Hsu charged in $60-million scheme
Christopher Tomlinson / AP
Disgraced Democratic fundraiser Norman Hsu, here with his lawyer Eric Elliff, is accused of perpetrating a "massive Ponzi scheme" costing investors across the country $60 million.
U.S. attorney in southern New York says the Democratic fundraiser ran a 'massive Ponzi scheme' and committed campaign-finance violations.
By TOM HAMBURGER and DAN MORAIN, TIMES STAFF WRITERS
September 21, 2007
NEW YORK--Moving with surprising speed, the U.S. attorney's office here charged Democratic fundraiser Norman Hsu with violating campaign-finance laws and overseeing a massive $60-million fraud.
U.S. Attorney Michael J. Garcia of the Southern District of New York said Hsu pressured investors in his scheme to make campaign contributions to candidates for president, U.S. Senate and other offices "in an effort to raise his public profile."
Additionally, Hsu, 56, threatened investors, telling them that their failure to make campaign donations could jeopardize their investments with him.
The allegations are made in a criminal complaint that was unsealed this morning. This afternoon, a state airplane landed in Colorado to take Hsu back to California.
Hsu handed out more than $600,000 in campaign donations since 2004, and gave to a variety of charitable organizations. The campaign of Sen. Hillary Clinton (D-N.Y.) was the recipient of much of the money; he raised $850,000 for her from his network of associates.
Clinton has promised to return the money--although investors who have lost money may lay claim to at least some of it.
"When we learned about these allegations, we acted out of an abundance of caution" to return money to Hsu-related donors, Clinton communications director Howard Wolfson said today. "Obviously, these are very, very serious charges."
Garcia focused on the part of the complaint that accused Hsu of perpetrating a "massive Ponzi scheme" costing investors across the country $60 million, essentially using money from one investor to pay others in a pyramid fashion.
The case comes four weeks after Hsu's political activities and criminal past were disclosed in the Wall Street Journal and Los Angeles Times. California authorities are preparing to transport Hsu as early as today from Colorado to San Mateo County where he faces sentencing in a 15-year-old fraud case.
Once in California, Hsu will be held without bail. He forfeited $2 million in bail money when he fled by train rather than appear at a procedural hearing earlier this month. Hsu was caught in Colorado, where he waived extradition earlier this week.
Hsu already faces new lawsuits by investors and multiple federal and state investigations into his business dealings and political activities. Hsu had claimed he was putting the money into a garment operation.
A New York private-equity firm called Source Financing Investors claims in a lawsuit filed in New York that Hsu owes investors $40 million. Hsu allegedly lured investors by promising investors could make 5% to 6% interest in a month.
Bob Emmers, Hsu's spokesman from the firm Sitrick & Co., declined to comment today on the latest of Hsu's legal difficulties.
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