A NEW MAN IN DONORGATE?

By Michael Weisskopf and Adam Zagorin/Washington

In Beijing the talks were down to the wire. In the balance: billions of dollars in the textile and apparel trade between the U.S. and China. Chief U.S. negotiator Rita Hayes climbed into a Chinese limo for a key meeting last January and was joined for a 20-minute ride by Stephen Lau, a Hong Kong textile tycoon and self-described adviser to the Chinese.

As an exporter of Chinese goods to the U.S., Lau had a big financial stake in the talks. What gained him his unusual access to Hayes? His political connections may have helped. His American business partner, Tom Nastos of New York, is a major donor to the Democratic Party: he, his wife and one of his firms have given $90,000 since late 1995. The White House invited Lau to two pre-election fund raisers with Clinton in Washington (Nastos was invited to one). Lau's D.C. lobbyist was once a U.S. trade negotiator who gained entree to Hayes' confidential briefings, once reserved for U.S. industry.

In the Beijing encounter, Hayes accepted Lau's offer to help arrange a meeting with China's trade minister. Several weeks later, the two sides initialed an agreement criticized by some industry figures as a giveaway to China. Hayes told TIME that Lau had no influence on the talks and that she was "totally unaware" that in 1995 Lau, his companies and a business associate paid $3 million to settle a federal lawsuit charging them with making false declarations to Customs. Hayes says she knows nothing of Lau's links to the Democratic Party. Of her apparently brief sessions with Lau and his lobbyist this year and last in San Francisco and Beijing, she simply says, "Stephen offered his assistance."

--By Michael Weisskopf and Adam Zagorin/Washington