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NORMAN HSU |
FBI reportedly examining fund-raiser's investment venture
WASHINGTON - The FBI has reportedly begun examining a murky business venture run by disgraced Democratic fund-raiser Norman Hsu that paid out hefty profits over the past several years to investors, some of whom were pressed to make contributions to Hillary Clinton and other political candidates.
Sources told the Los Angeles Times on Sunday that several participants and their associates have been in contact with the Federal Bureau of Investigation about an investment pool operated by Hsu.
One, Irvine businessman Jack Cassidy, said he had tried to warn authorities and the Clinton campaign as early as last June that he feared Hsu was running an illicit enterprise but got no response.
"Nobody picked up the ball," said Cassidy, who was not an investor but heard about Hsu's business from a friend.
Last night, Clinton's campaign said it would return $850,000 in donations raised by Hsu. "In light of recent events and allegations that Mr. Norman Hsu engaged in an illegal investment scheme, we have decided out of an abundance of caution to return the money he raised for our campaign," Clinton spokesman Howard Wolfson said in a statement. "An estimated 260 donors this week will receive refunds totaling approximately $850,000 from the campaign"
Hsu, 56, emerged in the last three years as one of the Democratic Party's biggest fund-raisers, but became 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 initially dismissed the matter as a misunderstanding, then failed to appear for a hearing and was re-arrested in Colorado after fleeing California by train.
A spokesman for Hsu had no comment when asked about the FBI's interest in Hsu's business. An FBI official also declined to comment.
Since Hsu's arrest, there has been much speculation about the source of his wealth and his ability to put together such a broad network of donors, many of whom had never before given to political campaigns. Investigators are probing 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 percent 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 whether 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 that involved purchasing and reselling latex gloves; investigators determined he never bought the gloves and accused him of running a Ponzi scheme.
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Hsu's attorney has denied that he reimbursed anyone for their donations.
Hsu has been hospitalized in Grand Junction, Colo., since Thursday after behaving erratically on a train bound for Denver.
Times staff writer Dan Morain in San Francisco and Tom Hamburger contributed to this report.
© Copyright 2007 Globe Newspaper Company.
