WASHINGTON — Confronted with the possibility that disgraced fundraiser Norman Hsu might be running an illicit investment scheme, Sen. Hillary Rodham Clinton's presidential campaign announced late Monday that it was returning $850,000 from 260 donors associated with Hsu.
The amount is one of the largest ever returned by a single candidate, and the action marked a sharp turn for the Clinton campaign.
The New York senator's campaign staff had pondered the move for several days but acted after Clinton awoke Monday to a report in the Los Angeles Times that the FBI was examining a Hsu venture in which some investors said they had been pressured to make political donations to her.
"She saw that an investigation was proceeding and personally instructed us to sever all connections with Hsu and his network of donors," said a campaign source familiar with the events who was not authorized to discuss internal campaign dealings.
Before the announcement, new evidence surfaced that the Clinton camp had dismissed allegations about Hsu made by a Southern California businessman. In an e-mail obtained by The Times, a Clinton campaign staffer told a California Democratic Party official in June that the businessman's concerns were unwarranted.
"I can tell you with 100 certainty that Norman Hsu is NOT involved in a ponzi scheme," wrote Samantha Wolf, who was a campaign finance director for the Western states. "He is COMPLETELY legit."
In fact, Hsu was a fugitive wanted on a 15-year-old bench warrant stemming from an early 1990s investment fraud case.
The businessman's query prompted Clinton staffers to review public records about Hsu, but no problems surfaced, the campaign source said. In part because of that incident, the campaign also announced Monday that it would institute more stringent procedures to vet major contributors, including running criminal background checks.
Stanley Brand, a former House counsel who often represents legislators in ethics matters, called the Clinton campaign's decision "a ground-shifting event," though not a step he would have recommended.
"I understand it's politically driven. They don't want to be tainted," he said. "But they're going to give back a lot of money if they do this every time there's an allegation against a fundraiser."
