Oct 23, 2018 Last Updated 2:53 AM, Oct 1, 2018

Lippogate? Not really

In the recent national election in the United States, accusations flew between the political parties about illegal campaign contributions. Prominent in the list of questionable contributors was the Lippo Group, one of Indonesia's strongest private banking groups. Still under investigation are members of the Riyadi family who own the group, and employees and former employees.

Investigations are being pursued on multiple fronts. The magnitude of the scandals only became apparent in stages. The story began to unfold just a few weeks before the elections in November 1996. The National Committee of the Democratic Party (DNC) had received contributions of several hundred thousand dollars from an Indonesian gardener in the employ of a realty subsidiary of the Lippo Group in California.

Soft money

Contributions in this range are common to both parties. They are perfectly legal so long as the contributor is a US citizen or legal resident, and so long as the contribution is not designated for any particular candidate but rather for building up the political party as a whole.

A little instruction in the arcane campaign finance laws of the United States is in order. The laws place strict limits on what corporations, unions, political action committees and wealthy individuals can give to the campaigns of individual candidates (so called 'hard money'), but they allow almost unlimited contributions for 'party building' on behalf of all candidates ('soft money').

Campaign finance laws enacted in the wake of the Watergate scandal of 1972 were designed to limit influence peddling by wealthy groups. Ironically, these laws have had precisely the opposite effect: they have focused large contributions through the 'soft money' loophole, thereby concentrating influence at the centre.

The problem was that the Indonesian gardener's station in life and subsequent return to Indonesia raised question at the Federal Election Commission about the true source of the contribution. Indeed, investigators quickly discovered that, as expected, the true source of the contribution was not an individual, but the Lippo Group itself, a foreign corporation and, therefore, an illegal source. The funds were returned, but not before the political damage was already done.

Innuendo

When it became apparent that one contribution was tainted, there began a cascade of innuendo forcing the Democratic Party to investigate whether there were other sources of tainted funds as well. The Democratic National Committee (DNC) and Republican National Committee (RNC) are both required by law to run background checks on all contributors. Internal audits should have caught these problems, but it became apparent immediately that controls at the DNC had broken down.

Republican Speaker of the House Newt Gingrich with typical hyperbole called the Democratic fund-raising practices 'the most systematic large-scale effort to get around the law that I think we certainly have seen since Watergate, and in its total effort it is much bigger, I think, than Watergate was.'

As the investigators began to pursue the breakdown in DNC internal controls, other problems began to emerge. The person who vetted the contribution at the DNC had been John Huang, a top fund raiser for the Democrats and employee of the Commerce Department. John Huang had been previously a high ranking employee of Lippo Securities in Los Angeles, an affiliate of the Indonesia-based Group.

Other names related to the Lippo Group were discovered close to the administration. Charles De Queljoe, a naturalised US citizen and president of Lippo Securities, had been appointed to an administration panel on trade policy. David Yeh of Lippo Realty Inc was another major DNC contributor. And there were others.

Huang

The current Senate investigations have centred on John Huang. After he left Lippo Securities, John Huang moved to the DNC and became a very effective fund raiser among Asian-Americans. Later he requested a government post and was appointed by the Clinton administration to a minor position in the Commerce Department.

When the campaign scandal broke, questions began to be whispered, asking if Huang had perhaps misused his office to obtain classified economic information which he may have passed to foreign governments or corporations. Some circumstantial evidence has emerged.

Two other key witnesses are being sought in these Senate investigations, one a Lippo Group official from Indonesia and another a diplomat from China. Both have left the US. Currently, Huang is under intense scrutiny, and he is refusing to testify unless he is given partial immunity from prosecution.

Arkansas

In the highly charged campaign atmosphere before the November 1996 elections, the question was shouted: 'Has the administration been selling influence?' In the full light of post-election hindsight, the accusation that financial controls at the DNC were defective has stuck.

But was there a sweetheart deal with Lippo Group in order to gain influence, or was it really an innocent and legal contribution from a wealthy constituent with a common agenda? On balance, the evidence suggests the latter. But that evidence has not in any way stopped the innuendo.

The relationship between the Lippo Group and the Clintons goes back much further than the 1996 campaign to the days in the late 1970s and early 1980s when Bill Clinton was governor of Arkansas.

James Riyadi, a member of the family which controls the Lippo Group, lived in Arkansas while he was president of Worthen Bank. Lippo Group bought a majority portion of Worthen Bank. Reportedly a personal friendship developed between the Clintons and James Riyadi as they worked together on various development projects. Hillary Rodham Clinton's law firm represented the Worthen Bank as well, so the working relationships had considerable depth.

Members of the Lippo Group clearly had the governor's ear long before he became president. And not necessarily because they had bought that ear, but because they had earned respect over shared investment projects in one of the poorest states in the United States. Folks close to the Lippo Group in turn contributed generously and legally to then Governor Clinton's efforts at re-election and for President Clinton's first run for national office. While the illegal contribution accusations toward Lippo Group have been addressed and generally abandoned, the Lippo Group is under other investigations from other branches of the government stemming from unrelated problems. Lippo Group officials are being investigated for possible violations of US banking laws related to excessive lending to their own corporation. While such pyramid-like schemes are legitimate and common in Asian finance, they are illegal in the US.

China

The Senate investigations into campaign finances began with the Lippo Group, but they have moved completely into other areas of much greater sensitivity. The Lippo Group contributions have proven to be small potatoes in comparison. The vast majority of the Lippo Group contributions and those solicited by John Huang have proven to be undeniably legal.

Completely unrelated to the Lippo Group contributions, investigations have unearthed illegal contributions from foreign governments. The government of mainland China funneled contributions to both US political parties, it seems, through a network of front corporations, trade councils and quasi-academic institutes in a transparent effort to soften US policy on Chinese human rights violations and to weaken US support for Taiwan. Ev

en though circumstantial evidence of a connection between Lippo Group and the Chinese government has emerged (the Chinese government reportedly has a 40% equity share in the Lippo Group), after intense investigation, no evidence whatsoever has been discovered which directly links the Lippo Group with the Chinese government's illegal efforts at influence peddling.

Republican

Well after the election, the Republican Party has just recently begun to investigate its own fund raising practices. In May 1997 the RNC discovered more than US$ 120,000 in funds whose source turned out to be illegal under US law. Those funds were from a foreign source, the Hong Kong Youngblood Group. More disclosures along this line are likely to be forthcoming.

In comparison, the Democratic Party has been performing background checks on sources of funding since the scandal broke last October. The DNC by this last May has returned more than US$3.4 million in questionable funds. The contributions from the Chinese government are still under intense scrutiny.

In the heat of this hotly contested campaign, both parties have worked at the edge of legality, and sometimes crossed it. The Democrats in this last election are being painted by the Republicans as the worst offenders at this point, and that accusation has tended to stick.

However, the accusations of influence peddling have proven quite hard to substantiate, especially since all US politicians practise it in one form or another.

The finance scandals in the last weeks before the election substantially favoured the Republican accusers over the Democratic defenders. Although the innuendo hardly dented Bill Clinton's popularity, it did affect a number of closely contested Congressional campaigns and, contradicting earlier polls, produced a Republican-dominated Congress.

Remote

This election may turn out to be one of the dirtiest this century in the US. Even with all the scandals, innuendo and investigation, however, prospects for real campaign finance reform remain remote.

It is hard to believe that a single contribution by an Indonesian gardener living temporarily in the US could have caused such a national debate, and even more that it turned the tide of an election. While both the pattern of finance and the pattern of political contributions of the Lippo Group may seem to be politics as usual by Indonesian standards, they have turned out to be disastrous in the context of the United States.

Dr D Jay Losher taught at Satya Wacana Christian University in Central Java in the 1980s. He is now pastor of a Presbyterian church in Dallas, Texas.

Inside Indonesia 52: Oct-Dec 1997

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