WASHINGTON — A review of financial assets held over the past six years by Elaine L. Chao and her husband, Kentucky Sen. Mitch McConnell, reveals that the labor secretary-designate serves as director of an insurance
company that jointly owns a Lippo Group subsidiary with the Chinese government.
Indonesia-based Lippo is controlled by the Riady family and is at the center of the Chinagate fund-raising scandal.
Lippo chief executive James T. Riady has agreed to
plead guilty to a felony charge of defrauding the U.S.
government. Prosecutors say he funneled foreign
donations to the campaigns of Bill Clinton and other
Lippo’s man in the U.S., John Huang, was convicted of campaign fraud in 1999.
Senate financial-disclosure records show that, over the past four years, Chao has held a seat on the board of Protective Life Corp., which owns 50 percent of CRC Protective Life Insurance. Lippo co-owns the rest of the Hong Kong-based unit with China Resources Holdings Co., an intelligence-gathering front company for China’s People’s Liberation Army.
Chao owns more than 7,000 shares of Birmingham, Ala.-based Protective Life Corp., public securities records show.
The $1.4 billion-in-sales insurer sought out the joint venture in 1994, with the goal of underwriting policies in southern China.
To “solidify” the deal, a company director, William B. Blount, wrote Vice President Al Gore a letter seeking the administration’s support. The company also lobbied Commerce Department officials for their support.
Gore, in turn, sent a letter to Riady, congratulating him on the partnership. And Huang, then a Commerce official with a glaring conflict, nonetheless helped put the venture on the list of federally backed projects.
Meanwhile, Protective Life gave $50,000 to the Democratic National Committee.
The Chinese government subsequently took a stake in the venture.
Critics of Chao’s nomination worry that her ties to Chinese business interests present a conflict. Her China-born father, James S.C. Chao, has a cozy relationship with Beijing’s Communist Party leader, and owns a shipping company that does business with the Chinese government.
As a Cabinet member, Chao would have top-level clearance to U.S. trade and military secrets.
Sequestered from the press until after her confirmation hearings, she was not available for comment.
The Senate Health, Education and Labor Committee has
not yet set a date for hearings. GOP Sen. James
Jeffords and Democratic Sen. Edward Kennedy head the
Chao’s Lippo ties don’t end there.
Her husband, McConnell, has received steady campaign contributions during his years in the Senate from Lippo partner American International Group Inc., and its chairman, Maurice “Hank” Greenberg.
Last year, the New York-based insurer bought 5 percent of Lippo Life and 70 percent of its unit, PT Asuransi Jiwa Lippo Utama, for about $200 million.
AIG also has business ventures in China, recently opening its fourth office on the mainland. In fact, $40 billion-in-sales AIG was the first foreign company allowed to sell insurance in China.
Besides thousands in donations, McConnell also got $2,000 from AIG for a 1995 speech he gave in New York, his financial records show, though he says he gave it to charity.
McConnell hasn’t been shy about supporting AIG.
He rushed to its side in 1987, for example, to spare it from having to pay claims on the policy it underwrote on the U.S. Embassy in Moscow. The bugged building had to be rebuilt.
And he is China’s biggest Republican booster in the Senate, fighting to liberalize trade with Beijing, which is one of Greenberg’s hobby horses.
Greenberg, former chairman of the U.S.-China Business Council, has lobbied hard — and successfully — to sever the link between China’s human-rights and missile-proliferation records and its most-favored-nation trade status. (He was, incidentally, one of President Clinton’s candidates in
1995 to be CIA director.)
AIG’s international advisory board is headed by Henry A. Kissinger, the leading pro-China lobbyist in Washington.
Greenberg, a Heritage Foundation donor, was so forceful in his efforts to secure permanent trade benefits for China that he threatened to cut off funding to the conservative think tank if it didn’t tone down its concerns about China’s growing military threat.
Chao, also an outspoken China trade booster, is Heritage’s top Asian studies adviser and a distinguished fellow.
The Huang connection
Chao and former Lippo executive Huang are no strangers.
In 1993, when Chao was taking over as United Way president, Huang, then head of Lippo Bank, rounded up a coalition of Chinese banks and individuals to sponsor her visit to Los Angeles.
Before that, in 1989, Huang says Chao sought him out to help donate money to Republican senators. At the time, Huang and Riady and others in their Pacific Leadership Council were trying to lobby senators to relax U.S. immigration rules.
Huang, who once worked for a Louisville, Ky., bank,
ended up giving McConnell, who wedded Chao in 1993,
$2,000 in illegal donations (Lippo reimbursed Huang,
as part of a foreign money-laundering scheme). Another
$500 went to former New York Sen. Alfonse D’Amato.
The gifts were the only ones Huang has given to
Republicans. McConnell reportedly hasn’t returned his.
Calls to his office were not returned.
“I receive [sic] a call from Ms. Elaine Chao, because
I was a banker then, and she was asking whether I
could support Mr. D’Amato, because Mr. D’Amato was
coming in town,” Huang testified on Dec. 15, 1999,
before the House Government Reform Committee.
He added that Chao stressed that D’Amato was on the Senate Banking Committee.
Huang says he respected Chao’s advice because she was “a very distinguished, you know, Chinese-American community leader then.”
Huang, who muscled his way into a Heritage luncheon when he was at Commerce, last year described Chao as an “acquaintance” with whom he’s had “three or four” meetings or contacts.
Chao has expressed sympathy for Huang during his prosecution, even suggesting it was racially motivated.
In 1997, she slammed the Chinagate probe and its media coverage for singling out Asians.
“The media has selectively targeted Asian-Americans in their zeal to cover the story,” she told Dallas Morning News reporter Thomas Huang. “That’s a disgrace to our free society, and I think it’s totally unjust to hold the view that political contributions from Asian-Americans should be held to a higher standard, or are any more suspect.”
Asians “must not be discouraged from political participation,” she added. “Having been in the political arena and the public eye, for some years, I know that politics is a contact sport. It’s pretty tough. It doesn’t matter whether your name is John Huang or John Smith.”
Her husband, as it turns out, shared her distaste for the Chinagate probe.
One of the GOP’s top fund-raisers, McConnell in 1997 fought fellow Republican Sen. Fred Thompson’s hearings into all the funny money that rolled into ’96 Clinton-Gore campaign coffers from China.
“According to a well-placed Republican strategist, Mitch McConnell was still pressing his view in meetings of Senate Republicans that any discussion of the campaign-finance scandals only increased pressure for campaign-finance reform,” said political columnist Elizabeth Drew in her book, “The Corruption of American Politics.” “So the hearings were neither good policy nor good politics for Republicans,” as far as McConnell was concerned.
GOP Sen. John McCain has charged that the Republican leadership hasn’t aggressively investigated the Chinagate scandal, because it touches key Republicans. He hasn’t named names.
But there’s no love lost between McCain and McConnell.
Back in Louisville, word is that McConnell still isn’t speaking to Peppy Martin, Republican candidate for Kentucky governor in 1999.
She made the mistake of joking in a TV interview that since campaigns cost so much money, she “may have to develop a China connection of my own,” referring to McConnell’s wife.
“Mitch has got a Chinese connection,” Martin said. “Why can’t I?”
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