Funds Probe Unfairly Spared White House, '98
Report Says Donations: Revelations from long-sealed report show
internal dissension on Reno's refusal to appoint counsel.
By WILLIAM C. REMPEL, ALAN C. MILLER, Times Staff
Writers
WASHINGTON--A
confidential report by the Justice Department's former chief campaign
finance investigator, kept sealed by Atty. Gen. Janet Reno for nearly two
years, accused senior Justice officials of engaging in "gamesmanship" and
legal "contortions" to avoid an independent inquiry into Clinton-Gore
campaign fund-raising abuses. According
to an edited version of the 94-page document, former task force supervisor
Charles G. LaBella also faulted Reno's top advisors for using
"intellectually dishonest" double standards: endorsing independent
counsels to investigate Cabinet-level administration officials while
opposing them for similar or stronger cases involving senior White House
figures. Among those getting special
treatment, the report said, were President Clinton, Vice President Al
Gore, First Lady Hillary Rodham Clinton and former White House aide Harold
M. Ickes. It is the first indication that the task force was considering
Mrs. Clinton's conduct in the fund-raising scandal.
The bluntly worded July 1998 report also
called for a sweeping outside investigation into "the entire landscape" of
campaign finance allegations, referring to the possibility of broad
schemes "conjured up by sophisticated political operatives to circumvent"
election finance laws during the 1996 presidential race.
Senior Justice Department officials
strongly rejected LaBella's assertions, saying that the report leaped to
"outrageous" conclusions and personalized policy differences. According to
Justice Department spokesman Myron Marlin, Reno "based her decision on the
facts and the laws without regard to politics, the pundits or pressure."
It has long been known that LaBella, as
well as FBI Director Louis J. Freeh, supported the appointment of an
independent counsel, but the previously undisclosed documents provide an
extraordinary glimpse behind the scenes of a Justice Department storm that
swirled around Reno's controversial rejections of outside counsels.
They also include LaBella's stinging
indictment of a campaign finance system that he said encourages abuse by
both major parties and of enforcement of fund-raising laws that he said is
so weak it is "a bad joke" on the American public.
Since receiving the report, Reno has
kept it within the Justice Department and defied congressional pressure to
release it, even under threat of contempt action. A handful of Congress
members and aides have been allowed to read the report under strictly
controlled circumstances. The Times reviewed an excised version of the
report and related documents.
Ammunition for Reno's Critics
The disclosures are certain to provide
Reno's critics, including Republican lawmakers, with powerful ammunition
to renew charges that she acted to protect the White House. Already, last
week's conviction of longtime Gore fund-raiser Maria Hsia on campaign
finance violations resurrected Republican charges that the Justice
Department has failed to get to the bottom of the scandal.
And questions raised about Gore and
Hillary Clinton in the long-sealed documents could ricochet across the
2000 political landscape as well, as Gore seeks the Democratic
presidential nomination and the first lady bids for a U.S. Senate seat in
New York. Ickes, a former White House deputy chief of staff who
spearheaded the Clinton-Gore reelection effort, is a key figure in Mrs.
Clinton's Senate campaign. LaBella's
accusations are particularly troubling for the Clinton administration
because the career prosecutor was hand-picked in September 1997 to bolster
public confidence in the Justice Department-controlled investigations of
political fund-raising abuses. It was
Reno who chose LaBella to head the Campaign Financing Task Force and
salvage much-criticized investigations then run by the department's Public
Integrity Section. He arrived with a reputation as an aggressive
prosecutor from high-profile cases in New York and San Diego, where he
served under both Republican and Democratic U.S. attorneys in such
positions as chief of the criminal and public corruption divisions.
"The failure of Reno to listen to
LaBella seems to me to put a cloud on the impartiality of the top of the
Justice Department in what was supposed to be the most ethical
administration in the history of the United States," said Henry Ruth, a
former Watergate special prosecutor and criminal defense attorney. "I
can't remember . . . someone at that level, plus the FBI, saying 'go' and
the attorney general vetoing it without satisfactory explanation."
Responding on behalf of Clinton, Gore
and the first lady, White House spokesman Jim Kennedy said: "We're not
going to comment on selectively leaked information that's allegedly from a
sealed report we've never seen. However, this whole matter has been
investigated repeatedly at a cost of millions of dollars with absolutely
no finding of wrongdoing on the part of the president, the vice president
or the first lady."
LaBella
Stands by His Conclusions LaBella
said it would be "inappropriate to comment" on his report while it
remained confidential. However, the former task force chief said that he
stands by its conclusions. "It was the
right advice then and it's the right advice today," he said. "I still
believe it's the only way to avoid even unwarranted appearances of a
political fix." He said that Reno could
yet refer the matter to an outside special prosecutor under existing
Justice guidelines, a move that he recommends.
Ten months into his tenure with the task
force, LaBella filed his report to Reno, warning that numerous conflicts
of interest made the Justice Department's insistence that its own lawyers
handle the inquiry into the 1996 Clinton-Gore campaign "a recipe for
disaster." LaBella was joined on what he called an "interim report" by
James V. DeSarno Jr., an assistant FBI director who supervised agents
assigned to the task force. Under the
independent counsel act, the attorney general was required to seek an
outside prosecutor upon receiving credible information that the president,
vice president or other senior officials may have violated the law or when
an investigation by the Justice Department "may result in personal,
financial or political conflict of interest."
LaBella maintained that both
circumstances applied and that Justice officials "resisted a common-sense
. . . application" of the law.
No
Specific Criminal Accusations Made
In singling out Clinton, Gore, Mrs.
Clinton and Ickes, LaBella's report did not accuse them of specific
criminal violations. Rather, it cited questionable actions by them and "a
pattern of conduct worthy of investigation" by an independent counsel.
For example, LaBella noted
administration dealings with various Asian American fund-raisers for the
Democratic National Committee as well as with wealthy foreign nationals
that it said "suggests a level of knowledge within the White
House--including the president's and first lady's offices--concerning the
injection of foreign funds into the reelection effort."
The report said that one of the common
themes among various cases under review at the time was "the calculated
use of access" to the White House and high-level officials, "including the
president and vice president." The
previously secret documents contradict Reno's assurances to Congress that
no serious rifts divided her Justice Department advisors. Indeed,
documents and interviews with a number of former task force members reveal
a bureaucratic brawl that went well beyond the commonplace tensions
between hard-nosed field prosecutors and seasoned Washington superiors.
"They didn't want us to succeed. It made
them look bad," said one former task force attorney who described
"unprecedented hostility" from senior Justice officials.
Another former task force prosecutor,
Steve Clark of San Diego, complained in a scathing internal memo in
December 1997 that his efforts to investigate possible corruption by both
major parties was frustrated by "behind-the-scenes maneuvering, personal
animosity, distortions of fact and contortions of law" by high-level
Justice officials. Top Justice lawyers
took strong exception to the LaBella report. Its frank language privately
outraged some of Reno's closest advisors.
Lee J. Radek, chief of the Public
Integrity Section, responded with a blistering letter to Reno. He called
LaBella's legal arguments "flawed," challenged the grounds for implicating
the first lady and ridiculed the underlying elements of LaBella's case for
an independent counsel. He said that, given one legal standard LaBella
sought to apply, "every member of Congress would be under criminal
investigation." Radek, a 29-year Justice
Department veteran and staunch foe of independent counsel referrals for
Gore, Ickes and the Clintons, also said that he was furious over LaBella's
suggestion that the motivations of some Reno aides were "colored by bad
faith, a deliberate twisting of the law and an effort to protect the White
House." LaBella, who was a senior field
prosecutor in San Diego, replaced one of Radek's staff attorneys who was
dumped after a series of investigative embarrassments and accusations of
mismanagement put the task force under heavy political fire.
Radek said in an interview that he and
LaBella had "an honest disagreement" about the application of the
independent counsel act but that "the attorney general's standing order
was to leave no stone unturned." In
fact, he said, "because of the sensitivity of this we went beyond the
normal parameters of a criminal investigation and tried to find out all
the facts, whether or not they were included in what is traditionally a
criminal investigation." Since the
fund-raising controversy broke in newspaper headlines in late 1996, Reno
repeatedly has rejected outside prosecutors for narrowly focused
investigations of alleged White House wrongdoing. She did so following
preliminary reviews of such matters as fund-raising telephone calls by
Gore from the White House, so-called issue ads funded by the Democratic
National Committee and congressional testimony by Ickes.
She also opposed requests for sweeping
inquiries as proposed by LaBella and Freeh.
Since becoming attorney general in 1993,
Reno has requested appointments of seven outside prosecutors, including
one in the Whitewater scandal. After that inquiry by Kenneth W. Starr
evolved into the Monica S. Lewinsky case, concerns rose over whether
excessive power had been given to overly zealous independent counsels.
Congress let the statute expire last year, a move endorsed by Reno.
LaBella left the task force voluntarily
days after filing his report to return to San Diego as acting U.S.
attorney. But, when he was passed over for the permanent federal
appointment in 1999, he ended his 17-year government career and joined
Decision Strategies Fairfax International, a private investigation firm.
Reno's Republican critics accused the administration of denying LaBella
the U.S. attorney's job as punishment for recommending an independent
counsel. Underlying LaBella's argument
for an outside prosecutor was criticism of what he called an excessively
narrow "stovepipe approach" to myriad campaign finance allegations. His
report urged a broader investigation, in part, because seemingly innocent
conduct in one inquiry could take on a more sinister gloss when viewed in
the context of other cases. "This is
especially true with respect to the conduct of senior White House
officials and key DNC and Clinton/Gore officials," the report said.
At the same time, the report seemed to
minimize the likelihood of a single, centrally controlled or highly
disciplined conspiracy. It said: "The campaign finance allegations . . .
present the earmarks of a loose enterprise employing different actors at
different levels who share a common goal: Bring in the money."
Appointment of Trie
Questioned Although half of the
report reviewed by The Times was excised to protect grand jury secrecy and
ongoing investigations, some of the deleted material was pieced together
from other documents. Most of that missing information relates directly to
the task force cases against Clinton, Gore, Ickes and Mrs. Clinton.
In one instance, documents show, task
force investigators regarded as suspicious the timing of Clinton's
appointment of friend and fund-raiser Yah Lin "Charlie" Trie to a
U.S.-Pacific trade advisory panel in 1996. That appointment came shortly
after Trie delivered $460,000 in donations from a Taiwan-based Buddhist
sect to the president's legal defense trust fund, set up to help defray
the Clintons' private legal bills. An investigative document called this
"a potential quid pro quo" that should be probed by an independent
counsel. Ultimately, Trie acted as a
self-described "mailman," delivering a total of $639,000 in checks and
money orders from the Buddhist group. The entire amount was rejected by
the trust, however, on grounds that it was from foreign sources.
Both Ickes and Mrs. Clinton met with the
defense fund trustee to discuss Trie's donations, and the first lady and
president agreed that the money should be returned. According to the
report, none of the three--the president, Mrs. Clinton or Ickes--informed
the DNC, where Trie was a major fund-raiser, that he was bringing in
foreign donations to the Democrats, which was illegal.
The report said that each had, at least
arguably, a fiduciary responsibility to alert Democratic officials and
said that Mrs. Clinton's "potential criminal involvement" grew out of this
failure. Trie continued to raise large sums for the Democrats. He pleaded
guilty to campaign finance violations last May.
While the report acknowledged that the
task force information against the first lady was "not overwhelming at
this time," it said it was sufficient "to warrant further inquiry."
In his response to LaBella's report a
few days later, Radek countered that, based on these facts, he was unaware
of any legal theory under which Mrs. Clinton could be prosecuted and said
that LaBella failed to supply one.
Ickes, who declined to be interviewed,
told Senate investigators that he "never connected" Trie with fund-raising
for the DNC until his name surfaced in news stories in October 1996; he
then contacted a party official. The
report also contended that Clinton knew or should have known some of his
supporters were bringing in foreign money. It cited circumstantial
evidence suggesting "a conscious avoidance of the truth concerning some of
the more flamboyant fund-raisers such as Trie."
Radek dismissed such arguments as vague
and said that he found Clinton's professed lack of knowledge believable
because it was "very unlikely" that notorious fund-raisers informed anyone
they were making illegal donations.
Regarding Gore, task force documents
indicate skepticism of the vice president's "failure of recollection" and
other inconsistencies in his story. The report said that Gore "may have
provided false testimony." The
allegation stems from a marathon fund-raising effort launched over White
House phones in late 1995, purportedly to raise unrestricted "soft money,"
which was outside the election law ban on political fund-raising conducted
from a federal workplace. The money was for ads to help the DNC and state
party organizations. Gore told
investigators he believed that no "hard money" was raised or used in the
media fund. Democratic records later showed that some money Gore raised
did, in fact, end up in hard-money accounts.
Soft money refers to unlimited
contributions by individuals, corporations and labor unions to political
parties that are not regulated by federal election law. Hard money refers
to restricted donations that can be spent directly on behalf of
candidates. Gore denied any wrongdoing.
In his initial defense of the calls in March 1997, he maintained that he
broke no laws because there was "no controlling legal authority" covering
such fund-raising solicitations. Later, the DNC said that funds were
allocated to hard-money accounts without Gore's knowledge.
Confronted with notes and memos
indicating that a November 1995 meeting Gore attended in the Map Room of
the White House included discussions about raising hard money, the vice
president said he did not recall such conversations or the memos.
Previously undisclosed documents show
that former White House Chief of Staff Leon E. Panetta told FBI agents
that he remembered Gore "attentively listening" to discussions about the
hard money aspects of the media fund and "walking through the papers" as
the November 1995 meeting progressed. These documents also indicate that
the task force obtained photographs from that meeting showing Gore looking
at papers that he said he did not recall reviewing.
Reno ordered an initial 90-day review of
the Gore phone calls in 1997 before deciding there was not sufficient
grounds to ask for an independent counsel. When a new memo from the 1995
meeting was discovered, however, Reno launched a second 90-day review to
determine if outside counsel should investigate perjury allegations
against Gore. Radek and Public Integrity
opposed the referral. In November 1998, in a statement and detailed
19-page court submission citing "clear and convincing" evidence that Gore
did not lie about the matter, Reno again decided against asking for an
outside prosecutor. The action spared Gore an investigation likely to
overlap his presidential campaign. In
contrast, independent counsel referrals in cases involving Labor Secretary
Alexis M. Herman and Interior Secretary Bruce Babbitt were based on "a
lower quantum" of information than that available on Gore and other top
White House officials, the report said.
A substantial portion of LaBella's
report cited flaws in campaign finance laws and suggested legal and policy
reforms. Among major obstacles to
enforcement, it said, are laws that make serious campaign finance offenses
misdemeanors rather than felonies, a truncated statute of limitations that
forces prosecutions within three years instead of five and the absence of
credible civil remedies when criminal sanctions are not appropriate.
"The fact is that the so-called
enforcement system is nothing more than a bad joke," the report said,
blaming "loopholes . . . , opportunists and the elected officials in
desperate need of funds to fuel media campaigns" for undermining the
system. LaBella called for overhauling
the Federal Election Commission to create an agency comparable to the
Securities and Exchange Commission, staffed to conduct sophisticated
investigations and empowered to levy heavy financial sanctions on campaign
finance violators. Both the Republican
National Committee and the DNC "pay lip service . . . but nothing more" to
complying with federal fund-raising laws, the report said.
In fact, during the 1996 campaign, each
party spent less to assure that its fund-raising was legal, the report
said, than it did securing "red, white and blue balloons for release on
election night."
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