SANTA ANA, Calif. – A Laguna Beach investment firm filed a lawsuit against Democratic fundraiser Norman Hsu on Friday, claiming he defrauded investors out of at least $23 million and required them to donate to Democratic candidates.
According to the lawsuit filed by Briar Wood Investments, Hsu persuaded the company's operator to do business with him by taking him to star-studded Democratic Party events. There, the 56-year-old Hong Kong native was praised by New York Sen. Hillary Rodham Clinton, California Atty. Gen. Jerry Brown and others, the lawsuit said.
As a condition of doing business with the fundraiser, Hsu directed investors to make contributions to certain Democratic candidates, the lawsuit said. The investors turned over tens of thousands of dollars, including $30,000 worth of checks to Clinton's campaign on a single day.
The lawsuit is the latest in a series of legal troubles that continue to mount for Hsu.
Last week, New York investors filed a similar suit against Hsu. On Thursday, federal prosecutors unsealed a criminal complaint accusing Hsu of operating a national Ponzi scheme and reimbursing investors for donations made in their names. And on Friday, a San Mateo County judge ordered Hsu held without bail in a 1991 theft case.
Briar Wood's chief, Martin Waters, first met Hsu at a San Diego trade show in the 1980s and the two were brought together again in 2004, the lawsuit said. Both were in the apparel business.
Waters and about 60 of his friends, family and neighbors were eventually drawn into Hsu's investment deals. According to federal authorities Hsu admitted the deals were phony.
Hsu told Waters he was investing in high-interest loans to companies in need of short-term financing, the lawsuit said. He invested $10,000 in the first deal and took part in about 40 more over the next three years. The deals matured in about 100 days and had rates of return that topped 20 percent.
Eventually, there were so many Orange County investors that Hsu convinced Waters to establish Briar Wood.
Starting in 2006, Hsu told Waters that new investors had to contribute to political campaigns he designated, the lawsuit said.
"He always used that phrase — 'favor' — in communications with the contribution demand, so Marty (Waters) knew what he meant," said attorney William Bollard, who is representing Briar Wood.
When Hsu's legal troubles surfaced last month, he tried to convince Waters that the investment business was "all taken care of" but checks started to bounce and now investors are out at least $23 million.
Bollard said Waters feels "completely taken." One investor sold a business to invest with Hsu while others took out second mortgages.
Waters declined to comment on the case Friday. Hsu spokesman Bob Emmers of Sitrick & Co. also declined to comment.
According to the lawsuit, Waters invested with Hsu in part because "prominent persons, including Sen. Hillary Clinton, New Mexico Gov. Bill Richardson, California Atty. Gen. Jerry Brown, national Democratic political adviser James Carville, film director Steven Spielberg, actor (Tobey) Maguire, grocery store magnate/billionaire Ron Burkle and others introduced and/or endorsed Hsu as a friend, colleague and trusted associate."
Brown's spokesman, Gareth Lacy, said Brown may have briefly attended an event but did not praise Hsu "or in any way vouch for him." Hillary Clinton's communications director, Howard Wolfson, declined to discuss the lawsuit. The Clinton campaign has given $23,000 donated by Hsu to charity and has announced it is returning $850,000 to about 260 donors associated with him.