Oct 6, 2008 3:19 pm US/Pacific
Feds Sue Democratic Fundraiser In SF Court
SAN FRANCISCO (AP) ―
Federal regulators on Monday sued political fundraiser Norman Hsu for allegedly operating a $60 million investment scam and using some of the proceeds to make contributions to Sen. Hillary Clinton and other prominent Democrats.
The Securities and Exchange Commission filed a lawsuit in U.S. District Court in Los Angeles that accuses Hsu of using a company called Next Components to solicit investments that promised high rates of return by providing short-term loans to other companies.
Instead, Hsu used the investments to pay off early investors in a classic Ponzi scheme while using the rest to make contributions and support a lavish lifestyle that included homes in California and New York, the lawsuit states.
Public records show Hsu donated millions to the campaigns of a host of candidates since 2003. He also attended many well-publicized fundraisers.
A year ago, a federal grand jury in New York indicted Hsu on charges of fraud and violating campaign finance laws. He is in jail awaiting trial.
Federal prosecutors said then that Hsu hoped the profligate campaign
spending would help draw money to his scheme by raising his public profile. To achieve his aims, prosecutors said, Hsu pressured many of his victims to contribute thousands of dollars to various candidates.
The government said in the indictment that he lost at least $20 million of the investor money, and that the rest of Hsu's assets had been frozen. He is now represented by a federal public defender in the criminal case.
"He has pled not guilty and he plans to contest the charges," attorney Martin Cohen said. Hsu is scheduled for trial in January.
The SEC made similar allegations in its lawsuit, which seeks to recoup the investors money and financial penalties.
"He allegedly then used the veneer of respectability created by his political connections to persuade his investors that the investments he offered were legitimate," said Linda Chatman Thomsen, director of the SEC's division of enforcement.
Hsu raised more than $1.2 million for Clinton and other Democratic candidates in recent years.
The Clinton campaign returned more than $800,000 to donors whose contributions were linked to Hsu after it was revealed in 2007 that he was wanted in California since 1992, the year he fled the state after pleading no contest to bilking investors of $1 million.
He voluntarily returned to California and posted $2 million bail in August 2007, claiming that the 1992 conviction was a misunderstanding.
The next month, Hsu skipped a court hearing in Redwood City and was once again declared a fugitive. He was arrested days later in a Colorado hospital after trying to commit suicide by drug overdose on a train.
He was ultimately sentenced to three years in a California state prison for the 1992 conviction and now faces a maximum sentence of 20 years in federal prison of convicted of the latest charges.
A federal judge in Los Angeles in May ordered Hsu to pay $28.8 million to aggrieved investors who sued him. Hsu wasn't represented by a lawyer in that case and never responded to the lawsuit.
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