Mr. Nice Guy - The Saga of Norman Hsu

Photo: The San Mateo County Sherrif mugshot of former New School trustee Norman Hsu. A shorter version of this article appears in the Oct. 15 issue of The New School Free Press. By Amelia Granger and Peter Holslin, additional reporting by Pamela Di Francesco.

By all accounts, former New School trustee Norman Hsu was a nice guy. He donated $80,000 to the university, endowed a Eugene Lang College scholarship, and raised over $1 million for Hillary Clinton's campaign. He even took the concierge at his $8,000 a month condo out to drinks.

"Everybody liked him," said the concierge, who spoke to Free Press reporters on the condition that he remains anonymous, due to the current federal investigation into Hsu's suspicious business practices.

Between late August and early September the Wall Street Journal ran a series of increasingly revelatory articles about this millionaire Chinese national and prominent "Hillraiser." It turned out that the 56-year-old Hsu (pronounced "shoe") was a fugitive and an alleged con artist who piloted a multi-million dollar criminal enterprise. He apparently took advantage of campaign donors and countless personal investors, and duped an investment firm led by the promoter of the original Woodstock music festival out of more than $40 million. He is currently facing charges in federal court of wire and mail fraud and illegal campaign contributions.

The concierge voiced a common refrain. "We were all bugged out," he said.

In an interview in his office last Friday, New School President Bob Kerrey downplayed the impact of the Hsu scandal on the university.

"It's an unpleasant experience," Kerrey said. "A big hit? No. Not even a small hit."

Kerrey said that university trustees had discussed the matter but decided not to change any procedures to recruit donors and trustees. The New School University still possesses the $80,000 Hsu has donated since 2006, Kerrey said, but is waiting to see how the trial unfolds before making any decisions regarding the money.

HOOK, LINE, AND SINKER

Hsu's problems with the law date back to 1992, when he was convicted of defrauding investors in a million dollar import scheme but never showed up for his sentencing. Last month, after the Journal articles attracted the attention of California authorities, Hsu turned himself in only to flee again, at which point a more complete picture of his financial dealings emerged.

Hsu is charged with running a Ponzi scheme—named after 1920s Boston conman Charles Ponzi—that took in $60 million. In a Ponzi scheme, the perpetrator finds a small number of initial investors who invest in a bogus business venture that offers a huge return in a very short time, then pays them with money gathered from a second wave of investors. Hsu's front companies were menswear import firms based in New York and called Components Ltd. and Next Components Ltd.

Two of Hsu's targets were Yau Cheng, who worked for Hsu while he was a real estate investor in San Francisco, and Joel Rosenman, who organized the Woodstock festival. Cheng began investing in Hsu's projects in 2001, and Rosenman in 2003, according records in their civil suit against Hsu. They both made handsome profits from their initial investments. Characteristically, the Ponzi scheme snowballed when their family members and associates joined the enterprise in August of 2003.

Hsu paid out returns to Rosenman and Cheng reliably for years, gaining their trust. In 2005 they created Source Financing Investors LLC (SFI) to continue investing in Hsu's deals.

To scam Source Financing Investors LLC, Hsu told investors that he had a simple and legal process to purchase orders of men's apparel from factories in China, selling them to an American financial company called Heller Financial, which sold the products to American fashion outlets like Nordstrom, L.L. Bean, Macy's and Hugo Boss. Hsu told SFI that he needed their money to finance the transaction. According to court records, he gave SFI post-dated checks for 22% returns, and signed contractual agreements for each deal.

The investors never bothered to verify Hsu's connections with businesses and factories in China or high-end fashion labels in the United States, court records note.

All the while, Hsu recruited other investors across the country to cover SFI's returns. Some of these investors, according to federal court records, were instructed to form investment groups in their communities with investors they recruited. This scheme spanned the country, with investor-victims from New York, New Jersey, and California.

One of the heads of these funds told the FBI that Hsu told him he had to make specific campaign contributions in order to be involved in Hsu's future investment opportunities.

SFI usually reinvested the proceeds from one deal into the next. In doing so, the investment firm fell for the classic Ponzi scheme: if investors had tried to cash their returns or stopped investing, their checks would have bounced and the scheme would have collapsed.

Eventually, of course, that is exactly what happened.

FRIENDS IN HIGH PLACES

After Hsu fled his sentencing hearing in 1992, federal authorities say he moved to Hong Kong, where he ran a series of apparel companies that eventually dissolved. He filed for bankruptcy in 1998, then moved to San Francisco and began investing in real estate. By 2006, Hsu had begun to make a name for himself as a top Democratic party fundraiser and had become a regular, if still somewhat unknown, figure in New York political circles.

Hsu lived in a condo on the third floor of a new, six story building at the corner of West Houston and Wooster streets. The concierge said that Hsu lived in one of the smaller units, but still paid about $8,000 a month.

On the same day Free Press reporters visited his building, FBI agents seized and removed the contents of Hsu's apartment. The contents, according to court documents, included a extremely valuable wine collection and a saxophone autographed by Bill Clinton.

Hsu often threw lavish parties for Democratic politicians and candidates. In 2006, according to the Wall Street Journal, he hosted a party for leading Democrats to celebrate the party's return to power in Congress. The venue was Buddakan, an exclusive spot in New York City where a private event costs $100,000, according to an event planner who spoke to the Free Press last week. According to guests, Hsu got on the D.J.'s microphone and yelled, "If you are supporters of Hillary for president in 2008, you can stay. Otherwise, get out."

The concierge told the Free Press that Hsu gushed about his political causes, the New School, Bob Kerrey, and his new position on the Board of Trustees. Hsu also loved talking about the Democrats he was raising money for.

"He wanted them to win," the concierge said.

THE SCHEME COLLAPSES

In August, when Rosenman and Cheng first read in the Wall Street Journal about Hsu's suspicious campaign contributions, Hsu assured them that there was nothing to worry about. But by early September, the Journal had delivered fourteen days of damning coverage about Hsu's mysterious past. Meanwhile, Hsu had returned to California to face trial for skipping his sentencing hearing in the 1992 fraud case.

On September 5, 2007, Hsu posted $2 million in bail and skipped town a second time, heading east on an Amtrak train called the California Zephyr. Authorities say Hsu ingested a handful of pills in a botched suicide attempt. The next day, police arrested the dazed and shirtless apparel executive near Grand Junction, Colorado. In his locked suitcase FBI agents discovered $7,000 in cash and the paper trail linking Hsu to his investors, including a handwritten ledger of campaign contributions he had instructed them to make.

Over the next few days, SFI investors discovered the extent to which they had been duped. On September 7, two deals with Hsu matured—meaning payment was due. But according to court records, when SFI associates tried to deposit the checks from Hsu, each for over $1 million and post-dated for September 5, they bounced. On September 12, SFI associates tried to deposit two more checks, both for over $1 million and post-dated September 12. Again, the checks bounced.

At the time, according to records for a $40 million civil suit recently filed by SFI against Hsu, Rosenman and Cheng's company had invested in 33 other deals with Hsu that had not yet matured, at a cost amounting to more than $35 million. When they investigated Hsu's claimed connections to the fashion industry, Rosenman and Cheng discovered that Hsu never had any, or at least none they could identify.

The doorman at 1431 Broadway, the offices of Components Ltd. and Next Components, told the Free Press that he recalled seeing Hsu there only "once or twice."

Theodore Chao was listed as Components Ltd.'s "agent," presumably the company's attorney, on Hsu's contracts with SFI. Chao supposedly occupied 510 8th Ave., Suite 508. But, as the Free Press discovered last week, there does not appear to be any such address.

"While SFI thought that it was investing in a legitimate clothing manufacturing enterprise," SFI's civil lawsuit against Hsu reads, "it was really providing Hsu with millions of dollars in cash to fund Hsu's pet political fundraising projects, and an extravagant international lifestyle."

SFI and Joel Rosenman's lawyers did not respond to phone calls from the Free Press asking for comment about developments in this case. Hsu's lawyers also declined to be interviewed for this article.

On September 14th, Hsu "admitted that the phony deals involved investments in the sale and distribution of items that did not actually exist," F.B.I. Special Agent Patricia O'Connor said in a statement in federal court. "Hsu also admitted that he made implied threats to his investors to pressure them to contribute to political candidates he supported."

BOARD MEMBER, AND CON MAN

Kerrey told the Free Press that he was introduced to Hsu by Paula Levine, a consultant who helps candidates raise money in New York City and who has worked with Kerrey on campaign issues in the past.

"She met Norman and said, 'This is a guy that you really ought to meet,'" Kerrey said. "'He's expressed some interest in being involved [in the New School].'"

Levine did not respond to phone calls from the Free Press asking for comment.

Kerrey said the board typically looks for candidates that are interested in the university, live in New York City and can attend meetings, and are willing to donate $25,000 a year.

Hsu was named to the Eugene Lang College Board of Governors in May 2006, according to Caroline Oyama, the New School communications director. The university's Board of Trustees voted Hsu onto the board on July 1 of this year, Kerrey said. Hsu resigned in late August after the first Journal articles appeared. In all, he served less than sixty days.

Since 2006, Kerrey said that Hsu had donated about $80,000 to the university, money that helped fund two major annual fundraising dinners and a Lang scholarship. Kerrey said the university has not yet decided what to do with the money.

"What we're planning on doing is just watching and seeing what happens in court," he said.

The New School does not run background checks on possible donors. Kerrey said that the Trustees, after reexamining their recruiting and voting procedures, had ultimately decided not to change that policy.

Kerrey insisted that the fallout from the Hsu scandal would not tarnish The New School's reputation. When asked by the Free Press if this incident demonstrates that the university has compromised its values to find rich trustees with political connections, Kerrey bridled.

"For God sakes, I'm a former U.S. Senator!" he said. "I don't need any friggin' help from Norman Hsu or anybody else."

Pakistan Training Camps Gaining in Popularity

Terrorist training in Pakistan is, evidently, now more popular than training in Iraq.

A Revolutionary Pledges to Take the Horowitz Mob Down

A fanatical battle is brewing.

This week's issue of the Revolutionary Communist Party's paper, Revolution, publishes a call to take down David Horowitz's upcoming “Islamo-Fascism Awareness Week,” a wave of fanatical campus consciousness raising that will hit the country October 22-26.

The event's student guide reads that the week purports to expose two "Big Lies" of the political and academic left: "that George Bush created the war on terror and that Global Warming is a greater danger to Americans than the terrorist threat." Of course this is a ham-fisted assertion taking aim at a body of people so large and diverse that logic deems such unity on the two matters far too improbable--which seems to deny the event any intelligent thrust and make it all hard to take seriously. Last week, Revolution seemed to get a lukewarm response from its readership. Some thought to let the wackos have their days in the sun while parts of the world go on getting wrecked by war and famine.

But we can't ignore it, says Toby O'Ryan of the Revolution. After all, there's something Gestapo about the activities: for one, students are encouraged walk around presenting Muslim students and administrators with a "petition denouncing Islamo-Fascist violence against women, gays, Christians, Jews and non-religious people." A refusal to sign, it seems, means being the enemy of America and enabler for the Islamic terrorist movement against women, gays, Christians, Jews and all other rational and free-thinking peoples.

O'Ryan sees a crucial victory for the Horowitzian nutcases if the revolutionaries ignore the events. What to do? "The only way to make people feel compelled to examine those assumptions is by effectively challenging them with the truth—with hard-hitting and documented facts to back it up," he writes. "That means taking on and tearing to shreds Horowitz’s arguments and bringing forward the truth in opposition to that."

Finally, he engages the proverbial Alamo routine, drawing a line in the sand: "There can be no bystanders; the question is whether the right side of this argument will speak up with all the power and sweep that it can muster and not only prevent a worsening polarization on campus, but start to change things for the better."

So, what side are you on--the Right's, or the right's?

Photo: The eminent racist David Horowitz.

Terrorism - Cool Again?

Our adventure in Iraq has started an explosive trend.

The war was supposed to rid the world of Al-Qaida and its alleged state sponsor, Saddam Hussein. But Al-Qaida has not only regrouped, to be stronger than before, according to findings in this summer’s National Intelligence Estimate. The terrorist movement is growing.

Al-Qaida in Mesopotamia, a homegrown Sunni group from Iraq, is slaughtering sheiks and military officers that support reconciliation between Sunnis and Shias.

This summer, Fatah al-Islam, a new terrorist militia supported by Syria, mobilized in a Palestinian refugee camp and waged war on the Lebanese army, in the name of Al-Qaida’s fanatical Wahhabism. Lebanon's National police commander, Maj. Gen. Ashraf Rifi, described the group as “imitation al-Qaida. A ‘Made-in-Syria’ one.”

Al-Qaida in the Islamic Maghreb, a group that grew up in Algeria in the 1990s and for many years called itself the Salafist Group for Preaching and Combat, has changed its name and piloted a new wave of bombings against North Africans over the past year. GSPC’s founder, Hassan Hattab, recently turned himself in to the Algerian police. But he said that the renamed group wanted to make Algeria “a second Iraq.”

On top of that, since the September 11, 2001 attacks, terrorist bombs have erupted across the Middle East, in Indonesia, Spain, Scotland and England. Police have foiled plots in the U.K., Germany and the United States.

Al-Qaida has an American P.R. guy named Adam Gadahn. He grew up listening to death metal, and then he got rid of his collection and converted to Islam. Recently, Osama bin Laden encouraged other Americans to convert to Islam on a propaganda video, presumably so we join the fight. Meanwhile, Al-Qaida media centers in Iraq keep turning up. USA Today recently reported that the U.S. military raided six Al-Qaida media houses in Iraq. The houses were flush with equipment: one house in Samarra was stocked with 12 computers, 65 hard drives and a filming studio. These spots are used to film and distribute videos of suicide bombings, attacks on Americans, interviews of militants for news outlets and recruiting videos for would-be terrorists.

According to a National Intelligence Council report from 2005, Iraq has become even more popular a destination for terrorist recruits than Afghanistan, where the C.I.A. and Pakistan’s intelligence service once funded, armed and trained a volunteer force of Arab mujihadeen to take on the Soviet invasion, only to see these holy warriors form the Taliban and Al-Qaida.

In part, Iraq is so alluring a destination for terrorists because over two million Iraqis have escaped their country. Many of them are middle-class professionals—-doctors, scientists, engineers, and archaeologists, precisely the type of people a country needs to remain stable and democratic.

That means the country, along with 170,000 families who have been internally displaced, is being torn apart by warring Shia militias and Al-Qaida in Mesopotamia, which has assassinated numerous advocates of reconciliation there.

The recent “surge” strategy has staved off attacks, somewhat. The military has fostered an alliance with local Sunni sheiks against the group. But ours is a quixotic fight: to ensure that deserted houses, apartment buildings, neighborhoods and entire towns will not remain safe houses, weapons caches and torture chambers for years to come, we will need a prolonged American presence with hundreds of thousands of troops. Few Americans are so devoted to securing a safe future for Iraq. Others seem to want to institutionalize the ethnic divide.

Hence, Iraq has become a training ground for militants. It is dangerous, but you can travel to Iraq for an education in various techniques: clandestinely raising funds, shooting an AK-47, building a remote-controlled bomb with bags of fertilizer and a cellular telephone. This is on-the-job training, because there is always a time to put your newfound skills into practice.

In the NIC report, intelligence experts expected that foreign terrorists will eventually filter out of the country and return to their own, presumably to take up jihad. “There is even, under the best scenario, over time, the likelihood that some of the jihadists who are not killed there will, in a sense, go home, wherever home is, and will therefore disperse to various other countries,” David B. Low, the national intelligence officer for transnational threats, told the Washington Post on Jan. 14, 2005.

The report, a year’s effort complied from research by over 1,000 foreign and American experts, does not anticipate a slump in the popularity of terrorism. It estimates that by 2020, Al-Qaida will have splintered into a variety of offshoots and local terrorist cells. With the aid of the Internet, they will be infinitely more mobile. “Training materials, targeting guidance, weapons know-how, and fund-raising will become virtual (i.e. online),” the report says.

In a way, the United States has become its own worst enemy. Thanks to the war in Iraq, terrorism is getting more popular every day.

Blackwater - Our Worst Enemy

"At the center's original lodge, [Erik Prince] proudly pointed out a stuffed bobcat, a wild turkey and a beaver that he recalled killing. The lobby of the Blackwater headquarters resembles a ski lodge with a twist: The front doors feature barrels from .50-caliber machine guns. Inside, a glass showcase displays replicas of guns used to assassinate presidents."

Read this. A loose cannon contracting company that specializes in building weapons and private armies gains a foothold the American government. So does that sow the seeds of civil war?

Bad Dancers: Abroad Shall We Turn?

This article runs in the October 15 issue of The New School Free Press.

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White Americans can rock, but unlike illustrious Bollywood stars, white people suck at dancing. Overindulgent intake of stale electro and disco derivatives, even derivatives of derivates (Bloc Party), can do that to a person. Don't fret. All hope is not lost for those with spirit. Let's take a look overseas to make those dancing legs twitter.

Ethiopia: "Ethiopiques, Vol. 3" (Buda Musiqe, 1975)

Seductive auxiliary police brass bands, swinging saxophone quartets, dramatic crooners like Mahmoud Ahmed and Hirut Bèqèlè, playing to the revolutionary backdrop of the 1970s, as Emperor Haile Selassie's empire fell—that's soul. See also Ethiopiques volumes 1 through 22.

Netherlands: "Nightmares From Rotterdam" (Moonshine Music, 1999)

Netherlanders are beguiling, known for their relaxed demeanors and close proximity to snow, and renowned for their gabber. Gabber consists of a heavily distorted kick on a drum machine, an extremely abrasive synth line, and some claps or cymbal crashes to punctuate the headache. Neophyte, DJ Paul, The Headbanger and the other brutal masters induce in their audience a frenetic, air-punching mania. Hits like DJ Rob and MC Joe's "Beat is Flown 1999" reveal a love for corny techno, too.

Algeria: "Algerian Raï" (ARC Music, 2005)

Raï—a musical genre from North Africa that means "opinion", "advise" or "point of view" in Arabic—is more punk than The Clash. It burst into world popularity in the 1990s as a violent Islamic terrorist movement tore Algeria apart. The offensive "category" called "world music" may actually apply with raï, which brings together Arabic folksong, hip-hop, ska, house and trance in Arabic, French, even Spanish. "Algerian Raï" is full of dramatic old-school electronic pop hits and synth-led balladry, with rich, microtonal vocals by artist the likes of Cheb Hasni. Also see Khaled, the King of Raï.

India: "The Bombay Connection, Vol. 1: Funk From Bollywood Action Thrillers 1977-1984" (Bombay Connection, 2007)

Hit songs and instrumentals from India's obscure spy flicks, like "Bond 303" and "Kashish," tear through tabla breaks, sexy funk lines, screaming horn licks, high-pitched women vocals and wild violin solos. "The Bombay Connection," compiling works by the prolific two-person composing teams Kalyanji-Anandji, Sonik-Omi, Lxmikant-Pyarelal and more, brings to mind a Hindi-speaking James Bond on an acid trip. This kind of music sends a powerful message: it's time to shirk the West's confusing dating rules, gather up a couple dozen friends and engage that mysterious love-prospect in an epic dance routine.

Cool Blue

Blues are rife on rainy days.