Fraud charge filed against fundraiser

Donor to Democrats accused in `Ponzi' scheme and campaign law violations

September 21, 2007|By Tom Hamburger and Dan Morain | Tom Hamburger and Dan Morain,LOS ANGELES TIMES

NEW YORK -- Moving with surprising speed, the U.S. attorney's office here charged Democratic fundraiser Norman Hsu with violating campaign-finance laws and overseeing a $60 million fraud.

The charges came as Hsu was returned to the custody of California authorities yesterday afternoon.

U.S. Attorney Michael J. Garcia of the Southern District of New York said Hsu pressured investors in his scheme to make campaign contributions to candidates for president, the U.S. Senate and other offices "in an effort to raise his public profile."

Hsu allegedly threatened investors, telling them failure to make campaign donations could jeopardize their investments with him. The allegations are made in a criminal complaint that was unsealed yesterday morning.

Hsu had handed out more than $600,000 in campaign donations since 2004, and gave to a variety of charitable organizations. The campaign of Sen. Hillary Rodham Clinton, a New York Democrat, was the recipient of much of the money; Hsu raised $850,000 for her through his network of associates.

Clinton has promised to return the money - although investors who lost money may lay claim to at least some of it.

"When we learned about these allegations, we acted out of an abundance of caution" to return money to Hsu-related donors, Clinton communications director Howard Wolfson said yesterday. "Obviously, these are very, very serious charges."

Garcia focused on the part of the complaint that accused Hsu, 56, of perpetrating a "massive Ponzi scheme" costing investors across the United States $60 million, essentially using money from one investor to pay others in a pyramid fashion.

On Wednesday, Hsu agreed to return to San Mateo County, Calif., to face a grand-theft charge to which he pleaded no contest in 1992.

Once in California, Hsu was to be held without bail. He forfeited $2 million in bail when he fled by train to avoid appearing at a procedural hearing earlier this month. He was caught in Colorado.

Hsu already faces investor lawsuits and multiple federal and state investigations into his business dealings and political activities.

Source Financing Investors, a New York private-equity firm, claims in a lawsuit filed in New York that Hsu owes investors $40 million. Hsu allegedly lured investors by promising returns of 5 percent to 6 percent a month.

Bob Emmers, Hsu's spokesman from the firm Sitrick & Co., declined to comment on the latest of Hsu's legal difficulties.

Tom Hamburger and Dan Morain write for the Los Angeles Times.

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