Monday, Nov. 11, 1996

THE CASH MACHINE

By John Greenwald

To understand why John Huang could move so freely through the White House, it helps to know that he came highly recommended to his Commerce Department job. In 1994, the White House sent Huang's name to then Secretary of Commerce Ron Brown as a "must hire" because he had "deep Arkansas connections and was well known to the President."

Even before he joined Commerce, Huang enjoyed special treatment from his friends in the West Wing. One favor came in the form of a top-secret security clearance that Huang was awarded while still a private citizen. TIME has obtained an official memo waiving the need for Huang to undergo a full background check before receiving the clearance. "Huang is granted this waiver," says the one-page document signed by the personnel-security chief of the Commerce Department, "due to the critical need for his expertise in the new Administration [by] Secretary Brown."

There was little doubt last week that in his own way, Huang had played a "critical" role in the Clinton Administration. Secret Service logs leaked last week showed that besides raising more than $4 million for the Democratic Party from Asian Americans this year, he was a frequent visitor to 1600 Pennsylvania Avenue. What the records didn't explain is just what Huang was doing during all those visits. Could he have been seeking political favors for big contributors, particularly those with ties to Indonesia, the home of the multibillion-dollar Lippo Group financial conglomerate that was once Huang's employer? Was Huang a rogue fund raiser? Or was he acting at the behest of the White House--perhaps even the President--to bring cash into the Democratic National Committee's coffers?

Questions like these, some of them raised by G.O.P. legislators, prompted Attorney General Janet Reno to order the Justice Department to weigh the possibility of recommending that an independent counsel be appointed to investigate the matter.

Huang is only part of a suddenly visible network of agents who have acted as conduits between a cash-obsessed campaign on one side and deep-pocketed business and foreign interests on the other. The Justice Department is investigating James Wood, an Arkansas lawyer who became the first political appointee to head the American Institute on Taiwan, the unofficial U.S. embassy there. Natale Bellochi, Wood's predecessor as ait chairman, and Taiwan businessmen had reportedly informed the State Department that the Arkansan was improperly using his post to seek campaign donations for Clinton. Wood denies the charge.

Another Arkansan under scrutiny is Mark Middleton, who left his post as a White House aide last year to run a company in Washington with extensive Asian dealings. While Middleton has denied representing himself as a current White House operative, one account of his activity has suggested otherwise. First reported in Yazhou Zhoukan, a Chinese-language newsweekly based in Hong Kong, and confirmed by a Taiwanese political consultant present at the incident, Middleton met in August with Liu Tai-ying, one of the closest advisers to the President of Taiwan, and was in the midst of describing his fund-raising mission for the Clinton campaign when Liu interrupted to say, "We are willing to lend support." "How much?" asked Middleton. The reply: "$15 million"--an amount that reportedly surprised Middleton. Middleton denies he solicited money as described in the reports. Liu has denied making the offer. Indeed, even if it was made, officials of Taiwan's ruling party may have quashed it soon afterward.

But it is Huang whose methods have brought the most scrutiny to the Democrats, most notably for an illegal $250,000 contribution from a South Korean firm and $425,000 in donations from an Indonesian couple of dubious American residency. Last week the Democrats, sensing public impatience, began changing the tone of their defense from evasive to contrite. B.J. Thornberry, executive director of the D.N.C., was designated to step forward and concede that the party was taking in so much money so fast, and was so understaffed at both the national and local levels, that party leaders had to abandon precautions set up years ago for screening out improper donors. "Virtually any fund-raising compliance is very heavily reliant on the due diligence of the fund raiser," Thornberry told the New York Times. She said there was "no way in the world" to investigate the sources of 25,000 to 30,000 checks.

Huang's expertise, his connections and his efficiency contributed mightily to the Democrats' embarrassment of riches. Born in China's Fujian province at the end of World War II, he grew up in Taiwan, eventually moving to the U.S. in 1969 to study for an M.B.A. at the University of Connecticut. After working as a loan officer at small banks in the Washington area, he moved to Kentucky and Tennessee and, more important, into the sphere of influence of the financial empire of Jackson Stephens, a sometime supporter of Bill Clinton's. In 1984, Stephens and Indonesia's Lippo Group, which is run by Indonesian billionaire Mochtar Riady and his son James, joined forces through Arkansas' Worthen Bank. At the point, Huang had the perfect resume--knowledge of Asia, experience with Southern banking, familiarity with local politics. And he possessed an important ethnic attribute. Like Huang, the Riady family is Chinese and, more significant, from Fujian. Huang was suddenly in the center of converging financial interests and political ambitions.

According to Huang, who worked both for Lippo and as Stephens' vice president at Worthen, he first met Clinton when the Arkansas Governor traveled to Hong Kong on a trade mission. The two met again at the 1988 Democratic Convention in Atlanta. "A group of our friends, Asian-community people, went to attend the convention," Huang said last week in a deposition taken in a civil suit against the Commerce Department brought by Judicial Watch, a nonprofit conservative group investigating Democratic fund-raising practices. "So in one of the hotel lobbies we shake hands, and that was it."

But not the end of it. In 1992, Huang became a fund raiser for Clinton's presidential campaign. "I was helping out to drum up Asian-community support," Huang said in the deposition. He volunteered for the job, he said, because Clinton "had been a friend to us since the Arkansas time, [and] we feel obligated to help a friend." But Huang added that his politics could be bipartisan. "I gave money," he said, "to the Republicans also."

By 1994 and 1995, Huang was moving seamlessly from his role as vice chairman of a Lippo Group bank in California to become a specialist in Asian trade for the Commerce Department. As a going-away gift from Lippo, Huang received $780,000 in salary and bonuses just before joining the government.

Today, Administration officials say they never bothered to investigate Huang's overseas connections because such checks aren't needed when a prospective federal employee has lived in the U.S. for at least the past five years. But David Harris, a former top official of the Canadian intelligence service who has studied the infiltration of Chinese spies into North American commerce, describes Huang's free pass as "horrendous." It is particularly disturbing, Harris says, because Lippo's shared ownership of a Hong Kong bank with the Beijing government could have opened an intelligence gusher to the People's Republic. "This failure could undermine the confidence of U.S. allies," Harris says. "Given Huang's history and background, it was unthinkable that an intelligence service wouldn't have done a foreign field check on him."

Once Huang joined Commerce, his appointment paid dividends. Secretary Brown led a trade mission to China the month after Huang arrived and returned with a $1 billion power-plant project to be financed by the Lippo Group and managed by Entergy Corp., a Louisiana-based concern with heavy interests in Arkansas. Commerce officials say Huang disqualified himself from any matters involving Indonesia because of his work for Lippo. But congressional investigators have uncovered documents to dispute that. They show that shortly after Huang joined the department, he attended two meetings at which officials from several federal agencies discussed ways to strengthen trade relations with Indonesia.

0n Jan. 17 of this year, Huang quit the Commerce Department to launch into his next career: Democratic fund raiser. He was an instant achiever. By all accounts he brought in more cash and aroused more enthusiasm among Asian Americans than any Democratic presidential candidate before Clinton had ever enjoyed. At a $1,000-a-plate dinner for Asian Americans in Los Angeles last July, Clinton proudly praised Huang for being so good at getting the audience to open its wallets. But on Oct. 18, Huang was suspended from his fund-raising slot after news leaked that he had solicited the $250,000 South Korean donation in violation of U.S. laws against foreign political contributions. Other improprieties soon emerged, and Huang disappeared until he was forced to make his deposition.

More questions were raised by Huang's dozens of visits to the White House this year. Secret Service logs show that Huang went there most frequently in February 1996, shortly after joining the D.N.C. "It creates a very bad impression to have a fund raiser spending that much time in the White House," says C. Boyden Gray, who served as Bush's White House counsel. Gray set up a "funnel" in the Bush White House during the 1992 campaign, requiring campaign officials to clear any conversations with Bush appointees in the government. "It was time-consuming because you had to make two phone calls instead of one, and sometimes it was frustrating because they'd say no," he says. "It probably chilled a lot of communications." Alas, for the Clinton Administration's zealous fund-raising operation, it's too late to turn down the heat.

--Reported by J.F.O. McAllister with Clinton; Nina Burleigh, Viveca Novak and Mark Thompson/Washington; Donald Shapiro/Taipei and Michael Shari/Jakarta

With reporting by J.F.O. MCALLISTER WITH CLINTON; NINA BURLEIGH, VIVECA NOVAK AND MARK THOMPSON/WASHINGTON; DONALD SHAPIRO/ TAIPEI AND MICHAEL SHARI/JAKARTA