Cover Story

The power of The purse

&quotAt some point," White House press secretary Mike McCurry told reporters last month, &quotour goal here obviously is to dump all this stuff, flush the toilet, and say it's all one big argument for campaign finance reform." The &quotstuff" Mr. McCurry was referring to was the huge amount of &quotAsian money" solicited by Democrats close to President Clinton, much of which has had to be returned because of its dubious origins. But as Mr. Clinton begins his second term in office, the tendency of many Americans may be to think of all the Washington &quotstuff&quot--the multiple Clinton problems, and the Gingrich complications as well--in excremental terms, and to wish that all would merely be flushed away, and soon. That is not about to happen. The Federal Election Commission and the Justice Department are continuing their probes, as is an increasingly skeptical press. On Capitol Hill, both the Senate and the House are preparing to conduct ambitious investigations. Campaign finance reform? That will have to come later in this session of Congress, if at all. How to make sense of the campaign money scandal? WORLD asked veteran journalist and former Justice Department official Terry Eastland to take us on a flashlight trip through the maze.

Issue: "Follow the Greenback Road," Jan. 25, 1997

Not until the few weeks prior to the November 5 election did the fundraising story begin to emerge, largely thanks to the persistence of The Los Angeles Times and The Wall Street Journal. The story has many parts, some bordering on the bizarre and unbelievable. While Asians and Asian-Americans are found in each, the central figure is the president.

In the wake of the 1994 elections that gave the GOP control of Congress, Mr. Clinton believed that to ensure his reelection he would have to scare off any Democratic primary rivals while also seeding public doubts about Republican policies. Toward this end, he ordered a heavy television advertising campaign beginning in 1995. It was, according to his political advisers, the earliest, most sustained such effort by an incumbent president.

To finance this campaign, Mr. Clinton chose not to tap his own campaign treasury. Instead, he turned to the Democratic National Committee. The DNC executed a massive fundraising program of unprecedented scope in which the president and also Vice President Al Gore were extensively used. Donors (and potential donors) got to shake hands or have coffee or dinner with one or the other. Some were invited to State Dinners. A few got to play golf with Mr. Clinton, and a select few even spent the night in the Lincoln Bedroom.

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Heavy solicitation of Asian-Americans, the nation's fasting growing minority, was part of the DNC's effort. Indeed, it was given a name: the &quotNational Asian Pacific American Campaign Plan." DNC documents show that the party hoped to raise an unprecedented $7 million from Asian-Americans. The DNC eyed Asian-Americans because (1) many are increasingly prosperous and (2), unfortunately for the Democratic Party, too Republican. In 1992, Mr. Clinton got only a third of the Asian-American vote.

Mr. Clinton was game for the Asian-American strategy. He had many Asian-American friends--most notably, James T. Riady, son of Mochtar Riady, the Indonesian billionaire whose Lippo Group has offices in the United States. The president came to know the Riadys after James Riady moved in 1977 to Little Rock, where he joined an investment firm. Over the years family members and Lippo associates have given heavily to Mr. Clinton and the Democratic Party. In 1993, one Lippo employee, John Huang, left the company to join the Clinton administration. Taking with him a severance payment of almost $900,000, Mr. Huang was appointed to the Commerce Department.

While with Lippo, Mr. Huang had raised money for the Democratic Party in Asian-American circles, and he wanted to do it again, as a full-time job. In the fall of 1995, he and Mr. Riady had an Oval Office meeting with Mr. Clinton during which Mr. Huang told Mr. Clinton he would like to leave Commerce and raise money for both the party and the president's reelection campaign. A month later Mr. Huang was at the DNC. His new title--one never before held by a staff fundraiser--was DNC &quotfinance vice chairman."

Mr. Huang proved an extraordinary fundraiser as often huge contributions rolled in from donors with business affiliations in Indonesia, Taiwan, Korea, Vietnam, and mainland China. Mr. Huang himself raised at least $3.4 million from these sources.

These contributions, like those made to the DNC by other parties, fell into the category known as &quotsoft money&quot--money that is not given to a specific candidate for federal office but to a political party, for general use. The question raised by the Democrats' Asian soft money is whether it involved violations of federal law.

Here are some recent fundraising episodes that threaten to further beleaguer the White House and the DNC:

**red_square** In the fall of 1995, while still at the Commerce Department, Mr. Huang made a bedside hospital visit to Hashin Ning, a Riady business partner who had fallen sick while on travel to the United States. At Mr. Riady's request, Mr. Clinton sent Mr. Ning a get-well note. Mr. Ning's daughter and son-in-law, Soraya and Arief Wiriadinata, advised Mr. Huang of their interest in supporting the Democratic Party and President Clinton. Mr. Huang suggested making contributions to the DNC. The Wiriadinatas, then permanent residents living in Arlington, gave $30,000--their first-ever American political contribution. Later, upon returning to Indonesia, they sent in $420,000 more. Because federal law permits donations from foreigners who are permanent residents, the $30,000 and perhaps also the additional $420,000 were legal contributions. The DNC nonetheless returned the money because it was unable to verify whether the couple had filed 1995 tax returns.

That information would have been relevant to deciding whether the Wiriadinatas contributed their own money or someone else's. It is a crime for one person to knowingly make a contribution using someone else's money. And if any of the money the Wiriadinatas gave came from overseas, that could be a crime. While federal law clearly prohibits foreigners from contributing to specific candidates, it is uncertain whether the law also outlaws foreign contributions to political parties. A Justice Department spokesman confirms that there has never been a prosecution in a case of foreign soft money.

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