'High Crimes and Misdemeanors'? The Huang Caper Reinforces Concerns about Clinton Malfeasance on Security Matters

(Washington, D.C.): For some time href=”index.jsp?section=papers&code=96-D_109l#N_1_”>⁽¹⁾,
there has been reason to be concerned
that the Clinton Administration’s neglect
of the most fundamental measures for
protecting sensitive information bearing
on the national security would translate
into vulnerabilities that would be
exploited by America’s enemies and/or its
commercial competitors. As the Center for
Security Policy noted on 25 October:

“There is a ticking
time-bomb — one that may well
explode on the watch of the next
President of the United States.
While it is difficult to say with
certainty at this point precisely
where and with what impact the
Clinton Administration’s
systematic disregard for the most
basic personnel, physical and
information security practices
will manifest itself, one thing
seems certain: Someone,
somewhere will seek to take
advantage of these self-inflicted
vulnerabilities to do grave harm
to the Nation’s interests.”

Enter John Huang

Recent disclosures about John
Huang — the Chinese-born former
Taiwanese fighter pilot, Indonesian
businessman and Democratic fundraiser who
served as a Principal Deputy Assistant
Secretary for International Economic
Policy in the Bill Clinton/Ron Brown
Commerce Department — offer disturbing
insights into how such vulnerabilities
might have been exploited. Consider the
following known facts:

Prior to joining the Commerce
Department, Mr. Huang was an
employee of the Indonesia-based
Lippo Group and several of its
subsidiary companies and banks.

One of Lippo’s enterprises is the
Hong Kong Chinese Bank,
Ltd. Mr. Huang’s
biography indicates that he was
the bank’s Vice President for
International Banking between
March 1985 and September 1986.

The Chinese Connection

On 7 November 1992, four days
after Bill Clinton’s election in
1992, the Lippo Group sold 15% of
its interest in the Hong Kong
Chinese Bank to China
Resources (Holdings) Company Ltd.
— the commercial arm of
Communist China’s Ministry of
Foreign Trade and Economic
Cooperation. China Resources is
used by Beijing to control its
investments and trade abroad. It
has been called one of the PRC’s
largest and most influential
enterprises in Hong Kong.

The Hong Kong Chinese Bank
transaction was reportedly
structured in such a way as to
avoid the requirement to obtain
approval from the Hong Kong Stock
Exchange. On 17 July 1993, China
Resources increased its holdings
from 15% to 50% —
paying a 50% premium over the net
asset value and realizing a cool
$164.8 million profit for Mr.
Huang’s employer at the time,
Mochtar Riady, chairman of Lippo
Group.

As noted by William Safire in his
28 October column in the New
York Times, China
Resources also has another
important function: providing a
cover for Chinese espionage.
In 1994, Nicholas Eftimiades, a
former naval and State Department
intelligence officer now employed
as a Defense Intelligence Agency
analyst, authored a book entitled
Chinese Intelligence
Operations. In it, Mr.
Eftimiades wrote:

“[Chinese
intelligence] case
officers make extensive
use of commercial covers.
For example, a
vice president of the
China Resources
(Holdings) Company Hua
Ren Jituan in Hong
Kong is traditionally a
military case officer
from Guangzhou.
This officer coordinates
the collection activities
of other intelligence
personnel operating under
Hua Ren
cover.”

Mr. Safire calls attention to an
alarming op.ed. article that
appeared in the Toronto Globe
and Mail on 5 September
1995. Entitled “Beware the
Threat of Chinese Spy Games”
and authored by David
Harris, a former chief
of strategic planning with the
Canadian Security Intelligence
Service, this article describes
the multifaceted effort being
made by Chinese agents to: divert
Western high technology, acquire
other militarily relevant and
commercial secrets, cultivate
agents of influence and coerce
overseas Chinese students to
serve as “sleeper
agents.”

While aimed at a Canadian
audience, the following excerpt
from the Harris op.ed. just
as easily applies to the United
States— and is of
particular interest in the
present context:

“In dealings with
Chinese officials,
Canadians should
understand that PRC
diplomatic, cultural and
intelligence activity is
a seamless
web….Canadians of
Chinese ancestry must be
warned of the
PRC’s strong preference
for recruiting ethnic
Chinese using leverage
and ‘help China’ appeals.
China’s use of guanxi
networks — social
relationships built on
favors — is the bedrock
of Chinese intelligence
collection. The approach
reflects [Beijing’s]
tendency to rely on a
great many sources, each
collecting small — and
not very incriminating —
amounts of
information.”

Mr. Harris also makes a point of
spotlighting China Resources
(Holdings) Company as a front for
Chinese intelligence. “U.S.
intelligence even says Hong
Kong’s China Resources Holding
Company traditionally reserves
one vice-presidential position
for a Military Intelligence
Department (MID) intelligence
officer.” Mr. Harris
has described the China Resources
involvement with the Hong Kong
Chinese Bank as a “textbook
Communist Chinese influence
operation.”

What Background Check?

Given U.S. intelligence’s
knowledge of the nature and
activities of China Resources,
one would have thought that a
Commerce Department request to
grant a Top Secret security
clearance to an ethnic Chinese
who, although a naturalized
American citizen, was formerly
employed by organization in
partnership with China Resources
(Holdings) Company would have
triggered red flags. In fact, it
appears that no foreign
background check was conducted on
Mr. Huang at all before he was
issued an “interim Top
Secret clearance.” href=”96-D109.html#N_2_”>⁽²⁾

Instead, on 31 January
1994, Mr. Huang received a
“waiver of background
investigation prior to
appointment” from
the Commerce Department’s
security office. This was done on
the grounds that “there
was a critical need for his
expertise in the new [sic]
Administration for Secretary
Brown.“

Although “final
clearance” was “held in
abeyance pending the results of
Huang’s background
investigation,” according to
congressional experts, it appears
that no overseas checks
were ever conducted of
Mr. Huang’s extensive
international travel, his
extended stays abroad, his family
overseas or his foreign employers
either during the five-months
between his waiver and his first
day on the job (18 July 1994) or
in the subsequent three months
until his final clearance was
adjudicated (18 October 1994).

Business As Usual in the
Clinton Administration?

The Washington Times on
31 October 1996 quoted Commerce
spokeswoman Anne Luzzatto as
saying that a “foreign
background check was not required
under security rules because Mr.
Huang did not reside abroad in
the previous five years before he
took the Commerce Department
position.” This appears to
be inconsistent with a 1991
directive signed by
then-President George Bush
requiring foreign background
checks on anyone who has lived
overseas within the previous ten
years — which Mr. Huang
certainly did. House Intelligence
Committee Chairman Larry Combest
(R-TX), has written the late
Secretary Brown’s successor,
Mickey Kantor, saying “[The
approach taken to streamline Mr.
Huang’s clearance] was contrary
to standard procedures.”
(Emphasis added.)

Commerce and Office of Personnel
Management representatives
nonetheless told the Baltimore
Sun on 30 October 1996 that
Mr. Huang’s “background
investigation was as thorough as
it was required to be.” The Sun
said Ms. Luzzatto claimed
“investigators were able to
gain the needed information
without interviews
overseas.”

David Harris, however,
has described the placement of a
person with Mr. Huang’s
background in a position of
Deputy Assistant Secretary of
Commerce without an FBI security
clearance as
“horrendous” and
something that “sends
shudders through any intelligence
officer’s body.”

Interestingly, according to the
31 October Wall Street
Journal, the Commerce
spokeswoman also averred that
“Mr. Huang couldn’t have
used his security clearance
before he officially joined the
agency as a top international
trade policy official in July
1994.” (Emphasis added.) In
view of the “critical
need” Secretary Brown
apparently had for Mr. Huang’s
expertise, it stands to
reason that he may have been
involved in meetings,
conversations, briefings, etc. in
which he was exposed to
classified information while
still on the Lippo Group’s
payroll.

There is no dispute, however,
that Mr. Huang was exposed to
highly sensitive intelligence
data and competition sensitive
trade information once he
collected his $900,000 severance
package from Lippo and joined the
Commerce Department, becoming
what Mr. Riady called “my
man in the Clinton
Administration.”

Guess Who’s Coming to
Dinner?

With the notable exceptions of the
aforementioned journals, the security
implications of the Huang Affair have
generally received less media scrutiny
than has his ready access to the White
House complex — including the Oval
Office — both during and after his
service at the Commerce Department.
Obviously, such access (which, by some
accounts, translated into as many as 78
visits this year alone, some involving as
many as four trips in a single day and
some of several hours duration) can only
reinforce concerns about the nature of
the sensitive information to which Mr.
Huang might have been exposed.

Such concerns are further intensified
by the apparent inability of the White
House to identify with whom Mr. Huang was
meeting or the subject of such meetings.
The most innocuous, if implausible,
explanation is that these were mostly
social occasions. But even
Clinton social occasions can have ominous
overtones. Consider the case of Jorge
Cabrera, the convicted drug
dealer who was entertained at a Clinton
fund-raiser despite a criminal record
that should have made him personna
non grata at, if not inadmissable
to, events with the President.

Then there is the matter of Grigori
Loutchansky, the founder of
NORDEX — a firm based in Moscow and
Vienna that U.S. intelligence has linked
to “Russian criminal activity”
— who was invited not once, but twice,
to meet with President Clinton for
private fund-raising dinners. Exposes in Time
Magazine and other American publications,
indicate that NORDEX was created by the ancien
Soviet regime for the purpose of earning
and laundering hard currency needed to
support Russian intelligence activities
in the West. It is also reputed to be
engaged in smuggling operations involving
nuclear materials and missiles.

The Bottom Line

While it is not clear whether Mr.
Loutchansky (through NORDEX or one of its
cut-outs), like Mr. Huang and Mr.
Cabrera, proved to be a source of large,
dubious (if not positively illegal)
campaign contributions for Mr. Clinton’s
benefit⁽³⁾,
one thing should be self-evident: Individuals
who there is reason to believe may be
engaged in activities like nuclear
proliferation, drug-trafficking or
associating with personnel of hostile
intelligence agencies have no business
being associated with the President of
the United States. Such
associations can only serve to legitimate
such individuals, and possibly create
pernicious quids pro quo for
services rendered to him politically.

If not a basic sense of morality and
sheer political prudence, then out of
deference to responsible security
procedures the President and his
government should be shielded from such
relationships. The Clinton
Administration’s wholesale disregard for
such security procedures may ultimately
cost the Nation — and perhaps Mr.
Clinton, himself — quite dearly.

– 30 –

1. See the Center
for Security Policy’s Decision
Briefs entitled The
Real ‘Snafu’ in the Clinton File Scandal
(No. 96-D 57,
17 June 1996), ‘No Aldrich
Ameses at the White House’: Are You Sure?
Real Care In Order As the NSC Reorganizes
‘C.I.’ ( href=”index.jsp?section=papers&code=94-D_45″>No. 94-D 45,
1 May 1994) and The Clinton
Security Clearance Melt-Down: ‘No-Gate’
Demonstrates ‘It’s the People, Stupid’
(No. 94-D
32, 25 March 1994).

2. Experienced
hands in the security business have told
the Center that an “interim
Top Secret clearance” is unusual, if
not unprecedented. Ordinarily, the
highest clearance provided without a
background investigation is at the
“Secret” level; a final
“Top Secret” clearance is only
adjudicated after a full-field
investigation is completed. On
exceptional occasions, an interim
“Top Secret” clearance is
issued to someone holding a fully vetted
“Secret” clearance, pending an
update to their background investigation.
This was, of course, not the case with
Mr. Huang.