Hsu refund pressures Clinton rivals

Sen. Barack Obama (D-Ill.) and former Sen. John Edwards (D-N.C.) will keep contributions they received from the business associates of two indicted Democratic donors.

{mosads}Watchdog groups say the two candidates are under increased pressure since rival Sen. Hillary Rodham Clinton (D-N.Y.) announced this week that she would refund $850,000 raised for her by Norman Hsu, who pleaded no contest to a grand larceny charge 15 years ago and has been a fugitive from justice ever since.

Clinton initially decided to return only the $23,000 that Hsu personally donated to her campaigns, but as word leaked that the FBI had expanded its investigation of Hsu to include possible illegal fundraising, Clinton decided to refund all contributions linked to him. The magnitude of the refund is unprecedented, experts say.

Fundraising watchdogs have pushed for tighter laws controlling donors who ingratiate themselves to candidates by raising tens or hundreds of thousands of dollars.

During his 2004 Senate campaign, Obama received tens of thousands of dollars from Antoin Rezko, a Chicago businessman who has since been indicted on charges of extorting millions of dollars from investment firms seeking business with a state-controlled teachers’ retirement fund.

Rezko has also been indicted for a scheme to defraud a company based in Bellevue, Wash., of several million dollars.

Obama’s Senate campaign also received thousands of dollars from Rezko’s business partners. This year, his presidential campaign has accepted nearly $10,000 from Rezko’s associates.

There are marked differences, however, between the scandals surrounding Hsu and Rezko. Hsu was convicted of a crime almost 15 years ago and fled from authorities before he could be sentenced. He also fled from a California court appearance scheduled last week before authorities caught him on a train to Denver.

Rezko, by comparison, has not been convicted. Furthermore, the Obama campaign said he has not bundled contributions for them this election cycle. Obama has acknowledged, however, that Rezko raised tens of thousands of dollars for his 2004 Senate campaign.

Campaign watchdog activists say that Clinton’s decision has placed more scrutiny on questionable contributions and that presidential candidates should do more than determine whether they are accepting legal contributions. They should also be wary of the appearance of corruption that some donors create.

“If a donor is indicted or under any other kind of a cloud, I, for sake of my campaign, would divest myself of any money associated with that cloud,” said Craig Holman, an advocate for Public Citizen, a nonpartisan watchdog group that helped pass lobbying reform through Congress earlier this year. “The candidate or officeholder could legitimately claim that a person is innocent until proven guilty and therefore, by use of that rationale, money [raised from him] is not tainted.

“From a practical perspective of campaigns, I would not play in that pool,” said Holman.

Obama has returned some money given to him by Rezko business associates, but not all such gifts. After Rezko’s indictment, Obama gave to charity nearly $12,000 that Rezko had contributed to his campaign fund. But Obama told The Chicago Sun-Times that Rezko had raised between $50,000 and $60,000 for his campaign.

 Obama has given away in total about $33,000 in contributions from Rezko and his business associates, according to a tally by The Chicago Tribune. He has also kept tens of thousands of dollars in contributions raised by Rezko or given by Rezko’s associates.

The Hill could not find any record of Obama returning a $5,000 contribution to his Senate campaign from Abdelhamid Chaib, who was sued for allegedly operating fake businesses with Rezko. Nor does it appear that Obama returned $3,000 given in the 2004 cycle by Imad Almanaseer, a Rezko business associate named in a corruption lawsuit involving a state health board that led to federal kickback charges.

Campaign records also show that Obama accepted nearly $35,000 in contributions from donors identified in various news reports as major investors in Rezko’s business dealings. Obama gave at least $6,500 of that total to charity.  

An Obama campaign aide said that these contributions are not relevant to a discussion about presidential fundraising in 2007 because they were made in a prior campaign.

“Tony Rezko didn’t raise money for our presidential campaign, so this isn’t relevant,” said an Obama aide.

A spokeswoman for Obama’s campaign said that it carefully vets its donors and fundraisers.

“We’re constantly reviewing and updating procedures to ensure we catch any potential for problems with any of our hundreds of thousands of donors,” said Jen Psaki.

Nevertheless, business associates linked by media reports to Rezko gave $8,000 to Obama’s presidential campaign in the second quarter of this year, according to campaign finance records.

Steve Weissman, the associate director of policy at the Campaign Finance Institute, a nonprofit institute affiliated with George Washington University that studies campaign finance, questioned how broad an impact Clinton’s decision to refund Hsu-linked donations would have on the Democratic field.

He said candidates would face strong pressure to refund bundled contributions from donors convicted of criminal misconduct. He said refunding contributions from the associates of persons under indictment could amount to impugning donors unfairly.

“You don’t want to have guilt by association,” said Weissman.

Meredith McGehee, of the Campaign Legal Center, a campaign finance watchdog group, said Clinton’s refund of money raised by a tainted donor should have reverberations.

“When you’re one of the top-tier candidates, it raises the pressure on all the other candidates to make sure they don’t have any of these questionable contributions,” she said.

 Clinton’s decision to refund money raised by Hsu could put pressure on her rival Edwards to refund nearly $130,0000 raised for his 2004 presidential campaign by Geoffrey Fieger.

 A federal grand jury indicted Fieger last month on charges of conspiring to make $127,000 in illegal contributions to Edwards’s 2004 presidential campaign, obstructing justice and causing false statements. He has pleaded not guilty.

A spokesman for the Edwards campaign acknowledged that the events surrounding Hsu have set new standards for presidential fundraising. He said, however, that the campaign would give away donations only if Fieger is found guilty.  

“We have always had an extensive vetting process for our raisers, but due to the recent events involving Norman Hsu and the Clinton campaign, and to err on the side of caution, we have begun doing criminal background checks as well,” said Edwards spokesman Eric Schultz.

“From day one, the campaign has taken their lead from and cooperated fully with the Department of Justice. Once this prosecution concludes, if Geoffrey Fieger is found guilty, the campaign will donate all the money in question to charity,” he said.