Democrats Return $325,000 Gift From Gandhi Relative

WASHINGTON —  The Democratic National Committee said Wednesday that it is returning one of its largest 1996 campaign contributions, $325,000, to Yogesh K. Gandhi because it could not verify that he was the source of the funds.

“The donation was lawful on its face,” DNC spokeswoman Amy Weiss Tobe said. “However, after questions were raised by the Los Angeles Times, we did our own investigation and ascertained that the check needed to be returned because there were so many unanswered questions.”

The refund is the latest--and largest--of a series of illegal or suspect donations the party has made after inquiries by the press and it fuels criticisms that the committee exercised little, if any, oversight of foreign contributors in its rush to keep pace with Republicans in this costliest-ever campaign season. The Democrats have returned more than $700,000 in questionable or unlawful donations in the last six weeks.

Gandhi, a distant relative of Mohandas K. Gandhi, is president of the Gandhi Memorial International Foundation in Orinda, Calif. He made the contribution during a Democratic fund-raiser at a Washington hotel in May at which he and his financial backers gave President Clinton a Gandhi peace award. Controversial Japanese spiritual leader Hogen Fukunaga--who has courted legitimacy around the world with Gandhi’s assistance--was photographed presenting Clinton with the life-size bust of Mohandas Gandhi, the late social reformer and leader in India’s quest for independence.

The DNC said that it began its own inquiry into the Yogesh Gandhi contribution after an Oct. 23 story in The Times suggesting that Gandhi did not have the financial resources in this country to make such a large contribution. Among other things, the story said that Gandhi had testified under oath in court in August that he had no U.S. assets and that his foundation had largely been defunct for several years.

Committee officials obtained a copy of the court transcript this week, then contacted Gandhi to ask him to document that he had the financial resources to make the donation, party sources said. The DNC official who spoke to Gandhi said Gandhi had “indicated that he had bank accounts in this country in his own name and that he would get back to us with additional information to confirm it” but had failed to do so.

The money was refunded to Gandhi late Wednesday, officials said.

It is illegal to conceal the true identity of a campaign donor, even though Gandhi himself was permitted to make a donation as a legal resident. The Times has reported that a Japanese colleague of Fukunaga’s has paid Gandhi in the past to promote Fukunaga with prominent figures around the world.

Gandhi could not be reached at the foundation or his home Wednesday. He granted an interview last month but has not returned numerous telephone calls in recent weeks.

In the interview, he said that he made the political contribution, his first ever, to celebrate a successful business venture that brought him $500,000 in April. But by the time he appeared in Small Claims Court in August to face a former foundation staff member who claimed that he was owed $3,046 in back pay, Gandhi said that he had no funds in this country and that he did not have sufficient earnings to require filing tax returns.

The Gandhi contribution was one of a series of large donations brought in by embattled DNC fund-raiser John Huang that are being investigated by the Federal Election Commission. Atty. Gen. Janet Reno has begun a preliminary review to determine whether an independent counsel should be appointed to look into the matter.

The Democratic committee previously had returned a $250,000 donation after The Times found that it came from a South Korean company, rather than the firm’s U.S. subsidiary. Foreign corporations are barred from contributing to U.S. election campaigns.

Gandhi now also faces an inquiry into his tax-exempt foundation’s finances in California. California Assistant Atty. Gen. Carole Ritts Kornblum said that, as a result of inquiries by The Times, the state’s Charitable Trust Section is opening an audit of the foundation’s revenue and spending for the last five years to determine whether it spent money in ways that were “not consistent with its charitable purpose.”

The state will seek restitution if it determines that any funds were used for other purposes, she said. The foundation has not submitted required annual financial statements to the state since 1991.

The Gandhi foundation was founded in 1984 to “promote the memory and principles” of the legendary Indian leader, according to its incorporation papers.

Its accomplishments appear primarily to have been raising money to place statues of Mohandas Gandhi in various cities and dispensing the Gandhi peace award to such famous recipients as Mother Teresa, Ronald Reagan and Mikhail S. Gorbachev as well as to Fukunaga and other less universally esteemed individuals with whom Yogesh Gandhi was associated.

Kornblum said that the attorney general’s office had sought to have the State Franchise Tax Board revoke the foundation’s state tax-exempt status in 1993 for failing to file its annual reports but that this action was not taken, apparently as the result of an oversight. She said that the request has been renewed. The Internal Revenue Service lifted the foundation’s federal tax-exempt status last year.

Times staff writer Glenn F. Bunting contributed to this story.