Ruling may threaten campaign finance inquiry Election laws apply only to hard money, judge finds


WASHINGTON -- In a decision that could seriously undercut the Justice Department's campaign finance prosecutions, a federal judge has ruled that the department misinterpreted election laws that restrict contributions by foreign nationals.

The ruling, issued Friday by Judge Paul Friedman of U.S. District Court, appeared to threaten the department's effort to investigate fund-raisers, Democratic Party officials and White House aides for their role in soliciting millions of dollars from overseas contributors in the 1996 election campaign.

Friedman's order came as part of the pretrial skirmishing in the case of Yah Lin Trie, a former Little Rock restaurateur and longtime friend of President Clinton who became an important Democratic fund-raiser and brought in hundreds of thousand of dollars, much of it, congressional investigators say, from his business contacts in Asia.

Friedman found that the law, which bars foreign nationals from contributing to federal elections, applies only to hard money contributions. These are regulated by federal election law and can be used to finance campaign activities that directly benefit candidates for federal office.

The judge found that the contribution law permits foreign nationals to make donations known as soft money, which is money that cannot be spent on behalf of candidates like hard money, but may be spent on generic party activities.

Friedman wrote that the government argued that the federal limit on foreign contributions "applies to soft money donations as well as to hard money contributions." The judge said, "The court disagrees."

He concluded that "the statute does not on its face therefore proscribe soft money donations by foreign nationals or anyone else."

The judge did not dismiss any counts related to soft money but said that the government would be required to prove in Trie's trial, scheduled to begin Feb. 1, that overseas contributions were deposited into hard money accounts. His decision suggested that prosecutors would also be forced to prove that fund-raisers who solicited the contributions knew that the donations would be divided between soft and hard accounts, a potentially insurmountable hurdle.

A Justice Department spokesman said yesterday that lawyers were considering an appeal of the decision, which was reported yesterday by the Washington Post.

Friedman's order was the second ruling in a month to attack the government's approach. Earlier, Friedman dismissed five of six counts against another Democratic fund-raiser, Maria Hsia, accusing the government of an "Alice in Wonderland" interpretation of the law because of an indictment charging her with causing campaign committees to make false statements. Friedman also dismissed three similar counts against Trie.

Taken together, Friedman's rulings in the Trie and Hsia cases represent a potentially serious judicial setback for the Justice Department. The judge's order could affect other pending cases, like one against Pauline Kanchanalak, a Thai entrepreneur who has been accused of bringing in nearly $700,000 in possibly suspect donations to the Democrats.

More broadly, the rulings underscore the difficulty confronting prosecutors in trying to bring criminal cases using election laws that the judge has said were intentionally engineered by Congress to be weak.

Pub Date: 10/11/98

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