IN THE U.S. DISTRICT COURT FOR THE

DISTRICT OF COLUMBIA

 

COMPLAINT

_____________________________________

W. L. MENG
9118 Park Avenue
Manassas, VA 20110
and
S.S. JONES, JR.
6707 Georgia Street
Chevy Chase, MD 20815

As Co-Trustees Under the Last Will and Testament of Ralph Harvey Meng, Deceased,
In their Capacity as Shareholders of Loral Space and Communications, Ltd.,


   Plaintiffs,

   vs.

BERNARD L. SCHWARTZ
600 Third Avenue
New York, NY 10016,
and
LORAL SPACE AND COMMUNICATIONS, LTD.
600 Third Avenue
New York, NY 10016,
and
DNC SERVICES CORPORATION,
d/b/a/ THE DEMOCRATIC NATIONAL COMMITTEE
430 South Capitol Street, S.E.
Washington, DC 20003,
and
THE DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE
430 South Capitol Street, S.E.
Washington, DC 20003,
and
THE DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE
430 South Capitol Street, S.E.
Washington, DC 20003,
and
WILLIAM JEFFERSON CLINTON
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500,
and
HILLARY RODHAM CLINTON
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500,
and
ALBERT GORE, JR.
c/o 1600 Pennsylvania Avenue, N.W.
Washington, DC 20500,
and
HAROLD ICKES
3107 Dumbarton Street, N.W.
Washington, DC 20007
and
MELISSA MOSS
Apartment 2D
1409 21st Street, N.W.
Washington, DC, 20036
and
ALEXIS HERMAN
c/o 200 Constitution Avenue, N.W.
Washington, DC 20001
and
MARVIN ROSEN
10 Tahiti Beach Island Road
Miami, FL 33143
and
TERENCE R. MCAULIFFE
7527 Old Dominion Drive
McLean, VA 22102
and
SALLY A. PAINTER
6522 Western Avenue
Chevy Chase, MD 20815,
and
JOHN HUANG
2100 Rimcrest Drive
Glendale, California, 92107

   Defendants.
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This is a shareholder derivative action brought pursuant to Rule 23.1 of the Federal Rules of Civil Procedure for recovery by and on behalf of Loral Space and Communications, Ltd. Loral Space and Communications, Ltd. is named as a defendant because it is an indispensable party for procedural reasons, the recovery sought in this action being for the benefit of Loral Space and Communications, Ltd.

PARTIES

1. Plaintiff W. L. Meng is a resident and citizen of the Commonwealth of Virginia and, as a Co-Trustee under the Last Will and Testament of Ralph Harvey Meng, who died on October 2, 1995 and whose will was probated before the Register of Wills in Queen Anne's County, Maryland (Estate No. 6634) on October 12, 1995, is a shareholder of Defendant Loral Space and Communications Ltd.

2. Plaintiff S. S. Jones, Jr. is a resident and citizen of the State of Maryland and, as a Co-Trustee under the aforesaid Last Will and Testament of Ralph Harvey Meng, deceased, is a shareholder of Defendant Loral Space and Communications Ltd.

3. Defendant Bernard Schwartz ("Schwartz") is a resident and citizen of the State of New York. Defendant Schwartz is Chairman of the Board and Chief Executive Officer of Defendant Loral Space and Communications Ltd.

4. Defendant Loral Space and Communications Ltd. ("Loral") is incorporated under the laws of Bermuda and has its principal place of business in New York, New York.

5. Defendant DNC Services Corporation, d/b/a/ The Democratic National Committee, is incorporated under the laws of the District of Columbia and has its principal place of business at 430 South Capitol Street, S.E., Washington, DC 20003.

6. Defendant Democratic Senatorial Campaign Committee is incorporated under the laws of the District of Columbia and has its principal place of business at 430 South Capitol Street, S.E., Washington, DC 20003.

7. Defendant Democratic Congressional Campaign Committee is incorporated under the laws of the District of Columbia and has its principal place of business at 430 South Capitol Street, S.E., Washington, DC 20003.

8. Defendant William Jefferson Clinton is President of the United States. Defendant William Jefferson Clinton is a citizen of the State of Arkansas and currently resides at 1600 Pennsylvania Avenue, N.W., Washington, DC 20500.

9. Defendant Hillary Rodham Clinton is the wife of Defendant William Jefferson Clinton and First Lady of the United States. Defendant Hillary Rodham Clinton is a citizen of the State of Arkansas and currently resides at 1600 Pennsylvania Avenue, N.W., Washington, DC 20500.

10. Defendant Albert Gore, Jr. is Vice-President of the United States. Defendant Gore is a citizen of the State of Tennessee. Defendant Gore's Washington, DC office is located at 1600 Pennsylvania Avenue, N.W., Washington, DC 20500.

11. Defendant Harold Ickes is a citizen of the District of Columbia and resides at 3107 Dumbarton Street, N.W., Washington, DC 20007.

12. Defendant Melissa Moss is a citizen of the District of Columbia and resides at Apartment 2D, 1409 21st Street, N.W., Washington, DC 20036.

13. On information and belief, Defendant Alexis Herman is a citizen of the District of Columbia. Defendant Herman's Washington, DC office is c/o the U.S. Department of Labor, 200 Connecticut Avenue, N.W., Washington, DC 20001.

14. Defendant Marvin Rosen is a citizen of the State of Florida and resides at 10 Tahiti Beach Island Road, Miami, FL 33143.

15. Defendant Terence R. McAuliffe is a resident of the State of Virginia and resides at 7527 Old Dominion Drive, McLean, Virginia 22102.

16. Defendant Sally A. Painter is a citizen of the State of Maryland and resides at 6522 Western Avenue, Chevy Chase, Maryland 20815.

17. Defendant John Huang is a citizen of the State of California and resides at 2100 Rimcrest Drive, Glendale, California 91207.

JURISDICTION AND VENUE

18. Jurisdiction over this matter is proper under 28 U.S.C. 1331, as Plaintiffs assert claims arising under the laws of the United States.

19. Supplemental jurisdiction is also proper under 28 U.S.C. 1367 because Plaintiffs assert various claims arising under state law that form the same "case or controversy" as Plaintiffs' claims arising under federal law.

20. Venue is proper in this district pursuant to the provisions of 28 U.S.C. 1391(a)(2) because a substantial part of the events or omissions giving rise to Plaintiffs' claims occurred in the District of Columbia.

21. Venue is also proper in this district under 28 U.S.C. 1401 because Defendant Loral could have brought suit against Defendant Schwartz in the District of Columbia.

DERIVATIVE ACTION ALLEGATIONS

22. Plaintiffs are Co-Trustees under the Last Will and Testament of Ralph Harvey Meng, deceased, who, since October 1992, was the legal owner of 448 shares of common stock in Loral Corporation, the predecessor in interest of Defendant Loral.

23. Upon the admission to probate of the Last Will and Testament of Ralph Harvey Meng on October 12, 1995, Plaintiffs became the owners of decedent Ralph Harvey Meng's 448 shares of common stock in Loral Corporation.

24. In January 1996, Defendant Loral was incorporated in Bermuda to succeed to the space and telecommunications business of Loral Corporation, in conjunction with the acquisition of Loral Corporation by Lockheed Martin Corporation ("Lockheed Martin").

25. In April 1996, Loral Corporation distributed all of Defendant Loral's shares to Loral Corporation shareholders on the basis of one share of Defendant Loral stock for each share of Loral Corporation stock. Plaintiffs' shares in Loral Corporation were thereby converted into 448 shares of common stock in Defendant Loral.

26. Defendant Loral is the successor in interest to Loral Corporation.

27. Plaintiffs bring this action on behalf of themselves, their beneficiaries and all other similarly situated shareholders of Defendant Loral.

28. Plaintiffs, or Plaintiffs' predecessor in title and interest, have owned shares of Loral Corporation and/or Defendant Loral at all times relevant to this action.

29. This action is not a collusive one to confer jurisdiction on a court of the United States that would not otherwise have jurisdiction.

30. Plaintiffs will fairly and adequately represent the interests of all other similarly situated shareholders in enforcing the rights of Defendant Loral.

31. A demand on Defendant Loral and its directors would be futile because the acts alleged herein were, on information and belief, knowingly committed at the direction of Defendant Schwartz, the Chairman of its Board of Directors and Chief Executive Officer, and other directors and officers of Defendant Loral and Loral Corporation under Defendant Schwartz' influence and control.

32. A demand on Defendant Loral and its directors also would be futile because Defendant Schwartz and other directors and officers of Defendant Loral and Loral Corporation have denied the acts alleged herein despite congressional inquiries, a criminal investigation and criticism from the media.

FACTS

33. Defendant Loral is one of the world's leading satellite communications companies, with substantial interest in the design, manufacture and operation of geosynchronous and low earth-orbit satellite systems. Defendant Loral also provides a broad array of satellite-based services. Since its formation in 1996, the company has assembled the building blocks essential to the creation of a seamless, global networking capability for the information age. Through affiliates, Defendant Loral also designs, makes and integrates telecommunications, weather and direct broadcast satellites.

34. Defendant Schwartz held the positions of Chairman of the Board and Chief Executive Officer of Loral Corporation from 1972 until January 1996.

35. Defendant Schwartz has been Chairman of the Board and Chief Executive Officer of Defendant Loral since January 1996.

Defendant Schwartz Unlawfully Secures Seat on Commerce Department Trade
Mission to China and Agreements For Defendant Loral After
$100,000 Contribution to The Democratic
National Committee

36. After William Jefferson Clinton was elected President of the United States in 1992, Ronald H. Brown, who had been Chairman of the Democratic National Committee ("DNC") during the 1992 elections, became Secretary of Commerce.

37. Several DNC officials and fundraisers also accepted appointments and/or employment at the U.S. Department of Commerce ("Commerce Department") under Secretary Brown, including Melissa Moss, a former top DNC fundraiser who became the Director of the Commerce Department's Office of Business Liaison ("OBL").

38. Other DNC officials, fundraisers and allies, such as Alexis Herman, who is now the Secretary of Labor, joined the staff of the Clinton White House as Director of Public Liaison.

39. Under Secretary Brown, the Commerce Department sponsored a series of foreign trade missions, allegedly to promote U.S. business interests abroad.

40. On such trade missions, U.S. business leaders traveled overseas with Secretary Brown and other Commerce Department officials to meet with foreign business leaders and government officials.

41. These trade missions often resulted in lucrative business deals for U.S. businesses, or expanded business contacts that led to, or could lead to, future business deals.

42. Before the start of a trade mission, participating U.S. business leaders often met with President Clinton or Vice-President Gore at the White House, during which time information was provided to U.S. business leaders.

43. On information and belief, the Clinton White House, the Commerce Department and the DNC provided seats to U.S. business and other leaders on foreign trade missions in exchange for $100,000 contributions to the DNC.

44. Seats on Commerce Department trade missions were provided in exchange for $100,000 contributions to the DNC at the direction of Hillary Rodham Clinton and with the knowledge and approval of President Clinton and Vice-President Gore.

45. Deputy White House Chief of Staff Harold Ickes, then-White House Director of Public Liaison Alexis Herman, OBL Director Moss, OBL Deputy Director Sally Painter, DNC Finance Chairman Marvin Rosen, and top DNC/Clinton-Gore fundraiser Terence R. McAuliffe, among others, played central roles in selecting trade mission participants.

46. John Huang, who was Deputy Assistant Secretary for International Economic Policy at the Commerce Department before transferring to the DNC, organized and participated in the Commerce Department's trade mission to China, and other countries, with the assistance of other Commerce Department Officials including but not limited to Ginger Lew, Melinda Yee, Jude Kearney, Laurie Fitz-Pegado, and Ira Sockowitz.

47. A January 13, 1994 memorandum from DNC official Eric Silden shows that the DNC had a direct role in selecting participants for Commerce Department trade missions. The memorandum states:

[OBL Deputy Director] Sally Painter at Commerce called to ask for a list of candidates for a trade mission to Russia. She needs an initial list by tomorrow (Friday 1/14) of 20-30 names . . . . Ari will use the "Belgium trade mission list" as a base of names, to be augmented by additional names that he feels are relevant to Russian trade. It was suggested that he contact Reta Lewis to determine which names on the Belgium list will be included in the delegation, so that they are not submitted to Commerce for the Russian delegation. . . . Bob will be the point contact with Commerce, as I will not be in the office on Friday afternoon to deliver the list to Sally.

48. According to a DNC brochure regarding its "Managing Trustees Program," individuals who contributed $100,000 to the DNC were "invited to participate in foreign trade missions, which affords opportunities to join Party leaders in meeting with business leaders abroad," among other perquisites.

49. On information and belief, Defendant Schwartz directly or indirectly offered and promised President Clinton, Vice-President Gore, White House Deputy Chief of Staff Harold Ickes, OBL Director Melissa Moss, OBL Deputy Director Sally Painter, then-White House Director of Public Liaison Alexis Herman, John Huang and/or other public officials that he would make contributions to the DNC, or other entities affiliated with the Democrats, with the intent to influence official acts, including obtaining a seat on the Commerce Department's trade mission to China and other favorable treatment from the Clinton Administration, in violation of 18 U.S.C. 201, 371 and 600, among other applicable laws.

50. In June 1994, Defendant Schwartz made a $100,000 contribution to the DNC.

51. In August 1994, Defendant Schwartz participated in the Commerce Department's trade mission to China along with Secretary Brown and others.

52. On information and belief, Defendant Schwartz was selected to participate in the Commerce Department's trade mission to China due at least in part to his $100,000 contribution to the DNC, in violation of 18 U.S.C. 201, 371 and 600, among other applicable laws.

53. During the trade mission to China, Secretary Brown and colleagues and agents of John Huang helped to orchestrate one or more meetings between Defendant Schwartz, Chinese government officials and Chinese business leaders.

54. Defendant Schwartz admitted to Ruth Marcus and John Mintz of The Washington Post that the meetings Secretary Brown arranged for him during the trade mission "helped open doors that were not open before." ("Big Donor Calls Favorable Treatment a Coincidence," The Washington Post, May 25, 1998).

55. As a result of his participation in the Commerce Department's trade mission to China, Defendant Schwartz negotiated and secured agreements for the launch of Defendant Loral's commercial satellites on board Chinese rockets.

Defendant Schwartz' Contributions to the DNC Increase
Dramatically After Participation in the
1994 Trade Mission to China

56. After the success of this initial effort to obtain favors from the Clinton Administration in exchange for campaign contributions, Defendant Schwartz reportedly admitted to Helene Cooper and Rick Wartzman of The Wall Street Journal, "I think that political involvement does enhance the visibility of a corporate executive, and to the extent that visibility is enhanced, access is enhanced as well." ("Traveling Pals: How Ron Brown Picks Who Joins His Trips Abroad Raises Doubts," Wall Street Journal, September 9, 1994).

57. Defendant Schwartz also reportedly boasted to Susan B. Garland of Business Week, "I can open any door I want as chairman of a $6 billion company." ("Clinton Cozies Up to Business," Business Week, September 12, 1994).

58. On information and belief, in a 1994 memorandum, then Deputy White House Chief of Staff Harold Ickes recommended that President Clinton call Defendant Schwartz to solicit contributions from him for a multi-million dollar advertising campaign. "I have it on good authority that Mr. Schwartz is prepared to do anything he can for the administration," Mr. Ickes reportedly wrote.

59. Defendant Schwartz subsequently made substantial, additional contributions to the DNC.

60. On April 24, 1995, Defendant Schwartz paid $25,000 to the DNC.

61. On June 30, 1995, Defendant Schwartz paid $75,000 to the DNC.

62. On September 30, 1995, Defendant Schwartz paid $20,500 to the DNC.

63. On November 28, 1995, Defendant Schwartz paid $100,000 to the DNC.

64. On June 10, 1996, Defendant Schwartz paid $100,000 to the DNC.

65. On October 18, 1996, Defendant Schwartz paid $70,000 to the DNC.

66. On December 20, 1996, Defendant Schwartz paid $6,000 to the DNC.

67. On June 27, 1997, Defendant Schwartz paid $100,000 to the DNC.

68. On December 23, 1997, Defendant Schwartz paid $50,000 to the DNC.

69. On January 21, 1998, Defendant Schwartz paid $30,000 to the DNC.

70. On March 2, 1998, Defendant Schwartz paid $25,000 to the DNC.

71. On April 22, 1998, Defendant Schwartz paid $100,000 to the DNC.

72. In addition, Defendant Schwartz also made substantial, additional contributions to other entities closely affiliated with the Democrats and the Democratic Party.

73. On June 30, 1995, Defendant Schwartz paid $20,000 to the Democratic Senatorial Campaign Committee ("DSCC"),which raises funds for and assists Democrats running for the U. S. Senate.

74. On September 30, 1995, Defendant Schwartz paid $20,500 to the DSCC.

75. On February 15, 1996, Defendant Schwartz paid $15,000 to the DSCC.

76. On April 24, 1996, Defendant Schwartz paid $50,000 to the DSCC.

77. On July 31, 1996, Defendant Schwartz paid $5,000 to the DSCC.

78. On September 16, 1996, Defendant Schwartz paid $30,000 to the DSCC.

79. On September 20, 1996, Defendant Schwartz paid $20,000 to the Democratic Congressional Campaign Committee ("DCCC"), which raises funds for and assists Democrats running for the U.S. House of Representatives.

80. On October 16, 1996, Defendant Schwartz paid $10,000 to the DSCC.

81. On October 24, 1996, Defendant Schwartz paid $5,000 to the DSCC.

82. On January 31, 1997, Defendant Schwartz paid $50,000 to the DSCC.

83. On April 25, 1997, Defendant Schwartz paid $5,000 to the DCCC.

84. On July 14, 1997, Defendant Schwartz paid $50,000 to the DSCC.

85. On October 27, 1997, Defendant Schwartz paid $1,000 to the DCCC.

86. On December 15, 1997, Defendant Schwartz paid $10,000 to the DSCC.

87. On December 19, 1997, Defendant Schwartz paid $50,000 to the DCCC.

88. On or about May 21, 1998, Defendant Schwartz reportedly contributed $217,000 to the Democratic Leadership Conference, a "think tank" closely associated with President Clinton and the Democratic Party.

89. On August 14, 1998, Defendant Schwartz paid $100,000 to the DCCC.

90. On information and belief, from 1994 to 1998, Defendant Schwartz contributed at least $1,460,000 to the DNC and other organizations affiliated with the Democrats and the Democratic Party.

91. On information and belief, Defendant Schwartz had paid to him for the purpose of using at least part of a $36 million bonus he negotiated for himself under Loral Corporation's merger agreement with Lockheed Martin, and other forms of compensation, to reimburse himself for his unlawful contributions and to provide a source of funds for further unlawful contributions.

92. On information and belief, Defendant Schwartz is the largest single contributor to the DNC and other organizations affiliated with the Democrats and the Democratic Party.

93. On information and belief, Defendant Schwartz directly or indirectly offered and/or promised President Clinton, Vice-President Gore, White House Deputy Chief of Staff Harold Ickes, OBL Director Melissa Moss, OBL Deputy Director Sally Painter, then-White House Director of Public Liaison Alexis Herman, John Huang and/or other public officials that he would make the additional contributions referenced in paragraphs 59 through 89 above, with the intent to influence official acts and obtain favors and/or favorable treatment from the Clinton Administration, in violation of 18 U.S.C. 201, 371 and 600, among other applicable laws.

94. On information and belief, Defendant Schwartz caused Defendant Loral to reimburse him for his unlawful contributions and to provide a source of funds for further unlawful contributions.

Defendant Schwartz Unlawfully Secures Favorable Ruling from President
Clinton Regarding Export Licensing for
Communication Satellites

95. Defendant Loral was, and is, developing a global cellular telephone network, known as "Globalstar," which will consist of forty-eight (48) satellites in low-earth orbit and eight (8) spare satellites, also in orbit.

96. Defendant Loral's launch strategy for "Globalstar" contemplates using Chinese and Ukrainian launch providers, with launch sites in China and Kazakhstan, to place its satellites into orbit.

97. Pursuant to the Arms Export Control Act, 22 U.S.C. 2778 et seq., and the U.S. States Munitions List created thereunder, anyone seeking to export a commercial satellite from the United States, for sale or for launch, is required by law to obtain a special export license.

98. Prior to November 5, 1996, the U.S. Department of State ("State Department") was charged with issuing special export licenses for U.S. commercial satellites.

99. On information and belief, aerospace industry executives, including Defendant Schwartz, sought to have authority for issuing special export licenses for U.S. commercial satellites transferred from the State Department to the Commerce Department.

100. On information and belief, in 1995, at urging of aerospace industry executives, including Defendant Schwartz, Secretary of State Warren Christopher agreed to undertake a review of special export licensing procedures for U.S. commercial satellites in consultation with the Department of Defense, Central Intelligence Agency ("CIA"), National Security Agency ("NSA") and the Commerce Department.

101. On October 9, 1995, Secretary Christopher decided to preserve the existing special export licensing procedures for U.S. commercial satellites.

102. In doing so, Secretary Christopher sided with the Defense Department, CIA, NSA and some of his own advisors, who noted that sensitive technological secrets were embedded in U.S. commercial satellites that could jeopardize "significant military and intelligence interests."

103. On March 14, 1996, President Clinton overruled Secretary Christopher's October 9, 1995 decision at the urging of the Commerce Department.

104. On November 5, 1996, the same day President Clinton and Vice-President Gore were reelected, authority for licensing the export of U.S. commercial satellites was shifted from the State Department to the Commerce Department.

105. On information and belief, President Clinton overruled Secretary Christopher's decision and transferred authority for export licensing from the State Department to the Commerce Department, as a result of the substantial contributions Defendant Schwartz had made and/or promised to make to the DNC and other entities affiliated with the Democrats and the Democratic Party, in violation of 18 U.S.C. 201, 371 and 600, among other applicable laws.

Defendant Schwartz Unlawfully Secures Waiver From President Clinton
for Launching Loral Satellite in China

106. The Foreign Relations Authorization Act of 1990 and 1991, 22 U.S.C. 2151 nt, in the wake of the events of Tiananmen Square, suspended the export of any satellites of U.S. origin intended for launch in China.

107. Under the Foreign Relations Authorization Act of 1990 and 1992, a suspension may be lifted for a particular launch if the President reports to Congress that it is in the national interest to grant a waiver.

108. Consequently, in addition to an export licence, any company wishing to launch a U.S. satellite on board a Chinese rocket had to obtain a waiver from the President as well.

109. On February 6, 1996, President Clinton signed waivers to allow four (4) U.S. commercial satellites to be launched in China, despite evidence that China was exporting nuclear and missile technology to Pakistan and Iran, among other nations.

110. On information and belief, at least one of these four (4) satellites belonged to Defendant Loral.

111. On information and belief, President Clinton signed a waiver allowing the launch of Defendant Loral's satellite in China as a result of the substantial campaign contributions Defendant Schwartz offered and promised to make to the DNC and other entities affiliated with the Democrats and the Democratic Party, and actually did make, in violation of 18 U.S.C. 201, 371 and 600, among other applicable laws.

Defendant Schwartz Unlawfully Secures Additional Waiver from President
Clinton Despite Prior, Unlawful Transfer of Sensitive
Satellite Encryption Data to China

112. On February 15, 1996, a Chinese Long March rocket carrying a $200 million satellite belonging to Defendant Loral failed in midflight.

113. The satellite on board the Chinese Long March rocket contained an encryption device on a circuit board that controls the satellite's communications and movement in space.

114. On information and belief, similar encryption devices are used in U.S. defense satellites, and, consequently, the devices are highly classified secrets of the U.S. Government.

115. On information and belief, the circuit board from the highly classified encryption device in the satellite that was destroyed during the February 15, 1996 launch was missing when the Chinese returned debris from the explosion to U.S. authorities, even though a control box containing the circuit board was recovered intact.

116. Peoples Liberation Army soldiers reportedly sorted through the debris while U.S. officials were kept away from the crash site for five (5) hours.

117. U.S. officials have publicly stated that they suspect the Chinese authorities took the board.

118. After the crash, NSA reportedly changed the encoded algorithms used by U.S. satellites.

119. On information and belief, during a subsequent analysis of the failed launch, Defendant Loral divulged sensitive, national security information to the Chinese that helped the Chinese to improve their rockets for future launches, albeit without obtaining the required export license from the State Department.

120. Specifically, as reported by both the New York Times and The Washington Post, engineers from Defendant Loral faxed a twenty-five (25) page memorandum to the Chinese summarizing the conclusions of an independent review panel about the causes of the accident. (Elaine Sciolino and Jeff Gerth, "Scientist Who Led Missile Review Promised Help to China," The New York Times, June 6, 1998; John Minz, "Technology Transfer Probe is Widened," The Washington Post, June 24, 1998; John Minz, "Testimony: Export Watchdog Neutered," The Washington Post, June 26, 1998.)

121. On information and belief, the sensitive, national security information divulged by Defendant Loral contributed to China's ballistic missile program, compromising U.S. national security interests and endangering the populace of the United States and the world.

122. On information and belief, the Chinese Long March rocket is nearly identical to Chinese intercontinental ballistic missiles.

123. Sometime in 1997, the Justice Department began a federal grand jury investigation into Defendant Loral's unauthorized release of highly classified, national security information to the Chinese.

124. In February 1998 President Clinton approved a waiver allowing the launch of another satellite belonging to Defendant Loral on board a Chinese rocket, despite a recommendation by the Criminal Division of the U.S. Department of Justice ("Justice Department") that the waiver would have a significant adverse impact on any prosecution arising from its pending investigation of Defendant Loral.

125. The Justice Department advised President Clinton that it did not believe it could obtain convictions from a jury once the jury learned that the President had found a subsequent waiver to be in the national interest.

126. On information and belief, President Clinton signed this waiver as a result of the substantial contributions Defendant Schwartz had made and/or promised to make to the DNC and other entities affiliated with the Democrats and the Democratic Party, in violation of 18 U.S.C. , 201, 371 and 600 among other applicable laws.

As a Result of Defendant Schwartz' Unlawful Contributions and Resultant Breaches of National Security, Defendant Loral Becomes Embroiled in "Chinagate" Scandal, Causing Substantial Damage to Defendant Loral and Wasting of Its Corporate Assets

127. By engaging in the acts referenced above in paragraphs 33through 126, Defendant Schwartz has caused Defendant Loral to be implicated in a political scandal and breaches of U.S. national security, and has brought Defendant Loral into substantial disrepute.

128. Defendant Loral has received substantial adverse public attention, is the subject of both criminal and congressional investigations, and has been placed at risk of substantial civil and criminal liability.

129. In May 1998, the Justice Department began investigating the contributions made by Defendant Schwartz to the DNC and other entities affiliated with the Democrats and the Democratic Party, and the waivers granted by President Clinton.

130. As reported in the May 17, 1998 edition of The Washington Post, the Justice Department's campaign finance task force:

is looking at allegations by congressional Republicans that the administration issued a disputed waiver for a satellite deal with China to a U.S. aerospace company [Defendant Loral] because its chief executive [Defendant Schwartz] is a major Democratic contributor.

Roberto Suro, "Justice Dept. Investigates Satellite Exports," The Washington Post, May 17, 1998.

131. On May 21, 1998, the House of Representatives passed a resolution urging the Clinton Administration to cooperate with congressional investigations into Defendant Loral's unauthorized transfer of technology to China and campaign fundraising practices.

132. On May 24, 1998, Senator Arlen Specter (R-Pa.) challenged Defendant Schwartz' conduct and the conduct of Defendant Loral on Fox News Sunday, a nationally televised program:

You have major concessions made by the President on technology transfers which adversely effect national security. These transfers are made at a time exactly when these enormous contributions were being made . . . . It raises a very substantial question.

133. On May 24, 1998, Defendant Schwartz himself also appeared on the Sunday morning talk show circuit in an attempt to deflect criticism away from his conduct and the conduct of Defendant Loral.

134. Both the State Department's intelligence arm and the Air Force's National Air Intelligence Center have concluded that "United States national security has been harmed" because of Defendant Loral's unauthorized release of sensitive technology to the Chinese.

135. National Security Council documents indicate that Defendant Loral's unauthorized release of sensitive technology to the Chinese was "criminal [critical], likely to be indicted, knowing and unlawful." (Edward Timperlake and William C. Triplett II, Year of the Rat, (1989) at 172; Roberto Suro and John F. Harris, "Clinton Rejected China Worries; Justice Feared Impact on Satellite Probe; Loral Lobbied for Deal," The Washington Post, May 23, 1998; William Safire, "The China Connection," The New York Times, May 25, 1998.

136. According to June 27, 1998 edition of The New York Times, a May 16, 1997 report by the Defense Technology Security Administration ("DTSA"), a U.S. Department of Defense agency responsible for safeguarding U.S. technology exports, Defendant Loral's unauthorized release of sensitive technology to the Chinese gave rise to at least three (3) "major" violations of U.S. national security, three (3) medium violations and twelve (12) "minor" infractions.

137. According to the June 27, 1998 edition of The New York Times, the DTSA report concluded that: "The significant benefits derived by China from these activities are likely to lead to improvements in the overall reliability of their space-launched vehicles and ballistic missiles, and, in particular, their guidance systems."

138. The DTSA report triggered a criminal investigation into Defendant Loral's unauthorized release of sensitive technology to the Chinese by the U.S. Department of Justice ("Justice Department"). This investigation is continuing.

139. The Justice Department's criminal investigation, in turn, generated a multi-pronged congressional investigation, which also is continuing.

140. The Senate Foreign Relations Committee and the Senate Government Affairs Committee conducted hearings into "Chinagate" in June 1998.

141. The House of Representatives' National Security Committee and International Relations Committee conducted joint hearings into "Chinagate" in June 1998.

142. Also in June 1998, the House of Representatives established as special Select Committee on U.S. National Security and Military/Commercial Concerns With the Peoples' Republic of China to look into "Chinagate." This select committee is reportedly investigating both the unauthorized release of sensitive technology by Defendant Loral and the campaign contributions of Defendant Schwartz.

143. In June and July 1998, the Senate Subcommittee on International Security, Proliferation and Federal Services conducted hearings into the Commerce Department's satellite export control procedures.

144. In July, 1998 CIA Director George Tenent ordered his agency to assess Defendant Loral's unauthorized transfer of technology to China for national security damage.

145. During an October 30, 1998 interview by Neil Cavuto on the Fox News Channel, Defendant Schwartz admitted that the unauthorized transfer of technology to China was an "oversight."

146. As a result these criminal and congressional investigations and the substantial adverse publicity Defendant Loral has received, Defendant Loral has suffered substantial harm to its good will, reputation and business interests and has been placed at risk of substantial civil and criminal liability.

147. On information and belief, Defendant Loral has been forced to expend substantial corporate assets in responding to these criminal and congressional investigations, and to the substantial adverse publicity it has received.

148. On information and belief, Defendant Schwartz used Defendant Loral's corporate funds for his illegal contributions, thus wasting Defendant Loral's corporate assets by pursing unlawful activities

149. On information and belief, John Huang, Charlie Trie, Johnny Chung, Ginger Lew, Hoyt Zia, Ira Sockwitz, Laurie Fitz-Pegado, among others, also were involved, directly or indirectly, in the "Chinagate" scandal and the actions set forth in paragraphs 33through 126, above.

COUNT I
(Breach of Fiduciary Duty -- Defendant Schwartz)

150. Plaintiffs reallege paragraphs 1 through 149 as if fully set forth herein.

151. As Chairman and CEO, Defendant Schwartz owed Defendant Loral and its shareholders fiduciary duties to act in their best interests and not to waste corporate assets.

152. Defendant Schwartz breached the fiduciary duties he owed to Defendant Loral and it shareholders and/or wasted corporate assets by: (a) unlawfully making contributions to the DNC and other entities affiliated with the Democrats and the Democratic Party in exchange for favorable treatment from the Clinton Administration, in violation of 18 U.S.C. 201, 371 and 600, among other applicable laws; (b) causing Defendant Loral's corporate assets to be used for unlawful ends; (c) causing Defendant Loral to be implicated in unlawful conduct and/or violations of national security; and (d) allowing and/or failing to prevent the unauthorized transfer of sensitive satellite encryption technology to China.

153. Because Defendant Schwartz' conduct was unlawful and/or resulted in unlawful acts, the decision to engage in such conduct was not a permissible exercise of reasonable business judgment.

154. Defendant Schwartz' conduct was willful and intentional, or undertaken with reckless disregard for the best interests and welfare of Defendant Loral and its shareholders.

155. As a proximate result, Defendant Loral and its shareholders have suffered substantial damages, including but not limited to being subject to criminal and congressional investigations, civil and criminal liability, loss of Defendant Loral's good will and reputation, harm to Defendant Loral's business interests and other wasting of corporate assets.

WHEREFORE, Plaintiffs request that judgment be entered against Defendant Schwartz, individually and in his capacity as Chairman and CEO of Defendant Loral, for an accounting and restitution to Defendant Loral of the $36 million bonus and for actual, compensatory and punitive damages, an award of attorneys fees and costs to Plaintiffs and Defendant Loral, permanent injunctive relief and such other relief as the Court deems appropriate.

COUNT II
(Negligence -- Defendant Schwartz)

156. Plaintiffs reallege paragraphs 1 through 155 as if fully set forth herein.

157. As Chairman and CEO of Defendant Loral, Defendant Schwartz owed Defendant Loral and its shareholders a duty to exercise reasonable care and prudence in the management, supervision, operation and control of Defendant Loral. This duty to exercise reasonable care and prudence includes the duty not to waste corporate assets.

158. Defendant Schwartz breached the duties he owed to Defendant Loral and it shareholders and/or wasted corporate assets by: (a) unlawfully making contributions to the DNC and other entities affiliated with the Democrats and the Democratic Party in exchange for favorable treatment from the Clinton Administration, in violation of 18 U.S.C. 201, 371 and 600, among other applicable laws; (b) causing Defendant Loral's corporate assets to be used for unlawful ends; (c) causing Defendant Loral to be implicated in unlawful conduct and/or violations of national security; and (d) allowing and/or failing to prevent the unauthorized transfer of sensitive satellite encryption technology to China.

159. Defendant Schwartz' conduct was willful and intentional, or undertaken with reckless disregard for the best interests and welfare of Defendant Loral and its shareholders.

160. As a proximate result, Defendant Loral and the shareholders of Defendant Loral have suffered substantial damages, including but not limited to being subject to criminal and congressional investigations, civil and criminal liability, loss of Defendant Loral's good will and reputation, harm to Defendant Loral's business interests and other wasting of corporate assets.

WHEREFORE, Plaintiffs request that judgment be entered against Defendant Schwartz, individually and in his capacity as Chairman and CEO of Defendant Loral, for an accounting and restitution to Defendant Loral of the $36 million bonus and for actual, compensatory and punitive damages, an award of attorneys fees and costs to Plaintiffs and Defendant Loral, permanent injunctive relief and such other relief as the Court deems appropriate.

COUNT III
(Unjust Enrichment -- Defendants DNC, DSCC and DCCC )

161. Plaintiffs reallege paragraphs 1 through 160 as if fully set forth herein.

162. The unlawful contributions made by Defendant Schwartz to Defendants DNC, DSCC and DCCC, which on information and belief were reimbursed to Defendants Schwartz from Defendant Loral's corporate funds, were a gratuitous gift of Defendant Loral's assets, made with no legal justification or excuse.

163. Defendants DNC, DSCC and DCCC were thereby unjustly enriched, and received the contributions with the knowledge that the contributions were unlawful and wrongfully being made at the expense of Defendant Loral and its shareholders.

WHEREFORE, Plaintiffs request that judgment be entered against Defendant DNC, DSCC and DCCC, jointly and severally, for an accounting and restitution to Defendant Loral all contributions made by Defendant Schwartz and for actual, compensatory and punitive damages, an award of attorneys fees and costs to Plaintiffs and Defendant Loral, and such other relief as the Court deems appropriate.

COUNT IV
(Civil Conspiracy -- All Defendants)

164. Plaintiffs reallege paragraphs 1 through 163 as if fully set forth herein.

165. On information and belief, Defendant Schwartz, the DNC, the DSCC, the DCCC, President William Jefferson Clinton, First Lady Hillary Rodham Clinton, Vice-President Albert Gore, Jr., White House Deputy Chief of Staff Harold Ickes, OBL Director Melissa Moss, OBL Deputy Director Sally Painter, then-White House Director of Public Liaison Alexis Herman, DNC Finance Chairman Marvin Rosen, DNC/Clinton-Gore fundraiser Terence R. McAuliffe, Deputy Assistant Secretary John Huang and other currently unknown individuals agreed, tacitly or explicitly, to participate in a common scheme to unlawfully obtain or provide taxpayer-financed government services and/or favorable treatment for Defendant from the Clinton Administration, in exchange for campaign contributions, in breach of Defendant Schwartz' fiduciary and other duties to Defendant Loral and its shareholders.

166. On information and belief, Defendant Schwartz, the DNC, the DSCC, the DCCC, President William Jefferson Clinton, First Lady Hillary Rodham Clinton, Vice-President Albert Gore, Jr., White House Deputy Chief of Staff Harold Ickes, OBL Director Melissa Moss, OBL Deputy Director Sally Painter, then-White House Director of Public Liaison Alexis Herman, DNC Finance Chairman Marvin Rosen, DNC/Clinton-Gore fundraiser Terence R. McAuliffe, Deputy Assistant Secretary John Huang, and others, performed one or more unlawful acts, or performed one or more lawful acts in an unlawful manner, in furtherance of this common scheme.

167. These unlawful acts were not within the scope of Defendants' authority.

168. Defendants' conduct was willful and intentional, or undertaken with reckless disregard for the rights of Defendant Loral and its shareholders.

169. As a proximate result, Defendant Loral and its shareholders suffered substantial damages, including but not limited to being subject to criminal and congressional investigations, civil and criminal liability, loss of Defendant Loral's good will and reputation, harm to Defendant Loral's business interests and other wasting of corporate assets.

WHEREFORE, Plaintiffs request that judgment be entered against all Defendants, jointly and severally, for an accounting and restitution to Defendant Loral of the $36 million bonus and for actual, compensatory and punitive damages, an award of attorneys fees and costs to Plaintiffs and Defendant Loral, permanent injunctive relief and such other relief as the Court deems appropriate.

COUNT V
(Violations of the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. 1961
et seq. -- All Defendants)

170. Plaintiffs reallege paragraphs 1 through 169 as if fully set forth herein.

171. Defendant Loral is an enterprise within the meaning of 18 U.S.C. 1961(4), the activities of which affect interstate commerce.

172. In order to secure benefits and other favorable treatment for Defendant Loral from the Clinton Administration, Defendant Schwartz made the following series of unlawful contributions to the DNC and other organizations affiliated with the Democrats and Democratic Party, which directly or indirectly benefitted President Clinton and Vice-President Gore:

(a) in June 1994, Defendant Schwartz made a $100,000 contribution to the DNC;

(b) on April 24, 1995, Defendant Schwartz paid $25,000 to the DNC;

(c) on June 30, 1995, Defendant Schwartz paid $75,000 to the DNC;

(d) on September 30, 1995, Defendant Schwartz paid $20,500 to the DNC;

(e) on November 28, 1995, Defendant Schwartz paid another $100,000 to the DNC;

(f) on June 10, 1996, Defendant Schwartz paid $100,000 to the DNC;

(g) on October 18, 1996, Defendant Schwartz paid $70,000 to the DNC;

(h) on December 20, 1996, Defendant Schwartz paid $6,000 to the DNC;

(i) on June 27, 1997, Defendant Schwartz paid $100,000 to the DNC;

(j) on December 23, 1997, Defendant Schwartz paid $50,000 to the DNC;

(k) on January 21, 1998, Defendant Schwartz paid $30,000 to the DNC;

(l) on March 2, 1998, Defendant Schwartz paid $25,000 to the DNC;

(m) on April 22, 1998, Defendant Schwartz paid $100,000 to the DNC;

(n) on June 30, 1995, Defendant Schwartz paid $20,000 to the DSCC;

(o) on September 30, 1995, Defendant Schwartz paid $20,500 to the DSCC;

(p) on February 15, 1996, Defendant Schwartz paid $15,000 to the DSCC;

(q) on April 24, 1996, Defendant Schwartz paid $50,000 to the DSCC;

(r) on July 31, 1996, Defendant Schwartz paid $5,000 to the DSCC;

(s) on September 16, 1996, Defedant Defendant Schwartz paid $30,000 to the DSCC;

(t) on September 20, 1996, Defendant Schwartz paid $20,000 to DCCC;

(u) on October 16, 1996, Defendant Schwartz paid $10,000 to the DSCC;

(v) on October 24, 1996, Defendant Schwartz paid $5,000 to the DSCC;

(w) on January 31, 1997, Defendant Schwartz paid $50,000 to the DSCC;

(x) on April 25, 1997, Defendant Schwartz paid $5,000 to the DCCC;

(y) on July 14, 1997, Defendant Schwartz paid $50,000 to the DSCC;

(z) on October 27, 1997, Defendant Schwartz paid $1,000 to the DCCC;

(aa) on December 15, 1997, Defendant Schwartz paid $10,000 to the DSCC;

(bb) on December 19, 1997, Defendant Schwartz paid $50,000 to the DCCC;

(cc) on or about May 21, 1998, Defendant Schwartz reportedly contributed $217,000 to the Democratic Leadership Conference, a think tank associated with President Clinton; and

(dd) on August 14, 1998, Defendant Schwartz paid $100,000 to the DCCC.

173. Defendant Schwartz' contributions violated 18 U.S.C. 201 (relating to bribery) and constitute racketeering activity within the meaning of 18 U.S.C. 1961(1) .

174. The repeated nature and common purpose of these unlawful predicate acts -- to secure benefits and other favorable treatment from the Clinton Administration in exchange for campaign contributions, in violation of 18 U.S.C. 201 -- constitute a pattern of racketeering activity within the meaning of 18 U.S.C. 1961(5).

175. Because the purpose of these repeated predicate acts was to secure benefits and other favorable treatment for Defendant Loral, Defendant Schwartz thus managed the affairs of Defendant Loral through a pattern of racketeering activity in violation of 18 U.S.C. 1962(c)

176. Likewise, Defendant Schwartz, the DNC, the DSCC, the DCCC, President Clinton, Hillary Rodham Clinton, Vice-President Gore, White House Deputy Chief of Staff Harold Ickes, OBL Director Melissa Moss, OBL Deputy Director Sally Painter, then-White House Director of Public Liaison Alexis Herman, DNC Finance Chairman Marvin Rosen, DNC/Clinton-Gore fundraiser Terence R. McAuliffe, Deputy Assistant Secretary John Huang and other currently unknown individuals conspired to manage the affairs of Defendant Loral through a pattern of racketeering activity in violation of 18 U.S.C. 1962(d).

177. These unlawful acts were not within the scope of Defendants' authority.

178. Defendants' conduct was willful and intentional, or undertaken with reckless disregard for the rights of Defendant Loral and its shareholders.

179. As a proximate result of Defendant Schwartz' violations of 18 U.S.C. 1962(c) and all Defendants' violations of 18 U.S.C. 1962(d), Defendant Loral and its shareholders suffered, and continue to suffer, substantial injury to their business and property, including but not limited to loss of Defendant Loral's good will and reputation, harm to Defendant Loral's business interests and other wasting of corporate assets

WHEREFORE, Plaintiffs request that judgment be entered against all Defendants, jointly and severally, for an accounting and restitution to Defendant Loral of the $36 million bonus and for actual and compensatory damages, treble damages, an award of attorneys fees and costs to Plaintiffs and Defendant Loral, permanent injunctive relief and such other relief as the Court deems appropriate.

Plaintiffs request trial by jury.

Respectfully submitted,

JUDICIAL WATCH, INC.

__________________________
Larry Klayman, Esq.
D.C. Bar No. 334581
General Counsel
501 School St., S.W.
Suite 725
Washington, DC 20024
(202) 646-5172

Attorneys for Plaintiff