Following the Money Trail on Hsu Sen. Hillary Clinton's presidential campaign is giving back $850,000 raised by Norman Hsu, who was arrested last week on a previous felony conviction. Questions remain about how Hsu raised the money.

Following the Money Trail on Hsu

Following the Money Trail on Hsu

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Sen. Hillary Clinton's presidential campaign is giving back $850,000 raised by Norman Hsu, who was arrested last week on a previous felony conviction. Questions remain about how Hsu raised the money.


From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.


And I'm Melissa Block.

We're going to begin this hour with the strange case of Norman Hsu, a major fundraiser for Democratic Senator Hillary Clinton and others. He has a habit of skipping out on legal proceedings. He left California last week for Colorado, apparently, to avoid a bond hearing related to a felony sentencing in which he didn't appear.

Hsu raised lots of money for Clinton. And her campaign now says it is giving back $850,000 in donations. The campaign is also starting to run criminal background checks on its money raisers.

NPR's Peter Overby reports.

PETER OVERBY: Hillary Clinton isn't the only one wrestling with Norman Hsu's money. One of her rivals for the Democratic nomination, John Edwards, has begun making similar criminal checks on those who bundle contributions for his campaign.

And the Democratic National Committee is sending letters today to donors whose contributions were brought in by Hsu. The committee wants to confirm if the contributions are legitimate. Hsu, meanwhile, is still in Grand Junction, Colorado, hospitalized and under arrest. He had fled California last week rather than appear at a bond hearing on a 15-year-old felony sentencing, which he had also skipped out on.

Hsu's fundraising has come under FBI scrutiny. There are allegations that he gave donors the money that he then bundled for Clinton, or even that the funds were diverted from a business scam. This type of straw donor case doesn't involve the candidate or the campaign, they're actually victims. But the story of Normal Hsu reflects the high tensions and high drama of political fundraising today.

Ms. NANCY BOXCORE(ph) (Fundraiser, Republican): The pressures are overwhelming to just get it in the door and get it in the bank.

OVERBY: Nancy Boxcore has, for years, done fundraising for Republican candidates. She says campaigns are always trying to vet donors. They often use Google or LexisNexis, but the vetting can get awkward.

Ms. BOXCORE: When you'd get a contribution (unintelligible) from an ethnic-class (unintelligible), you don't want to insult people by calling them and saying, oh, yes, by the way, I noticed you have an accent and you have a foreign-sounding last name. Are you a U.S. citizen? Because to don't want to insult them or hurt their feelings. But by the same token, you do have to vet them.

OVERBY: In fact, the whole business of vetting the incoming checks really started in 1996. And here is why it's a special problem for Hillary Clinton. In '96, with her husband running for reelection, a fundraising mania at the Democratic National Committee set off a scandal that almost drove the party into bankruptcy. It began with a soft-spoken fundraiser named John Huang, who organized events where Asian American donors could meet President Clinton. This audio of Clinton praising Huang was released by the Clinton administration as the scandal is being investigated.

(Soundbite of former President Bill Clinton)

President BILL CLINTON: I've known John Huang a very long time, at least to be as young as we are. And when he told me this event was going to unfold as it has tonight, I wasn't quite sure I believed him.

OVERBY: Events like this one raised plenty of money but some of it came from questionable sources. The DNC eventually returned the money that Huang raised. The scandal spread to other bundlers in the Asian American community. Huang and nearly two dozen others were charged with campaign finance violations and he pleaded guilty.

The DNC hired Paul Houghtaling to set up a compliance unit, running public records checks on donors and bundlers. Now, Houghtaling is a campaign finance consultant. He says Clinton is held to a higher standard because of the '96 scandal. But he and others also wonder why, even as her campaign send refunds to Normal Hsu's 260 donors, it's also inviting them to write new checks.

Mr. PAUL HOUGHTALING (Campaign Finance Consultant): The odd thing was that the campaign apparently said that they would give these people - that they're going to return the money - an opportunity to send the money back to them and recontribute if it came from them, which I found about rather odd.

OVERBY: Because if the Clinton campaign is sending the checks back now, what's going to make them cleaner tomorrow?

There are also new questions about the criminal background checks: the expense, the hassle, and whether they'll accomplish what they're supposed to.

Mr. HOUGHTALING: You better be right. Think you now hold yourself to a much higher standard that you're just not going to be able to live up to a hundred percent.

OVERBY: Another ratcheting up in the frenetic race for the White House.

Peter Overby, NPR News, Washington.

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