SENATE Rept. 105-167 - 105th Congress 2d Session - March 10, 1998

MINORITY VIEWS OF SENATORS GLENN, LEVIN, LIEBERMAN, AKAKA, DURBIN, TORRICELLI AND CLELAND Part 1 Foreign Influence........................................ 4577 Chapter 1: Overview and Legal Analysis........................... 4577 Findings..................................................... 4577 Overview of Following Chapters............................... 4577 Legal Analysis............................................... 4579 PART 1 FOREIGN INFLUENCE Chapter 2: The China Plan In early 1997, news reports appeared alleging that U.S. federal intelligence agencies had discovered an attempt by the government of the People's Republic of China (``Chinese Government'') to increase its influence in the U.S. political process.1 From February through December 1997, the Committee examined these allegations. The examination included a consideration of both public and classified (``non-public'') information. --------------------------------------------------------------------------- Footnotes at end of chapter. --------------------------------------------------------------------------- Following the 1995 congressional resolution advocating that Taiwanese President Lee be permitted to visit the United States, as well as President Lee's subsequent visit, the Chinese Government determined that Congress and state officials were more influential in foreign policy decisions than the Chinese Government had previously believed. The information considered by the Committee shows that during the 1996 federal election cycle, Chinese Government officials decided to attempt to promote China's interests with the U.S. Congress, state legislatures, and the American public.2 The Chinese Government's efforts have become known in the media as ``the China Plan.'' The Committee's public discussion of the China Plan began on July 8, 1997, when Chairman Thompson opened the first day of public hearings by asserting that the China Plan was ``hatched during the last election cycle by the Chinese Government and designed to pour illegal money into American political campaigns.'' 3 The Chairman explained that the information before the Committee indicated that the Chinese Government had apparently taken legal steps pursuant to the plan, such as hiring lobbying firms, contacting the media and inviting more members of Congress to visit China.4 He also asserted that, ``[a]lthough most discussion of the plan focuses on Congress, our investigation suggests it affected the 1996 Presidential race and State elections as well.'' 5 The Chairman's assertions implied that the non-public information presented to the Committee included evidence that the Chinese Government's activities had affected, or had some meaningful impact on, the 1996 elections. Based on the evidence presented to the Committee, the Minority makes the following findings: findings (1) Following the 1995 congressional resolution advocating that Taiwanese President Lee be permitted to visit the U.S. and President Lee's subsequent visit, Chinese Government officials decided to attempt to increase the Chinese Government's promotion of its interests with the U.S. Congress, state legislatures and the American public. These efforts, which became known in the media as ``the China Plan,'' reflected the Chinese Government's perception that Congress was more influential in foreign policy decisions than it had previously determined. (2) The non-public information presented to the Committee to date does not support the conclusion that the China Plan was aimed at, or affected, the 1996 presidential election. (3) Although some steps were taken to implement the China Plan, the non-public information presented to the Committee to date does not support the conclusion that those steps involved Chinese Government funds going to federal campaigns, either congressional or presidential. During the Committee's public investigation, the Committee learned that contributions derived from foreign funds made their way into the 1996 federal election. The non-public information presented to the Committee, however, does not support the conclusion that these contributions were tied to the China Plan, or to Chinese Government officials. The non-public information presented to the Committee does support the conclusion that the China Plan was implemented with a relatively modest sum of money that was spent on lobbying Congress, paying for members of Congress to visit China, and increasing public relations with Chinese Americans. (4) The non-public information presented to the Committee raised questions regarding the political activities of one individual investigated by the Committee, Ted Sioeng, but the information available to date was insufficient to support the conclusion that his activities in connection with the political contributions made by his daughter or by his associates in the United States were connected to Chinese Government officials or the China Plan. For information on Sioeng's activities explored during the Committee's public investigation, see Chapter 7 of this Minority Report. introduction After numerous press accounts were published discussing information gathered by Executive Branch agencies regarding the Chinese Government's plan to gain influence in the United States, Chairman Thompson began the first day of the Committee's public hearings by discussing these allegations. Thereafter, the Committee's handling of the allegations became one of the most hotly debated issues surrounding its investigation into campaign finance activities. Before describing the plan on July 8, 1997, the Chairman cautioned that he was able to reveal only a small portion of the information gathered by the Committee due to its non-public nature. He stated, however, that the Committee had ``uncovered a significant amount of documentary and other relevant information'' 6 indicating that the Chinese Government plan was ``one of the most troublesome areas'' of the investigation and needed to ``be placed on the public record . . . as soon as possible and in a careful and accurate manner.'' 7 The Chairman then described the plan as one ``hatched during the last election cycle by the Chinese Government and designed to pour illegal money into American political campaigns.'' 8 He asserted that ``high-level Chinese Government officials'' 9 crafted the plan and that ``the Committee has identified specific steps taken in furtherance of the plan.'' Such steps, he claimed, were undertaken by ``Chinese Government officials and individuals enlisted to assist in the effort.'' 10 The Chairman also asserted that the plan had been implemented by legal as well as illegal means.11 According to the Chairman, the legal activities proposed by the Chinese Government included ``retaining lobbying firms, inviting more Congresspersons to visit China, and attempting to communicate Beijing's views through media channels in the United States.'' 12 Immediately following the statement that illegal actions were involved, he asserted: Although most discussion of the plan focuses on Congress, our investigation suggests it affected the 1996 Presidential race and State elections as well. The Government of China is believed to have allocated substantial sums of money to achieve its objectives.13 In response to these assertions, Senator Glenn said that ``the Committee should go just as far as the facts take us.'' 14 Several Senators also immediately disagreed with the Chairman's conclusion that the China Plan had ``affected'' the presidential race, believing instead that the non-public information showed that the plan was focused exclusively on Congress. On the first day of hearings, Senator Levin pointed out that ``China's target in 1995 and 1996 was not the White House. It was the Congress.'' 15 In fact, Senator Levin noted that press reports indicated that the China Plan was focused on lobbying Congress, and that foreign countries had spent $86 million to lobby the U.S. Government in the first half of 1996 alone, with Japan registering expenditures of $17 million in six months.16 He concluded that the China Plan expenditure which had been referred to during the public hearing that morning was a small fraction of the $86 million.17 The amount referred to during the public hearing that morning was less than one candidate typically raises to run for election to the U.S. House of Representatives. On July 15, 1997, Senators Glenn and Lieberman issued a joint statement explaining their position: We are in absolute agreement as to the intelligence information known to us and the conclusions that can be drawn with certainty from that evidence. We acknowledge, and never denied, that the information shown to us strongly suggests the existence of a plan by the Chinese Government--containing components that are both legal and illegal--designed to influence U.S. congressional elections. However, as we also both agree, it is not clear from the evidence that the illegal aspects of such a plan were ever put into motion. Nor is there sufficient information to lead us to conclude that the 1996 presidential election was affected by, or even part of, that plan.18 Senator Durbin predicted that because the evidence pointed to the plan's focus on Congress, ``this Committee will not touch that issue'' and will instead focus only on any possible link between China and the Democratic presidential campaign.19 And, indeed, the Committee's investigation of the China Plan focused on the sole question of whether the Chinese Government actually made campaign contributions to the Democratic National Committee or the Democratic presidential campaign. After two months of hearings, Senator Durbin again commented that ``[t]his investigation kicked off with the Chairman's statement that we were setting out to find evidence of an effort by the Chinese Government to influence the outcome of the 1996 Presidential election. I don't believe there's been any evidence presented to support that . . . [P]erhaps there will be in the weeks to come.''20 Ultimately, despite the attempt by the Majority to tie China to a variety of contributions to the Democratic Party, the Committee to date has not received information in its closed proceedings, or in its open proceedings, that supports the assertion that the China Plan ``affected the 1996 presidential race.'' the committee's investigation The Committee's investigation of the China Plan consisted primarily of gathering non-public information already obtained by Executive Branch agencies. The Committee began requesting information from the agencies in February 1997, and thereafter received and reviewed boxes of responsive documents. The Committee also held closed hearings on July 28, 1997, and September 11, 1997, and received numerous staff briefings during the course of its investigation, which terminated on December 31, 1997. The Committee was informed that the non- public information from the Executive Branch agencies should not be understood to represent the full picture of any issue that was under investigation. With that caveat, the Committee reviewed non-public information to determine the extent to which the Chinese Government's activities affected the 1996 federal elections. This chapter sets forth conclusions based on the non-public information made available to the Committee. A more detailed classified report has been lodged with the Office of Senate Security, located in the United States Capitol. The Minority believes that it is the responsibility of the Committee to clearly distinguish between conclusions based on non-public information, not available to the public, and public information that is available to both the Committee and members of the public. This chapter focuses on conclusions based on the non-public information reviewed by the Committee. Where public information is discussed, it is clearly noted as such, although this chapter does not fully address conclusions that may be drawn from the Committee's public proceedings. The Committee's public investigation is discussed elsewhere in this Minority Report and, unlike the Committee's closed proceedings, is based upon information that is available for public review and analysis. This chapter discusses background on federal law regulating the political activities of foreign governments and companies in the U.S.; the results of the Committee's closed proceedings regarding the China Plan; and information not pursued by the Committee in its closed proceedings. The Minority response to the Majority Chapter on the China Plan is located in Part 9 of this Minority Report. See Part 9, Response to Majority Chapter 18. background Foreign involvement in the American political process has long been permitted under federal law. In 1938, the federal government enacted the Foreign Agents Registration Act (``FARA'') to govern the activities of all individuals in the United States who engage in lobbying, political activities or public relations on behalf of foreign governments or companies.21 As amended, FARA requires individuals who conduct political or public relations activities on the behalf of foreign governments or political parties to register as ``foreign agents'' and disclose their expenditures. An ``agent'' is defined as one who acts ``at the order, request, or under the direction or control of a foreign principal, or of a person whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidized in whole or in part by a foreign principal. . . .'' 22 Registration is not required if the individual is acting in his or her capacity as an official of a foreign government or a member of the news media.23 Beginning in 1996, individuals who lobby on behalf of foreign companies or other foreign private interests, as opposed to foreign governments, may register under the Lobbying Disclosure Act.24 Promotional activities on behalf of foreign governments or other interests have increased dramatically as the world economy has become more integrated. Foreign governments and companies are affected by, among other things, U.S. trade policies, foreign aid decisions, intellectual property protections, and tourism.25 As the world economy becomes more integrated, decisions made in the United States have an impact on the ability of foreign governments and companies to prosper. A report published by the Asian Development Bank in 1997 noted that ``[c]ountries that are well integrated into international production networks and widely exposed to market trends abroad will be much better placed to benefit than those that remain isolated.'' 26 The report suggested that Asian governments: Be open to foreign direct investment, and to capital markets more generally [because] free capital mobility allows firms to tap into funds from abroad and to create new and flexible capital structure with partners in other parts of the world.27 The report also noted that prosperous Asian countries are ``increasingly relying on international joint ventures, strategic relationships and information-sharing partnerships.'' 28 It comes as no surprise that lobbying and promotional activities of foreign countries in the United States have increased in recent years. In 1992, the Justice Department reported that Hong Kong interests spent nearly $80 million on lobbying and public relations in the United States, with Japan spending over $60 million, Canada $22.7 million, and Mexico $1.5 million on lobbying for passage of the North American Free Trade Agreement alone.29 By 1996, a summary of the Justice Department figures showing that foreign interests spent over $400 million on such activities in the first six months of 1996 alone.30 Despite the fact that China is the most populous country in the world, the Chinese Government reportedly spent only $450,000 on lobbying in 1991 and 1992. Chinese Government and private companies together spent approximately $2 million in the first half of 1996, only a fraction of the multimillion dollars spent by other countries.31 Although many foreign governments and companies have increased attempts to promote their interests in the United States, they are forbidden by federal law to influence the electoral process in the United States. Federal law bans (1) foreign contributions to political campaigns and (2) campaign expenditures paid for by foreign entities.32 A key issue raised in connection with the China Plan was whether the Chinese Government had proposed or undertaken to promote its interests in the United States by legal and proper means, or whether its activities may have amounted to illegal Chinese Government interference in the 1996 election process.