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GOP Gives Back $102,400 as Donation Storm Expands

Probe: Party chief says officials believed Hong Kong firm's funds were legal. Democrats zero in on revelation.

May 09, 1997|MARC LACEY | TIMES STAFF WRITER

WASHINGTON — The Republican National Committee announced Thursday that it would return $102,400 in illegal donations from a Hong Kong real estate company, marking an important expansion in the controversy over foreign-linked political contributions.

The money from Young Brothers Development of Hong Kong is the first large donation the Republicans have returned since the campaign fund-raising controversy erupted last fall. The Democratic National Committee has already acknowledged $3 million in illegal and improper contributions that it intends to return.

"For months, the Republicans have piously proclaimed their purity on campaign finances," DNC General Chairman Roy Romer said. "But the truth is now out."

RNC Chairman Jim Nicholson said the party had every reason to believe that the donations between 1991 and 1993 by a Florida corporation called Young Brothers Development USA were legal. The party decided to return the money after its lawyers confirmed a Time magazine report that the Florida company does not appear to have any significant assets or operations that differentiate it from its Hong Kong parent. U.S. subsidiaries of foreign corporations may make political contributions, but only if the money clearly originates in this country.

Nicholson said he has directed the party's lawyers to review all RNC contributions of $5,000 or more dating back to 1994.

The embarrassing revelation served to underscore a troublesome political reality: The huge cost of running for office has prompted both parties to test, skirt and sometimes violate the law in their rush for campaign cash.

Reflecting the increasing scope and complexity of the controversy, Atty. Gen. Janet Reno told reporters Thursday she had recently expanded the Justice Department task force that is investigating campaign finance abuses.

While Reno did not say how many lawyers she had added to the task force, her decision follows a recent announcement by FBI Director Louis J. Freeh that he had almost doubled the number, to 38, of FBI agents involved in the probe.

Responding to news of the illegal Republican contribution, Rep. Henry A. Waxman (D-Los Angeles) said: "We have a campaign fund-raising system that is completely out of control." He joined other House Democrats in urging Reno to include the Young Brothers matter in the Justice Department's investigation.

While characterizing the returned RNC money as an isolated incident, Nicholson accused Democrats of having engaged in "an orchestrated effort" to solicit foreign contributions during the 1996 presidential campaign. Nicholson also criticized the Democrats for not immediately returning all the improper money they have received, as the Republicans have done.

The DNC has returned $1.47 million so far and will return the remaining $1.49 million in questionable contributions by the end of next month, a spokesman said.

Legislation introduced this month in the House would force candidates and committees to send tainted money to the Federal Election Commission, instead of merely returning it to the donors.

Rep. George W. Gekas (R-Pa.) introduced the legislation with the DNC in mind--"to prevent the Johnny Chungs, the Charlie Tries, and the Jorge Cabreras from getting their dirty money back and spending it," he said.

But the bill would apply to Republicans as well.

The RNC was not the only GOP organization with egg on its face Thursday. The Republican reelection committees in the House and Senate received a total of $20,000 from Young Brothers Development USA in 1994, which they said they would return as well.

But the controversy is not likely to end there.

Young Brothers Development also guaranteed a $2.2-million loan to the National Policy Forum, a GOP advocacy group founded by former RNC head Haley Barbour. Barbour's group immediately passed along money from the loan to the RNC, which used it during the critical weeks before election day in 1994. The policy forum later defaulted on $500,000 of the loan, leaving the company to pay off the bank.

Barbour has defended the loan arrangement as legal, noting that there are no restrictions on nonprofit groups receiving foreign donations.

Still, Democrats in both the House and Senate are eager to determine whether the National Policy Forum was a front organization that served to channel foreign money into the Republican Party.

The Senate committee investigating campaign fund-raising has already subpoenaed the records of the now-defunct National Policy Forum. On Thursday, Sen. Fred Thompson (R-Tenn.), chairman of the Senate Governmental Affairs Committee, agreed to send out additional subpoenas targeting other key figures and organizations in the loan arrangement involving Young Brothers, the policy forum and the RNC.

One of the subpoena targets will be Hong Kong businessman Ambrous Tung Young, a big GOP contributor who runs Young Brothers Development. Young's donations earned him clout within the GOP, including meetings with House Speaker Newt Gingrich (R-Ga.) and former Senate Majority Leader Bob Dole. Barbour and Young also met together with Qian Qichen, China's foreign minister, in Beijing.

In the House, frustrated Democrats renewed calls Thursday for Rep. Dan Burton (R-Ind.) to expand his inquiry to include the new GOP allegations. Burton, chairman of the House Government Reform and Oversight Committee, has said he would pursue fund-raising improprieties in either party, but has so far limited his inquiry to Democratic activities.

Burton issued a statement Thursday saying he expects to make a decision on issuing subpoenas "in due course."

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