[NYTr] Hsu's on First? FBI Bumblers Looking into Mysterious Dem Funder

[All the News That Doesn't Fit]

LA Times - Sep 10, 2007 via rick kissell
http://www.latimes.com/news/local/la-na-hsu10sep10,0,4412655.story?coll=la-home-center


FBI looks into disgraced donor's business

Investigators study the legitimacy of an investment pool operated 
by Hsu, a Democratic fundraiser, who was arrested last week.

By Robin Fields, Chuck Neubauer and Tom Hamburger
Los Angeles Times Staff Writers

WASHINGTON --- The FBI has begun examining a murky business venture run 
by disgraced Democratic fundraiser Norman Hsu that paid out hefty 
profits over the last several years to investors, some of whom were 
pressed to make contributions to Hillary Rodham Clinton and other 
political candidates.

Sources told The Times on Sunday that a number of participants and 
their associates in Southern California and elsewhere had been in 
contact with the FBI about an investment pool operated by Hsu.

One associate, Irvine businessman Jack Cassidy, said he had tried to 
warn authorities and the Clinton campaign as early as June that he 
feared Hsu was running an illicit enterprise, but had gotten no
response.

"Nobody picked up the ball," said Cassidy, who was not an investor but 
heard about Hsu's business from a friend.

Clinton campaign spokesman Howard Wolfson declined to respond to 
Cassidy's claim, saying only that the campaign had conducted a 
background check of Hsu, who has emerged in the last three years as one 
of the Democratic Party's biggest fundraisers.

Hsu, 56, has contributed or raised more than $1.2 million for Clinton 
and other Democrats, but has become a source of embarrassment since The 
Times revealed in late August that he was a fugitive wanted on a 
15-year-old bench warrant stemming from an early 1990s investment fraud 
case. He called the matter a misunderstanding, then failed to show at a 
San Mateo County hearing and was rearrested last week in Colorado after 
falling ill there on an eastbound train.

A spokesman for Hsu had no comment when asked about the FBI's interest 
in Hsu's current business. An FBI official also declined to comment.

Since Hsu's arrest, there has been much speculation about the source of 
his wealth and how he was able to put together a broad network of 
donors, many of whom had never given to political campaigns. 
Investigators are looking into whether several of the donors who 
appeared to be of modest means contributed their own money to the 
candidates or were reimbursed, which would violate federal campaign law.

Investigators as well as investors are questioning whether Hsu's
current business was a legitimate bridge-loan investment pool, as those
involved were told, or a Ponzi scheme.

Hsu, a self-described apparel executive, appears to have operated the 
investment business for at least four years under such names as Next 
Components and Components Ltd., according to sources.

His pitch for investors and his request for political donations 
reinforced each other, as he represented himself as a wealthy 
businessman and big player in Democratic politics, several investors
said.

They were told their money was going into loan pools, some as large as 
$15 million, for businesses that needed short-term financing. Investors 
typically made at least a 6% profit in each 90-day period.

Several said they had received few specifics about the investments and 
believed in their legitimacy largely because they were given 1099 tax 
forms and paid taxes on their earnings.

Now they say they are fearful that they will never recoup their 
remaining investments; some wonder if the bridge-loan pool ever existed 
or if they were just paid with money coming in from new investors. In 
the early-1990s criminal case against Hsu, he solicited investors for a 
venture purchasing and reselling latex gloves; investigators determined 
he never bought the gloves and accused him of running a Ponzi scheme.

The New York Times reported Sunday that financial records from one of 
Hsu's companies show a similar pattern of money flowing to and from 
people who later made political donations through Hsu to Clinton and
others.

Hsu's attorney has denied that he reimbursed anyone for their donations.

Though the details of Hsu's investment business remain unclear,
campaign finance records show that his investors donated tens of
thousands of dollars to candidates he supported.

One investor said she made donations solely to stay in Hsu's good
graces and knew others who did so as well.

"They knew they had to do it or they were out," said the investor, who 
asked to remain anonymous. "There were people who maxed out every
credit card they had to give the maximum $4,600 in donations."

She said she opposed Clinton's presidential bid but gave money to her 
campaign anyway. "I can't stand the woman," the investor said.

Their donations were among those delivered in bundles by Hsu, making
him especially valuable to candidates because recent changes in
campaign finance laws have sharply limited the amount individuals can
contribute.

Hsu has been hospitalized in Grand Junction, Colo., since Thursday
after behaving erratically on a train bound for Denver. His condition
was upgraded to "good" on Sunday, St. Mary's Hospital officials said. 

[Times staff writer Dan Morain in Sacramento contributed to this
report.]