February, 1992, was a gloomy time for Bill Clinton. The Democratic Presidential candidate was besieged by charges of adultery and draft-dodging. Campaign contributions were drying up, and Clinton faced the grueling primaries ahead with the prospect of no money.
But friends from Indonesia rode to the rescue. James Riady, son of the founder of Jakarta-based Lippo Group, the $12 billion financial-services and real estate company, persuaded Little Rock-based Worthen Bank, once 15% owned by Lippo, to issue letters of credit worth $3.5 million, says a former Worthen executive. The intervention kept the Clinton campaign afloat.
ARKANSAS GUANXI. It wasn't the first time that the Riady family and Clinton would help each other during their 20-year relationship. Nor would it be the last. Now Clinton's Lippo connection--nearly $1 million has gone to the President and the Democratic Party since 1992 from Lippo owners, family members, and employees--has turned into a scandal that could haunt him in a second term.
The imbroglio reaches around the world, raising questions about whether U.S. trade and foreign policy decisions were influenced by the Indonesians. The controversy also calls into question the role of foreign donations in U.S. political campaigns, tarnishing both parties. Although GOP Presidential nominee Bob Dole accuses Clinton of taking foreign payola, even he once received a small amount from the Riady family.
Ultimately, though, the Lippo affair is linked to the Clinton White House. Many of its characters also are key to the Whitewater investigation, bolstering the view that the Arkansas way of doing business is less than pure. The back-scratching method, in fact, closely resembles what the ethnic Chinese who control Lippo call guanxi, or connections. In both places, gifts in return for political indulgences are routine.
Because Lippo's largesse came as donations to the Democratic Party and not to a specific candidate, it avoided federal caps on giving. But some of the gifts are now under Justice Dept. and Federal Election Commission scrutiny for possible violation of prohibitions on foreign money in U.S. politics.
A series of donations from Indonesians Arief and Soraya Wiriadinata look especially suspicious. They wanted to show their gratitude for a get-well card the wife's father, a Lippo co-founder, received from the Clintons, insists a Democratic National Committee spokeswoman. The couple gave $470,000 to the Democratic Party, with more than 20 checks written over six months. Most of the donations came after they returned to Indonesia following a brief stay in the U.S. Federal election rules forbid candidates from accepting money from foreign nationals unless they are legal residents of the U.S.
The couple was asked to contribute by a former Lippo executive, John Huang, a 46-year-old Chinese who emigrated to the U.S. from Taiwan in 1969. Huang appears to have been a money machine for Democratic candidates at Lippo. After receiving an $879,000 severance payment from the company, he spent two years at the Commerce Dept. Last January, he went to the DNC, where on Oct. 18, he was placed on leave while the FEC investigates his fund-raising. All told, Huang has raised some $5 million for Clinton.
JAVA PLANT. What did Lippo get in return? Nothing, says the White House. Yet during the past three years, the Administration has issued several decisions favorable to Indonesia and from which Lippo could benefit. Access to the White House is a prize connection, making the Riadys more desirable business partners to other Asians. And Lippo indirectly benefits by improved ties to President Suharto, who keeps a tight rein on business in his country. In 1994, for example, Clinton extended Indonesia's trade privileges after accepting Suharto's pledge to allow trade unions. That reversed a '92 Clinton campaign vow to crack down on the oil-rich nation's human-rights abuses.
White House Associate Counsel Mark Fabiani contends that American business interests, and not Lippo funds, are behind any easing of pressure on Indonesia. Some prominent business voices, however, have an Arkansas accent and a Lippo connection. Wal-Mart Stores Inc., for example, opened an outlet in Lippo's American-style supermall outside Jakarta in August. Likewise, Entergy Corp., which owns Arkansas Power & Light Co., is part of a consortium led by Suharto's daughter that is the front-runner to build a $1.3 billion power plant in Central Java. Entergy also is paired with Lippo on a $1 billion power-plant contract in China, a deal the late Commerce Secretary Ronald H. Brown trumpeted while on a 1994 trade mission to China.
While the Riadys refuse to comment, there's no doubt that the family has found a comfortable fit with its Arkansas cousins. Their supermall on Jakarta's outskirts--with its golf course and roller coaster--has all the earmarks of an American suburb. Now they have another bit of Americana: a political firestorm that is roiling a Presidential campaign.