FBI Merges China and DNC Donations Probes

The FBI has effectively merged its investigation of an alleged Chinese government effort to influence the American political system using covert campaign contributions with its inquiry into charges that the Democratic Party illegally solicited foreign campaign donations, according to U.S. officials.

The bureau has not found conclusive evidence linking the two, U.S. officials said. It has assigned 31 agents to the combined investigation.

The FBI’s inquiry into an alleged Chinese influence-buying scheme began first, after the Chinese government was stung by the Clinton administration’s controversial May 1995 decision to allow Taiwan President Lee Teng-hui to make an unofficial visit to the United States. President Clinton had been pressured by Congress to approve Lee’s visa and China purportedly decided that it needed to enhance its influence in Congress to match Taiwan’s formidable lobbying presence.

The FBI began a separate criminal investigation last fall into widespread allegations of improper Democratic Party fund-raising. But now, sources said, “you can’t tell the difference” between the two.

The FBI, working as part of a Justice Department task force, has yet to find a “smoking gun” that would tie a Chinese intelligence operation to any of the controversial figures who have been implicated in providing questionable donations in the 1996 campaign. But investigators are continuing to sift through evidence to see if such a connection exists, sources said.

Determination of such a link would increase the seriousness of the controversy, which has already sent tremors through the Democratic Party and the U.S. foreign policy community.

One official said that the task force is now operating on its own, almost like an independent counsel investigation. A leading attorney in the group, Laura Ingersoll, has received security clearances to investigate sensitive intelligence matters.

At the center of the inquiry is John Huang, the Democratic National Committee fund-raiser who solicited many of the donations in question from Asian Americans, including many with business ties in China.

Huang, a Chinese American, joined the DNC after serving in a mid-level position in the Commerce Department and before that as an official of the Indonesia-based Lippo Group conglomerate. Lippo has extensive business interests in China.

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Investigators are attempting to determine whether Huang could have been aiding the Chinese government while gaining influence with the Clintons and the Democratic Party. In addition, they are looking into whether he may have passed classified information to Lippo--and perhaps thereby to China--while he was serving at the Commerce Department.

One U.S. intelligence official said that the U.S. government should have questioned Huang’s relationship to Lippo--and by extension to China--and subjected Huang to a “full-fledged” security investigation before he was hired by the Commerce Department.

But in the United States it is often difficult to distinguish between improper foreign government activities and normal lobbying.

A U.S. intelligence official noted that agents of the Chinese government are instructed that “meeting influential people is an important part of their job”--which is the job description for most Washington lobbyists as well.

“The American political system lends itself to this kind of manipulation,” he said.

The FBI’s counterintelligence investigation began after U.S. intelligence intercepts from the Chinese Embassy in Washington showed that the Chinese government had developed an influence-buying plan.

About the same time as U.S. intelligence detected transmissions from the Chinese Embassy in 1995, the Chinese government in Beijing organized a high-level group, headed by President Jiang Zemin, that began beefing up lobbying efforts in Washington.

James Lilley, former U.S. ambassador to China and onetime CIA station chief in Beijing, said that Chinese Embassy employees here were instructed to “get off your duff and get some influence in Washington.” The FBI later determined that the Chinese plan included funneling money into U.S. congressional campaigns.

As the FBI’s counterintelligence investigation proceeded, the bureau’s criminal division and the Justice Department opened a separate investigation in late October or early November 1996 into allegations that the DNC had received millions of dollars in illegal foreign contributions.

Although China’s stepped-up effort to gain more influence was prompted by the Taiwanese president’s visit to the United States, experts said, it ultimately was intended by the government in Beijing to help secure membership for China in the World Trade Organization and permanent most-favored-nation status as a U.S. trading partner.

The federal investigations, along with two launched in Congress, are also expected to look at the activities of politically connected Americans seeking business in Asia. They include former Clinton aide Mark E. Middleton, an Arkansan who set up an international trading business after leaving the White House in early 1995.

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Middleton, who served as a top aide to former White House aide Thomas “Mack” McLarty, has been criticized for using his ties to the president--including a business card emblazoned with his old White House title and telephone number--to drum up business for himself.

Shortly after Middleton left the White House, according to his attorney, Robert Luskin, the Chinese Embassy in Washington supplied him with a list of 60 projects in China and urged him to find American investors for them. Luskin said that Middleton was unable to find any investors.

According to an acquaintance of Middleton, a Chinese Embassy official told Middleton that the projects had been set aside specially for investment by “the president’s friends.” But Middleton, when asked about it recently by The Times, insisted that he made no such remark to the friend.

A U.S. intelligence official said that China uses business opportunities to try to curry influence.

“They reward people not through direct payments but through favorable business deals,” he said.