Ex-Aides' Trial Puts Liu in Spotlight

City Comptroller John Liu's reputation and popularity may be at stake when his former campaign treasurer and a fundraiser go on trial this week on charges of conspiring to break campaign finance laws to raise ever more money for him.

Liu, a mayoral hopeful, has not been charged and is not expected to testify at his ex-aides' conspiracy trial. But the prosecution, coming as the city's most heated mayoral race in years gets into full swing, is making the case into something of a trial of his political prospects.

Liu's ex-campaign treasurer, Jia "Jenny" Hou, and former Liu fundraiser Xing "Oliver" Wu Pan are facing federal charges of conspiring to break campaign finance laws. Federal prosecutors say the two circumvented a $4,950 contribution limit by using straw donors — essentially, funneling money from one contributor through another — and by allowing the candidate to claim greater matching funds, so they could boost the Democrat's campaign war chest.

Both Hou, 26, of Queens, and Pan, of Hudson County, N.J., have pleaded not guilty to conspiracy and attempted wire fraud; Hou also has pleaded not guilty to obstructing justice and making false statements. The trial was scheduled to begin Monday but was delayed until at least Wednesday because of questions raised about the mental health condition of Pan.

The trial, likely to last several weeks, comes as campaigning gears up in the race to replace term-limited Mayor Michael Bloomberg, who is finishing his third term.

As the trial looms, the 46-year-old Liu has not avoided the subject, sometimes joking that his nickname is "embattled comptroller."

In recent years, he has tried to project an image as a strong mayoral contender who can draw support from two important Democratic constituencies, minority communities and labor unions. A former city councilman, he has striven as comptroller to position himself as a fiscal watchdog, putting more city spending records online and sharply criticizing a scandal-plagued city payroll technology project.

While pundits and analysts have seen the investigation as a body blow to his mayoral chances, Liu is attending candidate forums and otherwise signaling he plans to run, though he hasn't yet formally entered the race. Polls show him and several other announced and likely contenders significantly behind City Council Speaker Christine Quinn in the Democratic matchup. Several Republicans also are in the mix.

His attorney, Paul Shechtman, said he doesn't expect Liu to be called as a witness at the trial, but he'll be "an interested observer."

"Whatever the outcome of the trial, I do think that the public will learn that John Liu has always sought to run an honorable campaign," Shechtman said, adding that he was confident that no witness would testify Liu was aware of any wrongdoing.

Still, the cloud over Liu's campaign operation deepened a week before the trial, when prosecutors revealed that his former press secretary, Sharon Lee, had been granted immunity and would be compelled to testify about her solicitation of donations from as many as 10 family members and friends, half of whom she agreed to reimburse if they sent money.

At a pre-trial hearing Friday, Judge Richard Sullivan seemed less than impressed by Lee's potential testimony and said he would decide later whether it was relevant to the charges. He said a prosecutor seemed "squirrelly" when the lawyer was reluctant to say whether Lee was an unindicted co-conspirator, though he eventually acknowledged that she was.

Hou's lawyer, Gerald Lefcourt, said in a letter to Sullivan that Lee has maintained that the campaign did not ask her to solicit friends and family and that it was "her own doing."

Lefcourt said some contributors might have arranged among themselves to channel money through straw donors, but his client knew nothing of it.

Lawyers for Pan have argued that prosecutors developed a sting operation against Pan and manufactured a criminal case despite knowing — from Pan's repeated rejection of the government's advances — that he was not predisposed to violate campaign finance laws.

Defense lawyers also said authorities terrorized Pan with the threat of arrest to coerce him to help the government manufacture a crime that it could say Liu had committed. The attorneys said the government had been investigating Liu's fundraising since 2009 and began an undercover sting operation directed at the comptroller and Pan in early 2011.

"Mr. Pan was entrapped by the undercover sting into violating the campaign finance law, but Mr. Liu was not ensnared by the operation," the lawyers wrote in court papers.

The investigation has taken a toll on Liu's campaign, which has spent more than $433,000 on legal fees in the past two years, about one-seventh of the money he's raised for this election cycle, campaign finance records show. Liu's job approval rating hit a high of 57 percent a few months before questions surfaced about his campaign practices and plunged to 38 percent the month after Pan's arrest. It stood at 46 percent earlier this month, according to the Quinnipiac University Polling Institute.

"Bad headlines produce bad polls," said the institute's director, Maurice Carroll.

Still, if the trial concludes relatively quickly and without eliciting damning information about Liu, it might not ultimately be defining for a politician who hasn't yet formed a firm impression in many voters' minds. Some 46 percent of respondents in a Quinnipiac poll this month said they didn't know enough about Liu to have an opinion of him; the rest were close to evenly split among favorable and unfavorable views.

Clearly, the trial is "not the kind of attention that you want when your campaign is trying to get its grounding," said Lee Miringoff, director of the Marist College Institute for Public Opinion. "The saving grace is: Presumably it ends, and maybe he's able to turn the page and move on."

The case is a fraught one for Asian-Americans, many of whom cheered the Taiwan-born Liu's emergence as the community's first member to win citywide office in New York City. The city is home to about 1.5 million Asians, including the largest Chinese population outside Asia.

Asian-Americans hoped Liu would help raise their political profile, so "this thing happening is a tremendous shock and disappointment," said Peter Kwong, an Asian-American studies and urban affairs professor at Hunter College.

Some feel that Asian-American donors and fundraisers have gotten unfair scrutiny after other campaign finance allegations during the past two decades, said Kwong. In one example, former Democratic fundraiser and Hong Kong native Norman Hsu was convicted in a case that prompted Hillary Rodham Clinton to return more than $800,000 in contributions years ago.

But whatever those sentiments, some Asian-Americans also lament that Liu didn't see to it that no such allegations could be made against his campaign, Kwong said.

"For such an astute politician, this is not very elegant management, in terms of fundraising. So that's very unfortunate," he said.