Prepared Remarks Concerning United States v. Norman Hsu by Michael J. Garcia United States Attorney for the Southern District of New York New York, New York September 20, 2007 GOOD MORNING. TODAY WE ANNOUNCE THE UNSEALING OF FRAUD AND CAMPAIGN FINANCE CHARGES AGAINST NORMAN HSU. HSU IS CHARGED WITH PERPETRATING A MASSIVE INVESTMENT FRAUD AGAINST VICTIMS NATIONWIDE. IN DOING THIS HE USED A CLASSIC PONZI SCHEME IN WHICH VICTIMS WERE DEFRAUDED OF MORE THAN 60 MILLION DOLLARS. HSU IS ALSO CHARGED WITH USING OTHERS, INCLUDING SOME OF HIS FRAUD VICTIMS, AS STRAW DONORS TO MAKE TENS OF THOUSANDS OF DOLLARS IN ILLEGAL CAMPAIGN CONTRIBUTIONS TO VARIOUS CANDIDATES FOR U.S. CONGRESS AND PRESIDENT.
IN ADDITION TO UNSEALING THESE CHARGES TODAY, EARLY THIS MORNING, THE FBI AND THIS OFFICE SEIZED THE CONTENTS OF FOUR BANK ACCOUNTS USED BY HSU TO CARRY OUT THIS CRIMINAL ACTIVITY. FIRST, WITH RESPECT TO THE PONZI SCHEME, HSU SET HIMSELF UP AS MANAGING DIRECTOR OF TWO COMPANIES: COMPONENTS LIMITED AND NEXT COMPONENTS LIMITED. THESE COMPANIES PURPORTED TO ENGAGE IN SHORT-TERM FINANCING TRANSACTIONS GUARANTEEING HIGH RATES OF RETURN. INITIALLY, HSU RECRUITED A NUMBER OF SEED INVESTORS WHO IN RETURN FOR MONEY INVESTED WERE GIVEN POST-DATED CHECKS REPRESENTING THE PRINCIPAL PLUS INTEREST. THESE CHECKS WERE IN FACT PAID, REASSURING INVESTORS THAT THIS WAS A LEGITIMATE, PROFITABLE BUSINESS. THE SEED INVESTORS IN TURN RECRUITED FRIENDS AND ASSOCIATES TO INVEST WITH HSU: IN A NUMBER OF CASES AS -2-
OUTLINED IN THE COMPLAINT, THE SEED INVESTORS SET UP FUNDS TO COLLECT MONEY TO BE INVESTED WITH HSU. SOME MONEY WAS PAID OUT ON THE OLDEST INVESTMENTS, BUT MOST WAS STOLEN BY HSU. THERE WERE NO LEGITIMATE BUSINESS TRANSACTIONS BEING CONDUCTED BY HSU'S COMPANIES. LIKE ALL PONZI SCHEMES, HSU'S EVENTUALLY COLLAPSED, LEAVING INVESTORS HOLDING MILLIONS OF DOLLARS IN BAD CHECKS. IN THE COURSE OF THIS PONZI SCHEME, HSU ALSO PRESSURED INVESTORS TO MAKE POLITICAL CONTRIBUTIONS TO DESIGNATED CANDIDATES. IN SOME CASES, HSU ASKED INDIVIDUALS TO MAKE CONTRIBUTIONS IN THEIR OWN NAME BUT ON HIS BEHALF, THUS VIOLATING FEDERAL LAW. FOR EXAMPLE, IN 2006, HSU PROVIDED TWO INDIVIDUALS WITH A LIST OF POLITICAL ORGANIZATIONS AND CANDIDATES TO WHICH -3-
THEY SHOULD MAKE CONTRIBUTIONS. THESE STRAW DONORS WERE INSTRUCTED TO WRITE SEPARATE CHECKS FOR EACH CONTRIBUTION. HSU REIMBURSED THE STRAW DONORS DIRECTLY FOR THOSE CONTRIBUTIONS. IN THIS WAY, HSU CIRCUMVENTED THE LAWS GOVERNING THE MAXIMUM AMOUNT AN INDIVIDUAL MAY LEGALLY CONTRIBUTE TO ANY GIVEN POLITICAL ORGANIZATION OR CAMPAIGN. HSU WAS ARRESTED ON SEPTEMBER 6, 2007 IN DENVER, COLORADO ON A WARRANT CHARGING HIM WITH FLEEING TO AVOID PROSECUTION IN STATE COURT IN CALIFORNIA. ON SEPTEMBER 15, 2007, NEW YORK FBI AGENTS SECURED A SEARCH WARRANT FOR A NUMBER OF ITEMS SEIZED FROM HSU AT THE TIME OF HIS ARREST, INCLUDING A LAPTOP COMPUTER, A BLACKBERRY AND A SUITCASE. IN THE SUITCASE, AGENTS RECOVERED: THOUSANDS OF DOLLARS IN CASH; CHECKBOOKS FOR ACCOUNTS USED IN THE FRAUD AND CAMPAIGN FINANCE SCHEMES; HUNDREDS OF THOUSANDS OF -4-
DOLLARS IN CHECKS FROM HSU'S VICTIMS; BANK RECEIPTS SHOWING MILLIONS OF DOLLARS IN FINANCIAL TRANSACTIONS CONDUCTED BY HSU; AND HANDWRITTEN LEDGERS REFLECTING SPECIFIC AMOUNTS OF CAMPAIGN CONTRIBUTIONS OTHERS MADE ON BEHALF OF HSU TO CANDIDATES FOR FEDERAL OFFICE. YESTERDAY, A COURT IN COLORADO ORDERED HSU EXTRADITED TO CALIFORNIA WHERE HE IS EXPECTED TO ARRIVE TODAY OR TOMORROW. THIS OFFICE WILL COORDINATE WITH THE CALIFORNIA ATTORNEY GENERAL TO RETURN HSU TO NEW YORK TO FACE THE CHARGES ANNOUNCED TODAY. THIS CASE IS ABOUT-SELF PROMOTION AND GREED. HSU PERPETRATED A MASSIVE PONZI SCHEME TO SUPPORT HIS LAVISH LIFESTYLE AND IN THE PROCESS STOLE TENS OF MILLIONS OF DOLLARS FROM UNSUSPECTING INVESTORS. IN COMMITTING ACTS OF CAMPAIGN FINANCE FRAUD, HSU CORRUPTED A SYSTEM IN WHICH TRANSPARENCY IS PARAMOUNT, -5-
IN ORDER TO PURCHASE A PLACE ON THE CELEBRITY CAMPAIGN CIRCUIT. I WOULD LIKE TO COMMEND THE WORK OF THE FBI AGENTS IN NEW YORK AND IN COLORADO, AND THE PROSECUTORS FROM THE PUBLIC CORRUPTION AND ASSET FORFEITURE UNITS IN THIS OFFICE. OUR VICTIM WITNESS UNIT IS WORKING WITH THE FBI TO IDENTIFY ADDITIONAL VICTIMS OF THIS FRAUD AND THERE IS INFORMATION IN THE PRESS RELEASE FOR VICTIMS SEEKING TO CONTACT THIS OFFICE. WE ARE COMMITTED TO RECOVERING AS MUCH MONEY AS POSSIBLE TO COMPENSATE THOSE VICTIMS. THANK YOU. -6-