Mistrial Declared in Tax Fraud Case of Political Fund-Raiser

A federal judge declared a mistrial Monday in the tax fraud trial of Democratic fund-raiser Maria L. Hsia, after jurors insisted they were hopelessly deadlocked.

Jury foreman Tom Smith told U.S. District Judge Richard A. Paez that the panel was unable to reach a verdict on any of the four criminal charges lodged against Hsia.

After three days of deliberations, the Los Angeles federal court jury stood 9 to 3 for acquittal on one count, 7 to 5 for acquittal on two other counts and 6 to 6 on a fourth one.

Prosecutors declined to say whether they would recommend a retrial to their superiors in Washington. Their reticence appeared to irk Paez, who told them he expected an answer at a hearing June 17.

“You better evaluate this case very carefully, and I’m not kidding, very carefully with your superiors,” Paez told them.

If the government decides to retry Hsia, Paez said he would consider a defense motion for acquittal on grounds that the case is too weak to warrant prosecution.

The 19-day trial was prosecuted by lawyers from the Justice Department’s campaign finance task force, which was created by Atty. Gen. Janet Reno to investigate fund-raising abuses in the 1996 presidential election.

Hsia, an immigration consultant from San Marino, was initially indicted on charges of laundering donations to the 1996 Clinton-Gore campaign through monks and nuns at the Hsi Lai Buddhist Temple in Hacienda Heights.

She also was accused of using the temple to launder contributions to Don Knabe’s successful 1996 race for Los Angeles County supervisor, the 1994 reelection campaign of Sen. Edward M. Kennedy (D-Mass.) and the 1996 reelection effort of his son, Rep. Patrick J. Kennedy (D-R.I.). That trial, to be held in Washington, has been delayed by pretrial motions and appeals. No start date has been set.

Hsia, who declined to talk to reporters during the tax trial, hailed the jury’s vote Monday as a vindication. She called on fellow Asian Americans “to stand up and fight for their rights.”

She was accused of failing to file a personal tax return for 1994, filing false personal returns for 1995 and 1996 and aiding and assisting in the filing of a false return for her business, Hsia & Associates. If convicted, she could have been sentenced to 10 years in prison.

The government’s case was troubled from the start. Its chief witness, Hsia’s former tax preparer, Richard Tsai, gave conflicting and sometimes confusing testimony on the witness stand. Prosecutors were forced to impeach him with testimony he gave to a grand jury.

In opening statements to the jury, a government prosecutor said Hsia deliberately fed Tsai false information to put on her income tax returns and that when he balked she went to another tax preparer.

Defense lawyer Kenneth Barish contended, however, that Hsia was ignorant about finances and that her troubles with the IRS stemmed from numerous mistakes Tsai made and then tried to cover up by blaming the defendant. He also accused prosecutors of putting words in Tsai’s mouth.

Jurors on both sides of the divide said Monday that they discounted Tsai’s testimony almost from the start of deliberations.

In addition to finding themselves stuck with a less than reliable witness, the task force attorneys were forced to apologize to Hsia and her Washington-based lawyer, Nancy Luque, for a prosecution memo that referred to the two women as “lesbian lovers.”

The notation, described by a task force attorney as a “bad joke,” was made by prosecutor Gregory Tortelli, who put together the tax case against Hsia. He faces disciplinary action by the Office of Professional Responsibility when he returns to Washington.

The memo surfaced during a hearing held outside the jury’s presence. Hsia’s Los Angeles attorney, Kenneth Barish, argued that it demonstrated a pattern of government vindictiveness toward Hsia because of her insistence in fighting the campaign finance charges. He asked for a mistrial at that time, but Paez refused.

After the jury was dismissed Monday, Luque, Barish, Tortelli and co-prosecutor Joseph Laplante marched into a side room where they were overheard in a heated argument.

Luque, who successfully defended Julie Hiatt Steele in a recent obstruction of justice case brought by Whitewater prosecutor Kenneth Starr, said later that she told them she didn’t intend to allow the Tortelli memo to get “swept under the rug.”