Except for one. It belonged to a Chinese businessman officials should have been curious about–but noone now admits to remembering. On the president’s confidential briefing papers for the dinner Xiaoming Dai is described merely as ““the chairman and CEO of Asia Securities International, a company involved in real-estate development on both sides of the acific Rim.’’ In fact, NEWSWEEK has learned, he heads a Chinese property company with close ties to the communist government and to the Lippo Group, the Indonesia-based company with strong connections in both China and Arkansas. One of Lippo’s former executives is Huang, who, investigators suspect, may have been involved in funneling foreign money into U.S. elections–and in possibly sharing inside information on U.S. trade strategy with Lippo and their Chinese friends.
Even by the worldly standards of San Francisco, the fund-raiser at Sen. Dianne Feinstein’s Presidio Terrace home last June 9 was a remarkable gathering of the tribes. But, looking back, it’s also an early sign of how the money hunt of 1996 could turn into the national-security mess of 1997. Questions about foreign cash–specifically Chinese–in American politics are rattling the shaky foundations of U.S.-China relations on the eve of Vice President Al Gore’s visit there next week. They’ve further jeopardized Anthony Lake’s chances of becoming head of the CIA. They’ve given new impetus to the hearings maverick Republican Sen. Fred Thompson will hold this spring. And they’ve clouded the beginning of the president’s second term. The White House says it did nothing illegal. But that doesn’t mean it wasn’t manipulated by a foreign power.
The bureaucrats have cause to be nervous. They blew it. Just six days before the dinner at Feinstein’s, FBI agents warned the White House that the Chinese government may have decided to target American politicians for special political attention. National Security Agency electronic surveillance, NEWSWEEK has learned, found specific evidence that the Chinese might use ““illegal means’’ such as funneling secret cash to campaigns. The NSA intercepts also indicated that Chinese officials were determined to step up the pace of congressional junkets to Beijing. The FBI discovered that the Chinese had drawn up a list of 30 lawmakers they wanted to woo. Democrats included Feinstein, whose husband, Richard Blum, has major investments on the mainland. GOP ““targets,’’ NEWSWEEK has learned, included House Speaker Newt Gingrich and Rep. Dan Burton, who heads a committee investigating the fund-raising issue. (The Chinese deny the charges.)
Big stuff–or should have been. Here was a warning, backed by electronic eavesdropping, about a plot by a rising power with a $40 billion-a-year trade surplus and $100 billion worth of U.S. Treasury bonds in the bank. Yet no one, it appears, bothered to warn Bill Clinton, then or later. Though Attorney General Janet Reno was specifically advised in writing to do so by aides, she made only the most casual effort to inform the White House. She says she made one phone call to Tony Lake, the national-security adviser, but didn’t leave a message. Incredibly, the NSC functionaries briefed by the FBI didn’t tell Lake, either–though at that very time he was preparing to go to China for a crucial visit.
Who invited Dai to dinner at the senator’s? Feinstein’s office says it wasn’t she, and adds that the FBI didn’t brief her about the alleged Chinese plot until five days after the dinner. At the DNC, the convenientconsensus is that it was Huang–who isn’t talking. Did Dai somehow manage to kickin a contribution? As a foreign national, he would probably be ineligible, and he’s not listed as a donor in records. But Huang already stands accused–by Asian-American businessmen–of looking for ways to launder money to the DNC. And the party has returned $3 million, most of it from Asian-Americans, out of concern about its ultimate source. Despite repeated requests from NEWSWEEK, Dai did not comment.
By last fall the media was full of alarms about suspicious donors linked to the Chinese-born Huang–a former Commerce official with a security clearance. Still, no one warned the White House. Was it sheer inertia, or willful administration denial of the obvious in the middle of an election? Officials prefer the former. ““There’s a lot that comes across people’s desks here,’’ says one Justice lawyer. ““Who the hell remembers these things?''
But sloppiness has consequences. Reno’s dismal performance put more pressure on her to name an independent counsel to examine fund raising. The NSC’s slip-ups caught up with Lake at an untimely moment, making it look as though he had run a sloppy shop. That gave his implacable foe, Sen. Richard Shelby, something to rant about at Lake’s confirmation hearings.
While Washington focuses on the bureaucratic knife-fighting, the scandal may force American politicians to look more closely at what makes China tick. Why, after all, would the People’s Republic, after decades of disdain for Beltway rituals, suddenly decide to get down in the muck of U.S. politics?
One reason is the clumsiness of nouveau riche Asian powers who like trying to throw their weight around. Observers of trade politics note that in the 1970s, the Japanese began to hire U.S. government trade officials as they left office and put them to work as lobbyists. The South Koreans got in trouble when one of their Washington agents, a rice trader and bon vivant named Tongsun Park, was accused of spreading $850,000 in illegal cash and a little too much nightclub entertainment on Capitol Hill.
Because it may be more extensive and covert, the China question is more serious. The reason–or excuse–for the Chinese urgency is one Clinton himself likes to use: the other guys did it first. By virtue of its anti-communist history and precarious standing in the world, Taiwan has been masterful at working the United States. Over the years the country’s hired hands have been accused of funneling illegal cash into American politics. Now they’ve gone the K Street route, hiring lobbyists and PR experts. There are plenty of American CEOs to help China lobby on trade matters, including most-favored-nation status. August GOP figures with business ties to China–Henry Kissinger is one example–can usually be counted on to speak up on behalf of the People’s Republic. But on emotional issues–like Taiwan, Tibet and human rights–the PRC has been getting clobbered.
Caught by surprise when Clinton defeated George Bush in November 1992, the Chinese scrambled to make new connections. A PRC-controlled trading company bought a stake in Lippo’s Hong Kong bank that same month. Huang apparently saw his main chance, too. By April 1993, he was escorting Lippo heir James Riady into the Oval Office. China began deepening its financial relationship with Lippo; by July, the PRC was an equal bank partner. A former Chinese government official and several other PRC nominees were installed in the bank management, NEWSWEEK has learned, and in late 1995 a Chinese government company helped bail out Riady companies in Indonesia after Lippo Bank depositors panicked.
Now independent counsel Kenneth Starr is interested in all this. NEWSWEEK has learned that he has subpoenaed the White House for any information it may have about overseas Lippo executives in Jakarta and Hong Kong. Starr is looking for evidence that Lippo may have hired Clinton friend Webb Hubbell in order to buy his silence. But now that Lippo is so in thrall to Beijing, Starr may soon find himself investigating the China connection, too.
Behind the scenes, the Chinese are after concrete things: a home for their merchant fleet in Long Beach and admission to the World Trade Organization. In public, they want respect. They felt humiliated in, of all places, Ithaca, N.Y. Prodded by Taiwan’s K Street allies, Congress demanded that the island’s president, Lee Teng-hui, be given a U.S. visa to attend his reunion at Cornell University in 1995. Taiwan’s lobbyists got 30 state legislatures to pass similar resolutions. Despite vociferous objections from Beijing, Lee received the visa, gave a commencement address and gazed upon Cayuga’s waters.
By all accounts, Chinese President Jiang Zemin lost face, and saw red. In November 1995 he convened a new top-level committee, reporting directly to him, with the catchy title of Central Working Group to Study the U.S. Congress. Junket invitations to members of Congress started going out by the crateload. In January 1996 three senators–Feinstein, John Glenn and Sam Nunn–got the royal treatment in Beijing. In the leadership compound, with its cinnabar pillars and willow trees, Jiang wined and dined them, and escorted them though Mao’s private quarters. Soon thereafter the NSA eavesdroppers started overhearing brave talk of buying access.
Last June the FBI warned the White House that China was eager to buy influence in America. Clinton was never told, and six days later, at an elite fund-raiser at the home of Sen. Dianne Feinstein in San Franciso, he broke bread with the head of a Chinese company who has close ties to the rulers in Beijing.
China’s interests in Washington are about cash, connections-and some very important deals. A primer on what’s at stake:
Renewal of most-favored-nation status was in jeopardy in 1993 because of China’s lack of progress on human rights. The Clinton White House supported renewal after substantial lobbying- including some by the Riadys.
In 1993 the Chinese wanted to buy machinery from a defunct McDonnell Douglas factory. The Pentagon objected, but with the support of Commerce Secretary Ron Brown, the deal went through.
The Chinese shipbuilder just secured a $138 million federal loan from the U.S. government to buy four U.S.-built container ships. COSCO also leased the closed navy shipyard in Long Beach, Calif.
A sting to bust Chinese gun runners (Deng’s son-in-law was linked to them) was cut off early when the press learned of it. Some investigators think Clinton hands leaked the news. One potential target, Wang Jun, had attended a Clinton coffee.
