Democratic Fundraiser Norman Hsu Charged With Fraud

Friday, September 21st 2007, 7:01 am
By: News On 6

NEW YORK (AP) _ Days after top-tier Democratic fundraiser Norman Hsu was arrested in a 15-year-old fraud case, he contacted the FBI and confessed to making bogus business deals in a sprawling new scheme, prosecutors said.

Hsu was charged Thursday with swindling at least $60 million from investors and using some of his profits to make illegal donations to political campaigns. Prosecutors allege Hsu had engineered a ``massive'' Ponzi scheme that ensnared investors across the country.

The case, filed in New York, marks the latest in a string of legal problems for Hsu, who was already in custody and facing a California fraud case dating to 1992.

Robert Emmers, a spokesman for Hsu, declined to comment. Hsu's lawyer in San Francisco, Jim Brosnahan, did not return phone messages Thursday.

At a news conference, U.S. Attorney Michael Garcia said the main purpose of the fraud alleged in the New York case was to support a ``lavish lifestyle.'' But he said it also may have been fueled by Hsu's desire ``to purchase a place on the celebrity campaign circuit.''

The criminal complaint, unsealed in U.S. District Court for the Southern District of New York, said the 56-year-old clothing-industry entrepreneur pressured his business partners to make hefty donations to congressional and presidential candidates, most notably Sen. Hillary Rodham Clinton. None of the partners was identified.

Garcia said there was no evidence that the campaigns were aware of the scheme or acted criminally. The Clinton campaign has been cooperating with the investigation, he said. Clinton has announced that she will give back $850,000 raised by Hsu.

Hsu also is accused of donating money in other people's names, which is a federal crime.

Hsu arrived in California on Thursday, following his release by authorities in Mesa, Colo. He landed at San Francisco International Airport in the custody of state investigators and was whisked away by a caravan of law enforcement vehicles.

His troubles began when news reports this summer revealed that he was a fugitive from justice. In 1992 he had pleaded no contest to theft charges in a California case related to a fraudulent clothing import business, then skipped town before he could be sentenced. Investigators believe he fled to Hong Kong.

Hsu turned himself in last month but fled again after being released on $2 million bail. He was arrested in Grand Junction, Colo., on Sept. 6 after becoming sick on a train.

When he was arrested, Hsu was carrying a briefcase containing thousands of dollars in cash, bank receipts reflecting millions of dollars worth of transactions, and handwritten ledgers of campaign contributions, prosecutors said.

David Cardona, chief of the New York FBI's criminal division, said Hsu had no legitimate business operations. Hsu created the appearance of turning a profit by using new investment funds to pay ``phantom returns'' to his older partners, Cardona said.

Hsu was charged with mail fraud, wire fraud and violating campaign finance laws. If convicted, he faces a maximum of 20 years in prison on each of the fraud charges and five years on the campaign finance charge.

The complaint did not identify any of the alleged victims of the scheme, but one company that claims to have been cheated by Hsu filed a lawsuit last week in state Supreme Court in Manhattan.

Source Financing Investors _ a fund run by one of the creators of the 1969 Woodstock rock festival _ said it sank $40 million into a Hsu venture that purportedly made its money by making short-term, high-interest loans to clothing companies in China.

In the lawsuit, Source Financing Investors said its checks from Hsu _ some for as much as $1.5 million _ recently began to bounce.

The investors said they contacted clothing retailers with which Hsu claimed to have done business, including L.L. Bean, Macy's, Nordstrom and DKNY, and none had heard of him.

The FBI said it had identified several investors who lost amounts ranging from a few thousand dollars to several million. They were not named in the complaint.

Prosecutors said one account Hsu used to write millions of dollars worth of checks held only $83,000.