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Probe Reports Decry Abuses, But Overhaul Still Unlikely

Drafts depict system awash in scandal, but support on Hill for legislative remedies remains weak

By Rebecca Carr and Jackie Koszczuk, CQ Staff Writers

As Senate Republicans and Democrats prepare to issue separate reports on last year's campaign finance investigation, it is becoming increasingly clear that neither the summer-long hearings nor the reports can overcome resistance in Congress to campaign finance overhaul legislation.

Drafts of the reports obtained by Congressional Quarterly contain thousands of pages of minutely detailed accounts of a side of national politics rarely seen by the public -- political fundraising. But the documents say little that the public did not already strongly suspect: that national politics is awash in high-dollar donations from special interest groups who want something from Washington, and that everyone from President Clinton to the most junior Republican in Congress is increasingly dependent on these large, mostly unregulated contributions.

Among the myriad cases of abuse laid out in the majority report, Vice President Al Gore is accused of knowingly attending a fundraiser at a Buddhist temple in California, even though such an event on religious property is illegal. In the Democratic report, investigators describe a concerted plan by the Chinese government to curry influence with members of Congress in the hopes of opening a new avenue for influencing American foreign policy and decisions on trade with China.

The Republican majority report, prepared by Senate Governmental Affairs Committee Chairman Fred Thompson of Tennessee, focuses mostly on alleged abuses by Clinton, his aides, the Democratic National Committee (DNC) and a string of shady fundraisers.

Committee Democrats led by Sen. John Glenn of Ohio, who found plenty of fundraising dirt on Republicans during the course of the probe, have prepared their own report enumerating abuses on the GOP side.

Little Chance for Legislation

Sweeping inquiries such as the one conducted by Thompson and Glenn often provide the impetus for legislative remedies. And Thompson in fact expressed hopes at the outset of the investigation that the committee's work would spur overhaul legislation.

But in a twist of bitter irony for Thompson and other supporters of campaign finance overhaul, the final reports, when they are issued in the next couple of weeks, are likely to have little impact on the moribund efforts to pass legislation this year -- even though leading members of both parties concede that the campaign finance system built by the mid-1970s post-Watergate overhaul has fallen apart, especially with the advent of "soft money," the unlimited donations from corporations, wealthy individuals and labor unions that figured prominently in the fundraising scandals.

"In 1996, the federal campaign finance system collapsed," asserts a draft of the majority report.

The leading campaign finance bill in Congress, a bipartisan effort cosponsored by Sens. John McCain, R- Ariz., and Russell D. Feingold, D-Wis.

Soft money is so named because it cannot be used for nuts-and-bolts campaign expenses, such as television ads expressly urging a vote for a candidate. Instead, it is limited to more general party-building endeavors such as get-out-the-vote efforts. But in recent election years and especially in 1996, soft money began seeping into forbidden areas, and it is now being used to underwrite a wide range of direct political activity.

Senate Majority Leader Trent Lott, R-Miss., opposes the McCain-Feingold legislation. House Speaker Newt Gingrich, R-Ga., is under pressure from a bipartisan team led by Rep. Christopher Shays, R-Conn., to bring a bill banning soft money to a vote in the House.

In a concession to overhaul proponents, Lott promised to bring up the issue by March 6. But backers have been unable to muster the 60 votes they need to break a GOP-led filibuster. Short of a national outcry for overhaul -- or big losses at the polls in November that can be attributed to the campaign finance scandals -- a bill is unlikely to emerge from either chamber.

"I think it is so hypocritical for people to decry all the abuses and not want to improve the system," Glenn said in an interview Feb. 11. "This could have been a chance to clean up an increasing scandal. There is wrong on both sides."

Final reports from the committee Republicans and Democrats have been delayed repeatedly since Jan. 31, when Thompson originally had said he would release his report. Republicans are debating how to handle new information related to the investigation that they have received from the Justice Department and are also discussing how to handle the question of campaign finance legislation.

Thompson wants to include a chapter on the need for legislation, but Republicans are split on the issue. For instance, committee member Robert F. Bennett, R-Utah, has argued that present law governing the financing of campaigns is adequate, and that the problem in 1996 was not the system, but that Clinton and his allies were "blatantly circumventing the law."

Glenn and the committee Democrats have maintained that they will not issue their report until Thompson can get his out, in deference to the chairman. But drafts of both reports began to leak out the week of Feb. 9.

Copies of both the majority and minority versions make it clear that the Republicans, taking a hard partisan line, blame Clinton and the Democrats for most of the problems in the 1996 campaigns. Democrats in their report take a more evenhanded approach, blaming Republicans for some ill-conceived money schemes, but also conceding that Clinton and the DNC made plenty of mistakes.

A Desperate White House

The GOP draft creates a picture of a White House so demoralized and desperate after losing Congress to the Republicans in 1994 that it launched a reckless campaign to raise money in a hurry. Soft money was used illegally, the Republicans assert, to pay for television ads promoting Clinton's re-election. To launch the early campaign assault, "the president and his top advisers took control of the DNC and designed a plan to engage in a historically aggressive fundraising effort, utilizing the DNC as a vehicle for getting around federal election laws."

According to the draft GOP report, every suspect or unlawful scheme uncovered by Senate investigators stemmed from the intense pressure from the White House on the DNC to raise more than three times what the party committee had raised during the 1992 campaign.

Among the report's allegations:

  • The president and a top adviser, Harold M. Ickes, took effective control of the DNC, and vetting of contributions for illegal givers ceased.
  • Asian-American businessman John Huang was installed as a top DNC fundraiser and launched a scheme to funnel foreign contributions to Clinton, many of them from straw donors -- people who give money in their own name on behalf of someone else.
  • White House aides began to aggressively market the president in return for contributions, using informal coffees and photo opportunities with Clinton, overnight stays in the Lincoln Bedroom and other unseemly perks to reward generous donors.

Although the GOP report intimates that Huang and some of his associates may have had ties to Chinese government intelligence, the report does not provide evidence of influence-buying by the Chinese government, or of any administration policy changes that may have resulted.

The Democratic version takes pains to note that the few substantiated attempts by the Chinese to gain influence in the United States were focused exclusively on influencing congressional elections, not the presidential race. At the time, Chinese officials had become convinced that they would gain more leverage over policy by establishing friendly ties to key legislators, the minority report says.

Although the Democrats defend the president and his allies against assertions made by the Republicans, they are also sharply critical of Clinton and fellow Democrats for abuses committee members found repugnant.

About the DNC's acceptance of illegal contributions from foreigners, the Democratic report says, "There appear to have been instances where DNC officials ignored the warning signals and permitted improper contributions to be accepted."

The minority report is especially critical of Clinton's use of the White House to raise money. "Republicans can legitimately criticize the White House coffees as the marketing of access to the president . . . Even more disturbing were instances when DNC Chairman Donald Fowler intervened on behalf of contributors in the face of repeated admonitions to refrain from doing so."

But Glenn and the committee Democrats also cite several GOP abuses, especially the use of tax-exempt organizations to subsidize campaigns. The investigation uncovered several instances of ostensibly charitable groups being used to shield the existence of large contributions from wealthy contributors and to provide a new -- and illegal -- avenue of money into campaigns.

The investigation, the Democratic draft report says, showed that "both parties have become slaves to the raising of soft money. Both parties have been lax in screening out illegal and improper contributions. Both parties have openly sold access for contributions."

The John Huang Case

Republicans focused large portions of their draft on a discussion of how Clinton and the DNC failed to detect, perhaps purposefully, the influx of millions of dollars of illegal contributions from foreigners. The central figure was Huang, a longtime employee of and political operative for the Riady family of Indonesia, which runs the Lippo Group banking and insurance conglomerate. Huang was also a prodigious fundraiser for Clinton in both 1992 and 1996.

Huang landed a top political job working in the international economic policy section of the Commerce Department in 1994 -- a job for which he was ill-trained, according to the testimony of his former colleagues. Though he was given few responsibilities, he got top security clearances and access to sensitive information, which the GOP report suggests -- but does not prove -- may have been passed to the Riadys.

In 1996, Huang moved to the DNC to become vice chairman for finance after Clinton and top White House aides lobbied the DNC to hire him, the report asserts, based on testimony from Ickes.

Ickes recalled the president telling him that Huang was "prepared to go to work at the DNC or the Re-elect [committee], wherever the president . . . felt he could be best used."

At the DNC, Huang launched an aggressive campaign to raise money from the Asian-American community, eventually bringing in $3.4 million. But the investigation found that Huang and a circle of associates raised a lot of the money from foreigners or from straw donors who ostensibly gave their own money but were actually reimbursed by others.

A Huang associate, Maria Hsia, set up a controversial fundraiser in April 1996 at the Hsi Lai Temple in California, where Buddhist nuns were used as straw donors. The nuns wrote checks to the DNC and were later reimbursed by temple officials, who had been introduced to the scheme by Hsia. Such conduit schemes are illegal, as is holding political events on the grounds of tax-exempt religious organizations.

Gore appeared at the event, but later said he was unaware that it was a fundraiser. The GOP report cites several internal documents that show that DNC aides and Gore's own staff repeatedly referred to the event as a fundraiser. Before Gore left Washington, Ickes sent him a memo saying the April 29 event would be arranged by Huang and would raise $250,000.

"Despite his various denials, the vice president was well aware that the event was one designed to raise money," the report says.

Both Huang and Hsia refused to testify before the committee, citing their constitutional right against self-incrimination. The DNC has returned nearly half the money raised by Huang, some $1.6 million.

A DNC auditor ordered the contributions returned and, in a document citing the reason for the refund, wrote: "It was a temple, you idiot!"

Selling the White House?

The majority draft alleges that Clinton and the DNC hatched a plan to actively market access to the president. Clinton himself approved the plan to invite donors to the White House.

Investigators produced a note in the president's handwriting that said, "Ready to start overnights right away."

The coffees proved especially lucrative, the report says. The White House hosted 103 of them in 1995 and 1996, and more than 90 percent of the participants contributed money to the party, for a total of $26.4 million. At one controversial June 1996 event, the president met with Thai business executives brought in by DNC fundraiser Pauline Kanchanalak, who helped arrange $475,000 in contributions about the time of the coffee. Investigators found that the money was wired to her from a bank in Bangkok. Two other participants told investigators that Huang solicited contributions at the coffee, a process one of the witnesses described as a "shakedown."

Political fundraising is illegal on federal property. Administration officials have asserted that the coffees were not official fundraisers, but were instead meant to identify potential supporters.

One illustrative case cited by the report is international oil entrepreneur Roger Tamraz, who gave Democratic Party committees $300,000 in order to attend coffees with the president. Tamraz was trying to win approval for a 930-mile oil pipeline stretching between the Caspian and Mediterranean seas. In the end, he did not win the administration's blessing, but he got access to the president over the objections of high-ranking officials at the National Security Council.

Tax-Exempt Abuse

A major issue raised by Democrats in the investigation was the improper use of tax-exempt groups for politics.

However, the committee did not hold hearings on the issue because many conservative and liberal groups refused to comply with subpoenas seeking information. Many of the 32 nonprofit groups subpoenaed argued that the committee's subpoenas sought information beyond the scope of the panel's authority.

But after press reports about a conservative policy group run by then-Republican National Committee Chairman Haley Barbour, the committee looked into the National Policy Forum. Investigators alleged that Barbour, desperate for cash in the closing weeks of the 1994 congressional campaigns, arranged for Hong Kong businessman Ambrous Tung Young to guarantee a $2.1 million loan to the policy forum, which then gave the RNC a like amount of money. A few months later the policy forum defaulted on the loan from Young.

Glenn said he believes the deal was one of the most serious abuses. "The head of a national political party knowingly and successfully solicited foreign money, infused it into the election process and intentionally tried to cover it up," he said.

Barbour testified that he did not know the money came from foreign sources.

Democratic investigators also concluded that Barbour and other Republicans set up another tax-exempt group, the Coalition for Our Children's Future, which spent more than $5 million on advertising targeting congressional districts in 1996. The coalition, the report found, "sets a dangerous precedent for future elections." The ads were ostensibly intended to promote an issue, but more often than not they promoted a specific candidate, according to the report.

Democratic investigators also looked into a third organization called Triad Management Services Inc., a for-profit group run by Carolyn Malenick, a former fundraiser for Oliver L. North, the former Marine colonel who was a central figure in the Iran-Contra investigation and a 1994 Senate candidate in Virginia.

Triad offered donors a choice of giving to individual candidates, a slew of conservative political action committees or two tax-exempt groups named the Citizens for the Republic Education Fund and Citizens for Reform.

Democratic investigators found that Triad funneled money into the tax-exempt groups for the "sole purpose of running attack ads against Democratic candidates under the guise of 'issue advocacy.'" Triad "conspired with donors who had reached their maximum contribution limit to evade the law by laundering additional contributions through designated political action committees and then earmarking those contributions for certain campaigns," the minority draft says.

While Congress' campaign finance investigation may not yield legislation, issues raised by the probe have begun to produce serious consequences for some of the major players.

Yah Lin "Charlie" Trie, an old friend of Clinton's from Arkansas, surrendered to the Justice Department on Feb. 3 after ending a self-imposed exile in Asia. He faces a 15-count indictment on charges he funneled illegal foreign funds to the president's re-election campaign.

Trie, his wife and his businesses donated $220,000 to the DNC from 1994 to 1996, despite a series of failed business ventures. The committee concluded that the money came from Macau businessman Ng Lap Seng, and was intended to buy access for Trie and Ng. The money was instrumental in Trie's appointment to the Commission on U.S.-Pacific Trade and Investment Policy in 1996, the majority draft says.

The committee also alleged that Trie raised foreign funds for the president's legal defense fund, used to pay legal fees for Clinton and his wife, Hillary Rodham Clinton.

© 1998 Congressional Quarterly Inc. All rights reserved.
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