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MANHATTAN U.S. ATTORNEY AND FBI ASSISTANT DIRECTOR-IN-CHARGE ANNOUNCE FRAUD CHARGES AGAINST CAMPAIGN TREASURER FOR CANDIDATE SEEKING CITYWIDE ELECTIVE OFFICE IN 2013

FOR IMMEDIATE RELEASE
Tuesday February 28, 2012

At Least 40 Fraudulent Donations Allegedly Designed to Funnel City Matching Funds to Campaign

Defendant Also Charged with Obstruction of Justice

Preet Bharara, the United States Attorney for the Southern District of New York, and Janice K. Fedarcyk, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), today announced fraud charges against JIA HOU, a/k/a “Jenny Hou,” the campaign treasurer for a candidate (the “Candidate”) seeking citywide elective office in 2013 (the “Campaign”).  HOU is accused of participating in a scheme that used “straw donors” to funnel to the Campaign large, illegal contributions that were well above the individual limit authorized by the New York City Campaign Finance Board (the “NYCCFB”), with the intent to fraudulently increase the amount of matching funds provided by NYCCFB to the Campaign. She is also charged with obstructing the Government’s investigation of suspected fraud in connection with the Campaign’s fundraising efforts.  HOU was arrested this morning and will be presented in Manhattan federal court later today.

Manhattan U.S. Attorney Preet Bharara stated: “New York’s campaign finance laws are not optional. They ensure that all candidates operate on a level playing field and that everyone plays by the rules.  Today, we allege that Jia Hou, a Campaign Treasurer, was a central figure in a coordinated scheme to break the City's campaign finance laws.  As described in the criminal complaint, Hou concealed the use of straw donors, subverted the City's electoral system, and obstructed justice.  As today’s charges demonstrate, unlawful campaign conduct will not be tolerated.”

FBI Assistant Director-in-Charge Janice K. Fedarcyk stated: “As the complaint alleges, Hou circumvented the City’s campaign finance rules in a scheme that used straw donors to exceed the limit on individual contributions.  The intent of those rules is in part to limit the influence of wealthy contributors on political campaigns.  In a very real sense, Hou is accused of undermining the democratic process.”

The following allegations are based on the Complaint filed today in Manhattan federal court:

New York City’s Matching Campaign Funds Program

Candidates for elective office in New York City are eligible to receive matching campaign funds from a program administered by NYCCFB.  Under the program, for each dollar a New York City resident over 18 years of age contributes to a participating candidate – up to a maximum of $175 – the City provides the candidate $6 in matching funds.  Accordingly, each candidate could receive up to a maximum of $1,050 in matching funds per contributor.  Individuals are allowed to donate up to $4,950 to candidates running for citywide elective offices.  For each donation received, campaigns seeking matching funds must provide NYCCFB with a campaign contribution form that includes the donor’s name, address, employment information, and amount donated.  The donor must sign the form, acknowledging that he/she is not being reimbursed in any manner for making the contribution.

The Straw Donor Scheme

HOU serves as the Candidate’s treasurer for the 2013 election cycle and is responsible for all financial disclosures related to the Campaign.  She is responsible for accounting for every donation and for ensuring that all donations by individuals are within the maximum allowed by New York City.  HOU and the Candidate are the only individuals authorized to submit disclosure statements on behalf of the Campaign.  HOU is also responsible for disclosing to the NYCCFB the identities of “intermediaries,” also known as “bundlers” involved in soliciting and receiving donations for the Campaign.  

HOU participated in a scheme that used straw donors to circumvent the limit on individual contributions and with the intent to fraudulently increase the amount of matching campaign funds provided by NYCCFB to the Candidate’s 2013 campaign.  Certain individuals, who wanted to donate more than the legally allowed amount, would instead arrange for straw donors to make contributions that were under the limit.  The individuals would then reimburse the straw donors.  As part of the scheme, the Campaign submitted fraudulent contribution forms on behalf of the straw donors to NYCCFB.  The forms included information about the straw donors as well as their purported signatures acknowledging that each individual donor was not being reimbursed.   The information contained in these fraudulent contribution forms is used by the City to determine whether to release matching campaign funds to the Candidate’s 2013 campaign.

In furtherance of the scheme, HOU offered to reimburse an individual for a donation to the Campaign notwithstanding the requirement under New York State law that donations must be paid from a donor’s personal funds and may not be reimbursed in any manner.  In a series of instant messages on July 14, 2011, HOU and the individual discussed the reimbursement.   After the individual asked if HOU was taking personal funds to reimburse the individual, HOU responded: “don’t worry about it.  I’m gonna mail it to [individual’s residence].  Whenever you get a chance though, I need [you to] sign that form and send it back to me cus [because] I can’t charge your card without a signature.”

HOU also instructed a campaign volunteer (“Campaign-Volunteer-1”) to imitate the handwriting of campaign donors on the contribution forms in order to make it appear that the forms were filled out by the purported contributors and to disguise the Campaign’s use of Straw Donors.  In addition, HOU instructed another campaign volunteer (“Campaign Volunteer-2”) and others not to accept consecutively numbered money orders as donations to the Campaign because NYCCFB had previously notified the Candidate’s 2009 Campaign Treasurer that sequentially numbered money orders indicated that the contributions were coming from the same donors, instead of different donors, as reported.  HOU also discussed with Campaign Volunteer-2 ways to conceal information about campaign fundraisers in order to avoid alerting NYCCFB to the possible use of undisclosed intermediaries and straw donors. 

Furthermore, HOU worked closely with individuals who served as intermediaries in connection with multiple events where straw donors were reimbursed for their contributions, and failed to disclose to the NYCCFB their involvement in the Campaign.  NYCCFB records show that the Campaign did not disclose any bundlers or intermediaries for the 2013 New York City election cycle until January 17, 2012, despite the fact that the Campaign had been raising funds since at least December 2009.  On January 17, 2012, the Campaign disclosed a list of approximately 59 intermediaries to the NYCCFB, but that disclosure did not include multiple individuals who appear to have served in that capacity.

In addition, HOU impeded the Government’s investigation of suspected fraud in connection with the Campaign’s fundraising efforts.  Specifically, in an apparent attempt to frustrate the investigation, HOU failed to produce facially inculpatory documents in response to subpoenas served on her and represented that her production of documents was complete when in fact it was not.  

*            *           *

HOU, 25, of Queens, New York, is charged with one count of conspiracy to commit wire fraud, one count of attempting to commit wire fraud, and one count of obstruction of justice.  Each count carries a maximum sentence of twenty years in prison.

Mr. Bharara praised the investigative work of the FBI and expressed appreciation to the New York City Department of Investigation for its contribution to this ongoing investigation.

This case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Steve C. Lee, Brian A. Jacobs, and Justin Anderson are in charge of the prosecution.

The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

12-063

 

 

                                                               

 

 

 

 

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