Donor surrenders as Clinton camp ponders
As Democratic fundraiser Norman Hsu confronted an old criminal case and faced a new FBI investigation Friday, a fundamental question persisted: How did Democratic presidential front-runner Sen. Hillary Rodham Clinton’s campaign fail to see the red flags in Hsu’s contributions?
Until this week, Clinton counted Hsu as one of her most prolific money bundlers. He gave her campaign $22,300, regularly appeared as a co-host for major fundraising lunches and dinners, and raised more than $100,000 from his friends for her presidential run.
“Obviously, we were all surprised by this news, and we have a procedure that we follow and upon verifying it, we returned his money,” Clinton said this week.
When a campaign has attracted more than 500,000 donors, as Clinton’s has, there is no way a candidate’s staff can check out each contributor. Clinton and her aides said there was little they could have done to protect themselves, but fundraising experts from both parties pointed to warning signs that should have given aides pause.
“If I were raising money for the prohibitive front-runner for president of the United States, I would be very, very careful about who these donors are and do some level of research,” said Marty Wilson, a Republican strategist and fundraiser for Gov. Arnold Schwarzenegger and others.
The most obvious red flag: A check of a commonly used database produces a 1990 San Francisco Chronicle news story detailing how Norman Hsu had been kidnapped by gang members in the San Mateo County suburb of Foster City. A second widely used database discloses that Norman Yuan Yuen Hsu of Foster City had a bankruptcy in 1990.
Having established that he lived in San Mateo County, a check of the San Mateo County Superior Court’s website reveals that Norman Yuan Yuen Hsu had a criminal case.
In the early 1990s, Hsu, 56, pleaded no contest to grand theft in a scheme that cost investors $1 million, and then disappeared. On Friday, Hsu turned himself in to San Mateo County authorities.
Superior Court Judge H. James Ellis ordered him held on $2 million bail. Hsu, dressed in a sharply tailored black suit, was led from the court in handcuffs. After posting bail, the depth of his woes became more apparent. A Justice Department source disclosed that the FBI has opened an investigation into Hsu’s campaign donations.
Aides to Clinton and others say Hsu never asked for favors. But, like many donors, he would have his photo snapped with prominent people. A vanity wall lined with pictures of senators and governors can impress potential business partners, particularly those not be savvy enough to know that politicians regularly pose for such pictures.
“I recall him as a regular face at Democratic candidate fundraising events,” said John Emerson, one of Clinton’s major Southern California backers. “He strikes me as one of those guys who likes to be in the room, likes to be the guy who is there and has taken a picture with a candidate.”
Although Hsu was particularly active on Clinton’s behalf, she was hardly the only candidate who received Hsu’s contributions. After making his first federal campaign donation in September 2003, Hsu generated more than $1 million for Democratic politicians.
Clinton communications director Howard Wolfson said Friday that Clinton, like all candidates, relied on publicly available information to vet major donors. The system did not detect details about Hsu’s past. “There is a series of steps to examining donations when they come in, and obviously, in the case of Mr. Hsu, these did not uncover this decade-plus-old warrant,” Wolfson said.
Because Hsu had been giving to other candidates, Democratic recipients assumed he was a reputable source of money.
In most instances, a donor’s background is well-known. But if the person is not known to the campaign, that person will be vetted.
All major campaigns employ researchers who investigate their opponents, and pick over their candidates’ donors, particularly those who are raising six-figure sums. Some campaigns retain consulting firms specifically to vet donors.
One consultant said some campaigns ask donors for permission to run background checks because political opponents almost certainly will investigate the sources of their foes’ campaign money.
Another problem was the pattern of donations made by Hsu and his friends, particularly those from a family that lives in a modest home in Daly City, a working-class town south of San Francisco.
Members of the family have given more than $200,000 to politicians in recent years, often on or about the same days that Hsu gave money. Federal law prohibits donors from reimbursing others who give at their behest.
Clinton and Sen. Barack Obama (D-Ill.) each received money from the Daly City clan. After the proximity of the donations became the focus of news accounts, Obama and Clinton sent letters to the family seeking assurance that the donations came from their own bank accounts.
“There is a concern, though nothing is proven, that there is some potential reimbursement of campaign contributions,” said Richard L. Hasen, a Loyola Law School professor and election law expert. “Anytime you have an entire family or group of employees of apparently modest means making large contributions . . . it raises a red flag.”
At an appearance in New York this week, Clinton vowed that her campaign would “continue to analyze all contributions and take action if that’s warranted.”