PHANTOM WITNESS

By MICHAEL WEISSKOPF/WASHINGTON

John Huang had never before lost his cool in front of his colleagues. Yet here was the Democratic fund raiser agitating for three top executives from the world's biggest foreign investor in China to be invited to a White House coffee for prospective donors. Party officials saw no point in taking up space with foreigners not legally entitled to contribute. But "it was the only time Huang ever snapped," a former party official told TIME. And as a result, the three men from the Bangkok-based CP Group slipped into the White House in early June in 1996 to make their pitch to the President about China trade. Government investigators tell TIME that before and after the encounter, wire transfers totaling $625,000 were sent from the CP Group and an associate in Bangkok into the accounts of two Huang fund-raising associates or their families. Was it just a coincidence?

As Senate hearings open this week, Washington's campaign-finance scandal has come down to this: Republican Fred Thompson wants to know if Huang, the architect of Asian fund raising and the must-see Democrat for ethnic-Chinese moguls like the CP trio, was helping funnel foreign money into Democratic coffers and sending back U.S. government secrets in return. In tracing the money and telephone connections of Huang's fund-raising world, Thompson's investigators want to know: Was he a spy for China in the guise of a Democratic moneyman? Did he funnel money from Overseas Chinese-led companies by running it through a U.S. network of donors? Did he pass classified information about economic developments in Asia to his former employer, a burgeoning conglomerate with assets all over the continent? So far, Thompson's team has only partial answers, but it knows where the story begins.

The unholy liaison between foreign dollars and diplomacy began as a small, quiet meeting in the Oval Office. Standing before Bill Clinton on a September morning in 1995 were James Riady, the suave Chinese-Indonesian financier who was pushing to keep U.S. trade lines to China open; and Huang, networker par excellence, offering to raise money for the Democratic National Committee from Asian Americans he thought were good for $7 million.

The Clinton meeting had had its Republican counterpart just two weeks earlier, when G.O.P. chairman Haley Barbour pleaded his case aboard the yacht of Hong Kong tycoon Ambrous Tung Young. Barbour had offered Young a voice in shaping U.S.-China policy for the new think tank of the G.O.P.'s congressional majority. And by the way, Barbour added, the party needed a favor. Could Young forgive what remained of a $2.2 million loan that his overseas firm had guaranteed so the Republican Party could stop pouring money into the think tank and pour money into campaigns instead?

Nine months after evidence of foreign cash in U.S. politics surfaced in the last days of the 1996 campaign, Americans know that both Democrats and Republicans were so desperate for the unrestricted dole of "soft money" that they went overseas to find more. Either directly or through middlemen, both parties turned to Overseas Chinese businessmen with large commercial interests in the People's Republic of China for multimillion-dollar cash infusions. Both parties gave their benefactors a fair hearing on party trade policy toward China, and both maintained elaborate ruses to hide their new sources of cash. Yet the Democrats, it turned out, were far more successful at the game than the Republicans, and no Democrat was a better player than John Huang.

Huang got his wish of a D.N.C. job in late 1995 and went on to become the most central figure in Washington's fund-raising mess. And yet he remains a mystery. If he was a P.R.C. spy posing as a fund raiser and didn't want to leave any footprints, why would he submit receipts for taxi rides to the Chinese embassy? If he was busily slipping secrets to his old firm, the Lippo Group, why did he refuse the chance to win higher security clearances?

Thompson is not expected to expose every Democratic fund-raising transgression at the hearings he will chair through much of the summer. Most of the primary witnesses have refused to testify, in fear of increasing their exposure to criminal charges now that a federal task force of FBI agents and prosecutors is proceeding at a much slower pace to investigate Huang and his web of donors. Thompson is limited by law in his scope, dogged by Democrats to expand the probe and pressed by his own party's conservatives to confine it. Meanwhile, key Democratic fund raisers, including Charlie Yah Lin Trie and Pauline Kanchanalak, have either fled the country or were abroad to begin with.

But as Thompson's potential star witness, Huang may have as much value bound as unbound. The Constitution gives Huang the right to remain silent, but not to avoid a trip to the Capitol. If Thompson wants to compel Huang's appearance, all he needs to do is issue a committee order and, if necessary, get a judge to dispatch U.S. Marshal escorts to Huang's California home. And that would be only the opening act of a great political play.

Dramatic effects may be required for Thompson to give new life to a story that so far has proved nothing more than the need for campaign-finance reform. Nor has the tantalizing possibility of high-level government espionage materialized. Reports of a Beijing plot to reach deeply into American politics are sketchy, based on intercepts of telephone calls to the Chinese embassy that intelligence analysts say can be interpreted variously.

The allegation that corporate spying went on is much stronger, though hardly conclusive. Huang was a top executive for the Lippo Group before taking a farewell financial package of $788,750 and going to work for the Commerce Department in July 1994. With a top-secret security clearance, he received one-on-one briefings by a CIA officer every two weeks on average. Information on economic developments in Asia came in two forms: raw intelligence data that Huang could study but not keep, and so-called finished reports he was supposed to store in his office safe. Although investigators say little of the information was sensitive enough to interest Lippo, they are examining whether Huang called Lippo shortly after some intelligence briefings. And he made regular use of a private office across the street from Commerce, where he used phones and a fax machine. The suite was occupied by Stephens, Inc., the Arkansas-based investment-banking firm and onetime Lippo business partner.

Bank records provide other clues. The $625,000 in wire transfers from Bangkok around the time of the White House coffee last June went to two of Huang's closest fund-raising associates in Washington--Trie, a Taiwan-born dealmaker and old Clinton pal from Arkansas; and Kanchanalak, a Thai business consultant. What intrigues investigators is the timing--and where the money went. The trail splits in three directions: CP sent $100,000 to Trie and $50,000 to Kanchanalak; Kanchanalak's husband, a CP consultant, wired an additional $475,000 to his wife and other family members. Shortly after those transfers, the Kanchanalaks gave $450,000 to the D.N.C. and four state Democratic parties. Huang was credited in D.N.C. audits with raising that money. Investigators are trying to determine whether Trie transferred any of CP's money to straw donors who then gave the money to the D.N.C.

Like several other scandals in this presidency, Donorgate has roots in Little Rock of the early 1980s. It was there the Riady family and the Stephens firm joined up to acquire a bank. James Riady was sent to run it and hired a young banker who had knocked around Asia--John Huang. The outsiders found it easy to penetrate Little Rock's small circle of professionals. They socialized with Governor Bill Clinton and met several lawyers who would re-emerge in Donorgate: C. Joseph Giroir Jr., Mark Middleton and Mark Grobmyer. The most popular Chinese eatery in town was owned by Charlie Trie. Its name was Fu Lin, which can be translated as "Enrich your neighbor."

Huang's Arkansas experience eventually drew him to Washington. Not long after his old friend took the White House, Huang signed up to work in Clinton's Administration. The trade job Huang landed at Commerce bored him but offered a chance to indulge his passion for networking. He met hundreds of Asian-American traders, whose names he would later add to fund-raising invitation lists. A few, including Trie and Kanchanalak, shared his taste for politics.

Like Huang, they were culturally ambidextrous and therefore good candidates to represent the new financial powers of Asia, the overseas Chinese. Fleeing their motherland decades ago, those families settled throughout Southeast Asia, where they took local names and rose to enormous power. Some of them--the Riadys of Indonesia and the Chearavanonts, who control the CP Group--have begun to repatriate their fortunes to the world's fastest growing economy, China. And that's where their interest in U.S. politics comes in. The huge U.S. market is vital to keeping China's export-driven economy growing.

From his Commerce post, Huang fostered some of those relationships. In late 1994 he lobbied hard and successfully for a presidential endorsement of the U.S.-Thailand Business Council, a Kanchanalak project she pushed on behalf of Thai businesses like CP Group. Huang also served as the Riadys' liaison to the White House, escorting James at least twice to the Executive Mansion, where China was discussed.

Trie, on the other hand, did his own bidding. In September 1995, he arranged a White House tour for a business partner, wealthy Macau developer Ng Lap Seng, who has financial dealings with China's communist gentry. Before Ng's visit to the White House, he contributed $15,000 to the D.N.C. through a Little Rock firm he owned, but the firm had been incorporated only 10 days when its name appeared on the check. The D.N.C. has since returned the contribution, suspecting that it had to be overseas money.

By the time Huang arrived at the D.N.C. as deputy finance chairman, he had a fund-raising team in place. In February 1996 his first event for Asian Americans reaped $1.1 million--an eye-popping amount for a rookie. Four other events pushed the total to about $2.5 million. Huang was soon a party hero, toasted by Clinton at one affair. Huang began to promote himself for a high-ranking job in the second term.

But it all came undone before Election Day. The Los Angeles Times uncovered a $250,000 gift from the U.S. subsidiary of a South Korean firm that had just opened its doors. An additional $450,000 was given by a young Indonesian couple living modestly in suburban Virginia. It turned out the woman was the daughter of a major Lippo investor, who lived overseas. The disclosures continued: $325,000 from an Indian businessman in financial trouble; $253,000 from Kanchanalak that she admitted was not hers to give; the $15,000 from Ng's Little Rock firm, and tens of thousands of dollars from Buddhist monks, who take a vow of poverty.

Most of the contributions under scrutiny were traced to Huang, who went underground in the last weeks of the campaign and has only briefly resurfaced. In December the D.N.C. dumped him from its payroll, and the party has refunded half of the $3.4 million Huang raised for the campaign. His lawyer, Ty Cobb, said Huang maintains he did nothing wrong and is eager to tell his side of the story. But with no offer of immunity from federal prosecutors, Huang has refused to testify before Thompson.

That still leaves Thompson plenty of evidence to ruin the Democrats' season of contentment. Many of his witnesses will be forced under oath to describe the desperate hunt for soft money, the special access given to donors with business before the government and the suspension of White House vetting rules designed to keep hustlers with deep pockets from making pitches on presidential time.

If the story is embellished a bit to create the image of a White House with a giant FOR SALE sign on the front lawn, no one will be surprised. Congressional hearings are imperfect venues for truth telling; lawmakers often generate more heat than light, and sometimes neither. The agenda is controlled by the party in power; witness lists seem random; and testimony is piecemeal and confusing. The burden of proof is often less a question of what is revealed than how much gets on the evening news. Unlike a trial, where a judge maintains order and the rules of evidence often limit what can be introduced, the hearings of Congress can be wildly unpredictable.

No one appreciates the element of surprise more than Thompson, the chief Republican counsel of the Watergate hearings, who interrogated an obscure White House aide named Alexander Butterfield. Thompson got Butterfield to disclose the existence of an elaborate system of listening devices that Richard Nixon had installed in the White House. Under questioning, Butterfield revealed that the incriminating tapes that eventually sank the Nixon presidency were "still available." When he left the committee room that day in 1973, Thompson wrote later, he barely realized he had in hand the evidence to determine, in the words of his boss, Senator Howard Baker, "what did the President know and when did he know it." Twenty-four years later, Thompson knows that the little unforeseen development can turn a dreary hearing into history.

--With reporting by Kim Gooi/Bangkok, and Michael Duffy and Viveca Novak/Washington

With reporting by KIM GOOI/BANGKOK, AND MICHAEL DUFFY AND VIVECA NOVAK/WASHINGTON