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 --------------------------------------------------------------------------- \1\ S. Res. 54, Section 13(d)(1), 143 Congressional Record S1421 (daily ed. Feb. 13, 1997). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \2\ See 143 Congressional Record S 716-18 (daily ed. Jan. 28, 1997). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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)). --------------------------------------------------------------------------- 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: --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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 --------------------------------------------------------------------------- \5\ See S. Rep. 105-7, Report of the Committee on Governmental Affairs to Accompany S. Res. 39, p. 3. --------------------------------------------------------------------------- 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 --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \7\ See 143 Congressional Record S 1195 (daily ed. Feb. 10, 1997) (reprinting the Committee Rules). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \10\ See 143 Congressional Record S2109 (daily ed. March 11, 1997). \11\ Id. at S2114. \12\ Id. at S2125. --------------------------------------------------------------------------- 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 --------------------------------------------------------------------------- \13\ See S. Res. 89. 143 Congressional Record S4915 (daily ed. May 21, 1997). --------------------------------------------------------------------------- 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: --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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 --------------------------------------------------------------------------- \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.