Democrats Return Illegal Contribution

The Democratic National Committee has returned a $250,000 contribution from a recently established subsidiary of a South Korean electronics company because it violated a ban on donations from foreign nationals in U.S. elections, a party spokesman said Friday.

DNC officials acknowledged that they took the action Thursday after The Times raised questions about the contribution from Cheong Am America Inc., which is seeking a site for a manufacturing plant in Los Angeles County but has yet to generate any revenue.

The incident could be politically embarrassing because party officials invited John H.K. Lee, chairman of both Cheong Am America Inc. and its South Korean parent company, to a Democratic fund-raiser in April, where he met President Clinton after he pledged to make the substantial contribution that turned out to be illegal.

“It is our standard procedure to investigate the situation of each foreign-owned company to determine if proper criteria have been met,” said David Eichenbaum, DNC communications director. “In this case, that process broke down.”

Eichenbaum said that the DNC fund-raiser who was responsible for the contribution was under the impression, erroneously as it turned out, that it fulfilled the legal qualifications. He said it was unclear whether the fund-raiser was misled or there had been a misunderstanding.

The Federal Election Commission could still decide to open a civil inquiry into the contribution, even through the money has been returned, a spokesman said.

“Once a law’s violated, there’s been a violation,” said Ian Stirton, who declined to comment on the Cheong Am America donation specifically. He added it was also possible the commission would decide that the DNC’s action put the matter to rest.

Cheong Am America executives, who responded to questions earlier this week, were unavailable Friday to respond to the DNC’s decision.

Federal law prohibits contributions to U.S. campaigns from foreign nationals or corporations; a subsidiary of an overseas corporation is permitted to contribute only if it can demonstrate that it obtained the funds solely from its U.S. operations. It is also illegal to knowingly solicit or accept a campaign contribution from a foreign national.

At Lee’s direction, Cheong Am America made the contribution from a capital fund provided by Cheong Am Business Group in Seoul within weeks of the subsidiary’s establishment, according to Leonardo Kang, Cheong Am America’s executive secretary. The new company, which plans to settle in Carson, is to specialize in developing and producing high-technology components for enormous video display screens.

“The parent company in Korea invested $1.3 million in the States under the name of Cheong America,” Kang said. “We contributed $250,000 as a donation to the DNC from the capital money.”

In addition, a foreign national who has not established permanent residency in the U.S. is prohibited “from participating in any way in the decision-making process with regard to making contributions,” the FEC says. Kang said that Lee is not a permanent U.S. resident.

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Eichenbaum said that “our fund-raiser understood that the company had been in existence in the U.S. for some time, and was led to believe that the company’s principals, including its chairman, were U.S. citizens or permanent residents.

The fund-raiser was John Huang, a vice chairman of the party’s national finance committee who specializes in handling Asian American donors. Huang was traveling and could not be reached Friday.

In recent years, the FEC has emphasized the seriousness with which it regards violations of the ban on contributions by foreign nationals. The bipartisan commission can assess a fine up to twice the amount of money involved if it determines that a donation was illegal. The Justice Department can open a criminal inquiry if it has reason to believe that a transgression was committed knowingly.

A political committee could be charged with a violation if it knew or had reason to believe “that there’s something amiss” with a contribution, Stirton said.

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The Cheong Am America contribution was part of the millions of dollars that the Democrats have raised in controversial “soft money” contributions. Under a loophole in the law, corporations and wealthy individuals can give the political parties unlimited sums for registering voters and building partisan allegiance.

Eichenbaum acknowledged that Lee was invited to the April fund-raiser because he had pledged to make a substantial contribution. It was there that Lee met Clinton as well as Democratic General Chairman Christopher J. Dodd and National Chairman Don Fowler.

“There was a very brief encounter” with Clinton, Eichenbaum said. “A stand up, shake hands, say a few words and pass through. There was nothing of substance discussed.”

Kang said that the company had not sought or been promised anything in return for its gift.

He also said that Lee, who enjoys playing the piano and singing, had hoped to have the opportunity to do so accompanied by Clinton on the saxophone.