Sen. Hillary Clinton's presidential campgain announced that it is returning $850,000 in contributions raised by fugitive Norman Hsu. Please review the article and then discuss the issue(s), impacts and stakeholders affected by this event.
Clinton's Campaign To Return $850,000
Her Team Cuts Ties To a Top Fundraiser Jailed in Fraud Case
By John Solomon and Anne E. KornblutWashington Post Staff WritersTuesday, September 11, 2007; Page A01
Sen. Hillary Rodham Clinton announced last night that she will return $850,000 in campaign donations solicited by Norman Hsu, severing ties with a top fundraiser who was jailed last week after attempting to flee from criminal charges in California.
The refunds, among the largest in political history, come after weeks of reports about Hsu's controversial history and murky business practices. Clinton officials said that the senator, acting out of "an abundance of caution," had directed the campaign to return donations from about 260 contributors tied to Hsu because of his apparent involvement in an illegal investment scheme.
The campaign would not identify the donors involved.
Aides also said the campaign will begin conducting criminal background checks on big fundraisers to prevent a similar incident from occurring in the future.
Hsu was wanted on a 15-year-old warrant issued in California; after turning himself in to authorities last week, he did not appear at a hearing and later fell ill on a train ride through Colorado, where he was taken into custody.
The Hsu scandal has brought unwelcome reminders for Clinton of her husband's fundraising controversies in the 1990s, including an episode involving a Little Rock businessman named Charlie Trie. The Clinton legal fund returned or refused to accept at least $640,000 from Trie after allegations that he funneled phony donations from contributors who could not afford to write big checks.
Also in the 1990s, the Democratic National Committee returned more than $360,000 in donations from Taiwanese American businessman Johnny Chung, who raised money for the party during Bill Clinton's 1996 reelection bid and later admitted that he accepted some of the money from Chinese military officials.
Hillary Clinton's campaign decided more than a week ago to return $23,000 that Hsu had personally donated to her various campaigns. "Mr. Hsu donated to numerous charities and more than two dozen candidates and committees," Clinton spokesman Howard Wolfson said. "Despite conducting a thorough review of public records, our campaign, like others, was unaware of Mr. Hsu's decade-plus-old warrant. "To help ensure against this type of situation in the future, our campaign will also institute vigorous additional vetting procedures on our bundlers, including criminal background checks," Wolfson added. "In any instances where a source of a bundler's income is in question, the campaign will take affirmative steps to verify its origin."
Clinton "simply didn't want to have to keep answering questions about a bundler whose background is now clearly in question," a senior adviser said, speaking on the condition of anonymity.
Although Clinton will return the money raised by Hsu, Wolfson said the individual contributors could make new donations. "We will accept their contributions and ask them to confirm for our records that they are from their own personal funds," he said in an e-mail.
Clinton's campaign chairman, Terence R. McAuliffe, declined requests to explain how Hsu had become so prominent in her fundraising.
A portion of the money, at least $29,300, will be returned to members of a single family -- the Paws -- who live modestly in a small house near the San Francisco airport. The Paw family members first attracted attention to Hsu because they were writing large checks to the Clinton campaign even though they held such modest jobs as a postal carrier and a nurse.
It is illegal for a bundler to reimburse donors for the campaign checks they write because it would violate strict federal limits on how much an individual can donate to a candidate.
Lawrence Barcella, a Washington lawyer who has defended Hsu against allegations that he was funneling money back to the Paws in exchange for their donations, said the Paws had other sources of income to support their hefty schedule of giving, which included more than $200,000 in checks to scores of other Democratic candidates over the past four years.
Others expected to get their money back include a range of employees for various firms -- most in the apparel industry -- that have been connected to Hsu. And there are many more who have regularly appeared among Hsu's stable of donors, such as the owners of a San Francisco gift shop, the Lim family, whose connections to him are unclear.
A report emerged yesterday that the Clinton campaign ignored warnings about Hsu. Earlier this summer, Democratic Party officials raised questions with the campaign about whether Hsu had been involved in an illegal Ponzi scheme, according to a source familiar with the exchange. (The Los Angeles Times first reported yesterday that a Clinton finance director for the West Coast brushed aside questions about Hsu.) The source, who would speak only on the condition of anonymity, said the Clinton finance team did a second search of public records looking for any problems based on the allegations and found none. The campaign did not directly talk to Hsu about the allegations, the source said.
Kent Cooper, the Federal Election Commission's former chief of public disclosure, said Clinton's move to shed the tainted money was "a stunning development" certain to affect other campaigns in what is shaping up to be the most expensive election in history. The presidential candidates in both parties raised about a quarter-billion dollars in the first half of this year.
"The financial controls of these campaigns as they get bigger and bigger and raise more money need more resources," Cooper said. "It is a smart move by the Clinton campaign . . . to try to get ahead of the issue and claim some leadership on double-checking fundraisers and activities.
"To seek permission to do criminal backgrounds indicates a willingness to take more responsibility for the personal actions of these big fundraisers out in the field and will bring extreme pressure on other candidates to more carefully monitor and control their fundraisers," he said.
Clinton had raised roughly $52 million for her campaign through the end of June. Her chief rival for the Democratic nomination, Sen. Barack Obama (D-Ill.), had raised more than $57 million at the same point.
Hsu, who grew up in Hong Kong and moved to the United States in the 1969 to attend the University of California at Berkeley, came onto the scene as a fundraiser in 2003 when he began raising money for Sen. John F. Kerry's presidential bid.
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If anyone questions whether the Clinton team's issue management efforts were effective in putting this whole mess behind them, I think it's instructive to look towards the major news outlets. I took about 20 minutes to scan the 'Politics' section headlines from the Post, Times, CNN, MSNBC, Fox News, and Google News - I only found two articles (both from the NY Times, dated 9/15 and 9/12) that referenced Hsu. To me, that means a job well done.
In my mind, the key element - one which is discussed in some detail in the posted article - is the Clinton Campaign's willingness to not only return the money raised by Hsu, but also to implement first-of-their-kind measures to prevent similar occurences in the future. By going a step further, I think they insulated themselves from a lot more potential scrutiny.
I think returning the donations was a necessary step for the Clinton campaign, if they had not, they would've opened themselves up to more criticism by primary rivals and by the Republican presidential hopefuls. It seems as if the Clinton campaign was able to take action in a proactive manner so as to limit the adverse affects that could have resulted from inaction. In a political situation such as this, the most likely negative impact would be loss of reputational points and with it fewer campaign contributions. The campaign probably will not lose any reputational points, but will instead gain them for the effective management of this issue.
Aside from the potential political cost to Clinton's campaign, how is this going to change fundraising in the future? Are campaigns now going to have to scrutinize their donors, bundlers and fundraisers to make sure they don't have warrants out for their arrest? How about unpaid parking tickets? Barack Obama likes to use the line, "money is the original sin of politics," but that doesn't mean that candidates aren't responsible for who is funding their campaigns. If anything, this Hsu scandal means more valuable campaign time background-checking every person who makes a donation.
I believe the Clinton campaign took the right step, but didn't act quickly enough. Too often today, it seems as if CEOs and their board of directors wait to see the public's response to an incident before taking action. In this case, Clinton's camp knew Hsu's actions were wrong and took steps under pressure from the media, but before there could be a public outcry.
This morning, Clinton appeared on the Today Show. A day after announcing her national healthcare plan, Lauer was the only reporter who asked about Hsu incident:
Lauer: The, the question is, you know there are a lot of red flags here. What happened? The New York Times writes this, "This hurried--but not hurried enough--giveback, one of the largest on record, lays bare again how easily campaign professionals can allow greed to trump healthy skepticism and good sense when supporters like Mr. Hsu arrive on the scene with eye-popping contributions." How do you respond?
CLINTON: Well obviously, everyone was taken aback, to say the least not only the dozens of candidates who were the beneficiaries of contributions but the people who actually gave him money for investments and it was, it was a terrible and rude awakening. The fact is we need to move toward public financing. I've been saying that for years. I will strongly support that as president and my campaign has a good system for checking. This missed, this was missed. It was missed by everyone who looked. So-
LAUER: So when your, when your campaign returned the money, they said you're operating under an abundance of caution. Are you saying there wasn't that same abundance of caution when the check arrived?
CLINTON: Well yes, of course, we always check everything and check every person but, you know, it wasn't just my campaign. Unfortunately this goes back several years and the databases that were used didn't have this information. As soon as people found out, we all took action.
I believe Clinton effectively used this situation to push her campaign agenda. She took a negative incident and turned into an opportunity to promote public campaign financing. My guess is that the story is finished by Thursday.
What should have been a one day story has now dragged on for several weeks. The lesson to be learned here, aside from not taking donations from criminals, is to come clean, put everything on the table, apologize for the mistake in campaign administration and lack of politcal judgement and move on.
Unfortunately, there are still many questions left unanswered by the Clinton Campaign. How can someone raising that kind of money, playing that kind of role, not be investigated, not have their background throughly vetted. This is not the first time a Clinton has been implicated in a fundraising scandal. You would think someone would have learned from past errors in judgement.
The damage is permanent. As I write this, I am almost certain there is some political operative working on tv ads or some sinister communications strategy using Norman Hsu as the main component, to attack Hillary Clinton.
The story will continue to live, questions will continue to be raised, until Terry McAuliffe, the Clinton Campaign Chair, answers all questions asked.
The Clinton campaign took the best option available when they opted to return the money to the donors. If the campaign had decided to keep the money, you can be sure her rivals in both parties would have attacked hard. More than likely this story only kept its traction because it involved Clinton and evoked memories of the 1990s fundraising scandals. On that, it appears the Clinton campaign allowed themselves to fall into this position. As the frontrunner and one of the top fundraisers, the campaign should have been on the lookout for any political bombshells, especially anything that can be related back to old Clinton scandals. To the credit of the Clinton campaign, they took their hit, gave back the money, spun the story as a reason to support public financing, and now with the release of their health care plan have started to shift the news attention away from the issue.
I agree that the only upside to this incident is that it places Senator Clinton at the center of background checks for political donations. A mistake was made, and it was corrected. Should the campaign have been more aware of the background of such a large donor? Yes. Will they pay a price for this? I don't think they will pay a large price. Yes, it's a bad news cycle, but the good news is that it put other campaigns on the defensive as well. The issue that was raised did not seem to be, "Does the Clinton campaign accept shady donations." It seems to be, "Does this happen all the time in political campaign fundraising." The last is not a dig at Sen. Clinton, but rather a dig at the process, and the process is something that all candidates will have to answer to.
In the end, I think the campaign did the only thing it could do. I think it was a realtively simple example of how to handle an issue. They gave the money back...what was the other option? Had the campaign hung on to the money until Hsu had his day in court, the only story about the Clinton campaign is the legal fate of this guy.
Not only that, but the campaign became the leader of background checks for donors. It's just too bad they couldn't have done that before something like this happened to them.
This is in fact more than just a story about what Hillary Clinton should do about this one errant fundraiser. This story conjures up an image of Clinton that she has been steadfastly trying to change. That’s both congruent with this issue of Mr. Hsu, and different.
Specifically regarding the article you posted, you have at issue some questionable financial dealings in her past (true or not) that will now be talked about anew; you have a general opinion of her by some people as being untrustworthy; and you have an opportunity by her opponents to use this against her. Each of these issues could have a different impact, depending on the reaction by Clinton and her campaign.
Clinton has been trying to repackage herself as a different person than she was in 1993. She is now Clinton, the US Senator, not Clinton the First Lady. Repackaging herself allows her to reach more people, and move past her hectic, highly investigated tenure in the White House. The Hsu issue rekindles those memories for many and that’s a negative impact. Her fundraising in the future may also be negatively impacted. This issue gave her opponents an opening to attack her, and implicitly or not, remind voters of her troubling financial past (see above). Again, that’s a negative impact.
How negative all of that remains, or how sustainable it becomes is dependent on how the Clinton campaign reacts/reacted to its various stakeholders – current fundraisers for the campaign, bundlers, donors, the electorate, and the media. They have given money back to donors who gave money through Mr. Hsu, but said they can still contribute again. The Clinton campaign has communicated with the media and the general electorate at every turn their side of the story, (the he gave to numerous candidates, charities and causes and she was by far not the only one) and more importantly what they are doing to remedy the situation in the future (conducting criminal background checks, etc).
This is an issue. It’s one I’m sure the campaign didn’t want to waste time dealing with, especially when they are still trying to raise money for the third quarter (and trying to surpass Barack Obama); however, they have done a pretty god job of containing it – rolling out former FEC chief of public disclosure, who in the story said, “it’s a smart move by the Clinton campaign…to try and get ahead of the issue.”
All in all, she has contained one issue fairly well – the Hsu issue. Getting her hands around what the Hsu issue represents, how people perceive her, is a far different issue all together.
I think the campaign handled the donation problem very well. Competently and effectively. Sure it reflects poorly on their ability to research high dollar donors, but in the day in age where we can use the internet for almost everything, never needing to have face to face contact, it would be impossible for any campaign on the scale of this one to research everyone who gives a donation. The campaign took exactly the right steps in returning the donations. Should they have returned it sooner? Maybe. Is the best case scenario that they found this problem before accepting Hsu's donations? Absolutely. But this is far, far from the worst case scenario. If her reputation dips slightly, it is a reflection on the work of her campaign staff, not Hillary Clinton, Presidential Candidate. But again, the campaign has taken steps to resolve the issue and we can only hope that this campaign and all the others maintain this level effectiveness if and when other issues arise.
This issue is going to last, not necessarily in the media but the affect on donors is going to be bigger than anticipated. Bundlers are a major component to all the Presidential Campaigns bringing in large sums of money from a large number of small donors. I think that Senator Clinton's Campaign took the correct action in response but
there are articles in the Washington Post about bundlers for Senator Edward's and Governor Romney's campaigns who are being investigated or charged with fraud.
Also the release by campaigns of their list of bundlers may have damaged their long term, small donor collections. But I think the plus side, greater transparency in campaign fundraising, is well worth the loss in revenue to political campaigns.
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