The Wall Street Journal has tracked down the source of Norman Hsu's cash, and the good news is that the People's Republic of China didn't provide the funds -- at least, not some of them. However, the bad news is that Hsu apparently moved from Ponzi schemes to outright embezzlement as a former Woodstock backer proved as inept at background checks as the Democratic Party:
New documents reviewed by The Wall Street Journal may help point to an answer: A company controlled by Mr. Hsu recently received $40 million from a Madison Avenue investment fund run by Joel Rosenman, who was one of the creators of the Woodstock rock festival in 1969. That money, Mr. Rosenman told investors this week, is missing.
Mr. Hsu told Mr. Rosenman the money would be used to manufacture apparel in China for Gucci, Prada and other private labels, yielding a 40% profit on each deal, according to a business plan obtained by the Journal. Now the investment fund, Source Financing Investors, says Mr. Hsu's company owes it the $40 million, which represents 37 separate deals with Mr. Hsu's company. When Source Financing recently attempted to cash checks from the company, Components Ltd., the investors say they were told the account held insufficient funds.
Source Financing's arrangement with Mr. Hsu's company, according to court documents and investor accounts, echoes an older matter that came to light in recent weeks. In 1991, California officials charged Mr. Hsu with grand theft for failing to repay investors for money he raised to import latex gloves from China.
The Hillary Clinton campaign can stop the cash from going back to the bundled contributors. If Hsu stole $40 million, it explains how all of these families of modest means could afford to contribute eye-popping sums to her campaign and others. It also means that the FBI and Rosenman will want the money back.
This puts a brand new spin on the story, and a very bad development for the people through whom Hsu pushed these contributions. At a minimum, the donors who bundled Hsu's money face potential election-finance violations. The feds could add money laundering to the list of charges -- and since the money got sent around via wire transfers, wire fraud will likely get included. Finally, if the wire transfers show complicity to deceive, all of the contributors who participated may find themselves in the middle of a RICO prosecution, which could mean lengthy stretches in federal prison for everyone.
Furthermore, that would put the Democratic candidates and the organizations in a very uncomfortable position. The FBI would want to know just what involvement they had in Hsu's theft and subsequent manipulations of cash. While it would be unlikely that Hillary Clinton, Andrew Cuomo, Eliot Spitzer, the DSCC, and a host of other candidates and organizations would have knowingly approved embezzlement, some of their staff members could potentially have participated in the illegal activities that assisted it. In any case, it hardly paints the Democrats in a good light to have to answer depositions in a fraud involving the theft of $40 million, dragged out over the next several months.
However, the story still has some deep mysteries. One of the reasons Rosenman trusted Hsu was the 40% profits he and others received from investments in Hsu's companies in 2000-2004. With these companies exposed as fronts, the question remains how Hsu made those profits, which sucked in Rosenman and others. Did some other deep-pocketed entity front the money for Hsu in order to thoroughly launder the cash? It seems like the perfect long con -- show some flash up front and steal big in the end, but it still requires someone to supply the up-front money.
And if that was the point, why would Hsu bring all of this attention to himself by engaging in high-profile political fundraising? If theft was the point, it makes no sense. If influence and money-laundering was the point, who intended to benefit from it? Rosenman has his own connections to the Clintons and others. Who fronted Hsu?
Hsu's still an enigma. Now, however, we have literally hundreds of potential co-conspirators who will vie for the opportunity to mitigate their legal exposure and testify to Hsu's machinations. The FBI will not act gently, either, and neither will the IRS, which will undoubtedly recheck the returns of all involved in an effort to track the money themselves.