NEW YORK—Comptroller John Liu’s 2013 mayoral campaign treasurer was arrested on Tuesday on charges of conspiracy to commit wire fraud, attempted wire fraud, and obstruction of justice in the ongoing investigation into Liu’s campaign finances.
Jia Hou, also known as Jenny Hou, and others “engaged in a scheme to defraud the City of New York … by using straw donors to attempt to obtain campaign matching funds,” states the U.S. Attorney’s official complaint.
The city matches every dollar contributed by a New York City resident with $6, up to a maximum of $1,050 per contributor. Only the first $175 of each donation is matched, and the limit on donations is $4,950, which encourages candidates to obtain smaller donations from multiple donors.
Hou allegedly worked with others to fraudulently document large sums from a few donors as smaller donations from many straw donors. Once straw donors wrote the checks, and the contributions were documented, they were allegedly reimbursed.
A few of Hou’s alleged overt acts that led to this charge include: instructing a campaign volunteer to imitate the handwriting of donors on contribution forms; reviewing fraudulent contribution forms from straw donors at a fundraising event; and offering to reimburse an individual for a campaign donation in the summer of 2011.
“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,” wrote Hou in an instant message to a campaign volunteer on or about July 10, 2011, according to the complaint.
Another instant message conversation on or about July 24, 2011, is evidence, says FBI investigator Donald Chu, that Hou refunded money to straw donors. Chu wrote the report presented in the complaint, which is not a comprehensive documentation of all evidence he gathered in the case.
“THANK YOU!!!!! I’ll mail you out a ck [check] today,” wrote Hou to an individual unidentified in the complaint.
“Why,” asked the individual.
Hou responded, “Well… if I end up having to charge it, which is not the case right now than I’ll mail you a ck [check]. This is just for back up, to save my ass, if the numbers don’t hit 1 million [internal campaign fundraising target].”
“Wait are you taking personal funds to pay me?” asked the individual.
“Don’t worry about it,” responded Hou.
History of Fraud Investigation
The Epoch Times first reported on possible fraud in John Liu’s city comptroller campaign in September 2009. The FBI began investigating Liu’s campaign later that year.
In November 2011, Liu’s 2013 mayoral campaign fundraiser Xingwu “Oliver” Pan was ensnared via an FBI sting operation and charged with fraud. Pan allegedly accepted a $16,000 donation from an undercover agent even though the city’s limit on campaign contributions is $4,950.
Hou got wise to the investigators’ ways, according to Chu’s report.
In August 2009, the New York City Campaign Finance Board (NYCCFB) had noticed that money order numbers were all in sequence in Liu’s comptroller campaign documentation, suggesting they did not come from multiple donors as claimed.
Hou instructed campaign volunteers on May 5, 2011, not to accept money orders “as they can be problematic later on.” Donald Chu believes Hou gave the instruction to avoid NYCCFB scrutiny.
John Liu’s Involvement
Hou and other volunteers placed campaign checks in such a way in their documentation that they covered the date and location information of fundraising events, states the complaint.
In an instant message chat with Hou on or about July 9, 2011, a campaign volunteer asked her whether Liu, referred to in the complaint as “the Candidate,” was concerned about releasing the fundraiser information.
The volunteer asked, “How does [the Candidate] feel that the info about FRs [fundraisers] are on some of the cntrb [contribution] forms?” The volunteer was concerned about having, “the info about the FRs [fundraisers] to be on the cntrb [contribution] form, which will eventually be photocopied and submitted to CFB [Campaign Finance Board].”
Hou replied, “I know what you mean and what your concerns are [.] [The Candidate] never gave me clear instructions on that.”
Chu believes the “concerns” Hou references are that the campaign finance board will be alerted to the possible use of undisclosed intermediaries, and in turn, possible use of straw donors. Chu did not comment on Liu’s involvement.
The complaint gives a detailed account of interactions between an undercover FBI agent and a Liu fundraiser, Pan, that also mentions Liu directly. Pan, referred to as “Intermediary-3” in the complaint, tells the agent that Liu has knowledge of a fundraising event that will not be officially disclosed.
“Here’s the thing, only [the Candidate] knows it’s your [referring to the U/C] event. Legally, legally on the form it’s those money from, those everybody’s. Whatever, whatever is on the form with their [referring to the straw donors’] check,” Pan told the undercover agent. (The material in brackets is from the complaint; “U/C” refers to an undercover agent.)
John Liu is close with Hou’s family, Councilman Peter Koo told the Daily News.
Liu and Hou’s father have public ties. Hou Jianli and Liu traveled to China together in 2007. At a fundraising activity held for John Liu on May 5, 2007, Hou Jianli donated $4,950, the maximum donation permitted by law, $500 of which was later returned. Jianli donated $800 to Liu’s mayoral campaign on Dec. 7, 2010.
Mei-Hua Ru, Liu’s campaign scheduler, got young Hou the job as Liu’s treasurer. Ru has been instrumental in Liu’s rise to power, and “has helped connect Mr. Liu to a network of Chinese businessmen and civic leaders who now make up his donor base in the city’s Asian-American enclaves,” according to the New York Times.
Hou, 25, has been collecting money for Liu’s campaign since December 2010. On her Facebook page, Hou says she is from Beijing, went to Rutgers University, and currently lives in Flushing.
Hou and Liu are the only ones allowed to make disclosure statements on campaign finances, according to the statement.
The complaint states that she discussed with volunteers ways to conceal from the NYCCFB information about intermediaries involved in reimbursing straw donors for their contributions. Hou allegedly had close contact with such intermediaries and did not disclose the involvement of these intermediaries to the finance board.
Hou also did not provide subpoenaed records, thereby impeding the federal investigation.
As he was entering the federal courthouse on Pearl Street, Hou’s attorney, Martin B. Adelman, commented on the case.
In reference to the instant message conversations and emails in the complaint, Adelman said he is “a great disbeliever in emails.” He said Hou will plead not guilty to all three charges.