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John Liu's Campaign Treasurer Charged With Fraud

By Jill Colvin | February 28, 2012 1:10pm | Updated on February 28, 2012 9:29pm
City Comptroller John Liu denied any wrongdoing following the arrest of his campaign treasurer.
City Comptroller John Liu denied any wrongdoing following the arrest of his campaign treasurer.
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DNAinfo/Jill Colvin

MANHATTAN — The campaign treasurer for embattled City Comptroller John Liu was arrested Tuesday on campaign finance fraud charges — the latest blow to the presumptive mayoral candidate who has been wrangling with allegations about his fundraising efforts for months.

The investigation that led to the arrest of Jia "Jenny" Hou unearthed instances of campaign workers discussing illegal contributions and raised questions about how much Liu, once considered a rising star in city politics, knew about the alleged improprieties.

It also painted a picture of Hou, a young aide, as a supporter who was willing to go to great lengths to illegally raise money for Liu, including using her own cash and covering up the alleged fraud.

Jia Hou,25, leaves Manhattan Federal Court with lawyer Martin Adelman on Feb. 28th, 2012
Jia Hou,25, leaves Manhattan Federal Court with lawyer Martin Adelman on Feb. 28th, 2012
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DNAinfo/Paul Lomax

Hou, 25, of Queens, is accused of participating in a scheme dating back to 2009 that used “straw donors” to funnel illegal contributions far above the legal limit into Liu's campaign, the United States Attorney in Manhattan and the FBI announced Tuesday.

Hou, who had previously served as a volunteer for Liu's 2009 campaign and who had been responsible for all financial disclosures related to the 2013 race, allegedly played a key role in the scheme, where individuals who wanted to donate far more than legal limit arranged for straw donors to make contributions and later reimbursed them.

In addition to bringing in big money fast, the smaller donations would allow the campaign to illegally collect thousands in public matching funds from the city, authorities said.

“Today, we allege that Jia Hou, a Campaign Treasurer, was a central figure in a coordinated scheme to break the City's campaign finance laws,” Manhattan U.S. Attorney Preet Bharara said in a statement. "Hou concealed the use of straw donors, subverted the City's electoral system, and obstructed justice."

The arrest is the second connected to Liu's campaign in recent months. A top fundraiser, Xing Wu Pan, was arrested in November for allegedly funneling $16,000 in illegal contributions into Liu's $1.6 million war chest.

Hou allegedly instructed campaign volunteers on various techniques to try to elude authorities, according to undercover video and instant message chats cited in a federal complaint.

In one case, she allegedly told campaign volunteers to forge the handwriting of campaign donors on contribution forms to make it appear as if they had been filled out by the straw donors themselves.

“Fyi, CFB auditors look very carefully at the handwriting . . so if you’re doing that, just make sure the handwriting looks as close to the donors [handwriting] as possible. if it [is] too difficult, don’t take risk," Hou allegedly wrote.

"Gotcha," the volunteer responded, authorities said.

Hou also allegedly tried to cover up the fraud by instructing volunteers not to accept consecutively numbered money orders, which would tip authorities off to the fact that the money was coming from a single source.

In another case, authorities said, Hou volunteered to personally reimburse a $500 donation as the campaign struggled to reach a $1 million internal fundraising target, according to a recorded phone conversation and instant messages exchanged on July 14, 2011.

Officials said Hou also worked closely with campaign bundlers — who collect large sums of money from multiple donors — at events where straw donors were reimbursed, and failed to disclose their involvement in the campaign, as is required by law.

While the campaign disclosed a list of bundlers on Jan. 17, 2012 after months of delays, officials charge the paperwork did not include multiple individuals who had served in that role.

Campaign staff were also videotaped by undercover officers discussing illegal contributions and explaining how straw donors would be invited to campaign events to make it look as if their contributions were legitimate, officials said.

And federal authorities allege that Hou obstructed the government’s investigation by failing to turn over subpoenaed documents.

Liu has denied any knowledge of wrongdoing, but the complaint released Tuesday raises questions about how much he might have known about alleged illegal activity in his campaign.

In one episode prior to a fundraising event, an undercover officer posing as a businessman reported being coached by a donor identified as Pan.

"[Pan] had informed [the undercover officer] that when [Pan] would state this was [the undercover officer's] event to the Candidate, the Candidate would 'know what I meant,' and would understand that all of the donations made at the event were really coming from [the undercover officer's] money," the complaint read.

In a brief appearance in Lower Manhattan Tuesday evening, Liu echoed an earlier statement that said he was shocked by Hou's arrest.

“I was rather stunned when I heard the news this afternoon," Liu said, as cameras flashed. "These allegations against Jenny Hou are uncharacteristic and unexpected of this intelligent, hardworking person that I've come to know and depend upon. And I sincerely hope that she will be treated fairly."

Liu repeatedly ignored point-blank questions about whether he was aware of Hou's alleged actions, and instead insisted his campaign was fully complying with investigators.

"I believe my campaign has acted properly at all times. But I am aware that the complaint suggests that there are instances where it's otherwise," he said.

"Tonight I'm going to sort out exactly what has happened and figure out how to move forward from here."

Hou posted $100,000 bond after a brief appearance in Manhattan federal court Tuesday evening, where she seemed calm and composed, dressed in blue jeans and a plaid checkered shirt.

Before the arraignment, her lawyer, Martin Adelman, described her as an "idealistic young woman" who is deeply involved in her community.

She is charged with one count of conspiracy to commit wire fraud, one count of attempting to commit wire fraud and one count of obstructing a fraud investigation.

Each carries a maximum sentence of 20 years in prison, officials said.

With Ben Fractenberg