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Charges tie Hsu to Ponzi scheme
Democratic fundraiser Norman Hsu, who raised $850,000 for Sen. Hillary Rodham Clinton's presidential candidacy, was charged yesterday by federal prosecutors in New York with violating campaign-finance laws and overseeing a massive $60 million fraud.
U.S. Attorney Michael J. Garcia said Hsu, 56, is accused of perpetrating a Ponzi scheme to defraud people across the United States and violating federal campaign-finance laws by making contributions to various political candidates in the names of others.
Hsu, a New York businessman who donated more than $1 million to Democrats, was a fugitive who evaded capture for 15 years before his Aug. 31 arrest. The Hong Kong native had failed to appear in court for sentencing after pleading no contest in 1992 to a felony charge of defrauding investors of $1 million in a bogus investment scam.
After his August arrest, he failed to appear at a bail reduction hearing in California but was apprehended Sept. 6 in Colorado after he fell ill on an Amtrak train.
The Clinton campaign said that Mrs. Clinton, New York Democrat, would return the $850,000 in bundled campaign donations from a network of Hsu associates.
According to a criminal complaint unsealed yesterday in U.S. District Court in Manhattan:
•Hsu operated and was the managing director of Components Ltd. and Next Components Ltd., which provided investment programs to extend short-term financing to businesses. Hsu recruited victims by guaranteeing high rates of return on short-term investments.
•After receiving money from investors, Hsu for a time repaid both the interest and principal as promised. Thinking Hsu to be trustworthy and the companies to be legitimate and potentially profitable, the victims agreed to roll over their invested funds into new investments, contribute additional, larger sums of money to the scheme or recruit friends to invest with him.
•In reality, the companies were merely vehicles for Hsu's Ponzi scheme, in which money owed as returns to older investors was paid with money received from newer investors, and Hsu never invested the money in the manner he represented to his victims.
Mr. Garcia said that in the end, Hsu defrauded his victims out of more than $60 million. In an effort to raise his public profile and persuade more victims to invest in his fraudulent scheme, Hsu pressured investors to contribute tens of thousands of dollars to various presidential candidates and others for the Senate and the House, he said, adding that Hsu made victims think that failure to make political contributions to candidates he supported would jeopardize their investment relationship and put their money at risk.
He also said Hsu violated the Federal Election Campaign Act by making contributions to various political campaigns in the names of others, known as "straw donors."
Mr. Garcia said Hsu is charged with one count each of mail and wire fraud, and one count of violating the Federal Election Campaign Act. If convicted, he said, Hsu faces up to 45 years in prison and fines totaling twice the gross gain or loss resulting from his financial fraud crimes.
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