[NYTr] What Made Norman Hsu Run? More on Mysterious Dem Fundraiser

[All the News That Doesn't Fit]

The Wall Street Journal - Sep 8, 2007
http://online.wsj.com/article/SB118920845515221199.html


What Made Norman Hsu Run?

He charmed friends, investors and politicians. But behind lurked
failures, a kidnapping and lawsuits 

By Ianthe Jeanne Dugan in New York,
Jonathan Cheng in Hong Kong and Brody Mullins in Washington

At a New York restaurant overlooking Central Park in April 2006, the
governor of Pennsylvania sat down to dinner with about a dozen
Democratic supporters. The 10-course meal in a private room at Per Se,
including dishes like Nova Scotia Lobster Tail "Cuite Sous Vide," cost
about $18,000, says a diner who was there. The host, Norman Hsu, was a
businessman that the crowd admired but knew little about.

In the past few weeks, much more has become known about Mr. Hsu: That
he had filed for bankruptcy twice, including a time in 1990 when he
said he had no income, no job, and little more than a Toyota 4-Runner
and a jade ring. And that he was wanted by California authorities for
grand theft charges to which he had pleaded no contest in 1992, then
fled before facing sentencing.

Mr. Hsu turned himself in on that matter a week ago, after news
coverage of his past -- which began with a Wall Street Journal article
about his unusual campaign giving -- had brought the conviction to
light and led politicians to hand over some of his campaign donations
to charity. Mr. Hsu posted a $2 million bond -- and then he vanished
again. On Wednesday, when he was supposed to appear in court in
California, he instead boarded Amtrak's eastbound California Zephyr
near Oakland. Along the trip he fell, was taken to a hospital in Grand
Junction, Colo., and arrested. On Friday, authorities were taking steps
to send him to California.

Mr. Hsu's lawyer issued a brief statement Friday afternoon saying that
"the strain [Mr. Hsu] has been under during the last week has been
enormous and, perhaps, unbearable. We will be getting him the best
medical care available." As for the charges Mr. Hsu left behind, the
lawyer, James Brosnahan, said: "The legal matter pending in San Mateo
Superior Court will be handled in its proper course."

Much about Mr. Hsu remains a mystery, most notably the source of the
money for the donations that made him a favorite in Democratic circles.
For years Mr. Hsu tapped a vein of fellow Asian-Americans, first to
help seed startup businesses and lately to help feed his sudden passion
for politics.

His tale also shows the foibles of the U.S. political fund-raising
system, which attracts a crazy-quilt of donors -- including ordinary
citizens, the powerful trying to expand their fame, the ambitious
seeking favors and social outsiders seeking a ticket into the American
elite. Campaigns say they try to screen this milange of donors, but the
task is difficult and the hunger for cash means they sometimes don't
look too closely. "It is hard to raise money, and everybody is anxious
to succeed," says John Catsimatidis, a fellow Democratic fund-raiser.
"Nobody wants to think anything is bad about somebody who is doing so
much to help. He was a very, very nice man."

People who knew Mr. Hsu in Hong Kong remember him as a man with a
magnetic personality who could walk into a crowded bar and instantly
seem as if he knew everybody. He dominated a conversation. "He was a
friendly guy -- social, humorous -- a very good salesman," says Ernest
Ng, an old college friend who did business with Mr. Hsu and later fell
out with him.

Mr. Hsu's past, illuminated by documents fished out of storage at
various courts and interviews with former partners and friends, is full
of failed businesses, a kidnapping, lawsuits and bouts of financial
ruin followed by hard-to-explain recovery. He charmed friends,
relatives, and college classmates into investing in real estate,
restaurant and apparel businesses, many of which failed, stranding
investors.

Mr. Hsu hasn't spoken publicly since the spotlight recently fell on his
fund-raising and his past. When The Wall Street Journal sought to
interview him in August, he responded with an email saying he was
"shocked, sad and angry that you have chosen to pick on me for NO
reason." He said that he simply wanted to pay back some of the
opportunities he received in America, while maintaining a private life.

Politicians and donors describe a pleasant and friendly man, though
most are hard-pressed to say what he did for a living. "Everybody loved
him, even the staff. He'd take them out to lunch," says Terry
McAuliffe, campaign chairman for Hillary Rodham Clinton, one of he
biggest recipients of Mr. Hsu's largess. Mr. McAuliffe adds, "He was
very hard to understand, to tell you the truth."

Statement by Hsu's Attorney

James Brosnahan, Norman Hsu's attorney and a partner at the law firm of
Morrison & Foerster, issued the following statement late Friday:

"In the last 36 hours a great many friends of Norman Hsu have expressed
concern about his mental health and physical well-being. We are very
pleased and relieved that he is now being cared for at St. Mary's
Hospital in Grand Junction, Colorado. The strain he has been under
during the last week has been enormous and, perhaps, unbearable. We
will be getting him the best medical care available. The legal matter
pending in San Mateo Superior Court will be handled in its proper
course."Norman Yung Yuen Hsu was born in October 1951 in Hong Kong, he
has told acquaintances. A former college friend and business associate,
Pedro Woo, says Mr. Hsu's ethnic roots are in Shanghai. He moved to
California and received a Social Security card there in 1969, when he
enrolled at University of California, Berkeley, as a computer-science
major. He married shortly after graduating, in May 1974, at age 22,
according to a marital certificate.

He received a license to sell real estate in California in 1976. After
winning a degree from the University of Pennsylvania's Wharton School in
1981, he got involved in a wide range of enterprises in California,
including clothing stores and restaurants, according to court documents.

Mr. Hsu, according to several accounts as well as records, built trust
by establishing a perception of himself as a successful businessman. He
was known for dressing well, was occasionally quoted in trade
magazines, and had a long list of businesses registered under his name.
He had impeccable educational credentials.

Mr. Woo met Mr. Hsu in the early 1970s when both were at Berkeley, and
invested in a clothing company Mr. Hsu was starting with another
Berkeley graduate. That third person had returned to Hong Kong and was
to supply men's casual wear for Mr. Hsu to distribute in the U.S.

Mr. Woo lost at least $50,000, according to his account and Mr. Hsu's
bankruptcy documents. "He abused my trust, and I was very angry," Mr.
Woo says. "But I could not find him. He was moving around."

Mr. Hsu developed a long trail of addresses, in some cases mystifying
longtime occupants of the locations. One address currently linked to
him is 5586 Bandini Blvd. in Bell, Calif., near Los Angeles. It is
occupied by Blusound Electronics. "I have no idea who he is," said
Mansour Parvizi, a Blusound official. "We get mail for him all the
time, mainly from bill collectors."

As his businesses unraveled, Mr. Hsu began raising money in the late
1980s for a new venture that he said would buy and resell latex gloves,
and eventually other apparel. He raised about $1 million from more than
a dozen investors. This time, he met many of the investors through a
business acquaintance named August Wu, a restaurateur who said Mr. Hsu
had gained his trust as a partner in several deals.

"He was a very warm, caring person," Mr. Wu says. "He acted like a very
good friend."

According to court transcripts, some investors gave their life savings
over to Mr. Hsu, while others refinanced their homes to borrow money to
invest. "He had a reputation as being a very successful business
person," said one of the investors, Alvin Chau, an Oakland, Calif.,
accountant.

Adding to the trust, Mr. Hsu repaid some early investors, building up a
sense among future investors that they, too, would profit, according to
court documents. "It was a classic pyramid scheme," says Ronald
Smetana, the deputy attorney general in California who handled the case
in 1991.

With the latex-glove venture, when no products or profits surfaced,
several investors sued. In the summer of 1990, Mr. Hsu filed for
bankruptcy protection. Then in September 1990 he was kidnapped,
according to an article in the San Francisco Chronicle. The police, the
article said, arrested men they said were connected to Asian gangs. Mr.
Hsu told police that he had been assaulted and taken to Foster City,
Calif., where police pulled over a car driven by his alleged abductors
when it ran a red light.

In October 1990 he divorced, after his wife filed a petition citing
"unhappy and irreconcilable differences."

Mr. Hsu was practically destitute, according to bankruptcy documents. He
owed $1.64 million to a long list of people, including his
father-in-law, who had lent him money. The documents said he was
renting a home for $1,750 a month in Foster City and spending $75 a
month for clothes.

Mr. Hsu vanished just before his scheduled sentencing in 1992. He soon
began building new businesses, this time in Hong Kong.

One, a clothing company called Newton Enterprises Ltd., opened in
September 1992, according to Hong Kong business records. Documents link
Mr. Hsu to another Hong Kong company about that time as well. Both had
vague incorporation papers that suggested they could be used for
anything from financial advisory services to travel agencies to garment
manufacture.

In registrations for Newton and the other firm, Mr. Hsu listed his
address as on the 39th floor of Convention Plaza, which is a luxurious
place in the heart of Hong Kong with views of Victoria Harbor. Eng Boo
Cheh, a Singaporean garment industry executive who helped set up Newton
with Mr. Hsu, recalls Mr. Hsu frequenting a nightclub at the Grand
Hyatt near there. "He'd call and say, 'Come have a drink,' " Mr. Eng
says. "He befriended a lot of people there."

But his star also fell in Hong Kong. Both companies were dissolved in
1997 and 1998. The Hong Kong courts declared Mr. Hsu bankrupt in the
summer of 1998.

Mr. Hsu soon returned to California, creating another chain of addresses
near San Francisco and Los Angeles. Real-estate brokers in the area say
that he actively invested in properties in the Bay area. He continued
dabbling in the apparel industry as well.

A few years ago, Mr. Hsu's activity in the Bay Area tapered off. And he
appeared to move to New York. And he emerged in another circle --
political fund-raising in New York.

Just how or why he got involved in politics is unclear. In 2004, Mr. Hsu
donated $2,000, the most then allowed, to the presidential campaign of
Massachusetts Democratic Sen. John Kerry.

Mr. Hsu began contributing generously to an array of Democrats,
including California Sens. Dianne Feinstein and Barbara Boxer and
Louisiana Sen. Mary Landrieu. He donated $5,000 to Bob Hertzberg, who
was running for mayor of Los Angeles. When Bill Richardson ran for
governor of New Mexico, Mr. Hsu was among the top contributors,
donating $37,000 in all. Mr. Richardson, like most other recipients,
now says he'll donate it to charity.

In 2004, Mr. Hsu began giving to federal candidates, including Mrs.
Clinton and Illinois Democratic Sen. Barack Obama. He also donated
checks from others.

Norman Hsu leaving the San Mateo County jail in California with his
attorneys last week. And he frequently threw parties. To celebrate the
Democrats' victories in Congress, the Senate and gubernatorial races, he
rented a New York club called Buddakan. With several governors and
others in the audience, Mr. Hsu grabbed the microphone, according to
someone who was there, and ordered anyone who wasn't supporting Hillary
Clinton to "get out!"

Mr. Hsu also was a burgeoning philanthropist. He was a significant
donor to the Innocence Project, which helps prisoners overturn unfair
convictions through DNA testing.

Mr. Hsu also is listed on the roster of members for the Clinton Global
Initiative -- an effort by Mrs. Clinton's husband, the former
president, to recruit people to tackle problems like poverty and
disease -- in 2005 and 2006. Members are required to donate $15,000 a
year.

Bob Kerrey, a former Nebraska Democratic senator who is president of
the New School in Manhattan, met Mr. Hsu through a mutual friend a few
years ago. Mr. Kerrey declined to say who the mutual friend is. Mr. Hsu
endowed a scholarship in his own name at the New School's Eugene Lang
College and joined its board. Last year, he became a trustee of the
university. He resigned a week ago, before surrendering to California
authorities.

Mr. Kerrey says he enjoyed talking about the fashion business with Mr.
Hsu and appreciated his Asian roots. "I thought he would be a great
addition to our community," Mr. Kerrey said. He acknowledged he did not
know much about Mr. Hsu's businesses or the source of his abundant
checks.

Then Mr. Hsu's new life came crashing down around him. First, a Wall
Street Journal article described close patterns between Mr. Hsu's
contributions and those of people who had no prior history of political
giving or obvious means for paying. The U.S. Justice Department is now
investigating whether the fund-raising was proper. One focus is whether
any donors were reimbursed, a federal felony. Mr. Hsu said in an email
response to questions last month that he has asked a lot of people to
contribute but never reimbursed anybody.

A week ago, Mr. Hsu showed up in court in Redwood City, Calif., to begin
dealing with the 16-year-old grand-theft charges. He was to have
returned at 9 a.m. Wednesday to surrender his passport and discuss a
bail reduction and restitution for investors.

Instead, according to an Amtrak spokesman, Mr. Hsu earlier that morning
had boarded a train bound for Chicago. Somewhere he stumbled, and at
1:13 p.m. Eastern time, somebody from the train called for an ambulance
in Grand Junction. Mr. Hsu arrived by ambulance at St. Mary's hospital
20 minutes later. A hospital spokesman said he was "delirious."

FBI agents arrived Thursday evening and placed Mr. Hsu under arrest. He
remained there overnight. As of late afternoon Friday, federal officials
were awaiting his release from the Colorado hospital before moving to
bring him back to California.

Back in Hong Kong, many of Mr. Hsu's early associates express sadness
at his fall. "He graduated from Berkeley, he went to Wharton and got
his MBA there," says Mr. Ng, the college friend who entered business
with him in the 1980s and fell out in a dispute. "It's a pity that he
had to cheat on people. He could have had a very good career."

[Kris Hudson in Grand Junction, Colo., Jim Carlton and Robert Guth in
San Francisco, Gary Fields and Jackie Calmes in Washington and John
Emswhiller in Los Angeles contributed to this article]