September 21st, 2007
09:06 AM ET
15 years ago

Clinton backer charged with swindling $60 million

Hsu appeared in court with his lawyer on Wednesday.

NEW YORK (CNN) - Federal prosecutors have charged Democratic fund-raiser Norman Hsu with breaking campaign finance laws and cheating investors out of millions of dollars in a $60 million Ponzi scheme.

The criminal complaint was announced Thursday at a press conference in Manhattan.

Hsu has raised money for several Democratic candidates, but most substantially for Sen. Hillary Clinton's, D-New York, presidential bid. Clinton's campaign has said it will return the $850,000 Hsu raised to the individual contributors.

Hsu is charged with one count of violating the Federal Election Campaign Act after using investors in his companies as straw donors, making various political contributions greater than $25,000, which Hsu then paid back to the straw donors. Other charges include one count each of wire fraud and mail fraud.

"In committing acts of campaign finance fraud" said U.S. Attorney Michael Garcia, "Hsu corrupted a system in which transparency is paramount in order to purchase a place on the celebrity campaign circuit."

Hsu contributed to political campaigns to raise his profile and draw more investors to his Ponzi scheme, prosecutors allege. "It doesn't appear the Ponzi scheme was devised in order to generate money for the political contributions," Garcia said.

Hsu persuaded his investors to contribute tens of thousands of dollars to various campaigns in order to build his public profile and lure more investors to his scheme, prosecutors say. Investors were made to fear that if they failed to contribute they would jeopardize their relationship with the company and risk losing their money.

However, the companies, Components Ltd. and Next Components Ltd., never conducted any legitimate business and were nothing more than an instrument to conduct the Ponzi scheme, prosecutors say. Hsu, whose phony companies guaranteed high return rates on short term investments, was actually paying older investors with money coming in from new investors, the allege. When the scheme fell apart investors were left holding millions of dollars worth of bad checks.

Hsu is being held in Denver on charges of fleeing San Mateo, Calif., to avoid prosecution. When he was arrested, authorities seized a laptop, a blackberry, and a suitcase filled with thousands of dollars. Also seized were checks from Hsu's victims as well as bank receipts for millions of dollars in transactions made by Hsu and a lists of specific campaign contributions made by investors on Hsu's behalf.

He would face 45 years in prison, as well substantial fines, if convicted on all charges.

- CNN's David Miller

Filed under: Hillary Clinton • Norman Hsu
soundoff (39 Responses)
  1. Daniel Newton, Charlottesville, VA

    I don't understand those that say a 45 year prison term is too harsh. To me, undermining our country's campaign system isn't too far from treason.

    September 21, 2007 12:18 pm at 12:18 pm |
  2. Paul, Phoenix, Arizona

    Why is it relevant to make the point that Hsu is a Clinton supporter? His alleged crimes have nothing to do with his candidate choices.

    Do a follow up: who does the former head of Enron endorse?

    September 21, 2007 12:27 pm at 12:27 pm |
  3. bob, seattle, wa

    Queen Hillary is not very 'selective' when it comes to those who contribute to her 'feather bed'. She is merely a mouthpiece seeking power for power's sake and most probably to be able to tell her fake husband 'See, I told you I know a thing or two and you aren't the only one who wears the pants in the family."

    September 21, 2007 12:39 pm at 12:39 pm |
  4. Tom - Dedham, Mass

    The color yellow is perfect for him?

    Posted By Anonymous : September 21, 2007 10:30 am

    Since you are anonymous from nowhere and yet CNN lets you post, here goes, yellow is perfect because he cowardly tried to run away from his problems. Get it.

    September 21, 2007 12:51 pm at 12:51 pm |
  5. dawn -- Gaithersburg, MD.

    So far, I know about crooked contributors to the Clinton, Obama, and Edwards campaigns. I have NO doubt that I'll hear about campaign finance violations in ALL of the campaigns before we elect a President.

    And Chris:

    If you think Giuliani won't be among them, you are either medicated or an insane prankster. Have you heard of Bernie Kerik? He was Giuliani's POLICE COMMISSIONER. He was Giuliani's BUSINESS PARTNER. Giuliani recommended him to be SECRETARY OF HOMELAND SECURITY. In other words, he was ONE MAN Giuliani knew VERY WELL. But apparently he didn't know that he had, inter alia: comandeered an apartment, donated to assist in Ground Zero efforts, as an illicit love nest, sold his stock in Taser International under circumstances that suggested insider trading, allegedly misused police property for personal benefit, and failed to comply with ethics rules regarding accepting gifts. (He pled guilty to the last one.) GIULIANI, however, is qualified to run the country.
    But Sen. Clinton, to be similarly eligible, is expected to know all the intimate, even hidden, details of the lives of tens of thousands of contributors. I see that you prefer Giuliani and are probably a Republican: well and good. But your political allegiance shouldn't prevent you from being able to construct a sound argument.

    September 21, 2007 12:59 pm at 12:59 pm |
  6. Margo Trent, Kansas City, MI

    DONG! Where is my au-to-mo-bile ?!

    September 21, 2007 01:02 pm at 1:02 pm |
  7. Chip Celina OH


    I admire your support, devotion and dedication to your candidate.

    Saying she had no clue who Hsu was when you can look back at some earmarks and see she knew EXACTLY who he was. She had even requested campaign workers to be overly diligent in vetting donors so the appearance of impropriety from the 96 fiasco didn't take place (which they failed to do). Then her campaign said it would be willing to accept the money from the 850,000 tainted bucks if the individual donors wished to give it back. Sorry, poisoned fruit of a poisoned tree. Lawyers make that case in court daily, but this group of WashDC/Yale lawyers fail to make that distinction when it comes to personal political gain.

    You use the fact that Kerik pled guilty to a charge as justification that his actions were illegal, but call cynicism of the fundraising tactics used by the 1996 Clinton campaign as false and thoroughly debunked (although that scandal resulted in 22 guilty pleas by actionable parties).

    Which is it?

    Have a good weekend,

    September 21, 2007 01:47 pm at 1:47 pm |
  8. David, Los Angeles, CA

    "But your political allegiance shouldn't prevent you from being able to construct a sound argument."

    You would be better off getting a sound argument out of a houseplant than getting one out of a Bush- or Giuliani-loving conservative. "We're fighting them over THERE so we don't have to fight them OVER HERE!!!"

    September 21, 2007 01:57 pm at 1:57 pm |
  9. Ron, TX

    If Clinton gets elected, I wouldn't be surprised if he's secretly pardoned like Bill did for all his 300 law-breaking friends.

    September 21, 2007 04:23 pm at 4:23 pm |
  10. Matt Kachaluba, Phoenix, AZ

    It's funny how when all the stories about Ken Lay broke, the media never reffered to him as "George W Bush backer, Ken Lay".

    Get over yourselves, the few missteps the Clintons have had don't hold a candle to the high crimes, political favors, and bribes surrounding the GOP and the Bush administration.

    September 21, 2007 04:49 pm at 4:49 pm |
  11. CP, Columbia, SC

    To the Hillary Clinton supporters who are upset over her name in the title to this article – doesn't feel too good when CNN does it to your candidate, does it? It happens to them all, and as an Obama supporter, I feel like it happens to him a whole lot, especially on CNN, but hey, we all have our biases. And to be fair, when I saw the headline, I did think, hmmm... Clinton wasn't the only candidate who received donations from Hsu. She did received the most it seems though...

    September 21, 2007 05:47 pm at 5:47 pm |
  12. C. Mass, Washington D.C.

    How ironic that a prodigous supporter of the Democratic party wears a "yellow" jumpsuit to their arraignment

    September 21, 2007 08:29 pm at 8:29 pm |
  13. Calvin Preddie, Mississauga, ON, Canada

    Why is it that every story about Mr. Hsu has to link him to Senator Clinton?

    Your story correctly states that he raised money "for several Democratic candidates, but most substantially for Senator Clinton ($850,000.00 which she states she will return to individual contributors).

    If your story wants to accuse Senator Clinton of corruption and collaboration with Mr. Hsu, then be brave enough to say so and cease trying to project her as guilty by association while leaving out the others who have benefitted from contributions from Mr. Hsu.

    September 22, 2007 07:32 am at 7:32 am |
  14. Gary Lumsden, New York, New York

    There is an old saying, "The masses are asses".

    The Clintons understand that saying better than any others since Huey Long or Franklin Rosevelt.

    It is shocking to think that there are so many in voters in the United States who buy into their 'PROGRAM'. The good news is that a large percentage of that population are too stupid to show up at the polls!

    September 22, 2007 10:50 pm at 10:50 pm |
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