US criminal probe eyes Clinton donor

Federal prosecutors have opened a criminal investigation into a Washington-area donor to Hillary Clinton's presidential campaign, investigating whether he illegally reimbursed other contributors.

The case is similar to one brought last year against Norman Hsu, a New York businessman who was indicted in November on charges of paying associates for donations to the New York senator. The Clinton campaign ultimately returned more than $800,000 raised by Mr. Hsu, who was also accused of cheating investors out of millions of dollars.

The new investigation centers around contributions last year by William Danielczyk, chairman of Galen Capital Corp., a northern Virginia private-equity firm, and by the executive's family, employees and investors, according to lawyers and others close to the case.

Investigators are seeking to determine whether the contributions Mr. Danielczyk solicited for Sen. Clinton were then repaid by his company. It is a federal crime to reimburse political contributions, punishable by fines and sometimes imprisonment.

Mr. Danielczyk and other executives at Galen Capital didn't return repeated calls this past week. In an interview last year, Mr. Danielczyk said he "did not and would not" reimburse his employees for contributions.

There's no evidence that the Clinton campaign knew that Mr. Danielczyk may have violated the law. With no public announcement, the campaign returned $115,000 that Mr. Danielczyk raised last year, Federal Election Commission records show.

Mr. Danielczyk was one of Sen. Clinton's network of wealthy "bundlers," major donors who persuade friends and colleagues to contribute together to a candidate. Bundlers have been a vital source of funds for Sen. Clinton's campaign, far more than for her Democratic rival, Barack Obama.

Most of the contributions raised by Mr. Danielczyk were received by the campaign at an intimate March 2007 fund-raiser at Sen. Clinton's Washington home. The Wall Street Journal reported last Sept. 20 that many of the people listed as having contributed that day were registered Republicans with professional ties to Mr. Danielczyk. One of them, Pamela Layton, said in that article that her donation of $4,600 "was all corporate money."

A Justice Department spokesman declined to comment on a possible investigation.

The Clinton campaign declined to comment on the probe, but said in a statement that "the campaign's policy is to cooperate with any law enforcement investigation." Howard Wolfson, a Clinton spokesman, added that after the Journal story last year, the campaign "immediately followed our compliance procedures that are standard when a question is raised about a contribution [and] after following these procedures, we made a decision to refund certain contributions."

The Hsu case and other alleged instances of bundling abuse have fueled calls to toughen disclosure rules for big bundlers. Congress last year approved legislation to require registered lobbyists to disclose how much money they bundle for congressional and presidential candidates.

The Justice Department and Federal Bureau of Investigation have added resources, training and agents to staff campaign units around the country. An FBI official says the bureau has 54 election-law cases under way.

The number of bundlers and the amount raised through that method has soared in recent years, accounting for more than one-quarter of presidential contributions recorded last year, up from 8% in 2000, according to an analysis of campaign records by The Wall Street Journal last December.

Campaigns themselves usually aren't fined for bundling abuse. They routinely return contributions to questionable donors or those who have exceeded the individual limit allowed by federal law, currently $2,300 for a primary and $2,300 for the general election.

Sen. Clinton's campaign has returned a higher percentage of donations than either Sen. Obama or Republican presidential candidate John McCain.

Galen Capital describes itself as a merchant-banking firm with offices in McLean, Va., Los Angeles, San Diego and Nashville. Most of its investments have been in health care and private aviation, and the firm provides consulting and financing for seller companies and investors.

Mr. Danielczyk first donated to Sen. Clinton in July 2006, giving $2,100 to her primary campaign in her re-election race that year for the Senate. He gave the same amount in September 2006 for the general election. All of his contributions in 2007 for her presidential campaign were returned.

As of Friday, Mr. Danielczyk was still listed on the Clinton campaign Web site as a "HillRaiser," the name for bundlers who bring in more than $100,000 to the campaign. Mr. Wolfson, the Clinton spokesman, said Mr. Danielczyk was "on the list for the money he raised and was never taken off."