FBI says Ponzi scheme got fundraiser monies
September 21, 2007
NEW YORK ” Norman Hsu, the Democratic fundraiser with a habit of fleeing the law, confessed to FBI agents last week that he pressured investors in what he now admits were phony business deals to contribute to political campaigns, prosecutors said in an indictment that was unsealed Thursday.
The complaint, filed in U.S. District Court in Manhattan, accused Hsu of bilking at least $60 million from hundreds of investors in a nationwide Ponzi scheme, and using some of that money to illegally reimburse at least two people who made a total of $60,000 in campaign donations at his request.
While the complaint did not specify which candidates received the illegal or coerced contributions, federal authorities confirmed that one of them was U.S. Sen. Hillary Rodham Clinton. Her presidential campaign has said it intends to return $850,000 to more than 200 people whose donations were collected by Hsu.
If convicted of the three charges he faces ” mail fraud, wire fraud and violating the Federal Election Campaign Act ” he could face a maximum of 45 years in prison.
Hsu, 56, an apparel industry executive and major donor to Democratic candidates and causes, surrendered to the authorities in San Mateo County, Calif., at the end of August after reports surfaced that, for the last 15 years, he had been a fugitive in a 1992 million-dollar fraud case. He was released on $2 million bail, but a week later fled again. While riding an Amtrak train from California to Denver he fell violently ill and was taken to a hospital in Grand Junction, Colo., where federal agents eventually arrested him.
The indictment said that while in Colorado, Hsu reached out to FBI agents on three occasions and asked to speak to them without his lawyers present. He is said to have told the agents that his business deals involved no real investments but were in fact fraudulent, and “admitted that he made implied threats to his investors to pressure them to contribute to political candidates he supported.”
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Working through two shell companies, Components Ltd. and Next Components Ltd., Hsu persuaded numerous investors from across country to give him money ostensibly to help secure short-term loans for various companies doing business in the apparel industry, the government said.
Those schemes, the complaint said, focused on several aspects of the apparel trade, from helping obtain letters of credits for wholly imaginary manufacturers to financing the importation of high-end Chinese clothing that did not exist. As in all Ponzi schemes, the government said, Hsu paid interest to the first wave of investors with principle invested by secondary waves and used this purported success to lure in more investors.