Liu’s Campaign Treasurer Charged With Fraud

Federal authorities charged New York City Comptroller John Liu’s campaign treasurer with fraud and accused her of impeding the investigation into his fund-raising operation.

Jia “Jenny” Hou, the 25-year-old treasurer, was arrested Tuesday morning on charges that she participated in a scheme to use “straw donors” – contributors who are later reimbursed – to funnel illegal, high-dollar donations to Liu’s campaign.

Investigators also alleged that she obstructed the ongoing federal probe into Liu’s campaign – charges that appear to contradict the comptroller’s previous assertions that his staff is cooperating with the inquiry.

“I am stunned by this news about Jenny Hou,” Liu said in a statement. ” These accusations against her are uncharacteristic and unexpected. Jenny is a smart, hardworking person who I hope will be treated fairly.”

Hou has not responded to previous interview requests by The Wall Street Journal.

Hou is the second person connected to Liu’s campaign to be arrested as part of the federal investigation. Fund-raiser Xing Wu Pan was arrested in November and indicted earlier this month; he has pleaded not guilty and plans to accuse the government of wrongdoing.

In the complaint against Hou released Tuesday, investigators describe a series of instant messages she sent on July 14, 2011, allegedly discussing an illegal campaign reimbursement.

The unidentified person messaging with Hou asked if she was taking personal funds to reimburse that person’s donation, according to the complaint. Hou replied:

“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 instructed a campaign volunteer to imitate the handwriting of campaign donors on contribution forms in order to make it appear that the forms were filled out by the purported contributors and to disguise the use of straw donors, authorities charged.

The treasurer also allegedly discussed ways to conceal information about campaign fund-raisers in order to avoid alerting the city’s Campaign Finance Board to the possible use of undisclosed intermediaries and straw donors, according to the complaint.

Liu has repeatedly denied that he or his campaign have done anything wrong. But the charges against Hou, a central figure in the comptroller’s campaign, undermine his claims that his staff is cooperating and raise further questions about his political future.

People familiar with Liu’s political intentions have said he has remained confident he would launch a bid for mayor next year even as the federal investigation into his campaign has intensified. Tuesday’s arrest of his campaign treasurer will likely spark renewed calls for his resignation.

At a news conference in Brooklyn, Mayor Michael Bloomberg declined to discuss the charges against Hou or the political impact on the comptroller.

Liu, the city’s chief financial officer, is the first Asian-American to hold citywide elective office.

{The Wall Street Journal/Matzav.com Newscenter}