The Washington Post | February 13, 1997; Page A01
By Bob Woodward and Brian Duffy

Justice Department investigation into improper political fund-raising activities has uncovered evidence that representatives of the People's Republic of China sought to direct contributions from foreign sources to the Democratic National Committee before the 1996 presidential campaign, officials familiar with the inquiry said.

Sensitive intelligence information shows that the Chinese Embassy on Connecticut Avenue NW here was used for planning contributions to the DNC, the sources said. Some information was obtained through electronic eavesdropping conducted by federal agencies.

The information gives the Justice Department inquiry what is known as a foreign counterintelligence component, elevating the seriousness of the fund-raising controversy, according to some officials. 

The sources declined to provide details about the scope of the evidence relating to the alleged efforts by the Chinese representatives. They also declined to specify what foreign contributions might have been involved, but they said the new evidence now being scrutinized in the inquiry is serious.

A Chinese Embassy spokesman denied yesterday that his government had anything to do with improper efforts to influence the administration. "We have done nothing of that sort," the spokesman said.

White House press secretary Michael McCurry said yesterday that "to the best of my knowledge, no one here had any knowledge of" the allegations concerning the Chinese. He said the White House would have no further comment.

The evidence relating to the Chinese government led Justice Department lawyers and FBI executives to increase the number of FBI special agents working on a special investigative task force from a handful to 25, including several specialists in foreign counterintelligence investigations, sources said. Laura Ingersoll, a Justice Department attorney assigned a leading role on the fund-raising task force, has security clearances to investigate a variety of sensitive intelligence matters, officials said.

The new dimension to the fund-raising investigation could result in Attorney General Janet Reno eventually recommending that the matter be turned over to an independent counsel, according to one well-placed source. Reno so far has declined requests for an independent counsel, saying that the Justice Department task force can conduct a full and independent inquiry and that there is no specific and credible allegation of wrongdoing against any of the senior executive branch officials covered by the Independent Counsel Act. Such a finding would have to be made by the Justice Department task force before Reno could recommend appointment of an independent counsel.

Washington and Beijing have been at odds over human rights and trade issues, but the Clinton White House has been seeking recently to improve relations. Secretary of State Madeleine K. Albright is traveling to Beijing later this month, and President Clinton announced in his State of the Union message that he also would visit. He has extended an invitation to Chinese President Jiang Zemin to come to Washington.

The Chinese effort to win influence with the Clinton administration can be traced to 1993, one source said. During the Reagan and Bush administrations, the Chinese government felt comfortable dealing with Washington. During the 1992 presidential campaign, authorities in Beijing spoke openly about wanting Bush to win reelection because he was an "old friend" of China. Clinton had criticized the Bush administration during the campaign for "coddling" Beijing and giving China most-favored-nation trade status after the 1989 crackdown in Tiananmen Square.

After Clinton defeated Bush, Chinese officials were uncertain about how to deal with the new administration, officials said, even though as president, Clinton essentially adopted the Bush policy toward Beijing. The Chinese Foreign Ministry has long urged the leadership in Beijing to increase its lobbying efforts in Washington, arguing that China has lagged behind Taiwan and Israel in trying to influence U.S. policy.

Some investigators suspected a Chinese connection to the current fund-raising scandal because several DNC contributors and major fund-raisers had ties to Beijing. Last February, Charles Yah Lin Trie, a fund-raiser for the Democratic National Committee, used his influence with party officials to bring Wang Jun, head of a weapons trading company owned by the Chinese military, to a White House coffee with Clinton.

Wang also heads a prominent, state-owned investment conglomerate. Clinton has since said he should not have met with Wang, and $640,000 in checks that Trie delivered to president's legal defense fund has been returned because of questions about the source of the funds.

Another reason investigators suspected a Chinese connection was the role of John Huang, a former Commerce Department official and DNC fund-raiser now at the center of the campaign controversy. An American citizen born in China and raised in Taiwan, Huang has said he now has no friends or relatives in China. But Huang is a former executive of the Lippo Group, a highly profitable Indonesian conglomerate owned by the Riady family, who are ethnic Chinese. Lippo has extensive interests in China, including approval to build a power plant in Fujian Province, Huang's place of birth. 

In 1993, Lippo sold 50 percent of its holdings in one of its banks, Hong Kong Chinese Bank – where Huang was a vice president in the mid-1980s – to a corporation run by the Chinese government.

Huang was not the only Lippo executive to get a job with the Clinton administration. In December 1994, U.S. Trade Representative Mickey Kantor named Lippo's president of securities, Charles De Queljoe, to the Investment and Services Advisory Committee. Huang had sought jobs at the State Department and the National Security Council staff for De Queljoe, a big Democratic giver, in an early 1993 letter to the White House.

Last month, Rep. Gerald B.H. Solomon (R-N.Y.), chairman of the House Rules Committee, asked FBI Director Louis J. Freeh to investigate Huang and the Lippo Group, with an eye to "potential economic espionage against the United States by a foreign corporation having direct ties to the People's Republic of China."

Solomon said then that he was concerned about Huang's access to intelligence information and dozens of calls Huang made from Commerce to the Lippo Group. He also asked Freeh to investigate apparent discrepancies in the birth date listed on Huang's visa application forms and his government employment forms.

Huang was employed at Lippo for nine years before he joined the Commerce Department as deputy assistant secretary for international economic policy. His severance package from Lippo totaled $788,750.

Huang was given a top-secret clearance at Commerce after what Republicans have called a lax background investigation. Despite Huang's extensive ties to Lippo, the background investigation was limited to his activities in the United States because he had lived here for more than five years. Commerce officials now say they wish a foreign background check had been done, even though it was not required.

In preparation for his job at Commerce, Huang received an interim security clearance while he was still working at Lippo. But Commerce Department officials said that did not entitle him to see any classified information, and they maintain he saw none. Because of a bureaucratic error, the officials said, Huang retained his top-secret clearance after he left the Commerce Department to become a DNC vice chairman in December 1995. 

During his 18 months at Commerce, Huang was scheduled to attend 37 intelligence briefings, including briefings on China, and saw more than two dozen intelligence reports. 

From his Commerce Department office, Huang made more than 70 phone calls to a Lippo-controlled bank in Los Angeles. The calls are now being scrutinized by the Justice Department task force. 

Huang's message slips from the Commerce Department also show a call from one Chinese Embassy official in February 1995 and three calls from the embassy's commercial minister in June and August of that year.

According to Huang's Commerce Department desk calendar entries, obtained by The Washington Post, he had three meetings scheduled with Chinese government officials. He was slated to go on a U.S. government-sponsored trip to China in June 1995 that was canceled. He attended a policy breakfast at the Chinese Embassy in October 1995 and a dinner there the same month, his calendar shows.

One of the many unexplained records from Huang's files shows an unusual travel pattern in the fall of 1995. His expense account records show he left his Commerce Department office to visit the Indonesian Embassy on Massachusetts Avenue NW on Oct. 11, claiming a $5 reimbursement for taxicab fare. The expense records indicate Huang did not return to his office at Commerce until the following day – when he took another $5 cab ride, not from the Indonesian Embassy but, according to his records, from the "residence of the Chinese ambassador."