Newsweek Feb. 9 issue - 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.
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