A federal grand jury on Tuesday indicted Democratic fund-raiser Norman Hsu, a former men's sportswear executive, on charges of duping investors of at least $20 million in a Ponzi scheme and using some of the money to make illegal contributions to presidential candidates.
The 15-count indictment, which was unsealed in U.S. District Court in Manhattan, charged Hsu with six counts of wire fraud, six counts of mail fraud and three counts of violating federal campaign finance laws.
Hsu, claiming to be the managing director of two New York-based apparel firms, Components Ltd. and Next Components Ltd., persuaded people to invest at least $60 million during a seven-year period beginning in 2000, the indictment said. The companies appear to have been fronts for his alleged scheme.
Invoking his fashion background, Hsu allegedly made "false promises" to investors, saying he would give them a "high return'' on short-term investments and, instead, used funds from the latest investors to pay off the older investors, according to the indictment.
Hsu, 56, has been jailed since September for grand theft in a separate Ponzi scheme in California. He had been a fugitive since 1992 after being sentenced to three years in prison.
In the latest case, Hsu perpetrated "a massive scheme that defrauded investors across the United States," Manhattan U.S. Attorney Michael J. Garcia said in a statement.
Hsu swindled his victims, who were not identified, "of at least $20 million," the indictment stated.
The Hong Kong native owned legitimate men's apparel companies in the Eighties, including H Two O Inc. and Laveno Sportswear, which eventually failed. Although a fugitive, he resurfaced and used his fashion credentials to work his way into the inner circles of Democratic presidential candidates. He became a member of the "Hillraiser" group, the top echelon of fund-raising for Sen. Hillary Rodham Clinton. Clinton's campaign has said it returned $850,000 in contributions from Hsu and his affiliated donors.
Hsu wanted to raise his profile and lure more investors to the scheme, the indictment said. He pressured them to give money to candidates of his choosing. If they failed to do so, Hsu allegedly told victims that their investment could be endangered. In addition, he violated federal campaign finance laws, which limit individual donations, by reimbursing investors for contributions to candidates he favored.If convicted, Hsu faces a maximum of 20 years in prison on each of the mail and wire fraud charges and five years in prison on each of the federal campaign finance charges. The indictment also seeks the forfeiture of all of Hsu's property, at least $20 million.
When Hsu was captured in September, a New York investment firm, Source Financing Investors, came forward with allegations of fraud against him. WWD reported that a source close to Source Financing Investors, run by Joel Rosenman, one of the creators of the 1969 Woodstock music festival, said Hsu promised $40 million from Source Financing would be used in the short-term to manufacture men's wear apparel in China for Prada, Gucci, Theory and Hugo Boss, as well as other brands, which would yield a 40 percent profit. The luxury brands Hsu named as clients all said they never did business with him.
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