How a Business Flop Became Political Force [Hsu]

Wall Street Journal (no subscription) ^ | November 12, 2007 | Ianthe Jeanne Dugan, John R. Emshwiller, Jonathan Cheng and Jim Carlton

[CutePuppy]

Hsu Wowed the Democrats As He Beguiled Investors; 'He Craved Attention'

November 12, 2007; Page A1

By the time Norman Hsu flew to Beverly Hills in early September and checked into the Raffles L'Ermitage hotel, the life of the top Democratic donor and self-professed clothing magnate was coming unraveled.

Mr. Hsu, a slight, 56-year-old immigrant from Hong Kong, was under investigation for campaign-finance violations. An old grand-theft charge had come back to haunt him. Sen. Hillary Rodham Clinton and other politicians had begun returning his donations. He was so distraught that he sent off suicide notes before leaving his Manhattan home for California.

Still, he appeared unruffled when he settled into the hotel's café to comfort a nervous investor, Martin Waters. Mr. Hsu was dressed in jeans, Prada shoes, a black T-shirt and a baseball cap. "Don't believe what you are reading," Mr. Hsu said, according to Mr. Waters, who owns a small clothing company and was owed more than $20 million for deals he and his friends made with Mr. Hsu.

"Plenty of people are still supporting me," Mr. Hsu assured him, mentioning Pennsylvania's governor, who initially stood by him when news of his troubles broke. "Your loans are secure."

Mr. Hsu also met with other investors that day, but his effort to salvage his reputation went nowhere. Within weeks, federal prosecutors in Manhattan had charged him with fraud and election-law violations, accusing him of running a "massive" Ponzi scheme that cost investors more than $60 million.

.....

[CutePuppy]

1. Hsu talked about "loan" (which is what was a correct structure of the deals), not an "investment" - so no "Ponzi scheme"

2. What Ponzi schemer would go to the trouble of flying to assure his "investors", instead of flying the coup when becoming exposed in newspaper? Means he knew that the money was still coming into the accoounts set up to pay the high-sky "interest" on the loan - that's no Ponzi scheme, that's money-laundering.

[fieldmarshaldj]

Money-laundering and the Clintons. As American as apple pie.

[DoughtyOne]

How do you spell Money Laundering?

Arkansas Development Finance Authority

[Brad from Tennessee]

Good to see Wall Street Journal keeping after this story.

[CutePuppy]

Politics was a world where his schmoozing and fund-raising talents were powerful currency. He became a "bundler," someone who could induce hundreds of acquaintances to donate.

The timing is very important - he became a "bundler" after he got friends in high political places - the $60 million Question is WHO placed and shortly thereafter advanced Norman Hsu on the board of American School?

[jer33 3]

hmmm... I wonder if Hsu was also involved in counterfeit clothing.

[neverdem]

Clinton Aides Prompted Queries at Events

The VRWC strikes again.

[CutePuppy]

Good to see Wall Street Journal keeping after this story.

Looks like Mr. Waters is talking, he even rediscovered that he is a Republican :

Some of the political donors he recruited, including Mr. Waters, were also his investors. Some of them say they felt pressured to contribute for fear of being cut out of the next lucrative deal. "I'm a Republican," Mr. Waters notes

[libstripper]

The curious thing about this article is how it never mentions what an earlier article in the LA Times mentioned: many of the "investors" were persuaded to participate in Hsu's enterprises by all of the endorsements he received from the Witch and others. It also shows an astounding lack of curiosity over the legal redress those "investors" might be able to get by filing securities suits against the Witch and other DemonRats based on the idea that the endorsements provided to Hsu, from which the Witch and other DemonRats massively benefited through contributions, make them liable for negligent or intentional misrepresentations about Hsu that induced the "investors" to participate in his schemes.

[Presbyterian Reporter]

Norman Hsu has shown himself to be an opportunist who will do anything to steal from his acquaintences. Now the question still unanswered is whether Hsu will cut a deal with the Feds to implicate the Democrats in return for a lesser sentence.

I hope the recent delays in his prosecution are being caused by the Feds cutting a deal with Hsu to implicate Hillary.

Hsu could have been laundering money obtained from well-heeled Hillary supporters and that would be a much bigger story than Hsu’s ponzi endeavors.

[boop]

"Mr. Hsu bonded with Democrats who were disenchanted with Ronald Reagan's ascent. "We all felt that the Democratic Party was in danger of losing its soul," Mr. Richards recalls. "Norman was empathetic.""

So a crook was NATURALLY attracted to the democrat party. And in order to get rich in the greedy Reagan eighties he stole millions of dollars.

[CutePuppy]

This article is basically a good summation of the material previously presented in WSJ and LA Times, with just a microscopic bit of new information, e.g. the "investment" in Hsu's companies was really technically a series of short term loans at exorbitant rates ("shark loans") so he could, supposedly, in turn, execute "bridge loans" to struggling Chinese manufacturers at exorbitant rates - which makes just about as much sense as poor Chinese immigrant dishwashers in New York giving generous donations to Hillary's campaign.

Article does briefly point out that people were enticed ("arm-twisted") to make political donations to get in on a "deal of the century" - a no-lose proposition with 20% a shot up to three times a year.

It may be difficult to prove that there are security violations on Hillary's part, unless she specifically directly endorsed Hsu's "enterprises" and encouraged "investment" in them, rather than by calling Norman "her friend" she may have implicitly landed the "air" of respectability and trust on him. I think "holding him out" would be the equivalent legal term for case to be made.

I think Earvin "Magic" Johnson and few other athletes and famous people were paid "endorsers" in a "phony investment" scheme some years ago, but endorsers were not charged in the participation in the fraud. As an aside, Hillary (as Bill Clinton before) had several fundraisers with Magic Johnson.

There is no question that both Hsu and Hillary profited from this symbiotic relationship and the scheme, but I am not sure that securities fraud on her part can be proven, unless she slipped up in her "endorsements". I think better question to ask is, exactly which accomplishments caused Norman Hsu become a board member of American School (the beginning of "respectability tour" for Hsu,) i.e. WHO recommended him to the post - that's where the thread could start to unravel - but that maybe on a par with that other question - WHO hired Craig Livingstone? Did not see any curiosity from the media regarding this, and there may be a guy who could be willing to talk - Bob Kerrey, who is NOT going to run for Senate from Nebraska, partly because of association with American School.

American School and its foundations, in part, may also be a conduit for "funny money".

[CutePuppy]

Hsu could have been laundering money obtained from well-heeled Hillary supporters and that would be a much bigger story than Hsu’s ponzi endeavors.

Exactly, that is the story. Even al-media has started to back off from "Ponzi scheme", but has not [yet] made the leap to real shenanigans - money-laundering. One simply cannot do a "massive Ponzi scheme" with a series of short term loans bearing interest of 20%-40% (and/or 60%-120% annually without even counting compounded interest) without "sugar daddy" on the other end.

Also, the "primary investors" (Martin Waters and Joel Rosenman) being astute businesspeople couldn't possibly think that "bridge loans" of this kind could legitimately bring in this kind of money in the era of easy money available at far lower rates and for longer periods of time to scrapped manufacturers who don't have such fat gross margins to afford these loans. So they had to be assured by someone (with better financial history or the ability to pay back money than Norman Hsu) that their "loans are secure", as Hsu himself put it, before they invested money and they themselves had to assure people that it's a "no-lose" proposition to put money in their hastily formed funds - otherwise who would sell their businesses or get mortgages on their houses or put their life savings on such a scheme, as the article documents.

Mr. Waters says he asked few questions before investing. "I figured if Hillary trusted him, I could trust him," Mr. Waters says.

Really???? That's all it took for Waters? A self-identified Republican so trusted Hillary!? That reminds me of Wall Street classic : "Bluestar, Mr Mannheim.Put all your clients in it."

From a guy (Hsu) who sported a chocolate-brown leather bomber jacket with the presidential seal. "Bill Clinton gave this to me," he told Mr. Waters.? I don't think a liberal Democrat like Joel Rosenman would put a $40 million fund together just based on the trust of Hsu's association with Clintons, and not even think of possibility of losing money. Has anyone ever lost money and their good name dealing with Clintons?

From Hsu's email:

"Some people lie when they have to; and I can understand that because all of us may have force into those situation sometime in our lives...some people are just born liars...lying when they have no reason to lie...it is their habit....AND BECOME PART OF THEIR LIVES."

There is also an interesting graph of Hsu's financial history in US with some gaps from 1992 through 2003:

[CutePuppy]

Yes, but I didn't quite understand the author's intent here - maybe he meant "disappointed" instead of "disenchanted". Why would Democrats be "disenchanted with Ronald Reagan's ascent"? Disappointed, likely, but disenchanted?

And yes, crooks are naturally attracted to "Crooks' Party". Unfortunately, few bad apples in "Stupid Party", who got too comfortable around government and being in power, made exploiting this fact very difficult and instead they and "Stupid Party" itself became a victim of such an exploit in 2006.

[Unicorn]

BTTT

[mo]

The scam here is that “Mr Waters” had nothing to lose...his business was being used as a laundromat...he was getting a cut....the WSJ has it wrong...the question is ..is it truly wrong...or is it wrong on “purpose”?!:)