May 15, 1998
Democrat Fund-Raiser Said to Name China Tie
This article is based on reporting by Jeff Gerth, David Johnston and Don Van Natta and was written by Jeff Gerth.
WASHINGTON -- A
Democratic fund-raiser has told
Federal investigators he funneled
tens of thousands of dollars from
a Chinese military officer to the
Democrats during President Clinton's 1996 re-election campaign,
according to lawyers and officials
with knowledge of the Justice Department's campaign finance inquiry.
The fund-raiser, Johnny Chung,
told investigators that a large
part of the nearly $100,000 he gave
to Democratic causes in the summer of 1996 -- including $80,000 to
the Democratic National Committee -- came from China's People's Liberation Army through a
Chinese lieutenant colonel and
aerospace executive whose father
was General Liu Huaqing, the officials and lawyers said.
General Liu was then not only
China's top military commander
but also a member of the top
leadership of the Communist Party.
Chung said the aerospace
executive, Liu Chao-ying, told him
the source of the money. At one
fund-raiser to which Chung
gained admission for her, she was
photographed with President
Clinton.
A special adviser to the White
House counsel, Jim Kennedy, said
today, "We had no knowledge
about the source of Chung's
money or the background of his
guest. In hindsight it was clearly
not appropriate for Chung to
bring her to see the President."
Chung's account, coupled
with supporting documents such
as bank records, is the first direct
evidence obtained by the Justice
Department that elements of the
Chinese Government made illegal
contributions to the Democratic
Party. Under American law, foreign governments are prohibited
from contributing to political
campaigns.
While the amount described is a
tiny part of the $194 million that
Democrats raised in 1996, investigators regard the identification of
Liu as a breakthrough in their
long search for confirmation of a
"China Plan." The hunt was
prompted by secret telephone intercepts suggesting that Beijing
considered covertly influencing
the American elections.
Chung, a Southern California businessman, began cooperating with investigators after he
pleaded guilty in March to campaign-related bank and tax fraud.
He is the first defendant in the
Justice Department inquiry to
agree to cooperate.
It is not clear whether other
Chinese officials or executives
were involved in the purported
payments by Liu, or what her
motivation or the Chinese military's might have been. At the
time, President Clinton was making it easier for American civilian
communication satellites to be
launched by Chinese rockets, a
key issue for the P.L.A. and for
Liu's company, which sells
missiles for the military and also
has a troubled space subsidiary.
The President's decision was
valuable to Liu for enabling
her company to do more business
with American companies, but it
had also been sought by American aerospace corporations, including Loral Space and Communications and the Hughes Electronics Corporation, a subsidiary
of the General Motors Corporation, seeking to do more business
in China.
It is not known, however,
whether anyone in the Democratic Party or the Clinton Administration had reason to suspect the
source of the contributions from
Chung.
A lawyer for Chung, Brian
A. Sun, declined to comment on
his client's conversations with investigators, citing his client's sealed
plea agreement with the Justice Department. "I'm shocked that sources
at the Justice Department would attribute anything like that to my client."
Chung has denied being an
agent of the Chinese Government.
"Nor did Chung ever try to lobby
the American Government on any
type of issue involving technology or
anything else," Sun said.
A National Security Council
spokesman, Eric Rubin, said, "It is
ludicrous to suggest there was any
influence on the determination of
U.S. policy on this matter." He said
he did not know whether any executives from Liu's company expressed an interest in the issue.
Liu did not return a message
left with her office in Hong Kong
today.
Chung's revelations have
opened an avenue of inquiry leading
in a diplomatically sensitive direction: next month, Clinton goes to
Beijing, where he hopes to announce
increased space cooperation between China and the United States.
A representative of the Chinese
Government denied that Beijing was
behind the purported contributions.
"China has always abided by the
laws and regulations in this country," said Yu Shu-ning, a press counselor for the Chinese embassy. "We
have nothing to do whatsoever with
political contributions in this country."
Chung, an American citizen
who was born in Taiwan, owned a
floundering facsimile company in
Torrance, Calif. He became involved
with the Democratic Party in early
1995 through Asian-American contacts at the White House and was
known for constantly trying to use
his connections in Washington with
Chinese Government officials and
executives.
Despite being labeled a "hustler"
by one Presidential aide in 1995,
Chung managed to visit the White
House at least 49 times. He and his
company contributed $366,000 to the
Democratic National Committee --
most of it before he met Liu. The
full amount was later returned after
questions were raised about Democratic fund-raising.
A Democratic National Committee
spokesman, Richard W. Hess, said,
"We did not know and had no way of
knowing the source of his funds."
Chung met Liu in June
1996 in Hong Kong. She was not only
a lieutenant colonel in the military,
but a senior manager and vice president in charge of international trading for China Aerospace International Holdings Ltd., according to the
company's 1996 annual report.
The company is the Hong Kong
arm of China Aerospace Corporation, a state-owned jewel in China's
military industrial complex with interests in satellite technology, missile sales and rocket launches.
Liu's father, General Liu, was
China's senior military officer, and
as vice chairman of the powerful
Central Military Commission was in
charge of China's drive to modernize
the People's Liberation Army by
selling weapons to other countries
and using the hard currency to acquire Western technology. In that
role, he oversaw his country's missile deals.
In addition to his military role,
General Liu was a member of the
Standing Committee of the Politburo
of the Communist Party, the very top
circle of political leadership in China.
He retired from his official positions
last fall at the time of the Party's
15th Congress.
China Aerospace sells satellites,
launches them and owns a large
chunk of a Hong Kong satellite operator, but the financial viability of
many of these ventures depends on
American satellites. In 1996 President Clinton made it easier for
American satellites to be launched
by Chinese rockets. The decision was
announced in March but due to delays did not take effect until election
day.
As Liu began her relationship
with Chung, her company and
her father were trying to fix China's
troubled rocket program. That
spring, China Aerospace had brought
in outside experts, including officials
from Hughes and Loral to help analyze why a launch the previous February had failed. The Pentagon later
concluded that the outside review
harmed American national security
by advancing China's rocket and
missile capabilities. Both companies
denied wrongdoing.
In 1991 and 1993 the United States
barred all American companies
from doing business with two China
Aerospace units who had made illegal missile sales to Pakistan. In each
instance, Liu was assistant to the
president of the sanctioned company.
Writing about who in China may
have benefited from the 1991 missile
deal, former Secretary of State
James A. Baker 3d, in his memoirs,
said, "In all probability, several senior government and party officials or
their families stood to gain from the
performance of those contracts."
The sons and daughters of China's
elite -- sometimes referred to as
"princelings" -- have developed lucrative businesses based on their
family connections.
The missile deals were part of
General Liu's strategy of selling Chinese weapons to other countries to
raise money to acquire Western
technology.
"Liu was a proponent of P.L.A.
modernization who was very much
interested in obtaining Western technology," said retired Rear Adm. Eric
A. McVadon, the American defense
attache in Beijing in the early 1990's.
He said Liu constantly rebuffed
American concerns about China's
weaponry sales.
Those concerns were front and
center in 1996, when General Liu was
still in charge of the P.L.A. They
included China's sale of missiles to
Iran and of nuclear equipment to
Pakistan, as well as its own bellicose
military maneuvers near Taiwan.
Liu, McVadon recalled,
was a "gladhander" who "brokered
deals." In 1990 she was granted a
visa to visit the United States as a
representative of a China Aerospace
subsidiary.
At the first meeting between
Chung and Liu in June 1996,
Chung is said to have told investigators, Liu told him she was interested in again visiting the United
States. Soon learning that Chung
could arrange meetings with the
President, she expressed an interest
in meeting Clinton.
Chung helped Liu obtain a
visa on July 11, 1996, according to a
law enforcement official. Five days
later, he wrote the Democratic National Committee that he wanted to
bring Liu and a Chinese medical
executive to a July 22 fund-raising
dinner to be held at the Brentwood,
Calif., home of the financier Eli
Broad.
Both of his guests' names were
placed on the guest list after
Chung wrote a check for $45,000 to
the Democratic National Committee
on July 19.
A week later, Chung
set up a California corporation for
Liu and himself, records show.
Liu arrived in Los Angeles on
July 21, and the next day Chung
accompanied her to two fund-raising
events attended by Clinton, according to a law enforcement official. The first was an early evening
$1,000-per-plate gala at the Beverly
Hilton.
Later that night, Chung and
Liu attended a $25,000-per-couple
dinner at Broad's home that
raised more than $1.5 million for the
Democrats. The President was photographed with Liu, a routine
courtesy at such events.
Sun, Chung's lawyer, said,
"I don't think she was any different
from any of his business contacts --
they thought Johnny was influential
and someone they would like to know
as they furthered their business dealings in the United States."
The previous year, photos from
another Chung visit with Clinton
had caused a problem. The President
had expressed concerns about some
of Chung's Chinese business clients -- unrelated to Liu -- whom
the fund-raiser brought to a March
1995 radio address by Clinton.
Clinton's director of Oval Office operations, Nancy Hernreich, in
testimony taken by Senate investigators, said Clinton told her later
the visit shouldn't have happened.
She took that to mean that Clinton thought Chung's clients were
"inappropriate foreign people."