Liu Paying Treasurer’s Legal Bills, Raising New Questions

The attorney defending Comptroller John Liu’s campaign treasurer on fraud charges is being paid out of Liu’s own campaign funds, according to Liu’s most recent campaign finance filing.

Liu’s campaign paid Martin Adelman, the white collar defense attorney who was quoted as representing Jenny Hou yesterday, $15,000 in December for a “retainer/legal fee.”

And several campaign finance experts said this sets up questions of whether Liu is violating the city’s campaign finance laws – and whether Hou can reasonably be expected to testify against her boss if her boss is paying for her defense.

Reached by phone on Wednesday morning, Adelman said, “it is not clear who is paying for the defense” of Hou and that the matter of whether Liu’s campaign is paying is “yet to be determined.”

Asked to explain the fact Liu’s campaign had paid Adelman as recently as December, the attorney said, “I’m not discussing it any further.”

If the Liu campaign continues to pay for Hou’s defense, it could raise a difficult question for the 25-year-old treasurer, a prominent lawyer said.

“What happens if she flips and testifies against him? Is he going to continue to pay for her defense?” the lawyer asked.

Hou is facing one count of obstructing justice in the criminal complaint, suggesting she has not been open to cooperation with the government so far.

“It certainly would raise the specter of unlikelihood of cooperation with the authorities when the attorney representing the person criminally charged is being fully compensated out of campaign funds,” said prominent criminal defense attorney Murray Richman.

“It’s implicit therein that the campaign funds are being controlled by the comptroller, who may be the final subject of the investigation. It puts a question to the attorney’s loyalty. Who is the attorney representing, the comptroller or the person charged?” Richman added.

Richman said the judge in Hou’s case would have to conduct a curcio hearing to determine whether Hou is aware of the potential conflict.

On Tuesday, Liu said he was “stunned by this news about Jenny Hou,” and called the accusations “uncharacteristic and unexpected,” despite the fact the lawyer who is representing her had been retained several months ago.

A request for comment from Liu campaign spokesperson George Arzt was not immediately returned.

Hou, 25, is charged with three counts in the complaint filed yesterday in Manhattan federal court, and each carries a maximum sentence of 20 years, leaving open the possibility she would be willing to bargain with prosecutors in exchange for leniency.

The other campaign finance question, whether Liu’s spending on criminal defense is allowed by city law, is more nebulous.

Spending money from campaign funds on criminal defense is not explicitly allowed under the city’s campaign finance laws, said Campaign Finance Board spokesman Eric Friedman.

“The city law says that you are presumptively allowed to spend campaign money on legal defense of a noncriminal matter that arises out of a campaign,” he said. “It is silent on the criminal matters.”

If a candidate such as John Liu were to drop out of the race at any point, he would no longer be subject to city laws on campaign funding, and would instead fall under the state’s guidelines, which are more lenient on the issue of spending campaign funds for criminal defense, Friedman said.