Frantically Ducking Donorgate

But new charges could haunt Clinton well beyond Nov. 5

Just days before a Presidential election, a national political party balks at disclosing campaign contributions. A top apparatchik goes into hiding to evade a subpoena. And a senior Presidential aide admits the White House is coordinating a run-out-the-clock legal strategy.

Sounds like Watergate. But this time, it's the Clinton White House that's stonewalling. At issue: questions about soliciting funds from overseas interests and possible misuse of trade missions for fund-raising purposes. Republicans and even some worried Democrats are crying foul. Indeed, documents provided to BUSINESS WEEK and other news organizations lend support to charges that a cadre of Democratic operatives may have used trade- and export-promotion efforts as fund-raising vehicles while the late Ronald H. Brown was Commerce Secretary.

DAMAGE CONTROL. Clintonites already have a postelection plan to control the damage from the scandal, advisers say. Clinton will order an audit of DNC records, which aides think may establish that up to $3 million more in foreign funds will have to be returned to donors. The President will also order a housecleaning of the DNC's top ranks. Plus, he is expected to deliver a speech in Santa Barbara, Calif., on Nov. 1, endorsing limits on "soft money" donations and possibly new prohibitions on accepting money from foreign sources, including people who are legal residents of the U.S. but not citizens.

But the affair isn't likely to go away. Already, 10 congressional panels are investigating Donorgate. And the Justice Dept. may be forced to name an independent counsel. Even some Democrats are distraught. "All this foreign money flying around--it's the damnedest thing I've ever seen," says one top adviser. "You throw in the kind of money being spent on this election, and the whole thing is a recipe for disaster."

At the center of Donorgate is ex-Commerce aide John Huang, a U.S. citizen born in China and educated in Taiwan. Huang, 46, raised nearly $5 million for the DNC--part of it possibly illegal because of its foreign origin. Some of the money has already been returned to donors. Huang previously had worked for an Indonesian company, the Lippo Group, which gave nearly $1 million to Clinton's reelection effort through employees and family members. For two weeks, he eluded federal marshals trying to serve him with a subpoena in a civil lawsuit.

In concert with his better-known efforts to drum up contracts abroad for U.S. companies, Brown ran a "shadow Commerce Dept.," of which Huang was a member, says a former Administration official. The group included Huang and other Brown proteges from his former post as DNC chairman. They had some involvement in policymaking but mainly maintained close ties to political movers, shakers, and corporate donors.

At Commerce, officially at least, Huang was a midlevel bureaucrat dealing with international economic policy and the point man on Taiwan issues. Unofficially, he acted as a liaison with the Asian-American business community, regularly attending lunches and dinners with prominent Asians. The Administration has sought to portray Huang as a bureaucrat who signed papers and planned budgets, but copies of his appointment books, telephone logs, and correspondence show little evidence that he was an administrator.

The documents also show that Huang participated in matters that could have presented conflicts of interest. In his first two weeks at Commerce, he attended two meetings of an Indonesian working group even though he previously had been intimately involved in Indonesian issues through the Lippo Group. He later attended at least four more government meetings on Indonesia. Huang also kept in touch with Lippo Bank officials, who were then being probed by the Federal Deposit Insurance Corp. for Bank Secrecy Act violations. The bank eventually was cited for violating money-laundering rules.

And Huang kept in close contact with a group of Arkansans, including former White House aide Mark E. Middleton and Clinton golfing buddy and Lippo consultant Mark Grobmyer, both of whom were seeking business deals in Indonesia. Huang, Middleton, and fellow Arkansan James C. Wood, appear to have functioned as a kind of fund-raising tag-team in Taiwan, soliciting money from companies, politicians, and religious groups. Wood, chairman of the American Institute in Taiwan, acts as unofficial U.S. liaison to Taipei.

On July 31, 1995, Middleton visited Lin Yang-kang, then a presidential candidate in Taiwan, and offered to arrange meetings with Clinton or other top U.S. politicians. A spokesman for Lin says Middleton did not specifically ask for money but made it clear his visit to Taiwan was to solicit donations for Clinton's campaign. Separately, a Hong Kong magazine has reported that an official of Taiwan President Lee Teng-hui's ruling Kuomintang Party offered Middleton a $15 million donation to thank Clinton for granting Lee a U.S. visa for his controversial June, 1995, visit. Such a donation would violate federal laws barring contributions from foreign nationals. There is no evidence that any such donation was ever made to the Clinton campaign, and party officials deny making the offer.

Documents also show that Huang met in Taiwan with top government officials in January, 1995, to lobby on behalf of Westinghouse Electric Corp.'s bid to build a $6 billion nuclear power plant there. Weeks later, Westinghouse forked over $15,000 to the DNC. Westinghouse eventually won the bid. A spokesman says, however, that the decision to make the gift was made earlier and had "no connection to the trade mission."

MISINTERPRETED. Huang refuses to comment, but a Commerce Dept. spokeswoman denies that any of his or Brown's trade trips involved fund-raising. Through a spokesman, Liu denies that he and Middleton ever discussed money. Middleton and Grobmyer did not return phone calls. Wood has denied soliciting funds in Taiwan but has admitted that remarks he made last May about Taiwan owing a debt to Clinton could have been misinterpreted. Clinton sent two aircraft carriers to patrol waters off Taiwan last winter while China was conducting military exercises meant to bully Taipei.

All this spells big trouble for Clinton, especially if the GOP retains control of Congress. It may not spoil Bill Clinton's reelection, but just may help make his second term a legal nightmare.

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