Gop Joins Tainted Money Ranks Return Of $102,400 Is Party’s First; Demo Total Is $3 Million

The Republican National Committee announced Thursday it would return $102,400 in donations illegally funneled into GOP coffers from a Hong Kong real estate company, as the growing controversy over foreign-linked contributions enveloped both political parties.

The money from Young Brothers Development of Hong Kong is the first large donation the Republicans have returned since the campaign fund-raising scandal erupted last fall. The Democratic National Committee, by contrast, already has acknowledged $3 million in illegal and improper contributions that it intends to return.

Republicans, who have relentlessly condemned the Democrats for accepting foreign cash, sought to differentiate their returned money from that of their rivals. But Democrats gleefully seized on the tainted money as evidence that Republicans have been holier than thou.

“For months, the Republicans have piously proclaimed their purity on campaign finances,” DNC General Chairman Roy Romer said. “But the truth is now out - they have deliberately concealed receipt of foreign contributions.”

The embarrassing revelation served to underscore a troublesome political reality: The huge cost of running for office has prompted both parties to test, skirt and sometimes violate the law in their rush for campaign cash.

“We have a campaign fund-raising system that is completely out of control,” said Rep. Henry A. Waxman, D-Calif., who joined House Democrats in calling on Attorney General Janet Reno to include the Young Brothers matter in the ongoing Justice Department investigation of campaign finance activities.

RNC Chairman Jim Nicholson said the party had every reason to believe that the funds, donated between 1991 and 1993 by a Florida corporation called Young Brothers Development USA, were legal. As a safeguard, he said he has directed the party’s lawyers to review all RNC contributions of $5,000 or more dating back to 1994.

While characterizing the returned RNC money as an isolated incident, Nicholson accused Democrats of having engaged in “an orchestrated effort” to solicit foreign contributions during the 1996 presidential campaign. Nicholson also criticized the Democrats for not immediately returning all the improper money they have received, as the Republicans have done.

The DNC has returned $1.47 million so far and will return the remaining $1.49 million in questionable contributions by the end of next month, a spokesman said.

U.S. subsidiaries of foreign corporations may make political contributions, but only if the money clearly originates in this country. In the case of Young Brothers Development, Time magazine reported that the U.S. subsidiary does not appear to have any significant assets or operations that differentiate it from the Hong Kong company.

Only after media reports raised questions about the money, Nicholson said, did party lawyers determine that the contributions actually originated with the parent company in Hong Kong. “Upon learning those facts, we immediately returned the contributions, before the day’s end,” Nicholson said.

By shipping the money back, the RNC added to a growing heap of questionable contributions returned this year. Legislation introduced this month in the House would force candidates and committees to send tainted money to the Federal Election Commission, instead of merely returning it to the donors.

Rep. George Gekas, R-Pa., introduced the legislation with the DNC in mind “to prevent the Johnny Chungs, the Charlie Tries, and the Jorge Cabreras from getting their dirty money back and spending it,” he said.

But the bill would apply to Republicans, as well.

The RNC was not the only GOP organization with egg on its face Thursday. The Republican re-election committees in the House and Senate received $20,000 from Young Brothers Development USA in 1994, which they said they would return as well.

But the controversy is not likely to end there.

Young Brothers Development also guaranteed a $2.2 million loan to the National Policy Forum, a GOP advocacy group founded by former RNC head Haley Barbour. Barbour’s group immediately passed along money from the loan to the RNC, which used it during the critical weeks before Election Day in 1994. The policy forum later defaulted on $500,000 of the loan, leaving the company to pay off the bank.

Barbour has defended the loan arrangement as legal, noting there are no restrictions on nonprofit groups receiving foreign donations.

Still, Democrats in both the House and Senate are eager to determine whether the National Policy Forum was a front organization that served to channel foreign money into the Republican Party.