- The Washington Times - Sunday, May 7, 2000

Testifying under subpoena before a Senate subcommittee on Monday, Charles LaBella, the former head prosecutor for the Justice Department's campaign-finance task force, made a startling revelation.

For the first time since his still-secret report was issued in July 1998, Mr. LaBella acknowledged that he recommended to Attorney General Janet Reno that she seek the appointment of an independent prosecutor to investigate the connection between President Clinton and Bernard Schwartz. Mr. Schwartz is of course not only the Democratic Party's largest individual donor in 1995-96, but also someone whose firm was simultaneously involved in the highly questionable, and potentially illegal, transfer of missile-related technology to China. What follows is a quid-pro-quo chronology of political donations from Mr. Schwartz; the questionable activities of his firm; and the favorable technology-transfer decisions the Clinton administration made that greatly benefited Mr. Schwartz's firm to the detriment of U.S. national security.

1993. Subjected to intensifying congressional pressure and following the determination by U.S. intelligence and the State Department that China had sold missile technology to Pakistan, the president bars the U.S. aerospace industry in August from using Chinese rockets to launch satellites that the State Department classified as "munitions." One of the companies most affected was Loral Corp., now known as Loral Space & Communications.

In the previous six years, according to Federal Election Commission data, Mr. Schwartz, Loral's chairman and CEO, had made less than $100,000 in cumulative political donations, mostly to Senate Democrats.

January 1994. After intense lobbying by the U.S. aerospace industry, Mr. Clinton classifies three satellites as "civilian," enabling them to circumvent the sanctions he had imposed only five months earlier. To permit the satellites to be launched from Chinese rockets, Mr. Clinton also issues the requisite presidential waivers, a procedure instituted by President Bush after the 1989 Tiananmen Square massacre.

June 1994. Mr. Schwartz sends the DNC a $100,000 soft-money contribution, eight times the size of his first soft-money donation in 1993.

August-September 1994. Mr. Schwartz goes to China, having received (purchased?) a highly coveted slot on Commerce secretary and former DNC chairman Ron Brown's trade mission. With Mr. Brown's help, Mr. Schwartz uses his Chinese contacts to obtain satellite-transmission rights for a mobile telephone network in China, a deal worth billions. In a Sept. 20 memo to the president, White House Deputy Chief of Staff Harold Ickes, who was directing the Democratic Party's fund-raising from his West Wing office, suggests a presidential follow-up to Mr. Schwartz's lucrative China trip. "In order to raise an additional $3,000,000 to permit the [DNC] to produce and air generic TV/radio spots as soon as Congress adjourns," Mr. Ickes advises the president to call Mr. Schwartz and invite him and others to a White House breakfast "to impress them with the need to raise $3,000,000 within the next two weeks."

October-December 1994. President Clinton in early October lifts the sanctions he had imposed on China for selling missile technology to Pakistan, a major victory for the aerospace industry. At about the same time, Mr. Ickes informs the president in a memo that Mr. Schwartz "is prepared to do anything he can for the administration." Meanwhile, in a seemingly unrelated development, Johnny Chung, a recently bankrupted California entrepreneur, joins the titans of soft money, giving the Democrats nearly $100,000 between August and December, 1994.

January-September 1995. Mr. Schwartz signs a letter to the president lobbying for the shift of satellite-export responsibility from State to Commerce. The dispute centered on State's inclusion of satellites on its "munitions list." In April, to address the issue, Secretary of State Warren Christopher establishes an interagency task force. From April through September, while the issue is being examined, Mr. Schwartz accelerates his soft-money donations to the Democratic Party, topping $140,000 for the period. Meanwhile, Chung delivers another $175,000 to the DNC.

October 1995. Agreeing with intelligence agencies, the Pentagon and his own advisers, Mr. Christopher decides to keep the satellites on his department's "munitions list." Commerce appeals.

February 6, 1996. Despite reports in January that China continued to export nuclear technology to Pakistan and missiles to Iran, President Clinton signs waivers for four satellite launches by Chinese rockets. On the same day, Wang Jun, who owns a huge stake in a Hong Kong satellite company, meets with Ron Brown. That night, he attends one of the notorious White House coffees. Beyond his interest in satellites, Mr. Wang is a Chinese arms dealer and the son of one of China's most reactionary leaders.

February 15, 1996. One of China's rockets crashes, destroying a $200 million Loral satellite.

March 1996. During the same week that China fires missiles into Taiwanese waters to bully the island during its democratic elections, Mr. Clinton officially reverses Mr. Christopher's October decision and awards authority over satellite-export licensing to Commerce. Between October 1995 and March 1996, while the president was considering reversing Mr. Christopher, Mr. Schwartz donates more than $150,000 to the Democratic Party. Between April and December 1996 that is, after the reversal he donates another $300,000, making him the Democrats' largest individual soft-money donor (more than $600,000) during the 1995-96 cycle.

April-May 1996. A commission headed by Loral reviews the rocket crash and determines it was caused by a flaw in the rocket's flight-control system. Without getting the report vetted by the federal government, the review commission shares its 200-plus page report with the Chinese. Because the same Chinese company produces both strategic nuclear missiles and space-launch missiles, improvements in the guidance and control systems of China's space-launch rockets are easily transferable to its strategic nuclear-missile program.

Summer 1996. Liu Chaoying, a lieutenant colonel in the People's Liberation Army, funnels $300,000 to Chung from Chinese military intelligence. Miss Liu is also an aerospace executive at firms sanctioned by the United States in 1991 and 1993 for providing missile technology to Pakistan. And she is the daughter of China's then-highest-ranking general. According to Chung, Miss Liu told him to contribute the money to the Democratic Party. In July, Chung gives the DNC $45,000, which gained him entrance to two Hollywood fund-raisers, including one where his guest, Miss Liu, was photographed with the president. Chung's firm pays out another $35,000 to the Democrats in September, bringing his three-year total to $366,000.

1997. The Pentagon issues a classified report in May analyzing the effect of the Loral-led review commission's unauthorized release to China of its report on the crash of the Chinese rocket. "United States national security has been harmed," the Pentagon concludes, by the improvement in China's missile capabilities that the review report made possible. The Pentagon's analysis prompts a criminal investigation of Loral by the U.S. Customs Service and the Justice Department.

Also in 1997, the DNC, admitting it could not vouch for the source of Chung's donations, is forced to return the $366,000 he had contributed. No problem. Mr. Schwartz, even as his firm was being investigated by a federal grand jury, shovels another $366,000 into Democratic coffers, in effect underwriting the Chung refund.

February 1998. Despite intense opposition from the Justice Department, which was worried its investigation into Loral would be compromised, Mr. Clinton gives permission to Loral to officially transfer essentially the same missile expertise to China that the company is being criminally investigated for giving without authorization in 1996. Mr. Clinton's February waiver calls the deal "in the national interest." Meanwhile, Mr. Schwartz sends the DNC another $55,000 during the first three months of 1998.

March 1998. Chung pleads guilty to using "conduit" donors to funnel illegal donations to the Clinton-Gore re-election campaign.

June 1998. While Chung is cooperating with the FBI, Robert Luu, a California businessman under investigation for witness tampering, warns him not to discuss any possible connection between Miss Liu and Loral and Hughes Electronics, another U.S. aerospace company suspected of illegally transferring missile technology to China. In a conversation secretly recorded by the FBI, Mr. Luu strongly suggests that Chung not give up any information that would be "disadvantageous" to the two firms.

July 16, 1998. Mr. LaBella submits his 94-page report to Miss Reno. Echoing FBI Director Louis Freeh's earlier call for an independent investigation of the White House's fund-raising, Mr. LaBella's report specifically recommends that Miss Reno seek the appointment of an independent counsel to investigate the connections between Mr. Clinton and Mr. Schwartz. Other recommendations include independent counsel investigations of Mr. Ickes and Vice President Al Gore. Miss Reno declines to discuss the issue with Mr. LaBella, her hand-picked prosecutor, and refuses to this day to make his report public. She later rejects both the Freeh and the LaBella recommendations.

May 25, 1999. Chaired by Rep. Christopher Cox, the Select Committee on U.S. National Security and Military/Commercial Concerns with the People's Republic of China (PRC) issues an unclassified version of its report on Chinese espionage activities and U.S. technology transfers. The report concludes that Loral had "transferred missile design information and know-how to the PRC without obtaining the legally required licenses" and had "violated export laws." The Cox report also concludes that the 1996 decision to give the Commerce Department the principal responsibility for satellite export licenses "permitted the loss" of technology to China. The bipartisan report further concludes that the illegal donations from Chinese military intelligence through Lt. Col. Liu and Chung were "an attempt to better her position in the United States to acquire computer, missile and satellite technologies."

May 2, 2000. Mr. LaBella testifies before a Senate subcommittee. Chairman Arlen Specter, Pennsylvania Republican, calls Mr. LaBella's attention to the "section of your report which deals with Loral on the technology transfer from Loral to the People's Republic of China." Mr. Specter notes that there was "a recommendation as to proceedings as to an investigation for the chief executive officer of Loral, Mr. Bernard Schwartz, who had contributed some $1,500,000 to the Democratic National Committee." Mr. LaBella leaves no doubt about his rationale for recommending nearly two years ago that an independent counsel investigate Mr. Clinton. "Hypothetically," Mr. LaBella replies, "if you're going to investigate the person who gave the contribution because you think something was wrong with that because they were seeking a quid pro quo then it seems to me that part of the area of investigation would be the person who received the contribution."

In the aftermath of Miss Reno's refusal to seek the appointment of an independent counsel, the Justice Department's investigation of Loral is poised to enter its fourth year. Meanwhile, Mr. Schwartz continues to pour money into the DNC.

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