The China Card: Evidence of Beijing’s Involvement in Democratic Fund-raising Raises Anew Security Concerns
(Washington, D.C.): For some time, the
Center for Security Policy has been
concerned that the activities of 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 — might entail much
more than breaches of campaign finance
law. In fact, as the Center noted on 1
November 1996,(1)
Huang’s actions may have
constituted a serious breach of “the
most fundamental measures for protecting
sensitive information bearing on the
national security” that could
“translate into vulnerabilities that
would be exploited by America’s enemies
and/or its commercial competitors.”
Do All Roads Lead to
Beijing?
A front page story in today’s Washington
Post provides fresh and
disturbing evidence that such
concerns may justified. According to the
article, written by Bob Woodward and
Brian Duffy:
“A Justice Department
investigation into improper
political fund-raising activities
has uncovered evidence that representatives
of the People’s Republic of China
sought to direct contributions
from foreign sources to the
Democratic National Committee
before the 1996 presidential
campaign, officials
familiar with the inquiry
said….The information
gives the Justice Department
inquiry what is known as a foreign
counterintelligence component,
elevating the seriousness of the
fund-raising controversy…”
(Emphasis added.)
In light of this information, it is worth
revisiting observations made by the
Center in its 1 November Decision
Brief. These include the
following points concerning John Huang’s
access to classified information and his
suspicious connections, including those
derived from his pre-Commerce employment
with 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
China 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.
A Connection to Chinese
Intelligence?
- As noted by William Safire in his
28 October 1996 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: - Mr. Safire called 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: - Mr. Harris also made 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.”
“[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.”
“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.”
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. - 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. After the Huang
Affair burst into public view,
then-House Intelligence Committee
Chairman Larry Combest (R-TX),
wrote 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 1996 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 “golden
handshake” severance package
from Lippo and joined the
Commerce Department —
becoming what Mr. Riady called
“my man in the Clinton
Administration.”
Who Was John Huang Working
For?
Today’s Washington Post sheds
new light on the extent of the contact
Huang had with Chinese officials while he
had access to classified information at
the Commerce Department:
“During Huang’s 18 months at
Commerce, Huang was scheduled to
attend 37 intelligence briefings,
including briefings on China, and
saw more than two dozen
intelligence reports. From his
Commerce department office, Huang
made more than 70 phone calls to
a Lippo-controlled bank in Los
Angeles….Huang’s message slips
from the Commerce Department also
show a call from one Chinese
Embassy official in February 1995
and three calls from the
embassy’s commercial minister in
June and August of that year.
According to Huang’s Commerce
Department desk calendar
entries…he had three meetings
scheduled with Chinese government
officials. He was slated to go on
a U.S. government-sponsored trip
to China in June 1995 that was
canceled. He attended a policy
breakfast at the Chinese Embassy
in October 1995 and a dinner
there the same month.“One of the many
unexplained records from Huang’s
files shows an unusual travel
pattern in the fall of 1995.
His expense account records show
he left his Commerce Department
office to visit the Indonesian
Embassy…claiming a $5
reimbursement for taxicab fare.
The expense records indicate
Huang did not return to his
office at Commerce until the
following day — when he took
another $5 cab ride, not from the
Indonesian Embassy, but,
according to his records, from
the ‘residence of the Chinese
ambassador.'”
The Bottom Line
Today’s revelations in the Washington Post
only intensify the Center for Security
Policy’s longstanding fears that the
Clinton Administration’s insouciance
about personnel and information security
are an invitation to foreign penetration
and suborning.(2)
Perhaps the most important insights that
will emerge from the ongoing Department
of Justice investigation of the
Clinton/Democratic National Committee
fund-raising operation — and the
congressional inquiries that will shortly
get underway — may be the dangers posed
by such practices and the urgent need to
hold those responsible fully accountable
and to implement at once the necessary
corrective actions.
– 30 –
1. See the
Center’s Decision Brief
entitled ‘High Crimes and
Misdemeanors’? The Huang Caper Reinforces
Concerns About Clinton Malfeasance on
Security Matters (
1 November 1996).
2. See, for
example, the Center’s Decision
Brief entitled The
Clinton Security Clearance Melt-Down:
‘No-Gate’ Demonstrates ‘It’s the People,
Stupid’ (
25 March 1994).
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