Posted on 09/21/2007 12:12:28 AM PDT by CutePuppy
U.S. Alleges Fund-Raiser Used Political Role to Lift His Profile, Lure Investors
Federal prosecutors said in a criminal complaint that Democratic fund-raiser Norman Hsu pressured investors to make campaign contributions through him in order to raise his public profile -- then used his prominence to find more investors for illegal Ponzi schemes.
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Mr. Hsu is charged with mail fraud, wire fraud and violating the Federal Election Campaign Act. If convicted, he faces a maximum of 45 years in prison -- 20 years for each fraud charge, and five years on the campaign-finance charge.
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The complaint alleges that on several occasions, Mr. Hsu donated money to politicians under other people's names -- or reimbursed them for their donations. Such activity is illegal, but has grown in recent years amid stricter limits on individual contributions.
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The complaint includes detailed allegations of how Mr. Hsu mixed his business and political activities. Prosecutors say Mr. Hsu's self-confessed "phony" business served as an engine to raise massive amounts of money for candidates. He pressured investors to give to candidates of his choice -- and asked them, in turn, to push their friends and family, they allege.
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Mr. Rosenman gave investors a contribution form listing Mr. Hsu as a contact, according to investors. When one investor asked who Mr. Hsu was, Mr. Rosenman told him Mr. Hsu was the designer who had made the fund so successful, promising to deliver nearly $10 million more in profits this year -- a return of about 25%. The investor then donated $2,300.
"Hsu made implied threats to the victims leading them to believe that their failure to make the required political contributions would adversely affect the victims' ongoing investment relationship with Hsu," the complaint alleges.
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(Excerpt) Read more at online.wsj.com ...
The guy was throwing down $1-2 million in bills as a "front" to divert attention from the real scam.
He and his associates had probably bought millions and millions in "untraceable" casino chips that were stashed away, to be distributed later (the chips are then cashed in)----that's the real money launder---no sweat.
Laundering stolen cash from businesses (or crimes) by buying huge amounts of chips at casinos in Atlantic City, Las Vegas, and other global gambling venues, is a time-worn trick.............easily replicated in the politcal realm.
Over a period of time, Hsu and associates could have taken huge amounts of cash for their pals to casinos (to evade the IRS, SEC, and state and federal US banking laws).
A caveat: if Hsu or any of these people were stupid enough to enroll in casino promotions to earn high roller "comps" -- complimentary meals, nights in hotel suites.......the enrollment move allows the casino to know every single chip bet on every single game, and, more importantly, allows state and federal investigators to electronically track the movement of stolen money from business coffers to casino laundries. Casino records would also record wins on which the individuals may have failed to pay US taxes.
Hsu may also have sent wire transfers, checks and money orders to casinos that were converted into easily-hidden casino chips.
And remember, when the crooks get nabbed, they lie their way out of it, saying they "lost" the money gambling........money that is safely stashed away in untraceable chips.
Lastly, The Florida credit card processing company, Regpay, operated by Byelorussians with ties to organized crime, may have been used to process funds in these activities (Regpay was involved in processing credit cards for purchasing kiddie porn online).
Pretty good scam.
Just goes to show------all these "prominent" people are lousy judges of human nature.
So now we know that Victim-2 is Briar Wood Investments, Victim-1 is Source Financing by Rosenman and Yau Cheng. Both, according to them, account for more than $60 Million worth of lost "investments".
I don't see here anything approaching close to Ponzi scheme. I also don't see why Democrats would set up Hsu in a "Ponzi scheme" and create a huge problem for themselves, when it's so much easier and cleaner to use Hsu company as a channel for laundering money from rich entities - like China, Burkle, New School India China Institute etc. - into their campaigns through Hsu via small campaign contributions on retail level. It's a perfect "funnel tunnel". Why would they need to worry about where Hsu would get the money, when someone like Burkle or Steven Spielberg or a Chinese outfit (let's say the "factor", as the Hsu himself called it) singlehandedly could be on the other side of Briar Wood and Source Financing and cover the "interest" / "investor profit" and Hsu's "profit" which is then to be recycled into campaign by Hsu through "little people" in small $2,300 donations? And "investor" is pretty much guaranteed and assured that money can't be lost.
From http://www.freerepublic.com/focus/f-news/1899763/posts?page=113#113 :
According to the lawsuit, Waters invested with Hsu in part because “prominent persons, including Sen. Hillary Clinton, New Mexico Gov. Bill Richardson, California Atty. Gen. Jerry Brown, national Democratic political adviser James Carville, film director Steven Spielberg, actor (Tobey) Maguire, grocery store magnate/billionaire Ron Burkle and others introduced and/or endorsed Hsu as a friend, colleague and trusted associate.”
Note that Hsu did not get caught originally in "Ponzi scheme" - he got caught because of his "prior" (1991 case) and FEC records of likely illegal donations (like Paws)... "Ponzi scheme" came later when "investors" post-dated checks started to bounce and they are now out of money because Hsu's accounts are frozen and the "factor" or "factors" can't or don't want to send money to Components et al, or the amount became too big to cover without exposing themselves as "factors" - source[s] of excess money that went to campaigns and Hsu's comfortable life style.
Tell me if this would make sense to do for anyone invoolved in a Ponzi scheme : As a condition of doing business with the fundraiser , Hsu directed investors to make contributions to certain Democratic candidates, the lawsuit said. The investors turned over tens of thousands of dollars, including $30,000 worth of checks to Clinton’s campaign on a single day.
Usually, it would be the other way around. The only way they would be interested in and meet the "conditions", if they were assured and/or "guaranteed" the profits on their short-term loans in excess of what they could get from interest-bearing bank account. This was no Ponzi scheme, there had to be a "guarantor" (a "factor")...
This was no accident, either. Timeline shows that Hsu got set up in business (dormant or non-existent Components Ltd, registered as Next Components) at the same time as he became a board member of New School (Bernie Schwartz, Hochberg pattern, India China Institute grant[s]) without any qualifications to be one, and same time as Source Financing Investors LLC came into being (Rosenman's partner in SFI, Yau Cheng, was former partner of Norman Hsu), for the purpose of running a Ponzi scheme that he kneww had no chance to survive for long? Highly bloody unlikely!
OT. Ron Burkle (of Los Angeles based Yucaipa Companies) was recently a part of one of several groups that was asked by Bancroft family to "save" WSJ and Dow Jones from Murdoch's bid.
I believe that recently large casinos instituted the program of having electronic “chips” in the casino chips specifically for the purpose of being able to track them. But it’s a very recent and experimental development, so I doubt there is a lot of these in circulation, and don’t know how exactly it would be used to defeat this scam, except for one obvious way - “time not in use” could show that chip was not used for a long period of time, which is not an usual “behavior” of your regular casino chip...
True-—embedded electronic chips are replacing the old chips.
EXCERPT How a Billionaire Friend of Bill Helps Him Do Good, and Well
NY TIMES, Published: April 23, 2006 By JOHN M. BRODER and PATRICK HEALY
After leaving the White House in 2001, former President Bill Clinton was inundated with business and job offers, from investment-bank partnerships to seats on corporate boards. He turned them all down, with one exception: He agreed to be an adviser to a family of funds run by the Yucaipa Companies, a California private equity firm controlled by one of his best friends, the billionaire Ronald W. Burkle.
Mr. Clinton's arrangement with Mr. Burkle is an unusual one for a former president, giving him the potential to make tens of millions of dollars without great effort and at virtually no risk, according to Mr. Burkle and advisers to Mr. Clinton.
Mr. Clinton's role is to help find investment opportunities for Yucaipa projects, give credibility to the funds and champion their mission of investing in poor areas to corporate executives, union leaders and others. But he has put up little of his own money and has no day-to-day responsibilities over how the more than $1 billion in the funds is invested.
Mr. Clinton, 59, spends most of his time on philanthropic ventures, like fighting AIDS in Africa and poverty around the world, and minimal time on Yucaipa, his advisers say.
Mr. Burkle, 53, who made his fortune operating supermarkets, said that the time Mr. Clinton does spend on the funds is invaluable because of the incomparable access and political star power he provides.
Mr. Burkle, a major Democratic donor who is now a fund-raising force for Senator Hillary Rodham Clinton. He served as host for a fund-raiser for Mrs. Clinton at his Beverly Hills estate.........
The three Yucaipa funds that Mr. Clinton advises total more than $1 billion, according to interviews and public records. Mr. Burkle would not disclose the precise amounts, citing competitive concerns, but Yucaipa manages in excess of $3 billion, of which these three funds are a subset. The funds are intended to inject investment capital into poor urban and rural areas in the United States and abroad that traditional equity funds and banks are reluctant to serve, Mr. Burkle said.
The funds Mr. Clinton advises invest in grocery stores, retail developments, manufacturing and distribution, and minority-owned businesses. Yucaipa has found significant growth opportunities in such areas because of the low cost of land and the relative lack of competition.
Under terms described by Clinton advisers and Mr. Burkle, Mr. Clinton will receive a share of Mr. Burkle's profits on two domestic funds should their returns exceed 9 percent over the life of the funds. One fund had reported a gain of 51.3 percent and the other 25.8 percent in 2005, according to reports to investors.
Mr. Clinton is also a partner in a Yucaipa fund that invests in overseas ventures, for which he receives regular payments and would draw one-third of the profits when the fund is dissolved at least five years from now.
Mr. Burkle contributed millions of dollars to Mr. Clinton's campaigns and to the Democratic Party and has been a significant benefactor of the Clinton Library in Little Rock, Ark. He also helped pay part of the more than $11 million in legal bills Mr. Clinton accrued during the Whitewater and Monica Lewinsky investigations. Mr. Burkle was among the dozens of Democratic donors rewarded with a stay in the Lincoln Bedroom in the White House.
SOUORCE http://www.nytimes.com/2006/04/23/nyregion/23burkle.html?pagewanted=1&ei=5090&en=8072d510a5b4ab09&ex= 1303444800&partner=rssuserland&emc=rss
“Yucaipa has found significant growth opportunities in such areas because of the low cost of land and the relative lack of competition.”
And HUGE tax deferrments, no doubt : )
Perhaps this is why Bill destroyed Stan Lee Media and stiffed Peter Paul. He had a better deal from Burkle.
Interesting thought, bump
Don’t know if this has any relationship to Hsu, but Richard Riordan (former mayor of Los Angeles and a moderate or liberal Republican?) recntly rushed to disassociate himself from an investment gone bad with Ron Burkle.
Burkle-Riordan accord reported over investment
The former mayor of L.A. had sued over an investment with the billionaire businessman.
By Carla Hall, Los Angeles Times Staff Writer
September 8, 2007
A legal battle between former Los Angeles Mayor Richard Riordan and billionaire businessman Ron Burkle over an investment has ended before Burkle was even served with court papers, according to Burkle’s spokesman.
In a lawsuit filed Thursday in Los Angeles Superior Court, Riordan alleged that Burkle not only refused to let the former mayor — and once close friend — out of the deal, but changed investment strategy without letting the investors know.
The lawsuit, which sought unspecified damages, stems from a 1999 investment of $5 million that Riordan made with Burkle, who acquired his fortune mostly by buying and selling supermarket chains and who founded a powerful private equity firm with stakes in various industries
When Burkle, 54, found out about the Riordan suit, he dispatched a letter to the former mayor saying he was “shocked and surprised” and offering a buyout.
“It’s been resolved,” said Burkle spokesman Frank Quintero. “They had a very cordial, pleasant conversation last night.”
In that phone call, according to Quintero, the two men agreed that Riordan, 77, would donate the money to the Puente Learning Center and LA’s Best, an after-school program.
It’s unclear exactly how much will be recouped from Riordan’s $5-million investment. “It’s not a material amount of money, but I would be remiss if I did not advise you that this is a bad time to sell,” Burkle said in the letter.
... According to the lawsuit, Riordan was eager to get into high-tech ventures when he invested with one of Burkle’s “partnership-style investment vehicles” — the various entities that constitute Burkle’s Yucaipa Cos. — which in turn invested in Alliance Entertainment Co.
...Riordan said in his suit that he was told he would have an opportunity to cash out. In 2005, Alliance became part of the publicly traded Source Interlink and since then, the suit stated, “Source Interlink’s stock has steadily declined from nearly $14/share to about $4/share, today.”
Yucaipa Cos. owns about a third of Source Interlink, making it the largest shareholder. Source Interlink paid $1.2 billion in May for a specialty magazine unit, causing some analysts to publicly question whether Source Interlink had paid too much.
Riordan said in his suit “that Mr. Burkle has forestalled realizing losses in these companies whenever possible, in order to continue to falsely perpetuate the myth of his being a billionaire, ‘legendary investor’ with superior rates of return.”
Riordan’s investment is part of the partnership’s investment.
Burkle wrote to Riordan, “It has always been my principle that partners go into an investment together and get out together. Having said that, and because I know you’ve had a rough year with many challenges, I am willing to take you up on the offer you made . . . that we buy your partnership interest.”
The estranged wife of billionaire Ron Burkle is threatening to dismantle a 1997 post-marital agreement she says unfairly benefited the supermarket magnate, according to divorce papers filed in Los Angeles Superior Court.
After a contentious year and a half, Janet Burkle has appealed the decision of a private judge who ruled against her last month. She claims the earlier agreement is invalid because it fails to account for certain assets in her $30 million share of the community property, divorce papers say. ... Both sides have taken to personal attacks in detailing their arguments during the divorce, according to filings in the court. In repeated requests to have additional security for their son, Ron Burkle has accused Janet Burkle of being an irresponsible parent. He claims she threatened the child's safety by dating a personal trainer with a criminal record. Janet Burkle, meanwhile, says Ron Burkle has harassed her by conducting intrusive surveillance of her and her then-boyfriend.
"My husband cannot tolerate losing--anything!" Janet Burkle said in a court declaration filed in the divorce. "I know that he views my leaving him as a loss, not necessarily in the personal sense, but in the sense of 'win or lose.' I cannot sense (sic) strongly enough that my husband will do anything to win! This has made him a tremendous success as a business person but not very successful husband or father."
...In court papers, Ron Burkle cites his wife's interest in publicizing his business affairs to the media, as well as his "constitutional right of privacy," as reasons for his requests to seal the documents. "She will use the threat of such dissemination as leverage to attempt to extract a bigger financial settlement in this proceeding," he said in a declaration filed in February 2004.
Burkle says his wife "greatly exaggerated the lavishness of the lifestyle which I lead," but it is, by any measure, a privileged existence.
The Burkles took vacations with some of the area's most prominent individuals, including billionaire Eli Broad and former Los Angeles Mayor Richard Riordan. They stayed at the White House and bought Jaguars and BMWs as gifts to one another. They made substantial contributions to local causes such as the Walt Disney Concert Hall, where his name is displayed. They regularly hosted dinners for UCLA, which named its Center for International Relations after him.
He is a friend of and investor with former President Bill Clinton, and has held numerous fundraisers for high-profile Democrats, including Sen. John Kerry and former Gov. Gray Davis.
In one declaration, he acknowledges that "many of my present and contemplated business activities directly involve labor unions. I believe that public dissemination of detailed information about my lifestyle (especially as exaggerated by Petitioner) could be very damaging to those relationships by making those union leaders uncomfortable with the concept of being associated by their rank and file members of working closely with someone who purportedly lives that kind of lifestyle."
Much of Janet Burkle's claims alleging inequities in the post-marital agreement center on timing: the draft was prepared just before her husband cut a string of billion-dollar business deals. Burkle, who built his wealth primarily through investments in supermarket chains, saw his net worth skyrocket in 1999 when his investment firm, Yucaipa Cos., sold its holdings in Fred Meyer Inc. to Kroger Co. in a $13 billion deal. Fred Meyer owned the Ralphs, Food 4 Less and Hughes grocery chains.
In divorce filings, Janet Burkle specifically mentions an earlier $4.8 billion merger of Ralphs and Fred Meyer that was announced the same month they signed the post-marital agreement, but which was not included as community property.
Had those business deals been included, as well as several other assets acquired in the years following the 1997 agreement, Janet Burkle might be entitled to a substantially larger share of her husband's wealth, depending upon the date of separation. Under California law, the division of separate and community property occurs after the couple legally separate, a date Janet and Ron Burkle continue to dispute.
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There is also a bunch of stuff keyworded here at FR about Burkle.
Now, for a little trivia tidbit since you seem to be havin’ a good time looking at all of these relationships between the L.A. powerhouses. You have to wonder how they made all that money!
Did you ever see the movie “Billion Dollar Bubble”? It was about a company called Equity Funding Corporation of America, based in Los Angeles (on the 28th floor of the 1900 Avenue of the Stars building in Century City, to be exact). They marketed a package of mutual funds and life insurance to private individuals in the 1960s and 70s. It collapsed in scandal in 1973 after an ex-employee blew the whistle on massive accounting fraud, including a computer system dedicated exclusively to creating and maintaining fictitious insurance policies. Investigation found that from 1964 onward, as many as 100 company employees had engaged in organized deception of investors, auditors, reinsurers and regulatory authorities. The ficticious policies were sold to reinsurers for 180% of the first year premiums. Of the more than $3 billion worth of life insurance ostensibly issued by Equity Funding after that time, more than $2 billion proved to be fictitious.
On November 1, 1973, a Federal grand jury in California indicted 22 Equity Funding executives and employees. When all was said and done, they were all convicted—getting anywhere from 3 months to 8 year sentences. Stanley Goldblum, the President of the firm got 8 years. (Because the Equity Funding Life Insurance Co., a subsidiary, was incorporated in Illinois and other aspects of the case related to that state, Goldblum also received a three to 10-year sentence in Illinois which was allowed to run concurrently with the eight-year federal sentence.)
The company began in 1960 and the fraud was tracked back to having started in 1961. So, it had progressed for at least a decade at the time of the 1973 indictments. In 1969, a Los Angeles mudslide killed the head of the company, Michael J. Riordan, and his partner Stanley Goldblum took the helm. Because of Riordan’s death, he was never prosecuted in the affair but his heirs were sued (unsuccessfully, as I recall) for $26 million that Michael Riordan had benefitted from the fraud. In 1971, Michael Riordan’s wife, the primary beneficiary, became Jacqueline Riordan Getty, marrying George Franklin Getty II, son of oil billionaire J. Paul Getty. Getty died in 1973.
This company, booming from growth due to ficticious insurance policies, also became a hot stock to own. It was pumped by none other than the Michael Milken crew at Drexel Burnham Lambert, who was sued by investors in Equity Funding stock.
Oh, yeah—Michael Riordan was Dick Riordan’s big brother (New York transplants).
Thanks for that explanation for what was going on in Vegas. I knew something was up related to Laundering, because it appeared to be more then just a gambling addiction. For the life of me I could not figure out the specifics of ‘why’ it would be done. I was assuming that somehow the Casino itself was involved, but as you pointed out, perhaps not. The Casino was just the washing machine. The terrible gambler was just the cover so the feds would not be tipped off by the casino. Obviously the gambler did not loose everything. Cost of doing business. To wash $4 million it costs perhaps $1 to $2 million of show gambling losses.
Milken who served time for fraud-----is Burkle's best friend----Burkle was instrumental in putting Milken on the list of Clinton's midnight pardon scam.
Casinos are VERY tightly regulated---all casinos have gov’t regulators on-staff at all times. Of course, the govt is there to make sure casinos are not skimming off profits without paying taxes on it---the gov’t just wants its share.
Now there are cases where individuals have wired (or tried to wire) large sums of money to casinos. The casinos refuse the monies when they suspect it came from questionable sources…………like from government officials looting taxpayers’ assets for gambling.
Casino managers are very, very smart--they can smell a rat a mile away. Course, they also make their living off these rats.
That gambler you witnessed losing his shirt so ostentatiously was the front man for drug money laundering---guy had no cash worries---there was plenty more where that came from.
Yeah, Burkle thought it was just soooooooo unfair that Mikey couldn't take his family to the Olympics in Australia in 2000 because of the convicted felon's parole restrictions. Makes me shed a tear... NOT! The jerk only served 18 months of a 10 year sentence.
Milken is the one that financed Burkle's early grocery store acquisitions with his junk bonds. Later, Burkle's Yucaipa was funded with money from a group led by George Soros.
Sorry, HSU...Social Security has already been thought of...
Soros again....damn!
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