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Norman Hsu: Why Story May Hang Over Hillary, Others

Friday, 21 Sep 2007 | 5:12 PM ET

Here's why the Norman Hsu case is so alarming--for Hillary Clinton and other presidential candidates, not to mention the investors who prosecutors say were swindled out of $60-million. It's that no one knows how big this iceberg is.

Norman Hsu Fallout
A high-profile Democratic fundraiser is facing fraud chargers from the Fed, and Eamon Javers, Washington correspondent at BusinessWeek, and CNBC's John Harwood discuss the issue.

Campaigns say they "vet" potential donors for legal problems; aides to Sen. Clinton say the Hsu's travails slipped through the cracks. But in the rush to scoop up tens of millions of dollars, it's safe to assume that the campaign's top priority isn't screening donations out but rather ensuring that there are enough of them. Like wanderers in the desert who just want a drink, they want checks that will clear.

My colleague Brody Mullins of the Wall Street Journal--who first broke the Hsu story a few weeks ago--this week had a follow-up story about an intimate Clinton fund-raising dinner in Washington. One of the maximum $4,600 donors, Pamela Layton, said it was a corporate transaction for which she was reimbursed by her husband's boss. "I don't even like Hillary," she said.

The Clinton campaign promptly said it would return the money. But no one knows how many more Pamela Layton's there are. And that's especially dangerous for a Democratic front-runner who has made few mistakes so far--but has some vulnerability from the overhang of her husband's campaign finance woes in the 1990s.

Questions? Comments? Write to politicalcapital@cnbc.com.