Clinton to Return Funds from Fundraiser Hsu As the presidential candidates scramble for cash, Sen. Hillary Rodham Clinton's presidential campaign says it will return $850,000 in donations raised by Democratic fundraiser Norman Hsu, who is under federal investigation for allegedly violating election laws.

Clinton to Return Funds from Fundraiser Hsu

Clinton to Return Funds from Fundraiser Hsu

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Democratic presidential hopeful Sen. Hillary Clinton will return thousands of dollars in campaign contributions from an embattled fundraiser.

Norman Hsu, who picked up $850,000 in campaign contributions for Sen. Clinton, D-N.Y., was arrested last week after tying to escape sentencing on a decade-old criminal charge.

Clinton's campaign said on Monday that the arrest and allegations that Hsu engaged in an illegal investment scheme aided the decision to return the funds.

"In light of recent events and allegations that Mr. Hsu engaged in an illegal investment scheme, we have decided out of an abundance of caution to return the money he raised for our campaign," read a statement by spokesman Howard Wolfson.

A total of 260 donors will get their contributions back.

Sen. Clinton is the first to return money that's considered tainted because Hsu raised it. Her campaign also said its top bundlers – those who raise the money – will be subject to criminal background checks.

Campaigns routinely vet prominent supporters through public records, typically computer searches using Internet search tools Google or Lexis-Nexis.

These new criminal checks will be done on a group that up to now was considered among the elite of the Clinton campaign. They are called the "Hill Raisers" because they bundle contributions of at least $100,000.

"Has a campaign ever done anything like this before? Not that we're ware of," according to Wolfson.

He denied a report in the Los Angeles Times that the Clinton campaign had been tipped off about problems with Hsu last June. He said the campaign searched for public records on Hsu and did not find a trace of an outstanding warrant against him dating back to 1992.

Hsu had been found guilty of defrauding investors of $1 million — a felony. He was facing up to three years in prison when he skipped town before sentencing in 1992.

A Hong Kong native, Hsu made a living manufacturing men's clothing. He is a U.S. citizen.

He threw himself into raising money for Democrats in 2004, and has contributed or raised money for some two dozen candidates. Since the story of his fugitive status broke two weeks ago, Democrats have been ridding themselves of money that he donated.

But Clinton is the first to return the money. The question, which has drawn the attention of the FBI, is whether Hsu funneled money through other donors. That would be a felony.

As of June 30th, the Clinton campaign raised $52 million.

Jan Baran, a Republican campaign finance lawyer, notes that Clinton is hardly the first candidate to discover prominent backers with legal problems. He rattled off examples of politicians who have already embarrassed top Republican contenders Rudolph Giuliani, John McCain and Mitt Romney.

"This is a risk of campaigning for president — that sometimes you're gonna be surprised by the supporters that you have in your campaign, and if you're a candidate or campaign manager, you just hope you discover it before you accept their endorsement," said Baran.

But as campaign budgets have swelled in the past three elections, bundlers have become more and more important; and potentially troublesome.

Paul Houghtaling is a Democratic consultant who specializes in vetting the sources of campaign cash. He says bundlers tend to be entrepreneurs and their agendas may not be the same as those of the candidates they're supporting.

"These individuals seem to be the go-getter type, the people who oftentimes are using this as a vehicle to promote themselves, their businesses and their position," said Houghtaling.

Kent Cooper, a former official at the Federal Election Commission, suggests this could be just the beginning of Hsu's unintended impact on the Clinton campaign.

Those selected to represent you to donors gives you an indication of the candidate himself or herself, Cooper said.

Hsu finally surrendered to a decades-old arrest warrant on Aug. 31, but disappeared before a hearing last week where he was expected to turn over his passport and ask a judge to cut his $2 million bail in half.

He bought a ticket for an eastbound Amtrak train, but approaching Grand Junction, Colo., the train crew called for an ambulance.

Hsu was taken to a hospital in Grand Junction, where he was admitted for an undisclosed illness. The FBI arrested him there.

He is expected to be taken to the Mesa County Jail in Colorado to await extradition proceedings in state court once he is well enough to leave the hospital.

From NPR reports and The Associated Press