Ex-Leader Defends GOP’s Use of Loan

In the most dramatic chapter of the three-week-old Senate hearings on campaign finance abuses, former Republican national Chairman Haley Barbour came out swinging Thursday at what he called “outright false claims” that a GOP think tank funneled funds from a Hong Kong businessman into the 1994 congressional elections.

But Democrats produced documents that raised questions about the legality of the financial transaction and chipped away at Barbour’s repeated assertions that he did not know at the time the money had originated overseas.

Pressed about the use of foreign funds to guarantee a bank loan for the think tank he created, Barbour heatedly declared, “Everything that the National Policy Forum did was legal and proper. Everything.”

“Not a cent, not a red cent” of the money was used improperly for campaigns, Barbour told the Senate Governmental Affairs Committee.

Democrats maintain that Barbour and the Republican National Committee took an illegal $2.1-million contribution from Hong Kong businessman Ambrous Tung Young and then channeled $1.6 million into GOP coffers just before the 1994 elections, in which Republicans captured control of the Congress.

“It came from Hong Kong. We know it did,” Sen. John Glenn of Ohio, the committee’s ranking Democrat, said of the money.

But Barbour, with the help of some committee Republicans, painted an entirely different picture during approximately five hours of testimony.

Sen. Don Nickles (R-Okla.), who served as a National Policy Forum board member, defended the group as an issues-oriented organization not involved in partisan politics. “Some people have alleged this is a group that has laundered foreign money,” he said. “I think that’s hogwash.”

Until this week, the hearings had focused on questions about Democratic fund-raising practices, but Thursday was the second consecutive day that the spotlight turned on Republican ties to foreign funds.

Democrats are attempting to put Republicans on the defensive and to show that both parties have participated in fund-raising practices that need to be overhauled.

In his sworn testimony, Barbour sought to counter Democratic assertions that the nonprofit policy forum was a subsidiary of the RNC, insisting that they were separate entities even though he led both groups. In testimony Wednesday, Michael Baroody, the forum’s first president, said the lines between the groups were blurred and made the separation seem a “fiction.”

Democrats consider the distinction important because federal election laws make it illegal for party committees and federal candidates to accept foreign funds. As a separate entity not affiliated with the Republican Party, the forum was allowed to receive money from overseas.

Earlier this year, the Internal Revenue Service rejected the forum’s application for tax-exempt status because it considered the group overly partisan.

Before it closed its doors late last year, the forum defaulted on the loan from Young. With the help of the RNC, it paid Young roughly half the $1.6 million as part of a settlement.

Barbour’s refusal to concede any ground about his own fund-raising was so absolute that even the Republican chairman of the committee, Sen. Fred Thompson of Tennessee, brought Barbour up short.

“There are some important questions that you need to answer . . . and we’re going to spend however much time it takes to go through these things,” Thompson scolded the former RNC chief.

Thompson took issue with the way the loan was handled, saying the Republican Party should review the transaction and consider whether the GOP is obligated to repay Young.

“It looks like we [Republicans] owe him some money,” Thompson said. “He’s holding the bag to the tune of $800,000. . . . A deal is a deal.”

But Barbour noted that the RNC had already settled with Young and didn’t owe him any more money.

Barbour, an attorney who now lives in Yazoo City, Miss., is the highest-ranking Republican figure to appear before the committee. With a strong Southern accent and homespun glibness, he sought to disarm the Democrats who were seeking to undermine his credibility.

But he also took shots at Glenn, bringing up the senator’s efforts years ago to defend himself in the “Keating Five” scandal, a controversy that enveloped five senators who accepted large donations from savings and loan executive Charles H. Keating Jr.

Unbowed by criticism, Barbour also compared the forum to the Democratic Leadership Council, currently chaired by Sen. Joseph I. Lieberman (D-Conn.), another member of the Senate committee. The DLC is a centrist-oriented group formed by moderate Democrats, including President Clinton.

Barbour’s testimony revolved around his attempt to obtain financial support from Young, a wealthy businessman and Republican Party stalwart.

In 1994, Barbour arranged for a $2.1-million loan guarantee from Young Brothers Development USA, the Florida-based subsidiary of Young’s Hong Kong-based real estate and aviation company, to support the National Policy Forum.

The forum took out a bank loan, guaranteed by certificates of deposit purchased with funds provided to Young Brothers Development by the parent company in Hong Kong. The forum then sent $1.6 million to an RNC account as repayment of funds the party had advanced the group.

Barbour was preceded at the witness table Thursday by Republican fund-raiser Frederick Volcansek, who testified that in 1994, before the loan was made, he told Barbour that the money was coming from Hong Kong. Volcansek, now a Houston businessman, helped arrange the loan guarantee.

“The answer is, yes, I remember telling him,” Volcansek said. But he said he wasn’t surprised that Barbour didn’t recall the conversation because it was not a major point in their discussion. In any event, Volcansek said, it was legal for the policy forum to receive foreign funds.

As Democrats produced documents showing that Barbour had been notified that the loan originated overseas, he repeatedly claimed ignorance, saying he hadn’t seen the documents addressed to him.

Reminded that Young had twice told him he had to bring the matter of the loan up with his board of directors in Hong Kong, Barbour said he hadn’t understood what Young had said.

It took all day long before Barbour was willing to give an inch or show the slightest hint of misgivings about the loan.

He insisted throughout the questioning that the foreign loan arrangement was perfectly appropriate, but he acknowledged to Lieberman near the end of the hearing Thursday evening that he would not have pursued the loan had he known the money originated in Hong Kong.

A key point that Democrats made was that when the forum repaid the RNC in late October 1994, the money was immediately sent to an RNC account for state Republican organizations.

Barbour maintained that the RNC fund had millions of dollars available to it and didn’t need the $1.6 million from the forum. This claim provoked one of the most pointed exchanges of the day, when Sen. Robert Torricelli (D-N.J.) displayed Federal Election Commission records showing that on some days, there was a deficit in an RNC fund for state party organizations.

As Torricelli waved the FEC documents, Barbour angrily disputed his point. “Let me answer you under oath,” Barbour said. “It is not accurate.”

The RNC fund did in fact have a deficit, but Barbour included in his calculations a line of credit available to the party, which the RNC did not use.

Times researcher Janet Lundblad contributed to this story.

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