This is an article in The L.A. Times.
Wealth, mystery surround donor Hsu
Fugitive Democratic fundraiser Norman Hsu is linked to shadowy businesses and unsavory episodes.
By Greg Miller and Chuck Neubauer
Los Angeles Times Staff Writers
August 31, 2007
WASHINGTON — Money has brought both trappings and trouble for Norman Hsu. Major contributions to the campaigns of Sen. Hillary Rodham Clinton and other candidates have made the apparel executive an insider in elite political circles. He shows up in cozy pictures with politicians, at lavish fundraising events, and on the boards of prestigious organizations.
But Hsu’s history includes more unsavory episodes and associations. In 1990, he allegedly was kidnapped by Chinese gang members in San Francisco as part of an apparent effort to collect a debt. A year and a half later, he pleaded no contest to a charge of fleecing investors in what authorities called a Ponzi scheme of fraud. Along the way, he left a bankruptcy filing and bitter investors who accused him of making off with their savings.
Hsu is now at the center of a political scandal, with Sen. Clinton (D-N.Y.) and others rushing to return his contributions and sever embarrassing ties to a man still wanted on an outstanding warrant for the fraud case in California. Hsu could turn himself in as early as today in San Mateo County, where a hearing on the matter has been scheduled.
“The 15-year-old legal matter that Norman Hsu has is moving toward resolution,” said San Francisco attorney James J. Brosnahan in a statement to The Times. Hsu hired Brosnahan to represent him in California.
Court documents and interviews with close associates of Hsu have shed considerable light on his unlikely emergence as a major Democratic fundraiser. But much of Hsu’s story remains a mystery — including how to account for significant gaps on his resume and record, and where he got all the money that he has showered on Democratic candidates and causes.
Clinton and other candidates have scrambled to distance themselves from Hsu’s money. At a New York event Thursday, Clinton said: “I wish Mr. Hsu well in dealing with the problems he’s confronting.”
But he has powerful defenders. Former Sen. Bob Kerrey (D-Neb.) said in an interview that Hsu was being pilloried unfairly.
“This isn’t Osama bin Laden or some drug kingpin,” Kerrey said. “What he’s done is he’s volunteered to help people raise money for their campaigns. That doesn’t make him either unique or bad.”
Kerrey said he recruited Hsu to serve on a board of directors at New York City’s New School university, of which Kerrey is president. Kerrey said Hsu had called him earlier this week to warn him about coming media coverage. Kerrey added that Hsu had been “a terrific member” of the New School board and had not been asked to step down.
Former Hsu associates who lack the stature of the onetime Democratic senator offer a different account.
An ex-girlfriend — who is identified in court records but who asked not to be named in news accounts for fear of reprisal — said Hsu had conned her out of nearly $100,000. “He took advantage of me,” she said.
Hsu has some valid academic and business credentials. He received a master’s degree in business administration in 1981 from the University of Pennsylvania’s Wharton School, and he went on to set up a series of apparel-related companies in Southern California.
News clippings from the mid-1980s describe the Hong Kong native as a budding entrepreneur in the apparel industry, behind a collection of labels like H Two O and Charlie U.S.A. A 1983 business news story reported that one of Hsu’s companies, a San Francisco-based firm called Laveno, had sales of $400,000 and that the amount “should increase tenfold” in the coming year.
Hsu left Laveno in 1984; it went bankrupt a year later. Other clothing ventures followed a similar pattern. By the early 1990s, Hsu’s business dealings had landed him in trouble with law enforcement officials as well as investors.
The most alarming episode came in 1990, when police in Foster City, south of San Francisco, stopped a vehicle that had run a red light at 3:40 a.m. Inside, police found four men. According to news accounts, a frightened Hsu managed to tell police he had been kidnapped.
News accounts say Hsu was assaulted, and his former girlfriend said he later showed her burn marks on his arm that he said were inflicted by his abductors.
Police took the other three men in the vehicle into custody. Among them was Kwok Chung Chow, then 30, who was a high-ranking figure in one of the leading criminal gangs in San Francisco’s Chinatown. At the time, police speculated that the abductors intended to extort Hsu, but a lawyer’s filing in Hsu’s personal bankruptcy said he had been kidnapped “allegedly by individuals who are creditors of the debtor.”
The outcome of the case could not be determined by The Times. Police officials in the Bay Area said they had not been able to retrieve case records, and Chow and one of the other alleged abductors declined to comment when reached by phone by a Times reporter.
The debts that the alleged abductors appear to have been seeking could have stemmed from the business scheme in which Hsu convinced investors to help him raise money for a company that was to purchase latex gloves from a supplier and then sell them at a profit. Hsu never purchased the gloves and had no contract to sell them, authorities said.
Court records associated with that case outline what authorities described as a classic Ponzi scheme. Early investors were repaid and encouraged to recruit others to contribute cash to subsequent investments. In the end, more than a dozen invested in the latex glove scheme, contributing more than $1 million.
“We’ve established what amounts to a pattern here,” said prosecutor Ronald D. Smetana of the California attorney general’s office in a preliminary hearing, according to a transcript. “In fact, what Mr. Hsu was in the business of was running a Ponzi scheme; he was taking money and spending part of it on himself and returning it as it was available. As with any Ponzi scheme, the first ones in and the first ones out always do quite well. Those [who] hope that their investment will continue and stay to the end tend to lose their shorts.”
Most of the investors in the latex glove venture “certainly did,” Smetana said. Before the case went to trial, Hsu’s attorneys worked out a plea agreement. In return for dropping 15 counts, Hsu pleaded no contest in February 1992 to one count of grand theft and agreed to serve as long as three years in prison and pay a $10,000 fine.
But Hsu failed to show up for a sentencing hearing that summer, and the judge issued a bench warrant for his arrest in September 1992, setting his bail at $2 million. Authorities failed to locate Hsu for 15 years, until he was identified in news accounts this week as a prominent donor to Democratic candidates.
Brosnahan said Hsu was seeking to resolve the matter. “We arranged for him to appear in court and put up monies for bail, which can also be used for restitution to those, if any, who remain unpaid from the 1990s business transaction,” he said in the statement.
Hsu’s Washington-based attorney, E. Lawrence Barcella Jr., said Hsu was in Hong Kong from 1992 to 1996. Barcella said Hsu did not remember pleading to a criminal charge that included jail time and thought he had agreed to a settlement with creditors. At the time, Hsu was going through a separate bankruptcy proceeding.
Hsu has not responded to requests for an interview. Barcella said Hsu returned to California in 1996 and made a series of successful investments in Silicon Valley — which accounts for Hsu’s ability to contribute so heavily to Democratic causes in recent years, Barcella said. Hsu also continued to be involved in the apparel business, Barcella said.
But details about Hsu’s activities since 1996 are elusive. Unlike in the 1980s, when Hsu’s name appeared in a flurry of business and court records, there is scant evidence that he was actively launching businesses or making contributions to politicians.
At some point, Hsu began spending at least part of his time in New York City, where he appears to have pursued a private yet lavish lifestyle.
Hsu was affiliated with two businesses — Components Ltd. and Coopgors Ltd. — that have listed addresses on Fifth Avenue. But the building actually houses luxury apartments, not commercial offices, according to a doorman, who has worked there for the last 15 years. The doorman said Hsu lived in the building for a few years but moved out about four years ago.
The doorman, who did not want to be named out of concern that his managers would reprimand him for speaking about tenants, remembered Hsu clearly. He said Hsu lived alone in a marble-floored, one-bedroom apartment with mirrored walls on the 30th floor of the 34-floor building. The lobby has gold-colored panels and a chandelier.
The doorman said Hsu talked to him about the Yankees on occasion when he picked up packages, usually from Asia, at the building’s front desk. He said Hsu rarely had visitors, except for a younger man who appeared to be his son. Hsu’s son Oliver, who works at Stanford University, did not respond to an e-mail seeking comment. Hsu’s ex-wife Patricia declined to answer questions about him.
In New York, Hsu frequently went out at night dressed in a tuxedo and bow tie, and a limousine picked him up, the doorman said. “I know he was a very wealthy person,” he said.
A few blocks away on Broadway Avenue, office mates on the 10th floor of a building listed as the address for five of Hsu’s businesses said they had last seen him this week, when he picked up his mail.
He moved into the office about two years ago but never unpacked his boxes, said Ken Mulligan, 31, a sales executive for J.P. Doumak, a fabric supplier. He said Hsu would not visit the office space for months, then would show up for a few hours, say “hello,” check his mail, make a few phone calls and leave.
“He seems like a nice guy; he always dresses nicely in a suit,” Mulligan said. “He was very quiet.” Mulligan said he knew Hsu had been photographed with Sen. Barack Obama (D-Ill.) and Clinton. He said he thought Hsu lived in California most of the time and often traveled to China.
Hsu’s emergence as a major political fundraiser is equally mysterious.
Records indicate that he didn’t make his first federal campaign contribution until 2003, when he gave $2,000 to the presidential campaign of Sen. John F. Kerry (D-Mass.). Hsu rapidly established himself as a major donor, contributing to an array of Democrats — including California Sens. Dianne Feinstein and Barbara Boxer, Louisiana Sen. Mary L. Landrieu and New Mexico Gov. Bill Richardson.
All have said in recent days that they plan to divest their campaigns of Hsu’s donations.
Hsu has donated or raised more than $1 million for Democrats and their causes, often delivering large donations from multiple individuals. Some of these “bundled” contributions have raised suspicions. In particular, Hsu has worked closely with a family in Daly City, Calif., headed by William Paw, a mail carrier, and his wife, Alice, who is listed as a homemaker.
The Paws apparently never donated to national candidates until 2004. Since then, they have given $213,000, including $55,000 to Clinton. Barcella denies Hsu provided money for the contributions, which would violate federal law. The Paws, Barcella said, “have the financial wherewithal to make their own donations.”
As a result of his largesse, Hsu’s stock rose rapidly in Democratic circles.
He is a member of Clinton’s “HillRaiser” group, made up of individuals who each pledge to raise more than $100,000 for her presidential campaign. Hsu helped host a series of high-profile events, including one in March at the Beverly Hills home of Ron Burkle, an ardent Clinton backer. In May, he co-hosted a fundraiser in Palo Alto with Susie Tompkins Buell, another Clinton bundler.
In some cases, powerful Democrats have sought out Hsu. Kerrey, rumored to be weighing another run for public office, said he called Hsu to propose a meeting to recruit him to join the board at the New School.
“He had a very interesting background,” Kerrey said. “I was intrigued by the story of him coming from China to [attend UC Berkeley]. He went to Wharton.”
Kerrey said the university did not do background checks on prospective board members. Hsu gave thousands of dollars to the school in recent years, and helped host an event last year at which Clinton was the keynote speaker. Clinton helped steer nearly $1 million to the New School in a congressional earmark for a mentoring program for disadvantaged city youths.
Kerrey said Hsu had nothing to do with lining up Clinton to speak at the event, or with securing that earmark. Kerrey said Hsu had been an exemplary board member. “He came to meetings; he did the homework. He contributed financially,” Kerrey said.
Kerrey said he did not intend to ask Hsu to resign, despite Hsu’s criminal record. “It would be the board itself that would have to make the decision,” Kerrey said.
“Our board will be meeting in September. I’m sure it will be actively discussed.”
Kerrey said he never inquired about the source of Hsu’s wealth. “My presumption is that he’s rich,” he said.