[FOR TWO UPDATES, SCROLL TO THE END.]
Allegations that a past president of Taiwan illegally set up a $100 million secret slush fund to pay for overseas intelligence, propaganda, and influence operations are causing ripples that have reached into the Bush Administration.
At the end of March, Next, a Hong Kong magazine, and the China Times, a daily newspaper in Taiwan, reported that classified documents indicated Lee Teng-hui, Taiwan’s president in the late 1990s, established a secret account in the National Security Bureau to underwrite various activities, including running spy networks in China and elsewhere. The articles, which noted the NSB had made payments to Japanese officials (including former prime minister Ryutaro Hashimoto) and which identified Taiwanese intelligence officials stationed abroad, detonated a scandal in Taiwan.
The government did not challenge the veracity of the reports, and the Taiwanese news media reported Taiwan’s security services were recalling personnel from outposts around the world, including those in the United State, Japan, France and China. The Next magazine reporter who broke the story, Hsieh Zhong-liang, was charged with breaching national security and banned from leaving the country; his magazine’s office was raided by the police. Hsieh wouldn’t reveal the source who provided the documents, but other journalists speculated the information had come from a former National Security Bureau finance officer who is on the run and alleged to have embezzled $5.5 million. The leaks embarrassed the current government, which is controlled by the Democratic Progressive Party, for the DPP is allied with the Taiwan Solidarity Union, a pro-independence party led by ex-President Lee. Amid all the fuss, Lee called off a trip to the United States.
The scandal has tainted two senior Bush appointees in the State Department. Sing Tao Daily, a Hong Kong newspaper, reported that Lee used the secret account–which had not been approved by Parliament–to pay Cassidy and Associates, one of Washington’s largest lobbying firms, to work for Taiwan, and the newspaper said the slush fund had covered the costs of trips made to Taiwan by Carl Ford Jr., a Cassidy and Associates consultant. Ford is now assistant secretary of state for intelligence and research.
Sing Tao, citing the classified documents, also reported James Kelly, whom Bush last May appointed assistant secretary of state for East Asian and Pacific affairs, received money from this fund when he headed the Pacific Forum, a Honolulu-based think tank that is an arm of the Center for Strategic and International Studies, which is based in Washington, DC. Sing Tao maintained Lee drew $100,000 from the clandestine account in February 1999 to pay the Pacific Forum to support former Japanese Vice-Defense Minister Masahiro Akiyama’s study at Harvard University.
Both Ford and Kelly are significant players in crafting Bush Administration policy on Taiwan. Ford is a longtime expert on Chinese affairs. He was a China analyst with the CIA in the 1970s and the CIA’s National Intelligence Officer for East Asia in 1985. He has been a Capitol Hill staffer, a Pentagon official, and a prominent advocate of U.S. military assistance to Taiwan. Kelly was director of Asian affairs for the National Security Council during the Reagan Administration. He also served in the Pentagon in the early 1980s.