Hou, Pan Corrupted Campaign Using Straw Donors, U.S. Says

Two of New York City Comptroller John Liu’s supporters conspired to corrupt his campaign by using straw donors to try to funnel thousands of dollars in contributions, a prosecutor told a federal jury in Manhattan.

Jia “Jenny” Hou, 26, Liu’s former campaign treasurer, and Xing Wu “Oliver” Pan, 47, a fundraiser for him, attempted to hide the true source of some campaign contributions and then conspired to obtain matching funds provided by New York City’s Campaign Finance Board, Assistant U.S. Attorney Brian Jacobs told the panel of seven women and five men today.

The scheme was discovered after an agent with the Federal Bureau of Investigation, posing as a businessman known as “Richard,” approached Pan seeking to make a $16,000 donation to the Liu campaign. Jacobs told jurors they would see and hear secretly recorded conversations and videos of sessions which the agent had with Pan and Hou. The agent, John Chiue, would be the second witness called by the U.S., Jacobs said after court today.

“This is a case about how these two defendants, Oliver Pan and Jenny Hou, tried to corrupt an election here in New York City,” Jacobs said. “It’s about how they conspired to hide the true sources of campaign contributions and to obtain thousands of dollars in improper matching contributions from New York itself.”

Liu, who is seeking the Democratic nomination to succeed Michael Bloomberg as mayor, hasn’t been charged with wrongdoing.

Matching Funds

Pan’s lawyer, Irwin Rochman, told jurors today that his client had raised the money for the Liu campaign and never intended that any matching funds be sought as part of the fund-raising efforts.

“Whatever purpose or objective, the evidence will show that whatever Mr. Pan did was as a result of the extensive involvement and inducement of the government agent,” Rochman said. “But for that extensive involvement and inducement by the government agent, Mr. Pan would never have agreed to create those straw donor donations.”

Jacobs told jurors that an FBI agent posed as an out-of-state businessman named “Richard” and approached Pan seeking to open several restaurants in New York City. The undercover agent offered to give a $16,000 donation to the Liu campaign, which Jacobs said was above the maximum permitted by the city campaign finance laws. Richard was actually FBI Special Agent John Chiue, prosecutors said in court papers.

Campaign Worker

Gerald Lefcourt, a lawyer for Hou, said she only was a campaign worker for Liu and insisted she had no knowledge about what Pan and the FBI agent had been discussing.

“She was simply an administrator,” Lefcourt said. “She had no knowledge,” he said. “Why did they want to meet John Liu? He wanted to meet him, to be alone with Liu and see if there was any wrongdoing. They thought that through Oliver Pan they could get to John Liu. Not Jenny Hou. She had nothing to do with it. She had not spoken to the undercover agent. She didn’t know what the undercover agent and Oliver Pan had been talking about.”

Prosecutors said their case includes audio and video-recorded conversations and in-person meetings as well as thousands of pages of campaign documents, e-mails and records.

Both Pan and Hou are charged with conspiring to use the straw donors -- people whose contributions were reimbursed by others to inflate the amount of money funneled to Liu’s campaign, Jacobs said.

Attempted Fraud

Both defendants are charged with conspiracy and attempted wire fraud and face as long as 20 years in prison if convicted of either charge. Hou also faces a count of obstructing the government’s investigation by failing to produce documents sought by the federal grand jury that was investigating the campaign.

Paul Shechtman, a lawyer for Liu, has said the case originated from an informant’s 2009 tip that remains unsubstantiated.

“This case started with a hearsay allegation that three years, numerous witnesses, several subpoenas and one undercover investigation later remains uncorroborated,” Shechtman said in a phone interview. “Whatever the outcome, the evidence will show that John Liu, as much as anyone ever in public life, sought to run a clean campaign.”

New York Mayor Michael Bloomberg is founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

The case is U.S. v. Pan, 1:12-cr-00153, U.S. District Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal.