While California state prosecutors were dealing with the business-fraud case, the Justice Department was ramping up a look at Mr. Hsu's more recent political activities. People familiar with the new probe said Justice officials are investigating a pattern of donations by acquaintances of Mr. Hsu's in California. The investigation began following a Wall Street Journal story this past week about donations by these people -- mail carrier William Paw and the five other members of his family who list their Daly City address as 41 Shelbourne Ave., a small house near San Francisco airport.
Mr. Hsu has denied reimbursing any associates for their donations, which would be a felony, or other wrongdoing in his fund-raising activities. "I've asked friends and colleagues of mine to give money out of their own pockets, and sometimes they have agreed," he said in an email to the Journal this past week. A member of the Paw family also has said the family's donations were their own...
Mr. Smetana said he figured Mr. Hsu had returned to Hong Kong. Indeed, in magazine articles in 1993 and 1994, Mr. Hsu was identified as managing director of Newton Enterprises Inc., a Hong Kong-based exporter.
In recent years, he moved to New York, and told acquaintances he was working in the fashion industry. While he did run apparel companies at various times, some of the firms listed as his employer on campaign-contribution records are hard to track.
Mr. Hsu has maintained a very low profile within New York's apparel industry. Representatives of one of the country's main import groups, the U.S. Association of Importers of Textiles and Apparel, said they had never heard of Mr. Hsu. Firms that track shipments to significant U.S. importers also found no record that companies listed by Mr. Hsu had imported goods into the U.S. over the past year.
With Democrats racing to give back Hsu's donations, the political damage to them could be limited. The question is whether some elected officials had a close association with Hsu, and/or were aware of his shady dealings, and still associated with him.
After all, if some donor you've never heard of breaks the law, a candidate can hardly be accused of doing anything shady. But if the donor arranges millions in donations, regularly meets with you, or has a role in your campaign -- well, you'll need to answer some questions.
Mr. Hsu's reputation in New York was far different from the one he left behind in California. In 2004, he began circulating among Democratic donors at fundraisers, and became a huge "bundler" -- somebody who collects myriad checks from networks of friends, family and business acquaintances for political campaigns.
"I like him a lot," Mr. Kerrey said. "He's one of these guys in politics who gives and doesn't ask for anything."
Mr. Hsu raised more than $1 million for Mrs. Clinton's campaign and has been a major rainmaker for various Democratic candidates and causes.
Asked if he knew how Mr. Hsu raised so many campaign checks, Mr. Kerrey said, "I'm concerned about it. My hope is he didn't break the law."
Since Hsu served as a trustee at the New School, Kerrey's probably unable to avoid questions about him. But how did he wind up with such a position?