly suggests answers to others. The following pages
summarize the major findings of this inquiry.
the dnc raised millions of dollars in illegal foreign funds
Following the 1996 election, and in the wake of the growing
DNC fundraising controversy, the DNC was ultimately forced to
return $2,825,600 in illegal or improper donations.2
Of this total amount, almost 80 percent was either raised or
contributed by two men--John Huang and Charlie Trie.
Strikingly, both men were longtime friends of President
Clinton, and both were in positions to raise large campaign
contributions because of their personal relationships with the
President. Accordingly, the Committee began its hearings by
focusing significant attention on Huang and Trie, hoping to
answer two interrelated questions: what did President Clinton
and his top aides know about their illegal fundraising
activities, and why was nothing done to curb those activities.
This particular inquiry faced significant obstacles because
Trie fled to China soon after the controversy
arose,3 Huang invoked the Fifth Amendment and
refused to cooperate with the Committee, and the President
declined the Committee's invitation to testify. Despite these
obstacles, the evidence strongly suggests that, at a minimum,
the White House and the DNC received clear signs of danger
concerning both men and simply chose to ignore these warnings.
---------------------------------------------------------------------------
\2\ This figure is according to a June 27, 1997, DNC press release.
The DNC has failed to return additional contributions of questionable
legality.
\3\ Trie voluntarily surrendered to U.S. authorities in February
1998, following his indictment on 15 counts including defrauding the
FEC and obstructing the Committee's investigation.
---------------------------------------------------------------------------
John Huang
Huang first met President Clinton in the early 1980's
through their mutual friend, James Riady, the head of the Lippo
Group, an Indonesian industrial conglomerate. By at least 1992,
while employed by Lippo Bank in California, Huang began to
raise illegal foreign money for the DNC through Lippo owned
shell companies; these contributions were reimbursed with funds
from Lippo's headquarters in Jakarta, Indonesia. His
achievements as a fundraiser, coupled with his and Riady's
close friendship with President Clinton, ultimately propelled
Huang to the Commerce Department as a Deputy Assistant
Secretary in 1993. Despite its accompanying security clearances
and intelligence briefings, however, this job in the government
apparently suited neither Huang nor his patron, Riady, as Huang
was left with less real influence than he had enjoyed as a DNC
fundraiser. By the summer of 1995, therefore, Huang sought to
move to the DNC.
Two things are clear about Huang's obtaining a job as a DNC
fundraiser. First, it would not have occurred but for the
President's personal interest and recommendation. Second, it
took place even though Huang had already engaged in illegal
fundraising from foreign sources while at the Commerce
Department, and despite the DNC's awareness of clear
indications that Huang would continue to raise funds illegally
as the DNC's Vice Chairman for Finance.
The story of Huang's move to the DNC, and the fundraising
abuses that followed, began in the summer of 1995, when Lippo
lobbyist C. Joseph Giroir began trying to persuade the DNC to
hire Huang as a fundraiser specializing in the Asian-American
community. On September 13, 1995, Giroir arranged a meeting
between Huang, Riady, Fowler, and DNC Finance Director Richard
Sullivan, at which they discussed the potential for DNC
fundraising among the Asian-American community. Riady--a
foreign national then living in Indonesia and therefore in a
curious position to be consulted by senior DNC officials about
how the Democratic Party could raise money for President
Clinton's re-election--joined Giroir in telling Fowler that
Huang would be the ideal person to organize an Asian-American
fundraising effort for the DNC.
That same afternoon, Giroir, Riady, and Huang met President
Clinton and Presidential aide Bruce Lindsey in the Oval Office.
Giroir and Lindsey claimed to remember little about this
encounter, but Lindsey admitted that they had discussed Huang's
desire to move to the DNC. After this Oval Office meeting,
Lindsey told Ickes about Huang's interest in becoming a DNC
fundraiser. The President himself asked Ickes to interview
Huang regarding the move to the DNC. After meeting with Huang
to discuss the move, Ickes asked DNC Finance Chairman Marvin
Rosen to interview him for the job.
While Fowler's ambivalence may have caused the DNC to not
pursue Huang's services for most of that fall, Fowler's
position changed very quickly after the President intervened to
indicate his personal interest in Huang acquiring a DNC
position. At a fundraiser on November 8, the President asked
Rosen how Huang's move was progressing, and told Rosen that
Huang had been ``highly recommended.'' The DNC interviewed
Huang five days later, and Fowler hired him that same day.
From the beginning, however, some DNC officials were
privately concerned that Huang might illegally raise foreign
money for the party. Sullivan, for example, worried that Huang
might be another Johnny Chung--an Asian-American donor and
friend of Huang's who had offered in March 1995 to pay the DNC
$50,000 if Sullivan would arrange for five of his Chinese
business clients to attend a radio address with the President.
Because of his misgivings about Huang, Sullivan insisted that
Huang be given an extensive special training session on U.S.
election law by the DNC's general counsel, Joe Sandler. As
Sullivan told Huang, this training session was designed to
ensure that Huang knew laws restricting contributions from
foreign nationals. Sandler, however, denied that he was ever
asked to provide such training.
However, the DNC never undertook the special ``training''
sessions for Huang that Sullivan had recommended. Making
matters worse, despite its grave concerns about Huang, the DNC
agreed to compensate him with an ``unprecedented'' incentive
bonus plan clearly designed to encourage even more aggressive
fundraising. The results were all too predictable: Huang
immediately began illegally raising foreign money for the
Democrats.
Near the end of his tenure at the Commerce Department,
Huang developed a relationship with Arief Wiriadinata--a
landscape architect in Virginia who knew the Riadys because his
father had worked for Lippo in Indonesia, and who, with his
wife Soraya, ultimately contributed$450,000 to the DNC. On
December 15, 1995, shortly after Huang arrived at the DNC, the
President hosted a White House coffee to which Wiriadinata had been
invited by Huang. As captured on one of the videotapes the White House
belatedly released to the Committee in October 1997, Wiriadinata shook
hands with the President and confided to him that ``James Riady sent
me.''
Huang's first fundraising event, for Asian-Americans at the
Hay-Adams Hotel in Washington on February 19, 1996, also raised
early warning signs that the DNC's initial concerns about Huang
were well placed. By March 1996, the DNC discovered that two
donations Huang had raised at this event were illegal
contributions from foreign nationals. These checks, both for
$12,500, were attributable to two individuals who live in China
and run an international trading group based there. Although
these donations were returned, DNC officials continued to rely
on Huang. As the Committee subsequently discovered, the Hay-
Adams event raised at least another $25,000 in unlawful
donations laundered through third-party ``straw donors'' from
the Hsi Lai Temple outside Los Angeles.
Among the prominent Asian businessmen who attended the Hay-
Adams event was Ted Sioeng, a foreign businessman who owns a
pro-Beijing Chinese language newspaper in California and has
close ties to the Chinese government. Though he sat next to the
President at the head table at the Hay-Adams, Sioeng was not
then a resident of the United States, could not speak English,
and was ineligible to make political donations. Sioeng's
presence at the fundraiser--as well as at the head table at the
Hsi Lai Temple fundraiser Huang and Maria Hsia organized for
Vice President Gore two months later, and at another Huang
event with the President only two weeks after that--was
apparently arranged through Huang.
Throughout the remainder of 1996, Huang orchestrated
numerous events from which illegal foreign money flowed to the
DNC. On April 8, 1996, for example, Huang collected $250,000
from John K. H. Lee, a South Korean businessman who had flown
from Seoul to have dinner with the President--in return for a
$250,000 donation in the name of a U.S. subsidiary of his South
Korean business, formed shortly before the check had been
written. Huang arranged this contribution after being told that
Lee was merely ``thinking'' about opening a U.S. subsidiary in
California, and knowing that Lee was a foreign national
ineligible to contribute in his own name. This $250,000
contribution was funded by a wire transfer from Lee's South
Korean company. The DNC, however, found the donation
unobjectionable--at least until the 1996 fundraising scandals
first became public, at which point Lee's was the first
contribution returned.
Shortly thereafter, on May 13, 1996, Huang organized
another major DNC event in Washington, D.C. Like his others,
this affair was heavily attended by foreign nationals; Riady
and Sioeng, in fact, each sat beside the President at the head
table. During the course of the night, Huang arranged for
Yogesh K. Gandhi to meet the President and present him with a
bust of Mahatma Gandhi. Gandhi wanted a business associate to
be photographed presenting the award to Clinton, but the White
House had rebuffed his earlier attempts to arrange the meeting.
In exchange for the May 13 photograph with the President,
Gandhi donated $325,000 to the DNC. This money had, in fact,
been wired from one of Gandhi's business associates in Japan.
DNC officials admitted concerns during the 1996 campaign
about the number of foreign nationals who attended Huang's
fundraisers. It was not until July 1996, however, after an
event attended principally by Asian businessmen and their
families, that Rosen finally directed that Huang not manage any
further presidential events. Despite this concern, however, the
DNC was unwilling to forego Huang's fundraising: the party
deprived Huang of his ability to sell access to President
Clinton, but did nothing to check the money he generated.
The Hsi Lai Temple Fundraiser
At a fundraising lunch held on April 29, 1996 at the Hsi
Lai Temple in Hacienda Heights, California, and attended by
Vice President Gore, Buddhist monastics illegally funneled
$65,000 to the DNC through ``straw donors'' at the instigation
of Hsia, a longtime fundraiser for the Vice President. When
press accounts of this donation-laundering appeared, Temple
officials altered and destroyed evidence to protect the Temple,
Hsia, and the Vice President from embarrassment.
Despite his repeated, albeit inconsistent, denials, it is
reasonable to conclude that the Vice President was well aware
that the Temple event was for the purpose of raising money. The
event was organized by Huang and Hsia, who had longstanding
relationships with Vice President Gore that revolved almost
entirely around campaign fundraising. More specifically, in the
weeks prior to his Temple visit, Vice President Gore was
repeatedly reminded that the April 29 luncheon was a fundraiser
and was even meticulously informed by Ickes of the DNC's
``projected revenue'' for the event. The Vice President
received the last of these notifications of the April 29
lunch's ``projected revenue'' only 24 hours before he received
his briefing notes for the Temple lunch.
The Vice President's staff also knew that the Temple event
was a fundraiser. In March 1996, Deputy Chief of Staff David
Strauss had helped arrange a meeting in the White House with
the head of the Temple, Master Hsing Yun--a meeting which
Strauss believed would ``lead to a lot of $.'' The White House
staff repeatedly referred to the event as a ``fundraiser'' in
internal correspondence, and assigned to it a ``ticket price''
of ``1000-5000 [dollars per] head.''
The Temple fundraiser was merely the most egregious episode
in a longstanding pattern of illegal donation-laundering by
Hsia and the Hsi Lai Temple that stretched back at least to
1993. In that year, Hsia and Huang apparently collaborated in
laundering $50,000 to the DNC from the Hsi Lai Temple and from
Lippo Group sources overseas in connection with a meeting
between Vice President Gore's chief of staff and the chairman
of China Resources, a company linked in press reports to
Chinese intelligence. From 1993 until the general elections of
1996, over $140,000 in Temple money was illegally funneled to
Democratic candidates at Hsia's direction.
This pattern of donation-laundering in 1993-96 derived from
a broader relationship between Hsia, Huang, and Vice President
Gore that began in 1988 when Hsia, Huang, and Riady organized a
trip to Taiwan for then-Senator Gore. Hsia thereafter became a
significant fundraiser for the Senator. As early as 1989, her
fundraising efforts for him involved both monastics from the
Hsi Lai Temple and the illegal ``tallying'' of contributions
through the Democratic Senatorial Campaign Committee
(``DSCC'').
Charlie Trie
Trie first met the President in the late 1970's when he
owned and operated a Chinese restaurant in Little Rock. After
Clinton's election in 1992, Trie sold his restaurant and
openedDaihatsu International Trading Company in Washington, D.C. Soon
thereafter, Trie and his wife contributed large sums to the DNC, and by
1994 he had become a DNC ``Managing Trustee''--a title reserved for the
highest level of party contributor. From 1994 to 1996, Trie contributed
or raised approximately $645,000 for the DNC. In 1994, he contributed
$100,000 to the DNC while earning only approximately $30,000 as
president of Daihatsu. Nor could his firm Daihatsu have made up the
difference: throughout this period, it never made any profit.
In reality, most of Trie's money came from his Asian
business partner, Ng Lap Seng, a hotel tycoon in Macao with
reputed links to organized crime who advises the Chinese
government.4 Ng transferred approximately $1.4
million to Trie from 1994 to 1996, with many of these transfers
arriving through the Bank of China. Sometimes Trie contributed
Ng's money directly to the DNC in his own name. In other
instances, he laundered donations through other Asian-
Americans. Two of these ``straw donors'' made donations to the
DNC so that Ng could attend a White House function.
Accordingly, they donated a total of $25,000 to the DNC and
were reimbursed with money from Ng's account.
---------------------------------------------------------------------------
\4\ Ng refused to speak with Committee investigators who traveled
to Macao.
---------------------------------------------------------------------------
In addition to being a major fundraiser and close friend of
the President, Trie visited the White House 31 times in 1994
and 1995 alone. Intriguingly, Ng, who had no ties to the
President except through Trie, also visited the White House 10
times between June 1994 and October 1996. In one of the more
egregious examples of its dilatory document production,
however, the White House did not reveal Ng's still-unexplained
visits until just hours after the conclusion of the Committee's
public hearing on the activities of Trie and Ng.5
---------------------------------------------------------------------------
\5\ Only after end of the Trie/Ng hearing did the White House
release the ``WAVES'' records documenting Ng's frequent but unexplained
visits to the White House. These records had been requested from the
White House three months earlier.
---------------------------------------------------------------------------
Trie's fundraising efforts won him numerous White House
favors, including a Presidential appointment to the Commission
on U.S. Pacific Trade and Investment Policy--an act requiring a
new Executive Order to expand the size of the Commission. In
February 1996, assisted by a $50,000 donation from his business
partner Ernest G. Green, Trie arranged admission to a White
House coffee for Wang Jun, a Chinese arms dealer and advisor to
the Chinese government. Despite his connections to a major
Chinese armaments firm whose plans to smuggle automatic weapons
into the U.S. the Customs Service even then was investigating,
Wang was not vetted by the National Security Council (``NSC'')
and was admitted to the White House only on the strength of his
relationship with Trie and Green.
In March 1996, Trie wrote to the President on how to handle
U.S.-China relations, which were then tense. This letter was
faxed to the White House on the same day that Trie delivered
almost $500,000 to the Presidential Legal Expense Trust
(``PLET''). The Committee has been unable to determine whether
Trie wrote this letter on his own or on behalf of foreign
interests. Trie received a reply from the President prepared by
NSC staff and personally reviewed by National Security Advisor
Tony Lake.
Trie also set about to help the President and First Lady
defray the considerable personal legal expenses they had
accrued in fending off previous scandals. To this end, Trie
raised in excess of $700,000 from a controversial Buddhist sect
devoted to a woman named Ching Hai, and conveyed this money to
the PLET.
The PLET, however, became suspicious about the source of
Trie's funds. With White House approval, the PLET's executive
director, Michael Cardozo, hired an investigative firm that
determined that the money had been coerced from or laundered
through members of the Ching Hai sect. Nevertheless, soon
after, Trie sat next to the President at the head table of a
$5,000 per person fundraising dinner.
By June 1996, the PLET decided to return Trie's donations.
Rather than publicly reporting his contributions under its
regular practice, the PLET hid the fact that Trie had ever
given money to it. Moreover, the White House knew and approved
of this decision. Despite Ickes' and Lindsey's knowledge of
Trie's suspicious fundraising, neither warned the DNC. As a
result, while the PLET returned his donations, Trie's illegal
contributions to the DNC continued; Trie delivered $110,000 to
the DNC in August 1996 in honor of the President's 50th
birthday.
Both the DNC and the White House claimed complete surprise
that Huang and Trie raised substantial amounts of foreign
money. It strains credulity, however, to suggest that these men
could surreptitiously raise over $2.2 million for the DNC--much
of it from foreign donors at major DNC events the President
attended--without anyone suspecting the truth.
The White House and the Presidency Itself Became Fundraising Tools
The White-House inspired DNC drive for new sources of
campaign cash caused more than just an unprecedented influx of
foreign money into the 1996 campaign. More broadly, it debased
the White House and the Presidency itself by employing both in
constant efforts to raise money. Extensive DNC fundraising
occurred because the President and his advisors, including Dick
Morris, decided that the party's massive advertising campaign
would cost more than could possibly be provided by the ``hard''
money in the President's ``official'' campaign treasury. To
fill the gap, they turned to unregulated ``soft'' money even
though such monies could not by law be used to help a
candidate's campaign for office. Unlike official ``campaign''
contributions, however, DNC ``soft'' money could be raised from
wealthy donors in unlimited quantities. By diverting DNC funds
to campaign advertising controlled by the White House, the
Democrats had the best of all possible worlds: de facto
``hard'' money from key donors in unlimited quantities.
Senior White House and DNC staff developed new ways to use
the Presidency to raise campaign money. Among the favors
merchandised were access to senior decision makers, perks such
as ``overnights'' at the White House, Presidential coffees at
the White House (even in the Oval Office), flights on Air Force
One, seats in the President's box at Kennedy Center, and use of
the White House pool and tennis courts.
In this stampede to use the White House for every
conceivable variety of fundraiser, a number of alarmingly
unsavory characters gained access to the President in return
for campaign contributions. One was Chinese arms dealer Wang
Jun. Roger Tamraz, a major DNC donor, was allowed to meet with
the President on several occasions despite the NSC's opposition
and clear warnings that Tamraz might damage U.S. foreign policy
interests in Central Asia. As noted, Ted Sioeng, a foreign
national with suspiciously close ties to the Chinese
government, sat at the head table with the President or Vice
President at several fundraisers and lunched with Vice
President Gore at the Hsi Lai Temple.
White House Coffees
Perhaps nothing illustrates this merchandising of the
Presidency better than the DNC's White House ``coffees''--
fundraising events at which major donors were provided access
to the President in exchange for their campaign contributions.
Between January 11, 1995 and August 23, 1996, the White
House hosted 103 coffees. Most lasted at least an hour, and the
President attended the vast majority of them. Approximately 60
of these were DNC-sponsored coffees, 92 percent of the guests
at which were major Democratic Party contributors. These guests
made contributions during the 1996 election cycle of $26.4
million, an average contribution of over $54,000 per person,
with one-third of their total donations, some $7.7 million,
given within a month of the donor's attendance at a White House
coffee. For example, the five persons attending a coffee on May
1, 1996, in the Oval Office itself each contributed $100,000 to
the DNC one week later.
White House and DNC officials have strenuously denied that
the coffees were ``fundraisers.'' Numerous DNC documents,
however, including detailed memoranda Ickes prepared for the
President and Vice President, tell a different story, referring
to these White House events as ``political/fundraising
coffees.'' These documents carefully track the ``projected
revenue'' that would be raised by each event--to the point of
specifying amounts ``in hand'' (i.e., collected to date) and
the proportion of each coffee's projected revenue that would be
placed in the party's ``hard money'' and ``soft money'' bank
accounts. While not every White House coffee was a fundraising
event, most clearly were.
The coffees also demonstrate the extensive amount of time
the President was willing to spend with small groups of major
donors, and the extraordinary influence such donors had over
the White House and the President's schedule. The June 18, 1996
coffee organized by John Huang is a case in point. The only
guests who were originally to attend this coffee were three
foreign nationals from the CP Group, a Thai conglomerate. They
were clients of Pauline Kanchanalak, a DNC fundraiser and
lobbyist from Thailand. When DNC officials raised concerns
about the propriety of such a coffee, ``some people that might
be potential [legal] donors, [i.e.,] American citizens,'' were
invited at the last moment. It is clear that the coffee's
essential purpose was to sell the President's time to
Kanchanalak--who, with her mother-in-law, donated $235,000 in
to the DNC the next day--to make her look good in front of her
clients.\6\ Even worse, the only guests professing to have any
memory of the event recall Huang openly soliciting DNC
contributions, in the presence of the President. This was
clearly illegal.
---------------------------------------------------------------------------
\6\ Kanchanalak has since fled to Thailand, has refused to
cooperate with the Committee, and is under investigation by the
Department of Justice for possible obstruction of justice in connection
with evidence subpoenaed by the Committee.
---------------------------------------------------------------------------
Telephone solicitations
In addition to attending many major fundraisers and
innumerable smaller events such as coffees, the President--and,
particularly, the Vice President--were willing to use the power
of their offices to make direct telephone solicitations for
money. Vice President Gore made approximately 45 phone
solicitations from his White House office. These calls may have
raised as much as $800,000 for the DNC.
Based upon the premise that these telephone calls raised
only ``soft'' money, the Attorney General has rejected
suggestions that she recommend the appointment of an
independent counsel to investigate whether these calls violated
a federal criminal law prohibiting the solicitation of campaign
contributions on federal property. The Committee disagrees with
her view that raising ``soft money'' on federal property is
permitted, but significantly, even under the Attorney General's
view, the solicitation of ``hard'' money on federal property is
a crime. As DNC general counsel Joe Sandler revealed to the
Committee, of the money raised by Vice President Gore's
telephone solicitations from the White House, more than
$100,000 was deposited into the DNC's ``hard money'' accounts.
Indeed, the Vice President continued to make telephone
solicitations even after being advised by a DNC memorandum in
February 1996 that it was DNC policy to place a certain
proportion of the money thus raised into ``hard money''
accounts.7
---------------------------------------------------------------------------
\7\ Indeed, the DNC improperly allocated money between ``soft'' and
``hard'' accounts without seeking the express permission of donors, as
is required by federal law.
---------------------------------------------------------------------------
The all-consuming fundraising effort
In some ways, the most troubling result of the White
House's and DNC's ceaseless quest for campaign funding is the
great amount of time the President and the Vice President
themselves actually spent raising money. As Vice President Gore
himself noted, ``we can raise the [necessary] money . . . ONLY
IF--the President and I actually do the events, the calls, the
coffees, etc. . . . And we will have to lose considerable time
to the campaign trail to do all of this fundraising.''
Simply put, 25 years after Congress passed election reform
laws intended to insulate the President from an unseemly and
potentially corrupting involvement with campaign money,
President Clinton spent enormous amounts of time during the
1996 election cycle raising money. In the ten months prior to
the 1996 election, President Clinton attended more than 230
fundraising events, which raised $119,000,000. The President
maintained such a pace for over a year before the election,
often attending fundraisers five and six days each week.
According to Presidential campaign advisor Dick Morris,
President Clinton ``would say `I haven't slept in three days;
every time I turn around they want me to be at a fundraiser . .
. I cannot think, I cannot do anything. Every minute of my time
is spent at these fundraisers.' '' This frenzied pursuit of
campaign contributions raises obvious and disturbing questions.
Can any President who spends this much time raising money focus
adequately upon affairs of state? Is it even possible for such
a President to distinguish between fundraising and
policymaking?
Other Improper or Illegal Fundraising Activities
The unfortunate results of the DNC's chase for money were
not limited to its receipt of illegal foreign money and the
merchandising of the White House itself. DNC pressures to
change government policy developed in response to the wishes of
major party donors.
The Roger Tamraz affair
Lebanese-American businessman Roger Tamraz tenaciously
pursued his agenda with the U.S. Government. ``If they kicked
me from the door,'' Tamraz told the Committee, ``I will come
through the window.'' Unfortunately, his eagerness to promote
his business schemes and enlist the government's support
against the vehement protests of U.S. national security experts
found itself an ally in the cash-hungry DNC. The story of
Tamraz demonstrates, perhaps better than any other episode of
the Democratic fundraising scandals, that nothing was sacred in
the President's desperate search for campaign funds: no corner
of the U.S. Government--not even the Central Intelligence
Agency (``CIA'') or the NSC--was off limits.
An international businessman with significant involvement
in the oil business, Tamraz was wanted by French police and
faces an Interpol arrest warrant for embezzlement in Lebanon.
Tamraz was willing to invest great energy, and significant sums
of money, to secure U.S. backing for his oil pipeline project
in the Caucasus. Rebuffed by officials at the NSC who regarded
his schemes as untenable and harmful to U.S. foreign policy
interests, he began making huge contributions to the DNC. As
Tamraz had intended--and as he admitted to the Committee in his
remarkably candid testimony--these contributions enabled him to
enlist senior party officials like Fowler in helping Tamraz
gain the access to senior U.S. officials that a high-level
inter-agency working group had determined to deny him. His
contributions--both directly to the DNC and to various state
Democratic campaigns at Fowler's personal direction--also won
Tamraz the DNC chairman's intercession in a series of highly
inappropriate contacts with CIA officials. In at least two
conversations with a CIA clandestine operative named ``Bob,''
\8\ to whom he had been referred by Tamraz and who had already
been ``lobbying'' the NSC on Tamraz's behalf, Fowler asked the
CIA officer to help him ``clear Tamraz's name.'' Fowler even
telephoned NSC staffer Sheila Heslin to inform her that ``Bob''
would soon be sending her information about Tamraz. (Despite
taking notes of his discussions with Tamraz about Bob, despite
talking with ``Bob'' on at least two occasions, and discussing
the CIA officer with NSC staffers Nancy Soderberg and Heslin,
Fowler continued to deny any memory of his CIA contacts). After
Tamraz was ``disinvited'' from an October 1995 event with Vice
President Gore by the NSC, his DNC allies arranged for him to
attend a dinner with the Vice President at the home of Senator
Edward Kennedy. Despite the NSC's determined efforts to deny
him access to President Clinton, Tamraz's DNC contributions
bought him no fewer than six private meetings with the
President.
---------------------------------------------------------------------------
\8\ At the request of the CIA, the full name of this clandestine
officer (which is classified) had been withheld. In this report, he
will be described simply by his first name, ``Bob.''
---------------------------------------------------------------------------
Tamraz took the opportunity to discuss his pipeline with
President Clinton at a White House dinner on March 27, 1996.
The President assured Tamraz that someone would ``follow-up''
with him, and detailed Presidential advisor Thomas F. ``Mack''
McLarty to look into the matter the next day. Tamraz next met
the President at a White House coffee on April 1, 1996, at
which, Tamraz discussed his pipeline ideas with McLarty.
McLarty asked Energy Department employee Kyle Simpson whether
some reason could be found to support Tamraz's pipeline. When
Simpson conveyed McLarty's instructions to his colleague John
Carter, he told Carter that Tamraz had donated $200,000 to the
DNC and was considering giving an additional $400,000.
The nadir of the Tamraz episode occurred with Carter's
subsequent call to NSC staff member Heslin, who chaired the
inter-agency working group that had sought to deny Tamraz
access to senior government officials and who had determined
that the U.S. should not support his pipeline. Carter told
Heslin that if she reconsidered her opposition to Tamraz, it
``would mean a lot of money for the DNC'' because ``he's
already given $200,000, and if he got [what he wanted] he would
give the DNC another $400,000.'' Heslin refused, despite
Carter's claim that ``the President really wanted'' this and
threats that McLarty might exact reprisals against her.
The Indian Casino decision
The DNC also targeted the Interior Department's Bureau of
Indian Affairs (``BIA'') to influence a decision whether three
bands of Wisconsin Indian tribes would be allowed to open a
casino in Hudson, Wisconsin. A wealthy group of neighboring
tribes in Minnesota, who operated a nearby casino that would
face competition if the Hudson application were approved,
opposed the proposal. Significantly, the opposing tribes had
given large sums of money to the DNC, while the applicants had
not.
After the BIA's Minneapolis office approved the applicant
tribes' plan in late 1994, the opposing tribes hired Patrick
O'Connor, a prominent lobbyist and former DNC treasurer, who
spoke personally with President Clinton about this matter. Four
days later, O'Connor, accompanied by other lobbyists and
opposition tribal leaders, met with Fowler. As one participant
recalled it, Fowler ``got the message: it's politics and the
Democrats are against [the new casino] and the people for it
are Republicans.'' Fowler promised that he would contact Ickes
and have him talk with Secretary of Interior Bruce Babbitt,
which he did a few days later.
After making several calls herself to the Interior
Department, Ickes' assistant Jennifer O'Connor, in June 1995
asked a White House intern to get an update on the Hudson
casino. Heather Sibbison, special assistant to Secretary
Babbitt, told the intern ``it was 95% certain that the
application would be turned down.'' Just two days later,
however, a career BIA employee, wrote a 17-page analysis
recommending approval of the Hudson application. Nevertheless,
theassurances that Secretary Babbitt's staff conveyed to Ickes'
office were correct: despite the BIA's recommendation that it be
approved, a draft letter rejecting the application was prepared on June
29, 1995, and the Interior Department formally denied the application
on July 14.
The opposing tribes apparently had little doubt as to how
to show their gratitude for the Interior Department's decision
to protect them from gaming competition. According to FEC
records, in the four months following the Department's denial
of the Hudson application, the opposition tribes contributed
$53,000 to the DNC and the DSCC; they donated an additional
$230,000 to the DNC and the DSCC during 1996, and gave more
than $50,000 in additional money to the Minnesota Democratic
Party.
Another suspicious aspect of the Hudson episode involves
the inconsistent positions taken by Secretary Babbitt when
asked about the matter. According to Paul Eckstein, a longtime
friend of Secretary Babbitt who had been retained by the
applicant tribes, when Eckstein tried to persuade Secretary
Babbitt to delay making a decision on the Hudson matter,
Secretary Babbitt replied that Ickes had directed him to issue
a decision that very day. Later in their conversation, Eckstein
told the Committee, Secretary Babbitt turned the subject to
political contributions, declaring to Eckstein: ``Do you have
any idea how much these Indians, Indians with gaming contracts
. . . have given to Democrats? . . . [H]alf a million
dollars.''
When asked about these comments by Senator John McCain, who
then chaired the Senate Committee on Indian Affairs, Secretary
Babbitt denied that he had ever told Eckstein anything about
Ickes seeking a prompt decision on the Hudson matter.
Nevertheless, several months later, in response to this
Committee's inquiry, Secretary Babbitt changed his story,
admitting that he probably did make such a remark to Eckstein
about Ickes' request. Secretary Babbitt still claims to have
``no recollection'' of making the comment Eckstein recalls
about the opposing tribes' political contributions.\9\
---------------------------------------------------------------------------
\9\ The Attorney General has requested the appointment of an
independent counsel to investigate Secretary Babbitt's contradictory
statements.
---------------------------------------------------------------------------
The Hudson casino matter is, if anything, more sordid than
the Tamraz story, as political donations to the DNC apparently
succeeded in purchasing government policy concessions. In light
of the opposing tribes' DNC contributions, the DNC's lobbying
effort against the casino, the involvement of Ickes' staff in
drawing Secretary Babbitt's attention to this issue, and
Secretary Babbitt's remarkable comments to Eckstein, the Hudson
casino matter raises serious questions about the propriety--and
the legality--of the Interior Department's decision. And the
DNC also took advantage of two Oklahoma tribes that sought the
return of their former lands, and made contributions in the
belief that their prospects for favorable action would be
enhanced.
Foreign Efforts to Influence the U.S. Elections
The DNC's eagerness to raise unprecedented sums for
President Clinton's re-election, its recklessness in ceasing to
check the origin of such funds, and its entrusting its
fundraising efforts among Asian-Americans to lawbreakers such
as Huang, Trie, and Hsia led to numerous abuses. Among them,
the DNC's heedless pursuit of contributions allowed wealthy and
well-connected foreign nationals to arrange almost unlimited
access to the President and other top U.S. policymakers. Time
after time, figures such as Johnny Chung, who used access to
the President to advance his private business interests, Ted
Sioeng, Ng Lap Seng, Wang Jun, and Eric Hotung met privately or
in small groups with the President, Vice President, or other
senior Administration officials. Since this controversy began,
concerns have been expressed that the flood of foreign money to
the DNC during the 1995-96 election cycle and the access it
purchased might have permitted interested foreign parties to
influence the U.S. political process. Thus, the Committee made
it a priority of its investigation to determine whether this
had occurred.
PRC efforts
The Committee's attempt to examine this issue was
difficult. Many knowledgeable witnesses invoked the Fifth
Amendment and refused to cooperate with the inquiry. Others
fled the country, or were foreign nationals who remained abroad
and refused to cooperate. Finally, much of the information
relevant to this subject is classified and cannot be publicly
disclosed.
Despite these limitations, at the outset of the Committee's
hearings, based on information gathered from law enforcement
and intelligence agencies and open sources, Chairman Thompson
reported that the PRC government had undertaken efforts to
influence the U.S. electoral process during the 1995-96
election cycle. Owing to the sensitive nature of the subject,
it has not been possible until now to elaborate publicly upon
this matter in any detail. The full version of the Committee's
public findings are detailed elsewhere in this report.\10\ In
brief, while the Committee cannot determine conclusively
whether the PRC government funded, directed, or encouraged
certain illegal contributions made in connection with the 1996
election cycle, there is strong circumstantial evidence that
the PRC was involved. The basis for this conclusion is in
summary:
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\10\ See the section of this report on ``The China Connection.'' In
addition, the Committee has prepared a separate, more detailed, and
classified version of that chapter that will be maintained in secure
environs.
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Ties between the PRC and prominent figures in the
campaign finance investigation: The Committee has received
information that several individuals who provided donations
from foreign sources (principally in the greater China area) to
the DNC and other causes have ties to the PRC. The Committee
has learned that Maria Hsia has been an agent of the Chinese
government, that she has acted knowingly in support of it, and
that she has attempted to conceal her relationship with the
Chinese government. The Committee has also learned that Ted
Sioeng has worked, and perhaps still works, on behalf of the
Chinese government. The Committee has further learned from
recently-acquired information that James and Mochtar Riady have
had a long-term relationship with a Chinese intelligence
agency. Finally, an unverified single piece of information
shared with the Committee indicates that John Huang himself may
possibly have had a direct financial relationship with the PRC
government.
Evidence of a ``China Plan'' and Other, Possibly
Related Efforts: Against this backdrop, the Committee has
received other information that high-level PRC government
officials devised plans to increase China's influence over the
U.S. political process and to be implemented by diplomatic
posts in the U.S. Some of Beijing's efforts appear relatively
innocuous, involving learning more about Members of Congress,
redoubling PRC lobbying efforts in the U.S., establishing
closer contacts with the U.S. Congress, and funding from
Beijing. But the Committee has learned that Beijing expected
more than simply increased lobbying from its diplomatic posts
in the U.S. Indeed, as the Committee examined the issue in
greater detail, it found a broad array of Chinese efforts
designed to influence U.S. policies and elections through,
among other means, financing election campaigns.
Evidence of Implementation: The Committee has
identified specific steps taken in furtherance of the these
plans. Although some of the efforts were typical, appropriate
steps foreign governments take to communicate their views on
United States policy, others appear illegal under U.S. law.
Among these efforts were the devising of a seeding strategy of
developing viable candidates sympathetic to the PRC for future
federal elections; the creation of a ``Central Leading Group
for U.S. Congressional Affairs'' to coordinate China's lobbying
efforts in this country; and PRC officials discussing financing
American elections through covert means.
In addition, the Committee notes that this report is being
issued at a time in which there have been, and are likely to
continue to be, significant developments in the ongoing
investigation being conducted by the DOJ/FBI task force. If the
Committee receives significant new information that it can
disclose to the public, it may issue a supplemental report.
John Huang
Because of his central role in raising so much of the
foreign money returned to date by the DNC, and because of his
long relationship to the Lippo Group, the Committee examined in
detail John Huang's fund-raising activities and his service at
the Department of Commerce. Huang began involving himself in
U.S. politics in 1988 while an official at LippoBank, working
with James Riady, Hsia, and others to found the Pacific
Leadership Council (``PLC''), an Asian-American interest group
and political fund-raising organ, which organized a trip to
Taiwan (and the Fo Kuang Shan temple there) for then-Senator
Gore. Huang's colleagues at LippoBank--where he served as
President and Director--never understood his corporate duties
and described him as a ``mystery man.''
After the election of 1992, with Riady's encouragement, the
White House placed Huang on its list of ``high priority''
candidates for political appointment. In a letter to Deputy
Director of Presidential Personnel John Emerson, Democratic
activist Maeley Tom recommended Huang for a government
position, describing him as:
the political power that advises the Riady family on
issues and where to make contributions. [The Riadys]
invested heavily in the Clinton campaign. John is the
Riady family's top priority for placement because he is
like one of their own.
Huang was hired in 1993 as Deputy Assistant Secretary for
International Economic Policy at the Department of Commerce.
The work Huang actually performed in his new job, however,
was apparently as perplexing to his colleagues at the Commerce
Department as it had been to his associates at LippoBank.
During the 18 months that Huang worked at the Department, in
fact, he left virtually no mark; many of his colleagues found
themselves wholly at a loss to explain what he did.
Despite his superiors' attempt to ``wall off'' Huang from
matters relating to China, Huang received regular classified
briefings that included the greater China area. Without his
superiors' knowledge, Huang received 37 intelligence briefings,
viewing 10 to 15 intelligence reports at each session--a total
of 370 to 500 items of ``raw intelligence'' during his tenure.
Also unbeknownst to his superiors, Huang made multiple visits
and telephone calls to the Chinese Embassy while at Commerce.
And despite Huang's status as only a mid-level official at
Commerce, he made at least 67 visits to the White House, often
meeting with top officials and receiving briefings on trade
policy.
Equally mysterious were the over 400 contacts Huang had
with Lippo officials while he worked at Commerce: 237 phone
calls to LippoBank and affiliated entities in the United
States, 29 calls and fax transmissions to Lippo's Indonesian
headquarters, and an additional 107 calls to such countries as
China, Indonesia, Taiwan, and Hong Kong. Huang may have made
more such calls from the Washington office of Stephens, Inc.--
an investment banking firm based in Little Rock, partly owned
by the Riady family, which had extended loans to help finance
President Clinton's 1992 campaign--located across the street
from the Commerce Department. Huang secretly used this Stephens
office two or three times a week to make calls, pick up or
deliver faxes, and send packages. Jeffrey Garten, Huang's
superior at Commerce, and John Dickerson,the CIA liaison to
Commerce who provided Huang's numerous classified briefings, were
unaware of Huang's continuing contacts with Lippo.
The full scope and import of Huang's activities while at
Commerce may never be known: he has invoked the Fifth Amendment
and refused to cooperate with the Committee, Riady has left the
country, and many of his former LippoBank colleagues have
returned to Indonesia. The volume of Huang's contacts with
Lippo and the Chinese embassy, however, is cause for concern.
The Committee has found no direct evidence that Huang passed
classified information, but he had the opportunity to do so and
his activities have not otherwise been adequately explained.
the abuse of soft money
As part of its inquiry, the Committee had intended to
investigate the role of nonprofit groups in the 1995-96 federal
election cycle, particularly whether such nonprofit
organizations were genuinely nonpartisan and acted
independently of political parties or candidates, as required
by federal law. In addition, the Committee planned to
investigate whether political action committees evaded
statutory limits on political contributions, and whether
nonprofit organizations coordinated so-called ``issue
advocacy'' advertising with political candidates to be
considered in-kind campaign contributions limited and regulated
under federal election law.
To this end, the Committee subpoenaed 32 nonprofit
organizations, not including the principal party committees and
presidential campaigns. Although a number of these
organizations did begin prompt compliance with the Committee's
subpoenas, most of them, led by the AFL-CIO, refused to produce
any documents or witnesses. Indeed, some groups simply cited
the AFL-CIO's non-compliance as justification for their own
non-compliance. Though the AFL-CIO ostensibly based its refusal
upon various legal and ``constitutional'' grounds, its clear
purpose was to obstruct and impede the Committee's
investigation--as indeed the imposition of the December 31,
1997 deadline virtually invited it to do by preventing the
Committee from relying upon judicial contempt procedures, the
usual means to assure compliance with subpoenas.
In light of the poor cooperation received from most of
these organizations, the Committee believes that it is
generally inappropriate to draw conclusions about the role of
non-profit groups in the 1995-96 election cycle. For the most
part, the information available was insufficient to permit
meaningful analysis: few documents were produced, witnesses
were unavailable to explain the meaning and context of what
documents did arrive, and key individuals with knowledge of the
matters in question refused to testify before the Committee.
Despite these obstacles, however, the Committee received
information that the AFL-CIO coordinated its political
activities with both the DNC and the Clinton/Gore campaign.
Testimony from White House and DNC officials made clear that
White House aides and the AFL-CIO carefully reviewed each
other's advertisements and coordinated their timing and
placement.
With regard to conservative organizations, the Committee's
investigation uncovered no evidence that Triad Management
Services engaged in such coordination with the Republican
Party, although Triad may have coordinated with individual
candidates. The Committee also determined that while the
Republican National Committee (``RNC'') donated funds to
certain non- profit groups, this was in no way illegal or
improper: no evidence existed that the recipients spent this
money to influence federal elections at the RNC's request or
direction.
Finally, the Committee held extensive hearings on the
National Policy Forum (``NPF''), a think-tank established by
the RNC. The Committee was particularly concerned by
allegations that the RNC knew that a loan it made to the NPF--
and upon which the NPF later defaulted amid much acrimony--had
been guaranteed by foreign money through Hong Kong businessman
Ambrose Young. Additionally, the Committee attempted to
determine whether the loan guarantee proceeds were improperly
funneled into federal election campaigns in 1994. Ultimately,
however, the Committee determined that it is neither illegal
nor improper for nonprofit organizations to receive money from
foreign sources, provided that no such funds enter federal
campaigns. No foreign money involved in NPF's loan guarantee
was so used: none of these funds were diverted to Republican
``hard money'' accounts, and their expenditure was not
coordinated with political candidates; rather, the NPF used the
money to repay a valid, pre-existing debt.11
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\11\ Nor, it should be added, did the Committee find any reason to
conclude that testimony on this matter by RNC Chairman Haley Barbour
was anything less than truthful. Witnesses who testified to the
contrary all made inconsistent statements themselves, and Barbour's
version of events is corroborated by contemporary documents.