John Kerry needed cash, and soon. In July 1996 the Massachusetts senator was locked in a tough re-election fight, so he was more than happy to help when he heard that a generous potential contributor wanted to visit his Capitol Hill office. The donor was Johnny Chung, a glad-handing Taiwanese-American entrepreneur. Chung brought along some friends, including a Hong Kong businesswoman named Liu Chaoying.
Told that Liu was interested in getting one of her companies listed on the U.S. Stock Exchange, Kerry's aides immediately faxed over a letter to the Securities and Exchange Commission. The next day, Liu and Chung were ushered into a private briefing with a senior SEC official. Within weeks, Chung returned the favor: On Sept. 9 he threw Kerry a fund-raiser at a Beverly Hills hotel, raking in $10,000 for the senator's re-election campaign.
In a 30-year career untainted by scandal, Kerry's encounter with Chung and Liu would turn into a political embarrassment. Federal investigators later discovered that Liu was in fact a lieutenant colonel in China's People's Liberation Army and vice president of a Chinese-government-owned aerospace firm. And Chung, who visited the Clinton White House 49 times, went on to become a central figure in the foreign-money scandals of 1996. Chung eventually pleaded guilty to funneling $28,000 in illegal contributions to the campaigns of Bill Clinton and Kerry. According to bank records and Chung's congressional testimony, the contributions came out of $300,000 in overseas wire transfers sent on orders from the chief of Chinese military intelligence--and routed through a Hong Kong bank account controlled by Liu.
There was never any suggestion that Kerry knew about the dubious origins of Chung's largesse. Still, the appearance that the senator had played a cynical cash-for-favors game forced him to play damage control. In January 1998 he told the Boston Herald that the timing of the SEC meeting and the subsequent fund-raiser was "totally coincidental" and "entirely staff driven." He said the Beverly Hills event had been set up by a professional fund-raiser, and that he had never even met Chung until the night of the event. But congressional documents obtained by NEWSWEEK seem to tell a different story. "Dear Johnny, It was a great pleasure to have met you last week," Kerry told Chung in a handwritten note dated July 31, 1996. "Barbara [a Kerry fund-raiser] told me of your willingness to help me with my campaign... It means a lot to have someone like you on my team as I face the toughest race of my career." That same day the Kerry fund-raiser faxed a memo to Chung that read, in part: "The following are two ways in which you can be helpful to John." No. 1 was "Host an event in L.A. on Saturday, Sept. 9th." (A Kerry spokesman acknowledged that the senator may have met with Chung prior to the fund-raiser, but not in his Senate office.)
On the campaign trail, Kerry routinely attacks the president for his ties to big-dollar donors. Kerry championed campaign-finance reform, and refused money from corporate or labor political-action committees. But in some ways, he has played the Washington money game as aggressively as the Republicans he scolds. Over the years, reports the nonpartisan Center for Public Integrity, Kerry has raised more than $30 million for his Senate campaigns. A good portion has come from industries with an interest in the committees on which Kerry has a seat--including more than $3 million from financial firms (Kerry serves on the Senate Finance Committee). Kerry insists he is meticulous about avoiding any conflicts. "If these interests are giving money in hopes of buying influence with the senator, well, they should save their money because it won't work," says Kerry spokeswoman Stephanie Cutter.
Though he has shunned PAC donations, which are limited to $5,000 apiece, the senator in 2001 formed a fund-raising group called the Citizen Soldier Fund, which brought in more than $1.2 million in unregulated "soft money." Kerry pledged he would limit individual donations to $10,000. But in late 2002, just before new federal laws banning soft money took effect, Kerry quietly lifted the ceiling and took all the cash he could get. In the month before the election, the fund raised nearly $879,000--including $27,500 from wireless telecom firms such as T-Mobile, AT&T and Verizon. That same month, Kerry cosponsored a bill to overturn a judge's ruling and permit the wireless firms to bid on billions of dollars' worth of wireless airwaves. Kerry aide Cutter says it's a "stretch" to draw any connection between the two events.
Why did Kerry abandon his own rules about contribution limits? "This was just before the election, and it was clear the Democrats needed all their resources to fight the Bush money machine," Cutter says. Kerry spread the windfall strategically. More than a third of the fund's contributions went to just three states critical to a senator plotting a run for the White House: Iowa, New Hampshire and South Carolina.
Today that certainly seems like money well spent. Now, after a tough, expensive fight to the front, Kerry once again finds himself scrambling to find new sources of cash. He has personally urged more than a dozen top supporters to raise $100,000 each before the Feb. 3 primaries. As the money rolls in, he'll likely be taking a hard look not just at the numbers on the checks--but at the signatures, too.