The lobbyists were puzzled, not by Hayes’s request for silence–they’d known for days that the talks were winding down–but by the location she’d chosen to pass on the sensitive news: a conference room inside the Chinese Trade Ministry. That’s analogous to, say, U.S. arms-control negotiators’ holding a strategy meeting in the Kremlin. But what surprised them even more was that a lobbyist from the other side sat in on the meeting. William Houston was a familiar face to everyone in the room. The chief textile negotiator under Presidents Reagan and Bush, Houston had left the U.S. government to set up shop as a private consultant. Among his clients: Stephen Lau, a wealthy Hong Kong clothing exporter. Lau, who had attended two intimate fund-raising dinners with President Clinton, had millions potentially riding on the treaty’s outcome. To the dismay of the American textile lobbyists, Hayes didn’t ask her old friend Houston to leave the meeting, even though he had told some of the American textile executives that his client Lau was a trade adviser to the Chinese government.
Hayes insists that she had no authority to kick Houston out and that nobody complained at the time. Houston says he never passed confidential information on to Lau or anyone else. Still, later that same night, the trade talks broke down. The tentative deal Hayes had revealed just hours before was in limbo. After yet another round of talks, a deal was eventually struck. But some of the tough new quotas Hayes had trumpeted just days before were watered down–a blow to American textile companies and American workers, but precisely the outcome Lau and the Chinese government wanted. Hayes nonetheless says the American textile industry was happy with the final agreement.
Just how did a Hong Kong entrepreneur like Stephen Lau come to have such access to U.S. trade negotiations–and to the president of the United States? Sen. Fred Thompson’s committee investigating the campaign-finance mess, which resumes its public hearings this week, may soon be asking the same question. Already the committee has begun an investigation, interviewing Lau’s American business partner about how the Hong Kong exporter–who can’t legally make campaign contributions–attended two fund-raisers with the president.
Given Lau’s history with U.S. law enforcement over the years, the political red flags about him should have gone up immediately. NEWSWEEK has learned that Lau was a target of an intensive seven-year investigation by U.S. Customs, which suspected Lau and his company, Synergy Sport International, of systematically cheating the agency by falsifying import documents. An undercover customs agent posed as a low-level employee, infiltrating Lau’s New York office. In court documents obtained by NEWSWEEK, Justice Department prosecutors accused Synergy of making ““illicit payments’’ to Chinese officials to help obtain phony textile visas. The courts threw out part of the case against Lau, but in 1995 he and an American partner agreed to pay a $3 million penalty to settle the case without admitting guilt. Lau told NEWSWEEK he paid the fine in order to ““get the monkeys off my back.’’ A New York company that represented Lau in the United States later pleaded guilty to a felony charge of customs fraud.
Soon after the settlement, Lau embarked on a campaign to polish his image. On Nov. 9, 1995, Tom Nastos, a business partner of Lau’s in New York, brought Lau and his wife as his guests to a small fund-raising dinner with Clinton at the Hays-Adams Hotel, across the street from the White House. According to Nastos, Lau had his picture taken shaking hands with the president. That same day, Federal Election Commission records show, an obscure New York company headed by Nastos called T.J. Highlander contributed $50,000 to the Democratic Party. Nastos admits the contribution was made to pay his and Lau’s way into the dinner. Ten months later they were back at the Hays-Adams for another meal. This time Nastos ponied up $20,000.
If Lau’s connection to Clinton winds up a public liability, the biggest loser may be Rita Hayes, who is nominated to be ambassador to the World Trade Organization. Her Senate confirmation hearings could begin as early as this month, and they promise, like so many things connected to Clinton and campaigns, to be rocky indeed.
