Chinese Army Funds Went to Democrats, Donor Says

Congressional investigators who long have sought a firm link between campaign contributions to the Democratic Party and the Chinese government said Friday that one has emerged in new information provided to federal prosecutors by fund-raiser Johnny Chien Chuen Chung.

Chung, a Torrance businessman who became one of the Democrats’ largest donors in 1996, has said that a lieutenant colonel in the People’s Liberation Army provided some of the money he gave to the party and that the money originated in the Chinese military.

Chung’s account to prosecutors has given a more complete view of his business relationship with Liu Chao-ying, who, in addition to being in the Chinese army, is an executive of an aerospace concern and the daughter of an important general.

It was previously reported that Liu attended a $25,000-per-couple Democratic fund-raiser in Los Angeles in 1996 at Chung’s invitation. And it was known that Liu had paid Chung money--an estimated $300,000--which Chung has called a business investment.

But Chung’s new account indicates that the Chinese army was the source of a large part of the $100,000 in Democratic contributions he made before the 1996 presidential election--and that Liu had acted as the conduit.

“Some of the money was not from Liu’s corporation but from the [Chinese] government,” said one official who received an FBI briefing this week on Chung’s account. “Some of the Chinese money was intended for contributions.”

Reacting to the information, House Majority Leader Dick Armey (R-Texas) said: “A more serious violation of our campaign laws is inconceivable.”

The White House on Friday attempted to distance itself from any improprieties while acknowledging that Liu should not have been permitted to attend the 1996 Los Angeles fund-raiser.

“We had no knowledge about the source of Mr. Chung’s money or the background of his guest,” said White House spokesman James Kennedy. “In hindsight, it was clearly not appropriate for Mr. Chung to bring her to see the president.”

Brian A. Sun, Chung’s attorney, declined to detail his client’s closed-door conversations with the Justice Department’s campaign finance task force. But Chung associates maintained that Chung was not acting on behalf of the Chinese government and had legitimate business dealings with Liu, a Chinese resident, that justified her payments.

Still, the new information, first reported in the New York Times on Thursday, is expected to prompt Republicans to demand again that Atty. Gen. Janet Reno appoint an independent counsel to investigate the array of campaign finance abuses during the 1996 presidential election, most involving Democratic contributions.

Reno has resisted GOP demands for an independent counsel for more than a year, arguing that her office has not yet found specific and credible information of possible violations by President Clinton or Vice President Al Gore.

Particularly disconcerting to House investigators is Liu’s role as an executive of China Aerospace Corp., a state-run company, and her possible motive for allegedly funneling money into U.S. elections.

That motive remains uncertain, although some lawmakers speculate that she was seeking to influence a White House decision, pending at the time, to allow U.S. civilian satellites to be carried into space on Chinese rockets. Earlier this year, Clinton granted a waiver permitting U.S. companies to proceed with such deals with the Chinese.

“The serious implications of foreign government involvement in such illegal activity and the serious national security implications with respect to the transfer of missile technology should concern all Americans,” said Rep. Dan Burton (R-Ind.), chairman of the House Government Reform and Oversight Committee, which has been investigating the 1996 fund-raising abuses.

Burton met with Justice Department investigators Friday to share information on the matter. He also used the Chung developments to call on committee Democrats to break a procedural impasse on his panel and vote for immunity for four witnesses, including two former Chung employees.

Led by Rep. Henry A. Waxman (D-Los Angeles), committee Democrats have refused to approve immunity for any more witnesses in protest of what they contend is the unfair and intensely partisan manner in which Burton has conducted the panel’s inquiry.

Waxman gave no indication of backing down on the immunity dispute. At the same time, he said that the account attributed to Chung is serious.

“If what is reported is true, it’s very troubling,” Waxman said. He called Chung’s account “the first solid evidence of a Chinese government plan being implemented.”

Chung is cooperating with authorities after pleading guilty in March to election law violations, tax evasion and bank fraud stemming from his role as a donor.

Although investigators have suspected a link between the Chinese government and some of the donations to Clinton’s 1996 reelection effort, it has been denied by Chinese officials and been a tough connection to prove.

In its final report issued earlier this year, the Senate Governmental Affairs Committee “found a broad array of Chinese efforts designed to influence U.S. policies and elections through, among other means, financing election campaigns.”

But the report said that investigators could find no more than “strong circumstantial evidence” that the Chinese government “funded, directed or encouraged” illegal gifts to U.S. campaigns.

Democratic National Committee officials noted that they had returned all of Chung’s contributions--amounting to $366,000 over several years--after the first questions surfaced about the true source of the money.

“It was impossible for us to have known,” said party spokesman Richard W. Hess.

He added that the Democratic National Committee has changed its rules to forbid foreigners who are not part of the immediate family of a donor from attending its events.

That policy would have blocked Liu’s attendance at the Los Angeles event, Hess said.

Rempel reported from Los Angeles and Lacey from Washington.

* MONEY FACTOR: Money will loom even larger in ’98 elections, experts say. A5