Hillary Clinton returns fund-raiser Hsu's $850G; probe begins

BY MICHAEL McAULIFF and JAMES GORDON MEEK
DAILY NEWS WASHINGTON BUREAU

Tuesday, September 11th 2007

WASHINGTON - A red-faced Hillary Clinton yesterday returned $850,000 in campaign cash tied to felon fund-raiser Norman Hsu, as the Daily News learned New York prosecutors are leading the probe into Hsu's buck-raking.

The tainted dollars are being returned to 260 donors by the New York Democrat's White House campaign, her aides said.

The Clinton campaign scrambled to contain the damage from a fund-raising scandal that's been building for two weeks, after reports some donors of modest means contributed hefty sums to Clinton in coordination with Hsu, a New York apparel millionaire.

"In light of recent events and allegations that Mr. Norman Hsu engaged in an illegal investment scheme, we have decided out of an abundance of caution to return the money he raised for our campaign," Clinton spokesman Howard Wolfson said in a statement.

"Mr. Hsu donated to numerous charities and more than two dozen candidates and committees. Despite conducting a thorough review of public records, our campaign, like these others, was unaware of Mr. Hsu's decade-plus-old warrant."

To avoid future fund-raising black eyes, Wolfson said, the campaign will institute "vigorous" new vetting procedures, "including criminal background checks" on fund-raisers who bundle contributions from several donors.

At first, the campaign gave the $23,000 Hsu donated to charity. It relented on the rest of the cash yesterday after learning the feds were looking into whether Hsu was running a Ponzi scheme aimed at benefitting Clinton and other Democrats.

Hsu has also bundled massive sums for other Democrats, including Gov. Spitzer and Attorney General Andrew Cuomo.

Federal prosecutors in Manhattan have launched a probe to look into possible public corruption or election fraud offenses against Hsu, two law enforcement sources told The News.

"They're taking a look at him. They are very interested," one of the sources said.

Justice Department and FBI officials declined comment.

The FBI nabbed Hsu in Colorado last week after he got sick on an eastbound train. He was wanted after skipping out on a 1992 California sentencing date for a no-contest plea in a $1 million fraud rap. He turned himself in Aug. 31, posted $2 million bail - then fled again.