Wednesday, July 23, 2014   




Houses of scandal

Saturday, January 28, 2006


The wave of corruption allegations sweeping through Washington's highest echelons has washed into Hong Kong business. Zach Coleman and Chaim Estulin investigate

T he sign on the door of Suite 401 of the Baskerville House office building in Central has changed. The same folks are believed to be in the office, but a political drama on the other side of the world is disrupting their work.

Washington loves a scandal and almost daily revelations about lobbyist Jack Abramoff's influence machine have gripped political mavens worldwide.

The troubles of Abramoff, now under indictment, and his close friend, United States Congressman Tom DeLay, who has also been indicted on an unrelated matter and has stepped down as Majority Leader of the US House of Representatives, threaten to swamp the Republican machine in corruption investigations.

Less well known is that a substantial tributary of Abramoff's river of influence ran through Hong Kong. Joining the casualty list from the scandal next week will be lobbying firm Alexander Strategy Group, whose only office outside Washington was in Hong Kong. Following Abramoff's guilty plea on charges of conspiracy, mail fraud and tax evasion, Alexander Strategy's activities are now a focus of scrutiny by US government investigators, according to the New York Times.

With business as usual impossible, the firm will officially close its doors at the end of the month.

Alexander Strategy lies at the center of the web between Abramoff and
DeLay.

It was founded by former DeLay chief of staff Ed Buckham and employed DeLay's wife and other former aides. The firm worked closely and shared clients with Abramoff.

A significant avenue of cooperation ran through Hong Kong, where Abramoff's original firm, Preston Gates & Ellis, established its first overseas presence soon after he joined.

At the center of the Hong Kong operation was Belle Haven Consultants, which shared space with Alexander in Central. The ties allowed Alexander to reach beyond Capitol Hill to enmesh Asian clients. In the same office was the Heritage Foundation, the US conservative think-tank best known here for naming Hong Kong the freest economy in the world in its annual Index of Economic Freedom.

Through the efforts of Alexander Strategy, Abramoff and Heritage, millions of dollars flowed from Asia to Washington. Clients in turn gained access to official Washington, including President George W Bush.

Since The Standard first wrote about the subject two years ago, other investigations into the Asian ventures of Alexander Strategy and Heritage Foundation have raised more questions about whether Heritage overstepped the bounds of its nonprofit status in the US and how congressional junkets to the region were accounted for and financed.

Today, the Alexander Strategy and Heritage Foundation names are gone from the door of Suite 401. Belle Haven Consultant's name remains in the building and floor lobbies.

This little-known firm was formed as a for-profit entity by Edwin Feulner, Heritage's co-founder and president, in 1997 together with Kenneth Sheffer, his chief personal adviser on Asia policy, according to The Washington Post.

Feulner's wife, Linda, later took his place as a partner then withdrew in 2001 to serve as a paid senior adviser, the Post reported. She also served as a paid adviser to Alexander Strategy.

Alexander Strategy partner Edward Stewart told the Standard in 2004 that Linda Feulner introduced his firm to Belle Haven, which subsequently acted as a subcontractor to Alexander Strategy. Belle Haven, now co-owned by Sheffer and long-time associate Beth Allison Cave, has also been a client of Alexander Strategy's lobbying business.

According to US Senate records, Belle Haven has paid Alexander Strategy at least US$620,000 (HK$4.84 million) since September 2001.

A review of US Justice Department records by the Washington Post found that the two companies signed a new contract in late 2004 calling for Belle Haven to pay US$840,000 over the subsequent 10 months.

For three weeks that year, while Alexander Strategy represented Belle Haven, Standard Chartered Bank financed and directed part of the lobbying activity, according to Senate filings. StanChart has its own long- standing lobbyist in Washington and spokeswoman Gabriel Kwan declined to comment on the episode.

It's not clear what Alexander Strategy's shutdown will mean for the Hong Kong base. According to a source, although the firm boasted of dual Washington-Hong Kong offices in a 2002 press release, it largely operated here through Belle Haven, which remains open.

Sheffer and Cave operate a second company, Summit International Consultants, from the same premises. Neither Sheffer nor Cave could be reached for comment.

Aside from Belle Haven, Alexander Strategy also worked with at least a half a dozen other Asia-related clients but some of the liaisons were brief.

Shanghai River Resources, a Hong Kong consulting company run by Apple Daily executive and former Republicans Abroad chairman Mark Simon, hired Alexander Strategy in June 2002 to help promote a US- Taiwan free trade agreement on behalf of Taiwanese business interests but dropped the firm three months later.

Simon declined to publicly discuss the fall-out, but the Taiwanese moved their business to a rival lobbying firm two months afterwards.

The American Bondholders Foundation, which represents holders of bonds issued by pre-communist China, dropped Alexander Strategy in May 2002 but the filings do not indicate when the relationship started.

Another client was never mentioned in Senate filings. In December 1999, Ed Buckham traveled to the Pacific island of Saipan with Michael Scanlon, another former DeLay aide, to lobby members of the local legislature there to support Benigno Fitial, a former executive of an affiliate of Hong Kong- listed Luen Thai Holdings, to be House speaker.

The cash-strapped local government had suspended its pricey lobbying contract with Abramoff and Fitial supported its reinstatement.

Though he came from the minority party, Fitial won the speaker's post after two legislators switched their votes. The US Congress subsequently approved funding for special projects in the two legislators' districts and the local government reinstated Abramoff's contract.

Though Saipan yielded no official client for Alexander Strategy, the owners of Luen Thai and other island garment makers donated about US$500,000 to an organization called the US Family Network, which in turn paid hundreds of thousands of dollars to Alexander Strategy, according to a Post investigation of the group.

A similar dynamic may have been at work in Malaysia. In October 2000, Abramoff drew up a proposal on behalf of Preston Gates to assist the Malaysian government to repair an image damaged by political repression, anti- Western and anti-Semitic remarks by then-prime minister Mahathir Mohammed and the jailing of former deputy Anwar Ibrahim.

The plans included a public relations campaign, the organization of pro- government interest groups in the US and exchange trips by Malaysian and American officials.

Abramoff left Preston Gates soon after writing the memo, which is posted on The New Republic's Web site. By the end of 2001, Belle Haven had hired Alexander Strategy for help "promoting and advocating Malaysia's positive investment climate and business opportunities" in connection with a company called PK Baru Energy. A new group called the US-Malaysia Exchange Association also hired Alexander Strategy for support "enhancing the bilateral relationship between Malaysia and the US."

Virtually all of the money Alexander Strategy reported receiving from Belle Haven related to the Malaysian advocacy. Malaysia Exchange directly paid Alexander Strategy less than US$20,000 a year, according to Senate records.

Belle Haven also hired three other Washington lobbying firms, including one run by Heritage senior fellow and former US Senator Malcolm Wallop, around the same time to support its Malaysian campaign, paying them a total of US$780,000.

The Standard's earlier investigation reported that two of the firms indicated that Belle Haven retained their services on behalf of Malaysia Exchange. The US Lobbying Disclosure Act requires consultants hiring lobbyists to provide the identity of their real client, according to Jan Witold Baran, a Washington lawyer specializing in lobbying law.

A report by private investigators found PK Baru to be an inactive company run in part by Megat Junid bin Megat Ayob, a ruling party official and close ally of Mahathir who is also the chairman of Malaysia Exchange.

Megat Junid said in a 2004 interview with the Standard that he organized Malaysia Exchange after talks with Ed Feulner, whose deputy, Sheffer, served as a director. Wallop was deputy chair.

"We felt strongly when Bush won the presidency it was time to establish closer economic and social connections between the two countries," Megat Junid said. Sheffer told the Post, "These guys wanted to hire some people to figure out how can we start to improve our relationship with the US."

The new group generated fast results. In 2001, DeLay and three other congressmen traveled to Malaysia with their spouses on a trip officially sponsored by Heritage. Wallop, who went on the trip, told Time magazine that Belle Haven's financial involvement was more important to the trip than Heritage's.

In the following months, more congressmen made their way to Kuala Lumpur and senior Malaysian officials began beating a path to Washington, an interchange that climaxed with Mahathir visiting the White House in May 2002, his first state visit in eight years.

"We did a good job to create a good atmosphere between the two leaders," said Megat Junid, who was part of the delegation.

During Mahathir's visit, two House members who had recently traveled to his country launched an official Malaysia Trade, Security and Economic Cooperation Caucus. Though in past years Heritage had been publicly critical of Mahathir, Feulner hosted a dinner reception to honor the prime minister.

The Post, citing a former Heritage official, said Feulner that year pushed his staff to boost Malaysia's ranking in the Index of Economic Freedom, but the group denied such intervention.

Abramoff may have earned a return from coming up with the Malaysia action plan. A US Senate committee last year released an invoice for US$300,000 sent to the Malaysian Embassy in Washington by the American International Center in 2001. Two former Abramoff associates told the Post that the center was "a front created in part to hide Abramoff's representation of Malaysia."

The National Journal reported recently that the Malaysian government sent nearly US$1 million to the center in 2001 and 2002 and that the center in turn paid Greenberg Traurig, the firm Abramoff joined in January 2001 after leaving Preston Gates, US$1.5 million.

Intriguingly, a firm set up by close Abramoff ally Grover Norquist was retained to lobby on behalf of Anwar, the then-imprisoned former Mahathir aide whose cause celebre was cited in Abramoff's 2000 memo as a key justification for the government to commence its Washington drive.

Alexander Strategy's other big Asian client was the Korea-US Exchange Council, augmented by Universal Bearings, a company owned by the Hanwha Group of council chairman Kim Seung-youn.

Kim formed the council and hired Alexander Strategy to establish himself "as the leading Korean business statesman in US-Korean relations," according to a strategy document obtained by Time.

Feulner was on the council's board and Sheffer served as an adviser.

The Exchange Council and Universal Bearings have together paid Alexander Strategy close to US$1 million since 2001. Kim made key headway on his goal, hosting or traveling to Washington to meet DeLay, Vice-President Dick Cheney, House Speaker Dennis Hastert and then- Attorney General John Ashcroft, among others.

The junkets have come under scrutiny in part because House rules forbid members from accepting trips paid by the registered agents of foreign interests. The council registered as a foreign agent in 2001.


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