Testimony Links Top China Official, Funds for Clinton

WASHINGTON —  The chief of China’s military intelligence secretly directed funds from Beijing to help reelect President Clinton in 1996, former Democratic fund-raiser Johnny Chung has told federal investigators.

Chung says he met three times with the intelligence official, Gen. Ji Shengde, who ordered $300,000 deposited into the Torrance businessman’s bank account to subsidize campaign donations intended for Clinton, according to sources familiar with Chung’s sealed statements to federal prosecutors.

During their initial meeting on Aug. 11, 1996, in Hong Kong, Ji conveyed to Chung the Chinese government’s specific interest in supporting Clinton:

“We like your president,” Ji said, according to sources familiar with Chung’s grand jury testimony. Chung testified that he was introduced to the intelligence chief by the daughter of China’s retired senior military officer.

Chung’s testimony has provided investigators the first direct link between a senior Chinese government official and illicit foreign contributions that were funneled into Clinton’s 1996 reelection effort. It is the strongest evidence to emerge--in two years of federal investigations--that the highest levels of the Chinese government sought to influence the U.S. election process.

Key aspects of Chung’s testimony, which has not been made public, have been corroborated by financial records in the United States and Hong Kong, according to law enforcement and other sources.

It is illegal for U.S. political parties or candidates to accept contributions from foreign sources. Only a portion of the $300,000 made it into Democratic campaign coffers, records show.

A spokesman for China’s embassy in Washington denied any involvement in the 1996 elections.

“We are very categoric in our denial of these allegations,” said the spokesman, Yu Shuning. “All these allegations about so-called Chinese government officials’ political contributions into U.S. campaigns are sheer fabrications.”

This week, Chinese Prime Minister Zhu Rongji is scheduled to meet Clinton in Washington and attend a state dinner in Zhu’s honor at the White House. Zhu will make the first stop of his U.S. visit in Los Angeles on Tuesday.

On Friday, White House spokesman Jim Kennedy said the administration had no knowledge about the source of Chung’s donations during the 1996 campaign and declined to comment on “allegations regarding intelligence matters.”

Chung, 44, a Taiwan-born American citizen who lives in Artesia, Calif., was one of the most prominent figures in the 1996 campaign finance scandal. He contributed more than $400,000 to various Democratic campaigns and causes, visited the White House no fewer than 50 times and brought numerous Chinese associates to events with the president and First Lady Hillary Rodham Clinton.

He pleaded guilty last year to election law violations and became the first major figure to cooperate with a Justice Department investigation of campaign finance abuses, including a probe into improper foreign donations. A number of contributors have been indicted in the scandal.

Chung’s assistance earned him a strong recommendation for leniency, resulting in a sentence of probation and community service in December. Chung has told friends that he would like to write a book about his experiences.

Gen. Ji, the Chinese intelligence chief, was named by Chung in sworn grand jury testimony and in statements made to Justice Department investigators during extensive interviews from December 1997 through March 1998. Chung also turned over cartons of financial records.

Chung told investigators that he and Ji were brought together by Liu Chaoying, the daughter of retired Gen. Liu Huaqing. At the time, she was a Chung business partner as well as a lieutenant colonel in the People’s Liberation Army.

Leads Provided by Chung Pursued

Federal prosecutors assigned to the Justice Department’s campaign-finance task force are pursuing leads provided by Chung. They praised Chung’s cooperation in U.S. District Court papers that remain sealed, in part, due to national security concerns, sources said.

Chung’s relationship with federal authorities took a dramatic turn last spring when teams of federal agents moved him and his family into protective custody, law enforcement sources told The Times.

The FBI feared for Chung’s safety after he received veiled threats and bribe offers from individuals pressing him to keep silent about his China dealings. Those concerns grew after the FBI received information from overseas indicating that Chung could be in danger.

For 21 days in May and June, Chung and his family were kept under 24-hour guard in hotels near Los Angeles International Airport by teams of heavily armed FBI agents. And, as recently as two weeks ago, special agents again secluded the Chung family in a Torrance hotel for three days over still-unexplained safety concerns.

FBI officials in Washington and Los Angeles declined to discuss any of the actions or security measures. But former FBI Director William H. Webster told The Times that taking such steps in a campaign finance investigation would be highly unusual.

“This account suggests the FBI was taking this matter very seriously as a credible threat to this man and his family,” said Webster, who also formerly headed the CIA.

Justice Department spokesman Myron Marlin refused to comment Friday because of “an ongoing investigation.”

Law enforcement officials said that the investigation remains highly sensitive but refused to provide details or discuss the prospect for indictments.

Chung declined to comment for this article, except to say that he has “already told the whole truth to the grand jury.” His attorney, Brian A. Sun, who also declined to be interviewed, added that Chung has “fulfilled his obligations to provide complete and accurate information” to investigators.

Interviews with knowledgeable sources and documents obtained by The Times also disclosed that:

* Soon after returning home from Hong Kong and his meeting with Ji, Chung hired the Chinese intelligence chief’s son, then a UCLA student, to work at his Torrance fax business in late 1996.

* Chung began providing information to federal prosecutors earlier than previously known--a full year before he had reached a plea agreement with the Justice Department in March 1998. Investigators were given access to Chung’s Hong Kong bank records to assist their efforts to trace the $300,000 deposit back to its origins. Most of the money never got to the Democratic Party on Clinton’s behalf.

* Chung has told investigators that Liu Chaoying said she and Ji also were relying on others to funnel funds into Democratic campaigns.

Ji works directly for Xiong Guangkai, the deputy chief of staff of the People’s Liberation Army, who supervises all intelligence and foreign policy for the army. Xiong is a politically powerful figure in China and a close ally of Chinese President Jiang Zemin.

In Beijing, an officer at the central National Defense Ministry, which oversees the army, denied any connection between Ji and Chung in providing U.S. campaign donations.

“This matter is groundless,” said the officer, who spoke on the condition that he not be named.

The disclosures linking China’s military intelligence chief to donations to Democrats in 1996 are likely to complicate the already troubled relationship between Washington and Beijing.

Members of Congress are clamoring for a reassessment of relations with Beijing over both trade and human rights issues. The U.S. government also is investigating allegations that China engaged in espionage to steal sensitive nuclear military secrets from the Los Alamos National Laboratory in New Mexico.

Previously, the only publicly known link between the Chinese government and illicit funding for Clinton’s reelection was an indirect tie through Liu, the lieutenant colonel and former Chung business associate.

Her role in providing Chinese army money to Chung for campaign donations was first reported by the New York Times in May.

Liu did not respond Friday to questions sent by the Los Angeles Times to her office in Hong Kong.

Now, disclosure of the $300,000 that Ji reportedly earmarked for Clinton’s campaign implicates the highest echelon of China’s intelligence apparatus in a covert plan to influence the presidential election.

The $300,000 deposited into Chung’s account in the Overseas Trust Bank in August 1996--three months before the November election--was hung up temporarily because it had to be converted from U.S. dollars to Hong Kong currency. One source told The Times that the extra step associated with the exchange later helped federal investigators trace the funds.

Asked what evidence corroborated Chung’s account of his meetings with Ji, one law enforcement source familiar with the investigation said tersely: “Follow the money.”

Three Checks to Democratic Committee

Five weeks after receiving the Chinese funds, federal election records show, Chung donated $35,000 in three checks to the Democratic National Committee, which helped reelect Clinton. The remaining funds were transferred into one of Chung’s California bank accounts; it is not known how that money was used.

Rick Hess, a spokesman for the DNC, said that the party “was unaware of any supposed relationship” between Chung and the Chinese government at the time of the contributions. In 1997, the Democrats returned a total of $366,000 donated by Chung over a three-year period.

Shortly after the Nov. 5 election, Chung became the subject of intense public scrutiny after the Los Angeles Times disclosed his involvement in the campaign finance scandal. From that point on, Chung made no further contributions.

The existence of a covert Chinese government plan to support Clinton has been hotly debated since Sen. Fred Thompson (R-Tenn.) opened Senate investigative hearings in 1997 with a charge that there was such a scheme.

Republicans repeatedly claimed that the Chinese sought to help Clinton defeat former Sen. Bob Dole, but they have failed to prove it. The president’s defenders blamed some improper foreign donations on a group of overzealous supporters who exploited loopholes in the campaign finance system. The DNC has denied any knowledge of a “China plan.”

For the last two years, China has rejected in the strongest terms any connection to the American fund-raising scandal.

“China never interferes in other countries’ internal affairs,” President Jiang told a live television audience during Clinton’s trip to China last summer.

A few weeks before Jiang’s televised remarks, FBI officials had information that led them to believe Chung might be in danger. The agency responded by imposing extraordinary security measures to protect its key witness: More than 40 agents were assigned to guard Chung, his wife and three children for three weeks.

During this period when Chung and his family were kept in hiding, FBI counterintelligence agents also monitored groups of Chinese visitors traveling in Southern California, according to law enforcement and other sources. At least one group was regarded by U.S. intelligence operatives as a possible “hit squad,” said one federal law enforcement official.

No attempt was made to harm Chung or his family. One federal law enforcement source said that there is no evidence today that the visitors were sent to target Chung.

Chung Well Known in China

Well before Johnny Chung met Gen. Ji, the businessman already was well known in China as a man with access to the White House--a byproduct of his financial generosity with the DNC.

Chung was particularly adept at opening the doors of the White House to Chinese visitors who were his guests for tours and public events where they could be photographed with Clinton.

He met Liu in July 1996. She was not only a ranking military officer but also vice president of a Hong Kong subsidiary of China Aerospace Corp., a government-owned company that deals in satellite technology and missile sales.

A business relationship between Liu and Chung flourished immediately. They established a partnership to develop a fishery in south China. And they formed Marswell Investment Inc. in California to develop trade in telecommunications equipment.

Chung also helped Liu obtain visas to visit the U.S. and later arranged a meeting for her and other Chinese associates at the Securities and Exchange Commission.

Beijing had reason to prefer Clinton over his Republican challenger. Historically, China preferred dealing with second-term presidents, feeling they can be more pragmatic in the face of anti-China public opinion.

In spring 1996, Dole endorsed creation of a ballistic missile defense system for China’s neighbors, including Taiwan. Dole also suggested providing new defensive weapon systems to Taiwan.

Moreover, on July 6, 1996, Clinton’s then national security advisor, Anthony Lake, went to China to reassure leaders and tell them that Jiang would be welcomed to Washington for a state visit after the election. (Jiang came to Washington the following year.)

Twelve days later, Chung brought Liu to a Democratic fund-raiser featuring Clinton at the private residence of Los Angeles real estate magnate Eli Broad.

The next month, Chung traveled to China via Hong Kong. While in China, he was summoned back to Hong Kong for a meeting that an associate described as “important for our business,” Chung told federal investigators.

When Chung arrived in Hong Kong on Aug. 11, he was introduced to Ji by his business partner Liu. Chung told investigators that Ji’s rank and government affiliation were not immediately apparent and that the general used a false name during that initial encounter.

It was during this meeting that Ji observed: “We like your president,” before talking about providing money to help the Clinton reelection effort, Chung told investigators. Ji said he was going to provide some funds for Liu to give to Chung, sources familiar with Chung’s grand jury testimony said.

Chung told federal investigators that he tried to tell Liu outside the meeting that he didn’t want Ji’s money. Liu, in turn, attempted to reassure Chung by telling him that they already were engaged in similar transactions with others serving as conduits for Chinese funds to support Clinton’s reelection.

Within a couple of days, Liu moved $300,000 into Chung’s Hong Kong bank account. She told him it was from Ji. By that time, Chung was aware of Ji’s position and decided he could not refuse the money, according to his account to investigators.

Like Liu, Ji is the offspring of a politically prominent father. Ji Pengfei served as China’s foreign minister from 1972 to 1974 and later as a vice chairman of the National People’s Congress. The elder Ji also supervised negotiations over the future of Hong Kong and helped draft the Basic Law under which Hong Kong is ruled.

More significantly, the younger Ji is head of Qingbaobu, the wing of the general staff of the People’s Liberation Army that is in charge of military intelligence. His responsibilities also include military intelligence in Hong Kong.

Gen. Ji, who is in his mid-50s, was promoted to this post in 1992 during a closed five-day session of the Central Military Commission chaired at the time by future President Jiang. Ji has kept a low profile since that time and seldom appears in news accounts.

After Ji’s initial meeting with Chung, the two men joined Liu on another occasion for dinner. Details from that session could not be obtained.

A third encounter took place in Beijing in late September 1996. Chung carried a congratulatory letter to a Beijing University student from U.S. Secretary of Education Richard W. Riley and sought help from Liu in finding the student. She arrived at Chung’s hotel with Ji. No further details about that meeting were available.

In the U.S., the campaign finance scandal was about to break. By late October 1996, Chung was, as he said in an interview later, “too hot to touch.” The controversy surrounding Chung intensified as the foreign-money scandal heated up. He never again spoke directly with Liu, he told investigators. Other Chinese partners asked Chung to resign from business ventures.

In March 1997, Chung signed a letter granting federal prosecutor Michael McCaul authority to obtain all of his Hong Kong bank records, including documentation related to the Ji and Liu transactions. That paper trail confirmed key aspects of Chung’s story implicating China’s military intelligence, sources said.

Chung’s official cooperation with the Justice Department began with extensive interviews and legal proffers at the end of 1997. He told investigators about his meetings with Ji and identified the general from an FBI photo lineup, sources said.

Chung Agrees to Terms

In March 1998, Chung agreed to terms with prosecutors. He would plead guilty to misdemeanor election law violations, as well as felony tax evasion and bank fraud, and cooperate with investigators. But the level of cooperation soon went well beyond answering questions and turning over records.

In April, about a month after press accounts reported his deal with federal investigators, Chung was approached by a San Gabriel Valley businessman, who said he was an associate of Liu.

That session was secretly recorded by the FBI and videotaped with a camera hidden in a clock. In a conversation conducted in Chinese, the businessman offered Chung a carrot and a stick.

According to sources familiar with the investigation, the businessman advised Chung to keep silent about his contacts with Ji. In return, Chung would receive funds sufficient “to live very comfortably.” But the businessman suggested that Chung and his family could have safety concerns if the offer was ignored, the sources said.

The threats were veiled but ominous, the sources said, declining to provide details.

Furthermore, the businessman advised Chung to go to jail if necessary, assuring Chung that friends in high places would support him. The businessman even suggested that Chung could expect to be pardoned by the president.

On May 15, Chung carried a concealed recording device into another meeting with the businessman, sources said. That same day, the New York Times published a story reporting for the first time that Chung had linked Liu and the Chinese military to some of his DNC donations.

Later that day, U.S. counterintelligence agents received some unspecified information that caused concern for Chung’s immediate safety.

Within hours, Chung and his family, including two children of preschool age, were escorted by heavily armed FBI agents to the Embassy Suites on Imperial Highway in El Segundo.

The stay at the Embassy Suites was brief. During breakfast the next morning in the hotel dining area, an FBI agent sitting across from Chung looked up from his coffee to see a news report that showed a large image of the man he was protecting on a big-screen TV.

The FBI, believing that its hide-out may have been compromised, promptly moved the Chung family to the nearby Summerfield Inn, also in El Segundo.

Thereafter, the Chung family was largely restricted to a hotel suite. Whenever Chung left the room, he was instructed to wear a baseball cap and sunglasses to disguise his appearance.

Chung’s eldest daughter, a top student at Cerritos High School, was unable to return for final exams. An FBI agent arranged with the school principal for the girl to skip the tests. Another FBI bodyguard later escorted her to graduation rehearsals.

Chung began to chafe at the security restrictions.

“They had agents baby-sitting him around the clock,” said a federal law enforcement official. “He got tired of living like that. . . . It was like he was under house arrest.”

Federal Agents Keep Vigil

Even after Chung and his family returned to their Artesia home in time for their daughter’s June 15 graduation ceremony, federal agents kept a security vigil in the neighborhood, law enforcement sources confirmed.

Chung still was receiving federal protection last summer when Clinton visited China and President Jiang called claims of Chinese interference in the U.S. political system “very absurd and ridiculous.”

Late last fall, Chung appeared before the Washington grand jury investigating campaign finance abuses to provide his account of contacts with Ji that sharply contradicts Jiang’s denial.

Chung’s odyssey to the center of international scandal and intrigue had an unlikely beginning. In the mid-1980s, he was a busboy at a Holiday Inn in the San Gabriel Valley, an intense young immigrant from Taiwan struggling to overcome a heavy accent and empty pockets.

By the early 1990s, he had built a small but profitable company around a service that provided mass fax distribution for corporate and government clients. Among his first customers was then-Gov. Pete Wilson’s office.

By 1994, Chung was trading money for access to the highest levels of the U.S. government.

Chung “got caught up in this system,” his attorney, Sun, told a federal judge just before he was sentenced last December. It was Chung’s way of opening doors and getting to “hobnob with the big boys and girls.”

U.S. District Judge Manuel L. Real in Los Angeles expressed skepticism at claims made by DNC officials that they had no idea Chung’s money might have had foreign origins.

He said if they “didn’t know what was going on, they are the dumbest politicians” in his experience. Real then sentenced Chung to community service instead of a prison term.

Since his guilty plea, Chung has fallen on hard times. He owes about $500,000 in back taxes and legal fees, and his business is ailing, Sun acknowledged.

Chung has made informal contacts with publishers proposing a book about his experiences trading money for access to the White House, and about his personal, religious and political passage. No contract has been signed or negotiated, Sun said.

*

Times staff writers Jim Mann in Washington and Henry Chu in Beijing, and researcher Janet Lundblad in Los Angeles contributed to this article.

Hear Rempel discuss this story on The Times’ Web site at: http://arstechnica.netblogpro.com/chung

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Chung and China

1994

Aug. 2

Chung gives his first $11,000 to the Democratic National Committee at President Clinton’s 48th birthday party. He will donate a total of $366,000 to the DNC by the 1996 election.

Dec. 20

Chung squires a Chinese beer maker to meet Clinton at a White House Christmas party, helping to establish Chung’s ability to get Chinese access to Clinton. He will make 50 White House visits.

1995

March 11

Chung brings six business associates to the Oval Office for Clinton’s weekly radio address.

1996

June

Chung visits China and meets Liu Chaoying, a lieutenant colonel in the Chinese military and an executive of a Chinese government-owned aerospace company.

July 18

After helping Liu obtain a visa, Chung brings Liu to a Democratic fund-raising dinner with Clinton at a private home in Los Angeles.

Aug. 9

Chung and Liu form Marswell Investment Inc. in Torrance, Calif.

Aug. 11

In Hong Kong, Liu introduces Chung to Gen. Ji Shengde, chief of Chinese military intelligence. Ji, using an assumed name, asks Chung to act as a conduit for campaign donations to help reelect Clinton.

Aug. 14

A $300,000 wire transfer arrives in Chung’s Hong Kong bank account sent by Liu at the direction of Ji. Chung later donates a portion of these funds to the DNC.

September

Chung returns to China, where he meets Liu and Ji again.

1997

March

Chung gives access to his Hong Kong bank account to federal investigators to assist their efforts to trace the $300,000 to its origins.

December

Chung opens formal negotiations with prosecutors and does first of numerous interviews with them.

1998

March 5

Chung agrees to plead guilty to felony tax evasion and bank fraud unrelated to fund-raising and misdemeanor election law violations.

April

An associate of Liu offers money and a veiled threat to persuade Chung to keep silent about his contacts with Ji. The FBI records the encounter on a hidden video camera. Chung, wearing an FBI wire, meets with the Liu associate periodically over the next several months.

May 15

The New York Times reports that Chung told federal investigators that the Chinese army was the source of funds given him by Liu for 1996 Democratic contributions.

Fearing for Chung’s safety, the FBI abruptly takes him and his family to hotels near Los Angeles International Airport, where they are protected by heavily armed agents for 21 days.

May-June

The FBI monitors two groups of Chinese visitors traveling in Southern California, at least one of which was regarded by intelligence operatives as a possible “hit squad.” No attempt is made to harm Chung or his family.

Dec. 15

U.S. District Judge Manuel L. Real sentences Chung to five years’ probation for funneling illegal contributions into the 1996 election campaign. Real says he’s “surprised that the attorney general has eschewed appointment of a special prosecutor.” The Justice Department endorses a lesser sentence than called for by federal guidelines because Chung provided valuable leads.

1999

March

News accounts that the Chinese stole sensitive nuclear technology from the Los Alamos laboratory trigger charges that the Clinton administration was slow to address suspicions of espionage or inform Congress because it did not want to damage relations with Beijing.

April 8

Chinese Premier Zhu Rongji is set to meet Clinton at White House.

*

Sources: Government records, interviews, House Government Reform and Oversight Committee report and news accounts