‘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.

3. Published
reports do, however, indicate that
Loutchansky received a letter from
President Clinton thanking him for his
“support.”