Debating the ethics of modern campaign financing: Gillibrand, Spitzer criticized over Hsu contributions

by ERIKA LORENTZSEN, The Adirondack Daily Enterprise

posted 10/01/07

SARANAC LAKE — Norman Hsu, 56, a contributor and fundraiser for Democratic candidates, gave $10,100 to U.S. Rep Kirsten Gillibrand, D-20th District, who won her first Congressional election last November.

Gov. Elliot Spitzer also received an undisclosed amount from Hsu. However, unlike veteran Democrat Hillary Rodham Clinton, who returned the $850,000 she received from Hsu immediately, Spitzer and Gillibrand gave theirs to charity, a move some political analysts argue may be unethical.

Many supporters try to raise the discourse to talking about the issues rather than wasting time on something they consider to be an unfortunate consequence of working in the present system. Hsu allegedly funnelled $40 million or more in financing mainly from a New York investment group, Source Financing Investors LLC, for a nonexistent clothing company that would supply Chinese-made clothes to U.S. retailers like Nordstroms, Macy’s, DKNY and L.L. Bean, among others.

The main investor for Source Financing, Joel Rosenman, who was also one of the promoters of the 1969 Woodstock arts and music festival, has hired attorney Ronald Minkoff to handle the case. Minkoff, an attorney with Franfurt Kurnit Klein and Selz in New York, was required by state Supreme Court Justice Shirley Kornreich to post a $150,000 bail bond. Kornreich also granted the application to freeze and seal Hsu’s apartment on Wooster Street in Manhattan.

Also, the lawyers requested Hsu’s bank accounts at Bank of America and Metrobank New York to be frozen. The LA Times broke the scandal in August. Since then, Clinton gave the money back and Attorney General Andrew Cuomo is holding the money and setting up an escrow account, according to Associated Press.

Some voters agree it’s OK for politicians to give campaign contributions to charity, but not if they’re from a fraudulent contributer. “I agree that it’s good to give to charity, but not if you’re getting the money from a fraudulent source,” Chris Lapierre, 32, said as he went to buy groceries in Saranac Lake.

Democratic supporters argue that Spitzer and Gillibrand are exceptional politicians, and this doesn’t make any difference in the scheme of what the politicians stand for. “Anybody who thinks that there isn’t things happening across the board in politics today they’re naive,” Robert Biesemeyer, council member for the town of Keene and lifelong democrat said. “To raise the kind of money needed now it takes huge amounts and an organization.”

Both Republican and Democratic candidates argue they would need enormous staff to track all of their funding, and it would use up considerable time needed for campaigning and meeting with people about issues. While the story has blown up recently in the press, Democrat supporters said there’s more important things to worry about. “Gas has tripled, the debt is out of control, we’re mired in a war no one knows how to get out of, our respect in the world is at an all time low, and we sit here discussing things like this,” Biesemeyer said.

Gillibrand’s office is currently campaigning for the next election. In an effort to provide as much open disclosure as possible, her office was forthcoming with information and commented that $6,500 of Hsu’s contributions actually came from the Paw family in California and was given back to them. Then, Gillibrand donated $4,600 to the charity organization the Anderson Center for Autism in Staatsburg, N.Y. As of Friday evening, Gov. Spitzer has yet to disclose the amount of money he received and where he has donated it, though, Gillibrand was clear about what she did with the money. “When Gillibrand became abreast that Hsu was a fugitive, she gave the money to charity and back to the Paws,” press spokeswoman for Gillibrand Rachel McEneney said. “We felt it was the right thing to do.

When the Jack Abramoff scandal came to light, many involved gave to charity.” Some political science analysts believe this practice may be unethical, although common among both parties. “It’s fairly common to give money like that to charity, but it’s in my view that if a candidate knew the money came from fraudulent or false pretenses or was dishonestly raised, they should give the money back,” said Tom Konda, associate professor of political science at SUNY Plattsburgh.

Before the scandal broke, politicians were unaware of Hsu’s past criminal history. Now sitting in a Redwood City jail in California, Hsu was once considered a wealthy businessman, able to raise funds for campaigns and universities and serves on the board for the New School in New York. Yet, back in 1992, he fled formal sentencing in California for a case in which he allegedly stole $1 million from family and friends. He had pleaded no contest to grand theft and agreed to a prison term of three years.

Then, it was reported that he skipped town before the court hearing and took an Amtrack train, where he attempted suicide and was arrested at a Colorado hospital. As politicians rush to distance themselves from the affair, the practice of having a non-official person raising money for political candidates is common practice. Analysts pointed out President George W. Bush’s “Pioneer’s Club,” also used 100’s of people, where each went out to raise millions among family and friends. University alumni often join fundraising campaigns raising millions in the same manner. Hsu was influential in prompting a number of individual donors to contribute to political campaigns and worked with universities.

The pressures of raising millions for campaigns, analysts argue, is increasely complex. “This becomes a very complicated process,” Konda said. “Today, political candidates are expected to start raising money immediately after they’re elected. They spend a lot of time doing that. There’s a lot of pressure involved. Gillibrand giving a small amount to charity isn’t as bad and it would be much worse if she went to Hawaii, or had fun with it.”

At last filing, Gillibrand has raised an impressive $1,134,541, and has been fundraising all over the U.S. and with Americans abroad. The newest filings will be disclosed Monday. With five opponents declared, four of whom are Republican and one Democrat, she will compete with some candidates, who are already independently wealthy and who may not need to raise as much money through fundraisers.

Michael Rocque from Clifton Park, John Wallace of Columbia County, Sandy Treadwell of Westport and Lake Placid and Richard Wager, a 36-year-old Millbrook resident, are competing on the Republican side. Martin Guller, a Democrat from Columbia County, has also filed.

Treadwell, an heir to the GE fortune, is raising money on a smaller scale among locals whom he knows well, or through private dinners or coffee. “Sandy will make sure his campaign has resources to run a competitive campaign,” said press spokesman for Treadwell Bill McGahay. Multi-millionaires Ross Perot, Michael Bloomberg and John Kerry also used their own money for campaigns.

In the current political climate, “it takes a vast fortune to get elected,” Biesemeyer said. Analysts argue those who have the means to run their own campaign often encounter fewer scandals in fundraising. As politicians tour the country seeking donors, the issue of campaign finance reform continues to be discussed on the House floor.

Some candidates are looking at creating a more thorough screening process of potential donors. “Nationally, most politicians, including Gillibrand, are doing much more of a screening process,” McEneney said. “We’ll do our best to keep closer track, but at the time we didn’t know there was a warrant on Hsu. We don’t know how much resources we can put on this, but as soon as we became aware of it we do something about it.”