Candidates’ reliance on ‘bundlers’ let Hsu thrive

When Bill Clinton received an award at a gala dinner honoring the late Robert F. Kennedy last year, the former president expressed his thanks before an audience that included a Nobel Prize winner and a glittering array of show business celebrities and Wall Street titans. Yet the second sentence of his remarks expressed special gratitude to a man almost no one there had heard of: “our friend Norman Hsu.”

The story of Hsu, the major Democratic fundraiser who turned out to be a fugitive from justice, is a tangled one that stretches back more than 15 years. But more recent developments in the world of campaign finance helped create the environment in which a man like Hsu could be welcomed into the company of people like the Kennedys and Clintons.

Hsu is what is known in political parlance as a “bundler,” a specialized and increasingly important kind of fundraiser for today’s campaign finance managers.

Federal law limits the amount any one individual can contribute to a candidate or party. But there is no limit on how much an individual can round up in smaller contributions from friends and associates, and then deliver to a favored politician or party as a “bundle.”

That twist in the law has made bundlers indispensable, especially for presidential candidates and others who must raise record amounts of money to run campaigns without public financing.

The intensified money chase has created incentives for candidates not to look too closely into the backgrounds of individuals who can deliver big-time bundles.

Until last week, the Clinton campaign, like most others, did not do the typically expensive and time-consuming criminal background checks on major bundlers -- relying instead on LexisNexis and Google searches. That changed after the Los Angeles Times reported that federal investigators were examining Hsu’s current business ventures. Some investors had told The Times that they were pressed to make contributions to Clinton and other candidates.

Hsu is being held in Grand Junction, Colo. He was arrested in Colorado after failing to appear at a hearing in California last week on a 1992 grand theft conviction. He had been considered a fugitive for 15 years. On Thursday, he appeared at a bail hearing via a video linkup from his jail cell. Mesa County Judge Bruce Raaum ordered him held on $5 million cash bail, rather than the $50 million requested by prosecutors. Hsu is expected to reappear in court Wednesday at a hearing to consider his extradition to California.

Although Hsu arrived on the political scene just four years ago, bundling has been around for decades. But its importance became magnified after passage in 2002 of the McCain-Feingold law, which curbed contributions individuals could make to political parties.

The drive to attract bundlers was accelerated when George W. Bush’s 2000 presidential campaign started giving special recognition to those who delivered $100,000 worth of checks. Bush called them “pioneers,” and they received rewards for their efforts. At a minimum, such bundlers would be invited to private meetings at Bush’s Texas ranch and get invitations to events at political conventions. After Bush took office, several of his bundlers were named ambassadors and 48 were appointed to Cabinet agency transition teams.

Now every major presidential campaign seeks out bundlers and provides them some kind of recognition and reward. Former New York Mayor Rudolph W. Giuliani calls people who raise $250,000 “MVPs,” and those who raise $1 million or more “team captains.” Sen. Hillary Rodham Clinton of New York established a “HillRaiser” category for those who bring in $100,000 or more. Her campaign grants special status to those who raise at least $1 million.

The HillRaisers include several bundlers who have ties to President Clinton’s time in office. Wealthy Los Angeles businessmen Ron Burkle and Haim Saban were among Bill Clinton’s most loyal donors and are aligned with his wife.

The senator has new benefactors too, such as Michel Chaghouri, a 27-year-old Los Angeles-area resident who in 2004 was registered as a Republican. Chaghouri has raised at least $100,000 for Clinton. When he donated $4,600 earlier this year, he listed his occupation as not employed. He now works for the Clinton campaign.

Hsu apparently enlisted 260 people to give a total of $850,000 to Hillary Clinton for President, which the campaign said this week it would return.

The disgraced bundler and his network also delivered hundreds of thousands to other candidates. In 2005 and 2006, Hsu and his network gave at least $175,000 to Democratic Senate incumbents and candidates. House races were of less interest to Hsu -- only a handful of members received donations; most were friends of the Clintons.

One of Sen. Clinton’s Democratic presidential rivals, Sen. Barack Obama of Illinois, recently introduced legislation to require federal candidates to reveal the names of bundlers and the amounts they raise.

David Rosen, a former fundraiser for Sen. Clinton, says that he has long pushed for criminal background checks in campaigns he advises, but that most don’t want to pay for it. He called the level of vetting of major donors “ludicrous” because of the “wild, incredible demands” of fundraising. “Mistakes happen when people are overwhelmed, under-resourced and undertrained,” he said.

A 23-year-old West Coast finance director for Clinton waved away concerns raised about Hsu’s business practices, e-mailing a party official in June that Hsu was 100% “legit.”

In fact, among most campaign finance staffers, Hsu developed a sterling reputation. And until the Wall Street Journal and the Los Angeles Times wrote stories about him, that reputation was untarnished.

“He was important because he could raise money. He could bring in checks from people you never heard of,” said one Democratic operative who knows Hsu. Lacking authorization to discuss the matter, the person spoke on condition of anonymity.

Hsu was an especially prized bundler because he was “low-maintenance,” generous and never seemed to want anything, the operative said. What’s more, Hsu would return calls.

The checks he would bundle generally were for about $1,000. People responsible for vetting donations spend little or no time verifying that checks that small came from legitimate sources.

Unlike some donors, Hsu does not seem enthralled by policy. He has views like many other Democrats, but sees politics more like a game and will “root for his team,” the operative said. “He seemed to get a thrill out of the victories.”

Hsu, who is not registered to vote, emerged on the political scene in 2003 with a contribution to Massachusetts Sen. John F. Kerry’s presidential campaign.

Michelle Kraus, a political strategist, fundraiser and technology executive in Silicon Valley, came to know Hsu when she was helping Kerry -- and says she was immediately skeptical. She had worked extensively with the Asian American community during the campaign and said Hsu did not seem to fit in with those she knew.

She said he tried to ingratiate himself, offering to get her reservations at exclusive restaurants. “I was not impressed with Norman’s machinations,” Kraus said. “We are dealing with someone who wanted to be part of the cool kids.”

But though Kraus was wary of Hsu, she does not fault the Clinton campaign: “They just got suckered by a guy who suckered a lot of people.”

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tom.hamburger@latimes.com

dan.morain@latimes.com

robin.fields@latimes.com

Hamburger and Fields reported from Washington, Morain from Sacramento. Times staff writer Chuck Neubauer in Washington contributed to this report.