John Liu "Stunned" At Arrest of His Campaign Treasurer on Fraud Charges

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The campaign treasurer for City Comptroller John Liu was arrested and charged today with fraud for her role in a scheme that used fake donors to pump money into his relection campaign, federal prosecutors in Manhattan announced today. Jia Hou, also known as Jenny, is also charged with trying to derail the government's investigation.

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

Federal prosecutors described Hou as a "central figure" in the scheme, making her arrest another embarrassing black eye for Liu, the former city councilman from Flushing who is not only in charge of overseeing the city's finances, but crusaded against cost overruns in Bloomberg administration technology contracts and had mayoral aspirations.

Only Hou and Liu were authorized to submit financial disclosure statements for the campaign, so she was indeed central to Liu's reelection hopes.

"In a very real sense, Hou is accused of undermining the democratic process," FBI Assistant Director-in-Charge Janice Fedarcyk says.

In the scheme, people who wanted to contribute more money than the law allows found "straw donors" who made contributions and were then reimbursed. The campaign then submitted fake contribution forms for the straw donors. Each form was signed falsely to indicate that the donors were not reimbursed.

Hou not only used campaign funds to reimburse one of the donors, in alleged violation of the law, she told a campaign volunteer to falisfy signatures on contribution forms. She also is accused of discussed how to hide information about campaign fundraisers to avoid tipping off authorities, and failing to disclose the name of all private fundraisers in violation of the law.

Several bundlers--or private individuals who collected campaign donations on Liu's behalf--held "multiple events" where straw donors were reimbursed for their contributions. The campaign keep the names of all bundlers from campaign finance authorities for more than two years, and then only provided a partial list.

Hou is the second of Liu's campaign aides to be indicted. In November, Xing Wu Pan was arrested on charged that he illegally funneled thousands of dollars into the campaign.

As for Liu's statement, it would be snarky to point out that it recalled a certain Claude Rains in "Casablanca": "I am shocked, shocked to find that gambling is going on here."

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