NATIONAL

ARCHIVES
July 30, 2018
Katherine M. Anthony
Elizabeth France
American Oversight
1030 15th Street, NW, Suite B255
Washington, DC 20005
katherine.anthony @americanoversight.org
beth.france @americanoversight.org

Re: Fix the Court v. NARA, 18-cv-1621 (DDC)
Dear Ms. Anthony and Ms. France,
This letter describes the National Archives and Records Administration's (NARA) July 30, 2018
release being made pursuant to the parties ' agreed upon processing schedule in response to the
Freedom oflnformation Act (FOIA) request at issue in the above-referenced litigation.
NARA has completed a line-by-line review of the first 19 folders from box 140 of the Attorney
Work Files of Brett Kavanaugh , consisting of 1,025 pages. Of these 1,025 pages , 93 7 pages are
being released in full and 88 pages are being released in redacted form. The information within
these 88 pages has been redacted to preserve the secrecy of grand jury proceedings per 5 U.S.C.
§ 552(b)(3) , pursuant to Rule 6(e) of the Federal Rules of Criminal Procedure ; to protect the
personal privacy of living individuals per 5 U.S.C. § 552(b)(6) and (b)(7)(C) ; and to protect
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If you have any questions concerning this production or a related matter , please contact Rebecca

Kopplin , U.S. Department of Justice , at 202-514-3952.
Sincere] ,

-- ~

James R. Mathis
Supervisory Archivist
Special Access and FOIA Staff
NAT I O N AL AR. C H IV ES

a nd

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IN ~HE UNITED STATES DIS~RICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA,

)
)
)
)

Plaintiff,
v.

No. LR-CR-95-173

)
)

JAMES B. MCDOUGAL,JIM GUY
TUCKER, and SUSAN MCDOUGAL,

)
)

)
)

Defendants.

BRIEF IN SUPPORT OF MOTION TO DISMISS
MAY IT PLEASE THE COURT,
SUMMARYOF ARGUMENTAS TO PART I OF MOTION

Defendant,
indictment
his

Jim

for

rights

under

lack

under

Amendment

V to

Rule

6,

Guy
of

the

contains
names
that
of

define

seq.)

of

of

violations

of

and

due

processes

of

the

United

and

the
that

no power

the

administrative

this

states,

has

and

the

Special

to

make

on

be

a non-person

of

Columbia

Statute,

and
into

the

be argued

Act

Court
(28

counsel

James

USC
and

McDougal

a

28 USC §591 (a),

questioned.

Division

will

independent
that

with

It

the

which
Counsel

a parity

which

designated
the

order

Independent

District

appoint

under

cannot

as

the

Lady.

body

to

order

Starr

First

of

person"

of

McDougal's"

and his

jurisdiction,
covered

language

Mr.

"James

authorizes

"certain

have

for

Jury

the

Division

the

contrary:

AMERI

words

Special

his

that

that

President

Appeals,
et

Grand

jurisdiction

of the

§591,

dismiss

FRCrP.

the

the

to

and

Constitution

We acknowledge
defines

moves

jurisdiction,

the

the

Tucker,

We submit
the

Attorney

a "certain

to

the

General
covered

.1AI

PVERSIGHT

18-1621-000003

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person"

because

does

not

the

allow

statute

its

that

creates

application

the

beyond

entire

process

"certain

covered

persons".
The statute
and

was passed

prosecution

Morrison

v.

such

a high

not

in

of

high

Olson,

concert

with

Counsel

powers

a Grand
which

Special

he

come

provide

prosecution
in this

case,

This
lawfully,

simply
has

(a "certain
the

Whitewater

can

carry.

does
said

the

to· independent

into

covered

the

Developement
This

indictment

which

is
then

his

ability
be

those

to

accorded

or

not

powers.

statute
to handle

the
His

does

not

criminal

an

investigation

covered

person",

or
which,

President.

Independent

relationship

person"),

not

no jurisdiction.

this

to

is

President,

whether

counsel

"certain

an

-

has

related

involves

the

by

and

the

in a manner

indictment,

he

Branch.

McDougal

to have

have

that

can mean only

look

acts

an

investigation

Executive

not,

statute,

not

the

of

not

the

(1988).

be found

a statutory

case
to

actions

return

are
of

any

Jury

from

which

McDougal

should

any powers

cases

659

If

to

for

of

Counsel

Division

powers

officials

should

Independent
persuade

provide

487 US 654,

official.

Independent

to

two

between

financial
This

Co.
is

Counsel
the

President

institutions

is

beyond

appointed,

as

the

far
borders

as

and
the
of

Act
that

inquiry.
SUMMARY
OF ARGUMENTAS TO PART II
Our second

claim

for

dismissal

arises

OF THE MOTION
from the

fact

that

2

AMERICAN

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it

has

been

adjudicated

Independent

Counsel

returned

this

indictment
Haley.
this

number

had
on

to

matter

not
of

proof

these

that
an

unlawfully

Tucker.

were

to

The

the

Grand

This

is

a

Jury

that

which

If

and

1995,

and

Independent

be before

and

Jury

that

is

Tucker,

as our

- because
matter

reflected

as

nevertheless

indictment

prejudicial

an

witnesses,

attacking

first

Grand

then

his

but

became

Marks,
7,

1995.

subject

Jury

Grand

indictment,

the

were

that

June

indictment,

We submit

Court

Tucker,

deputies,

Many witnesses,
called

first

Grand

appearances

before

v.

right

in this

indictment.

indictment.
__.

the

this

matter

17,

his

before

same

August

the

and

of

was returned

of

involved

defamatory

,..___

- U.S.

indictment

months

matters

caused

LR-CR-95-117

person,

spent

the
another

no jurisdictional

unauthorized
have

before

was returned

the

Judge

on

first

indictment

Jury

went

indictment

That

Counsel

by another

they

which
in

was

the

first

including

before

that

plain

violation

Grand

Jury.'
of

I

Ru~e

6 (d),

FRCrP,

and

I

operated
under

to deprive
the

grand

Tucker

jury

clause

of his

right

to

of Amendment
I

the

due process

clause

For these

reasons,

a fair

presentment

V, as well

as under

I

of that

Amendmen~.

we submit

that

I

bhis

indictment

should

I

be dismissed.
jFOIA(b)(3) - Fed. R. Crim. Pro. 6{e) - Grand Jurvl

I.
THE "INDEPENDENT COUNSEL" ACT DOES NOT PROVIDE
THE SPECIAL DIVISION WITH UNLIMITED AUTHORITY.

The Special

Division,

an administrative

body

consisting

3

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of

judges,

has

petition

of

"scope

of

§593(b)

(2) (3)).

it

by the
In

our

the

the

duty

of

Attorney

selecting

General,

prosecutorial
It

has

Independent
and

of

Counsel

setting

forth

jurisdiction".
no powers

other

the

use,

(28

than

on

those

granted

to

quoted

in

Act.
this

motion,

case,

the

jurisdictional

statement,

says:

"Whether any individuals
or entities
have committed
a violation
of any federal
criminal
law ... relating
in
any
way
to
James
B.
McDougal's,
President
... Clinton's
or
Mrs ....
Clinton's
relationship
with Madison
Guaranty .•. , Whitewater
Development
Corp.,
or Capital
Management services,
Inc."
This
Special

grant

of

jurisdiction

exceeds

the

authority

of the

Division.
The

Special

Division

jurisdiction

which

application

of the

The Act begins
with

regard

(emphasis

to

Attorney
with

certain

to

it

the

authority

by both

to

the

Act

grant

and

the

General.
the

words

covered

authority

"Preliminary

investigation
28 use,

persons".

of the

Division

is

for

preliminary

providing
section

given

only

§591 (a).

supplied).

The entire
Special

is

has

"b"

applies".
That

which

derived

says

Attorney
from

the

investigation
"Persons

to

General
Act,

and of the
which,

after

in

§ 591 (a)

whom

subsection

(a)

president

and

has

a

28 USC §59l(b).
subsection

vice-president".

(b)
Neither

has
is

as

item

involved

1 "The
in this

case.

4

AMLHICAN

pVERSIGHT

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The

purpose

counsel
by

to

their

interest

his

position,

would

have

the

mentions

deputy,

the

Attorney

of

President.
of

The Act
attorney

of

"certain
also

general

provides
not

the

of the

In

case,

Independent

to

states

was

Motion).

establishes

that

neither

defendants,

has

even

Branch

of

"certain
It
nor

the

"certain

the
covered

is

United

covered

the

Committee

for

are

within

the

in which

the

(28 use,
Attorney

that

been

or

States

nor
is

This

announced,

the

( See

Tucker,

§59l(c)).

General.

Counsel

of Tucker,

because

President

Press

a member

of

to

the

motion,

of

the

other

of

the

Executive

No defendant

government.

the

Ex. "~'

Release,

attached
either

W'ith

two

is

a

person".

therefore

Special

and

circumstance

involved.

The affidavit

Revenue

Campaign

interest.

indictment,
not

of CIA and

to make an investigation

no recusal

this

cabinet

persons".

involves

United

of

level

covers

Director

officials

for

decides

of

of

executive

Internal

these

case

return

conflict

it

the

National

conflict

the

who,

apparent

President,

of

covered

the

independent

Department

of a high

of a personal

this

an

Executive

general,

of the

All

provide

an

the

Commissioner

and treasurer

definition

the

people

attorneys

the

to

General.

other

office

assistant

chairman

is
in

executive

members,

Act

people

with

the

the

prosecute

The Act
at

of

plain
Division
person"

as

that

neither

can

make

defined

the
James
in

Attorney

General

McDougal

into

Section

591(b).

a
Mr.

5

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18-1621-000007

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McDougal

is

simply

definition
59l(b)

of
of

ordinary

"certain

the

Court

of

covered

persons"

His

Morrison

court

in

be

changed

was made plain

the

described

within

found

cannot

subject,

In upholding

included

the

Section
from

by a signature.

statute

on this

be

status

simply

this

case

654 (1988).

page

to

to extraordinary

Supreme

the

eligible

statute.

The purpose

U.S.

not

the

· Morrison
statute,

in
v.

the

only

Olson,

487

in a limited

statute

in

these

way,

words

at

659:
"(The
Act)
allows
the
for
appointment
of
an
"independent
counsel"
to
investigate
and,
if
appropriate,
prosecute
certain
high
ranking
government
officials
for
violations
of
federal
criminal
laws."
The Morrison

that

Congress

determine

may give

the

are

not

Court

also
to

stated

the

is

plain

Division

counsel's

noted

take

authorized

The Act

made it

independent

The Court
no authority

court

that

any action

by the
narrowly

Act."

it

did

unlimited

not

" ... the

(p.

Special

or undertake
(p,.

"think

discretion

jurisdiction."

construed,

in Morrison

that

to
679).

Division

has

any duties

that

682).
because,

as

the

Supreme

(682):

•••
it is the duty of federal
courts
to construe
a
statute
in order
to save
it
from constitutional
infirmities
... and to · that
end we think
a narrow
construction
is appropriate
here."
11

The
with

Act

was

held

constitutional

a narrow

construction

that

The

in

answers

in

confined

Morrison,
it

but

precisely

only
to

its

terms.
Act,

§591 (b),

the

question

"who may be

6

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VERSIGHT

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the

subject

persons
are

of

to

listed

Tucker,

nor
to

It
they
there

Ms.

could

here.

counsel

issued

a

re

official

some

connection

his

Neither

among

that

he
11

non-persons

a "certain

The

attentions

McDougal,

class

of

~)

was

and

this

release

may be

covered

action,

filing

a press

high

The court

with

Upon

(Ex.

In

that

concerted

person"

involved.

may pay

591 (b) .
are

counsel.

nor

persons

Act.

be

alleged

independent

counsel

McDougal

concert

must

In

of

Section

be argued

in

covered

in

the

act

actions

whom independent

those

subject

the

indicted

person".

no

such

stated

appointed

to

But,

action

indictment

which

if

is

Independent

that

the

"certain

investigate

was

not

•

Olson,
and

818 F.2d

34 (Spec.

a statutory

to

lesser

commented,

at

"certain

48,

1987)

covered

officials,

page

Div.

Schmults

Olson,

person"

a
had

and . Dinkins.

·

that:

"·· .the
independent
counsel
has
continuing
jurisdiction
to investigate
the actions
of Schmults
and Dinkins
only insofar
as they were part
of a
concert
of action
with
Olson,
in violation
of
federal
criminal
law."
Independent

counsel

conduct

simply

because

like

indict

while

v.

to

Tucker,

attached
the

acts

person".

et
to

al.,

may not
he chances

acting

.

Dist.

There

alleged

in

the

There

must

be

criminal

some person

Independent

of Arkansas,

must

he would

Counsel.

U.S.

9/5/95

(Opinion

be some connection

between

indictment
some

purported

across

as the

Eastern

motion)

indict

concert

and
of

a

"certain

action

covered

between

the

7

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defendant

and

818 F.2d

at

Independent

indictment

and

"certain

Mr.

Counsel

that

there

Clinton.

person"

covered

person".

Olson,

supra,

48.

Here,
this

the

is

or

is

has

with

no connection

"2 11

{Ex.

ever

announced

been

filing

between

No other

)

the

this

"certain

mentioned

in

of
case

covered

the

Whitewater

publicity.
Whatever
the

indictment

appears

that

may be,

this

case

affirmatively

prosecutor
the

Whitewater

is

purpose

authority

not

for
his

part

it

is

agent

and

this

relationship,

and our

725 F.Supp.

demonstrable

563,

jurisdiction

and

there

this

should

between

of an independent

Whitewater
General

for

laws.

His

be

some

indictment
Counsel

is

no

and
to

be

demonstrable

be granted.

a

in
and it

must

Independent

567 (DDC 1989)

relationship

Attorney
criminal

There

motion

The

the

between

jurisdiction.

"Whitewater",

of the

of

no allegation

not.

narrow,

action

is

of

of all

relationship

Whitewater

is

enforcement

restricted

demonstrable

Secord,

a general

of the
is

within

that

there

(defines
wrongful

See,

U.S.

the

required

act

and

v.

the

counsel).
II.

JURISDICTION MAY BE PROPERLY DECIDED
BY THIS COURT AT THIS TIME.

Independent
authority

to

jurisdiction
status

Counsel
make

of

the

this

of Mr. McDougal

will

contend

jurisdictional

Court.

that

decision

The jurisdiction

as a "certain

this

covered

Court
as
depends

has
to

no
the

on the

person".

8

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VERSIGHT

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This
above,

exact

argument

whom a case
whether

is

or not

described

In

in

citizens.

Claim
within

because

scope

agent

accident

had

an

v.

to decide

a person

as

Lamagna,

automobile
injured

515

government

effect
Claim

of
Act

the

evening

Gutierrez

argued

for

at

Tort

was acting
time

terminating

certification,

occur

the

not

United

Federal

employee

does

in

Columbian

in the

the

at

the

out

suit

under

employment

accident

certain

brought

contested

132 L.Ed.2d

The

such

Gutierrez

which

of employment

of

the

waive

the
case,

sovereign

overseas.
because
with

a

that

the

was "groundless

lady

Lamagna,
when

the

determination

and untrustworthy".

383.

trial

the

is

in

the

the

as to scope

dismissed

Court

Attorney,

his

Tort

occurred.

unreviewable,

the

accidents

was

The

and power

Columbians

of

Federal

Gutierrez

right

a DEA employee

that

as to

before

the

was

certified

the

immunity

the

there

This

Court

the

so held

States

accident.

cited

375 (1995).

which

the

Tucker,

rejected;

has

The United
Act,

v.

statute.

The injured

States.

U. s.

Court.

before

Court

L.Ed.2d

in

correctly

a person

Gutierrez

Columbia

by the

was

in the

__, 132

raised

to be tried

The Supreme

us

was

and was rejected
This

is

point

court

held

substituted

the

case

Supreme

on the
Court

that
United

ground
saw

the

certification

was

for

and

States

of sovereign

the

question

Lamagna

immunity.
as

who decides

on

9

AMERICAN

pVERSIGHT

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which

side

of

Attorney,

the

The

court
had

Court

to

the

litigant

be

crime

Male,

and

his

the

court

that

local

U.S.

decision

is

decide

the

must

Congress
(p.

decide

intended

387,

the

note

statutory

decision

923

basis

violence"
not

(8th

the

6).

The

status

of

1991).

In

juvenile

for

he had committed

General

argued

question

"a

that

his

was conclusive

be questioned

had

same way in

Cir.
a

that

contrary,

involved

the

certified

of

the

held

614

Attorney

to

juvenile

F.2d

The

could

held

of Appeals

on the

"crime

circuit

the

General

violence".
on the

that

the

official's

stamp"

Court

Attorney

decision

Eighth

find

to

as an adult

that

that

"a rubber

Circuit

the

of

falls:

it.

u. S. v. Juvenile
prosecution

held
to

before

case

case

when that

jurisdiction

The Eighth

that

or,

declining

federal

the

Court.

Supreme

question,

the

line

unreviewably

contested,

court

the

in court.

although

it

The

did

hold

committed

a

"crime

whether

or

not

of

violence".
In

this

case,

is

a "certain

McDougal
59l(b)
Judge

of

the

Woods,

Gutierrez,
that
not

the

Act,

question
is
covered
person".

de~ining

in U.S.

and

the

question

to be decided

be decided

the

by the

v.

"person"

Tucker,

Eighth

court

Circuit

by the

before

shows

supra,

of an individual's
ex parte

A reading

in

the

Attorney

whom the

he

is

before

not.

Court

Male all

General,
case

of Section

Supreme

Juvenile
status

that

James

the

in
hold

law is

and is

to

comes.

10

AMLHICAN

pVERSIGHT

18-1621-000012

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 12

In

this

whether

not

though
The

he

Mr.
is

fact

could

case,

this

McDougal

mentioned

itself,

not

at

is

that

he

this

is

order
not

should

of the

is

be

must

covered

decide

person"

Special

a "certain

He simply

indictment

Court

a "certain

in the

be questioned.

The

time,

even

Division.

covered

person",

not.

dismissed

for

want

of

jurisdiction.
IN SUPPORT OF PART TWO OF THE MOTION TO DISMISS

I.
RULE 6(e)

FORBIDS PERSONS WITH NO AUTHORITY
FROMTHE PRESENCE OF THE GRAND JURY.

Rule
answers
jury;

6 (d)
the

the

of

the

question

Rule

Federal

Rules

"Who may be

of

Criminal

present"

before

Procedure
the

grand

says:

"d.
Who May Be Present.
Attorneys
for
the
government,
the
witness
under
examination,
interpreters
when needed
and,
for the purpose
of
taking
the
evidence,
a stenographer
..• may be
present
while the grand jury is in session,
but no
person
other
than the jurors
may be present
while
the grand jury is deliberating
or voting."
In
in

this

u.s.

that
be

v.

Mr.
in

acting
that

case,
Tucker,

Starr

the

outside
had

room presenting
What
forth

in

the
the

has

been

adjudicated,

LR-CR-95-117,

and his

grand

they

it

deputies

jury

their

or

to

decided

present

that
which

whatever

to

decision

September

had no authority

jurisdiction,

no authority

by the

means,
in

1995,

whatever

case.

be

5,

They

to
were

in substance,
the

Grand

Jury

evidence.
grand
prior

jury
indictment

heard

in
(Ex.

that
3).

prior
The prior

case

is

set

indictment

11

AMERICAN

pVERSIGHT

18-1621-000013

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 13

details

a series

bankruptcy

in

amounted

to

Independent
presented

was

a

accepted

and

er iminal

acts.

And

indictment

other

deputies
as

we

stated

in

transactions

alleged

The prejudice
should
after
all

have

relating
This

to

and directed
unfair,

the
right

Grand

Jury

Clause.

to

v.

Scott,

Unauthorized

to

and

persons

grand

jury

to

return

unrelated

to

the

allegations
Services,

and

The grand

fairly

had

to

jury

that

consider

on an unrelated

it

subject,

Tucker.
is

grand

amounts

to

therefore

in

indictment,

involves

not

presentment

55 F.Jd

jurors

nature.

it

an unfair
It

present

plain.

at

Tucker

jurisdiction

Management

hearings

and

right

prosecutor,
East

case

to

that

law.

his

derogatory

limit

special

is

his

while

Capital

grand

Jury.

indictment,

Tucker

of

is

guaranteeing

the

of a financial

considered

months

from

which,

the

indict.

know

with

crimes

grand

beyond

same

the

twelve

Grand

first

before

that

that

the

that

contention

into

Tucker,

the

to

transactions

therefore,

that

was

persuaded

against

the

and voted
Counsel

Counsel

illegal

made

fraudulent

those

who appeared

know

contentions

then,

that

We know,

We also

his

Independent

charges

and

Independent

when he sent

and an allegedly

deputies

evidence

those

And,

of

Texas,

criminal.

matters

transactions

Counsel

jury

an

of

by
jury.

the

use

violates

996

(1995).

the

grand

jury,

the
a

purpose
grand

See
of

of

jury

to

Amendment

V,

an authorized

due

process

whether

to

of

the

12

18-1621-000014

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 14

prejudice

of

the

indictments
v.

there

226

Airways,

Inc.,

v ..

Lill,

1988,
must

violation

Justices

Fed.

a

showing

F.Supp.

noted

that

the
the

lead

to

us

579,

589

(WD Tex.

v.

have

is
had

necessary

256.
re-trial

Nova

of a long

in

jury
the

considering
unbiased

1977)

say

that

Rule

trial.

6 (d)

Bank of

But,

the

the

harmless

concurring

Mechanik,

error

475 US 66

conclude

influence

Scotia,

if

case

that

the
violation
jury's
decision
doubt"
that
the
the substantial

that
on

the

v.

U.S.,

reversed,
had been

the

outcome

"may
of

supra,

would
tried

violation

the

487 US at

have

required

once.

We are

a
not

situation.

We contend
grand

to

Bank of Nova Scotia

And,

in that

only

substantial

proceeding.".

v.

reversal

" .•. if
it
is
established
that
substantially
influenced
the grand
to indict,
or if there
is "grave
decision
to indict
was . free
from
influence
of such violations."
It

to
a

after

of

U.S.

law,

before

(1988).

of

U.S.

1980).

the

application

of

Latham

1915);

prejudice

case

See,

Cir.

changed

250

dismissal

time.

50 (SD wva.

of

the

(5th

a conviction

487

following

in

a long

424

Court

invalidate
U.S.,

would

for

511 F.Supp.

v.

standard,

resulted

420,

428

Supreme

would

not,

basis

the
be

Nova Scotia

(1986)

se

States,

and U.S.
In

or

on a per

United

Braniff

target

that

could

first

there

hear

evidence

indictment
the

mind

charges
so

as

is

to

and

surely

"grave

doubt"

that

on the

complex

case

revealed

then

bring

to

in the

second

indictment

accord

Tucker

a fair

the

task

a clear

presentment

a

of
and
and

lJ

AM HICAN

pVERSIGHT .

18-1621-000015

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 15

due process

of law.

Even

under

unauthorized
of

the

"harmless

presence

inquiry.

See,

in

error"

the

U.S.

v.

type

grand

jury

Busch,

795

of

is

analysis,

wrong

F.Supp.

this

and needful
866

(ND Ill.

occurred

in this

1992).
Grand
circuit.

jury

Brown v.
Brown

1956)
in

abuse

the

U.S.,

followed

in holding

that

could

not

be

authority

record;

heard.

The

acting

beyond

grand
his

allegations.
it

grave

doubt

that
record,

then

795 F.Supp.
handled

the

We

which

but

the

faced

sworn

who had been

recognize

that

an

in the

not

the

breach

face

of
jury

prosecutor,
to

those

indictment.
be convinced,

obvious

from

Busch,

of Rule
of

juror

decision

jury

grand

as

by U.S.

grand

The

the

the

Court

inquiry

alternate

unauthorized

the

this

the

a minor

by making

by

brought

be pointed

jury

from

indict

is

a grand

nullified.

persuaded

prejudice

(DC DC

in a grand

what

to

383

perjury.

done
is

and should

way could

matter
and

to

as

reveals

jury

an

obvious

jurisdiction,

as

the
866,

foreperson
impaneled

indictment

be argued,

before

anything

is

1957).

F.Supp.

to

prosecutor

was

Cir.

140

amounted

The same grand

Should

(8th

statement

prejudice

jury

has

prosecuted

of the

first

549

Icardi,

because

that

the

v.

what

beyond

the

245 F.2d

of

was reversed

We contend

and it

an untrue

conviction
the

occur,

U.S.

presence

prosecutor

does

the

who had

jury

room.

of

Judge

the

supra,

6(d),

and

grand

jury

not

been

Woods

of

14

AMERICAN

pVERS _IGHT

18-1621-000016

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 16

September

5th,

holding

jurisdiction,
Court

of

course,

has

been

Appeals

for

the

that

it

represent

Independent

Counsel

it

stands

today,

adjudication

and

prosecutor
the

that

of

prosecutor

appealed

will

that
it

it

for

that

presence

months

be

of

before

to the

neither

and
the

the

can
As
is

an

Whitewater

grand

this

of

reversed.

precedent

establish
the

but

will

is

his

We cannot,

affirmed,

opinion

in

Tucker

be

beyond

counsel

Circuit.

that

does

acted

by Independent

Eighth

represent

was wrongly

subject

the

jury

indictment

on
was

returned.
This
in

Part

exercise
the

contention
I,
of

authority

that
the

motion,

that

Part

II

indictment,

jurisdiction

for
the

made as

this

of the

We pray,

is

of

because

too,

was

Independent

we contend,
an

unlawful

Counsel,

beyond

statute.
the

reasons

indictment

set

forth

above

and

in

our

be dismissed.
Respectfully

submitted,

William H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
15

AMERICAN

.pVERSIGHT

18-1621-000017

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 17

George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813
James J. Lessmeister
- AR #94038
ARNOLD, GROBMYER& HALEY
124 W. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171

CERTIFICATE

OF SERVICE

I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by U.S. Mail,
postage
prepaid
to the below named parties
on this
J..5"-.. day of
September,
1995.
Mr. Kenneth
w. Starr
Mr. Hickman Ewing
Mr. Steve
Colloton
Office
of Independent
Counsel
10825 Financial
Centre
Parkway
Two Financial
Centre,
Suite
134
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 W. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 W. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

AMERICAN

pVERSIGHT

16
18-1621-000018

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 18

STATE OF ARKANSAS

)
)

COUNTY OF PULASKI

)
AFFIDAVIT OF JIM GUY TUCKER

Jim

Guy Tucker,

1.

on oath,

I am one of the

states

as

defendants

follows:

in U.S.

vs.

McDougal,

et

al,

LR-CR-95-173.
2.
the

I am not,

Executive
3.

knowledge,
Executive

and

Department

I know the
neither
Department

Further

affiant

is

have

never

of the

been,

United

co-defendants
or has
of the

States

in

ever

been

United

an officer

this

member

of

Government.
case.

an officer

states

or

To my certain
or member of the

Government.

sayeth

Subscribed
and sworn to
befor,~ r.,-ethis
25th day
of September,
J.995.

d<WdlLJ&l~

AMERICAN

pVERSIGHT

EXHIBIT

1

18-1621-000019

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 19
Office of the Independent Counsel
..

: - .•·

.r
· ..,·1;_~~µ~

:TwoFirnmcial Centre

.
lOSZS Financial Ctntn: Park,..,crv. Si
·
Lirrle Ro,k. ArkaNar 72211
(501) 221-8700
Fax (501) 2Zl-8707

•,• '

itt!

1J.J

------~---------------------------------1995

17,

August

FOR IMMEDIATERELEASE

Kenneth

w. Starr

James

in a 21-counc

Arkansas

li

company licensed
Hale.

At the

time

board

~f

subsidiary

wholly-cwned
in

was the

wife

Mr.

in

violation
i:1 v:.olation

AMf-HICAN

of

of

involving

Madison

MGSL.

of

the

invest:-:.ent

businesE

and cwned

Administ~ation

and chairma~
Corporation,

Financial

Jim Guy Tucker

MGSL and

CMS.

James

Inciccment,

in the

of

a

was an att~rney
H . McOc:.;gal

Susan

of James B. McDougal and an owner of M3SL.
was

McDougal

violation

Madison

who represent.ed

Rock

Litt.le

charges

MGSL ~nd president

of

of

directors

Indictment

a small

to che charges

material

Rock,

( 11MGSL"l and Capital

Busi~ess

Small

the

was an owner

B. McDougal
the

by

L.

David

("CMS''),

Inc.

Services,

Mar.agement

by

to transactions

and Loar:. Association

Savings

H. McDo\!gal

in Litt:.e

jury

The

indictment.

wir.h ::espect

defendants
Guaranty

grand

today by a federal

were charged

Rock~js?nsas:

a~d Susan

Jim Guy Tucker,

McDougal,

'S.

in L~ttle

f~orn h~s office

,:ounsel

by Independent

was issued

statement

Tha following

18 U.S.C.

18 U.S.C.
of

VERSIGHT

12

on 19 felony

indicted

U.S.C

§

371

§ 1343
.

§

(Count.s

1344

One};

(Count

Conspi=acy

counts:

Wire

Two and Threel;

[Count.

f'oL:ri;

Mail

in

F~aud

Bank
f'raud

?raud
i:-.

EXHIBIT

2-

18-1621-000020

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 20

.... . violation

of

~;..,:: -:.;

···•:· .

Thirteen);

1006

Statement

Six);

Making

2 (Councs

Financial

Insti~ution

2 (Counts

Nine.

causing
of

the

a Small

of

Mr. Tucker
Four,

as well

as Misapplying

and Counts

of 18 U.S.c.
Making

Small

657

§

Fifteen,

and§

Entry

Investment

2 (Count

Three,

and

§

Misapplying
657 and§

§

; !--1aking or

Reports

and Statements
of

counts:

rwel ve,

Institution

18 U.S.C.

Counts
de,;cribed

One
above,

Fund:; in violation

·

and Mal:ing or Causing

Reports

the

and StcLtements

Company in violation

of 18

of

a

U.s.c.

§

Twenty-One).

Ms. McDougal was ir.dicted
through

felony

through

in

a False

in violati,,n

(Counc Twenty);

2

§

and Nineceen1.

on ll

Eight

18 U.S.C.

of 18 U.5.C.

the

Company

Financial

a False

of

Business

1006 and§

Ten,

in

and

of. 18 U.S.c.

and Eighteen)

Entry

was indicted

th:?:ough

the

Seventeen

!nvestment.

of

and Sixteen);

in violation

a False

2 (Counts

violation

in violation

Eleven

Funds

Twelve

~he Making o:

Institution

Seven,

Business

§ 1006 and§

Five, · Eight,
in

or causing

Fourteen.

Making

(Counts

Participation

to a Financial

and§

1341

§

Fraudulent

(Count

:014

u.s.c.

l6

Counts

on 8 felony

Twelve

counts:

through

Counts

Sixteen,

One

- described

above .
Conviction
imprisonment

on each
of up to

count of the
five

years,

special

assessment

Causing

the Making of a False

Institution

imprisonment

of

a fine

$SO, excepting

(18

U.S.C.

§ 1014).

of

up to

cwo years,

Indict~ent

which
a fine

punishable

of up to $250,000,

conviction

Statement

is

for

Making

by

and a
or

to a Finan:iai
is punishabl~
of

up to

by

$250,000,

and a

2

AMi-=nlCAN

pVERSIGHT

18-1621-000021

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 21
assessment

of

$50.

An indictment

is

merely

special

presumed
The

President

innocent

unless

Indiccment

does

William

Jefferson

and

an ~ccusacion

and

until

not

charge

proven

Clinton

a de!:e::-!dant

.:.s

,_.

i

guilty.

criminal

wrongd,)ing

or First

Lady HLllary

by

Rodham

Clintor..
The Independent

Counsel's

investigation

is

coctinuing.

in the Independent
are available
NOTE: Ccoies of the Indictment
D.C.
Rock, Arkansas and Wasr.ington,
in Little
Counsel's~offices

Ji

3

AMF-HICAN
18-1621-000022
13S '\.1tl)

,{3G\ f

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 22

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION

. .·:_,. ·.:
'•

• ..

1

UNITED STATES OF AMERICA
No .,dJ-t,7,t-

9 5 - // 7

v.
18

JIM GUY TUCKER,
WILLIAM J. MARKS, SR.,
and JOHN H. HALEY

u.s.c.

§

371

18 u.s.c.

§ 1014

18

§

u.s.c.

2

INDICTMENT
The Grand

Jury

charges:
COUNT ONE

Introduction

At various

1.
attorney

In
in

times

1987,

material

Defendant

Little

Rock,

GUY TUCKER represented
also

involved

2.
businessman

AMLHICAN

in

involved

pVERSIGHT

Arkansas.

cable

Defendant
in

this

the

Indictment:

JIM GUY TUCKER was

Capital

the

In 1987,

to

During

Management

television

Defendant

Services,

Inc.

JIM
He was

business.

WILLIAM J.
cable

1987,

a practicing

MARKS, SR.

television

was a

industry.

EXHIBIT

3

18-1621-000023

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 23

of
and

3.

Betty

4.

The Small

the

United

capital

Capital

privately-owned
Business

Management

in

JIM GUY TUCKER.

("SBA")

was an agency

responsibility

for

investment

lending

Services,

licensed

Act

licensing

companies

money

of

in which

50 percent

1958,

and

in making
small

to small

of

7.

loans

business

and

in
to

Small

Little

socially

Rock,
or

concerns.

("D&L")

WILLIAM J.

rights,

the

was a

was a Florida

MARKS, SR. was a SO
MARKS, SR. had

he was not

an officer

less
or

D&L.

Fleet

headquartered

National
in

State

headquartered

pVERSIGHT

located

WILLIAM J.

Defendant

("CMS"),

SBA under

Inc.,

Defendant

voting

Inc.

by the

D&L Telecommunications,

shareholder.

8.

Defendant

business

SBICs

disadvantaged

corporation

director

with

small

aid

of

Administration

CMS specialized

6.

AMLHICAN

to

SBIC,

economically

bank

to

Investment

Arkansas.

than

wife

concerns.

5.

percent

the

Government

in order

business

was

Business

States

providing

("SBICs")

Tucker

Bank

Providence,

Street

("Fleet")
Rhode

Bank and

in Boston,

was a commercial

bank

Island.

Trust

Company

was a commercial

Massachusetts.

2

18-1621-000024

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 24

9.

In June

MARKS, SR.
and

State

1987,

arranged
Street

television

to

Defendants
borrow

personally

{collectively

million

$8.5

"Fleet")

for

WILLIAM J.

use

in

from
a joint

Fleet
cable

vencure.

10.

Fleet

required

that

WILLIAM J.

MARKS, SR. pledge

collateral

for

into

JIM GUY TUCKER and

an escrow

the

loan.

account

Defendants
$500,000

Fleet
at

JIM GUY TUCKER and
cash

as

required

that

part

of

the

cash

the
be placed

Fleet.

The Conspiracy

11.

From on or

September

1988,

elsewhere,
did

unlawfully,
and
to

States,

namely,

the

purpose

Services,
investment

of
Inc.

of

5,

continuing

District

and
with

Grand

Jury

to

knowingly

of

each
to

other

commit
make

the

("CMS"),

a federally

in

with

with

United

States

the

statements

United
for

Management

small

a $300,000
Code,

known and

against

Capital

licensed

MARKS, SR.,

conspire,

material
of

about

and

others

an offense

actions

connection
18,

Arkansas

combine,
and

false

through

WILLIAM J.

knowingly

influencing

Title

1987,

JIM GUY TUCKER and

agree

company,

violation

June

Eastern

willfully,

unknown

in

the

Defendants

confederate

the

in

about

business
loan

Section

from

CMS,

1014.

3

AMERICAN

pVERSIGHT

18-1621-000025

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 25

The

12.

The purpose

statements
of

and

influencing

Defendants

in

and

14.

lend

$300,000

with

Manner

and Means

means

did

apply

to

Defendants

would

beneficiary

of

and

of

this

CMS

for

the

did

for

of

part

conspiracy

loan

personal

the
use

television

the

purpose
of

the

venture.

this

was sought

the

Defendants

$300,000.

conspiracy
CMS

would

to

following:

that

of

to

false

CMS for

conspiracy

others,

of

make

Conspiracy

the

represent

$300,000

cable

a loan

to
to

the

the

by which

was a further

was

a joint

among

was a part

Conspiracy

documents

connection

and

the

conspiracy

CMS to

included,

It

It

the

fraudulent

be accomplished

would

of

of

submit

The manner

13.

Purpose

that

that
the

the

borrower

and

be D&L Telecommunications,

Inc.

15.
JIM

It

was a further

GUY TUCKER would

and

part
did

of

this

conspiracy

represent

beginning

business

in

Arkansas,

business,

intended

to

do business,

when
or

to
in

CMS that

fact

applied

that

D&L was

D&L never
to

Defendant

did

do business

in

Arkansas.

4

AMERICAN

pVER

IGHT

18-1621-000026

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 26

It

16.

WILLIAM J.

of

D&L, ·when

authorized

to

It

17.

act

in
as

would

promissory

note

and did
to

of

this

did

fact

conspiracy

sign

of

part

this

of

arrange

for

D&L nor

Defendant

documents

an officer

as

of

D&L

D&L.

conspiracy

Betty

secretary

that

CMS loan

he was neither

an officer

CMS as

an officer

of

and

was a further

Defendants

neither

part

MARKS, SR. would

president
nor

was a further

of

that

Tucker

to

D&L, when

authorized

to

act

in
as

the

sign

a

fact

she

was

an officer

of

D&L.

18.
of

using

It
the

Defendants
to
the

proceeds

would

be placed
Fleet

19.

into

personal

It

Defendants
it

was a further

appear

Defendant

20.
Defendants
sale

of

the

Fleet

of

and

did

part
the

arrange

to

was a further

later

would

that

D&L had

and

for

the

was

would

did

c~eate

ratified

cable

and

repay

television

conspiracy

that,

benefit

D&L, the

proceeds
Fleet

of

as

instead

the

CMS loan

collateral

for

Defendants.

of

part

did

at

part

further

to
the

account

this

conspiracy
false

and

of

Betty

this

the

systems

that

the

acquired

to

actions

make

of

Tucker.

conspiracy

CMS loan

the

documentation

retroactively

WILLIAM J . MARKS, SR.

It

this

CMS loan

an escrow
loan

of

that

with
with

the

proceeds
the

of

proceeds

the
of

loan.
5

AMERICAN

VERSIGHT

18-1621-000027

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 27

21.

It

Defendants

was a further

would

and

SBA representing
working

It

Defendants

the

WILLIAM J.
Defendant
Betty

of

that

CMS to
the

and

stock

part

did

of

WILLIAM J.

of

cause

committed

in

23 .
Arkansas,
a loan

of

24.

transfer

the

the

In or

about

to

about

by Betty

the

falsely

to

the

by Defendant
Tucker,
of

that

D&L, and

that

Acts

conspiracy,
the

Jun~

and

to

following

effect

the

overt

of

Arkansas,

and

1987,

in

Eastern

the
the

objects

acts

were

elsewhere:

District

president

of

of

CMS for

D&L.

June

5,

in

1987,

the

JIM GUY TUCKER caused
of

that

represent

was president

District

early

the

by CMS was for

conspiracy

JIM GUY TUCKER asked

Defendant
proceeds

lent

to

D&L.

conspiracy,

Eastern

$300,000

On or

the

the

a document

SO percent

SO percent

that

Inc.

CMS to

MARKS, SR.

of

Defendant
of

Arkansas,

of

submit

this

D&L was owned

was secretary

In furtherance
purposes

conspiracy

$300,000

Overt

and

this

D&L Telecommunications,

MARKS, SR. and

Tucker

of

cause

was a further

would

SBA that

did

falsely

capital

22.

part

the

CMS loan

to

Eastern

District

the

president

an escrow

account

of
at

of
CMS to
Fleet.

6

AMERICAN

pVERSIGHT

18-1621-000028

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 28

25.

In or

Eastern

District

be sent

to

which
SR.

the

about

June

of

Arkansas,
of

note

was signed

president

of

the

D&L, by Betty

Tucker

Betty

as

In or

Eastern

District

be sent

to

stating

that

would

be doing

in

West

Arkansas,
loan

the

MARKS, SR.

about

to

the

secretary

date

to

$300,000,

WILLIAM J.

exact

MARKS,

of

D&L, and

MARKS, SR . , and

unknown,

in

the

JIM GUY TUCKER caused
dated
in

June

4,

Arkansas"

underground

5,

cable

in

the

JIM GUY TUCKER caused

to

"Size

1987,

Status

Declaration,"

MARKS, _SR.,

and

Compliance,"

which

and

by Defendant

On or

Arkansas,

August

labeled

identified

28.

in

in

to

1987,

and

that

D&L

construction

County.

WILLIAM J.
of

the

business

work

for

WILLIAM J.

CMS a letter

beginning

note

as

Defendant

of

extensive

Defendant

"Assurance

caused

1987,

June

president

On or

document

which

about

"D&L is

by Defendant

J.

guarantors.

of Arkansas,

Pulaski

27 .

individual

unknown,

JIM GUY TUCKER caused

by Defendant

JIM GUY TUCKER, Defendant

26.

date

CMS a promissory

by Defendant
Tucker

exact

Defendant

pr~sident

promissory
as

1987,

attested
D&L as

about

the

August

borrower

7,

1987,

of

the

in

JIM GUY TUCKER and

be created

a letter

the

be sent

to

was signed

document

labeled

by Defendant

the

$300,000

Eastern

WILLIAM J.

actual

president

of

CMS a

WILLIAM

JIM GUY TUCKER, both

Defendants

to

District

which

a loan

was signed

Eastern

of

loan.

District

of

MARKS, SR.
of

D&L

7

AMl HICAN

VERSIGHT

18-1621-000029

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 29

purporting

to

confirm

MARKS, SR. and
officers

of

O&L would

29.
caused

to

Defendant

Betty

the

an agreement
Tucker

were

corporation

apply

for

On or

about

be sent

to

authority

to

that

January

authorized

secure

the

to

do business

5,

1988,

CMS a check

JIM GUY TUCKER and

Defendant

for

Betty

WILLIAM J.

to

have

acted

loan

from

CMS, and

as
that

in Arkansas.

Defendant
$300,000,

Tucker,

to

United

States

JIM GUY TUCKER
signed
repay

by
the

loan

to

D&L.

All

in

violation

of

Title

18,

Code,

Section

371.

AMLHICAN

pVERSIGHT

8

18-1621-000030

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 30

COUNT TWO

1.

Paragraphs

realleged

and

1 through

incorporated

10 of

Count

by reference

One are

as

though

the

Eastern

hereby
set

forth

herein.
2.

On or

Arkansas,

Defendant

MARKS, SR.,
false

about

and

statement

Capital

Management
business

loan

from

borrower

for

CMS, in

purpose

Services,

Inc.

that

the

beneficiary

as

Defendants
for

. well

the

for

Defendants

JIM GUY TUCKER and

1014,

in

violation

and Title

18,

of
United

loan

from

18,

States

loan

was

in

truth

of

the

Inc.,

but

Fleet

National

Code,

of

licensed

to

Unit~d

actions

a federally

represented

WILLIAM J.

Title

the

with

proceeds

made a

a false

connection

when

D&L Telecommunications,

collateral

All

in

$300,000

the

of

influencing

("CMS"),

of

WILLIAM J.

knowingly

making

of

Inc.,

knew,

a personal

other,

Defendants

of

District

Defendant

the

company,

D&L Telecommunications,

be used

caused

the

called
the

in

by each

and

investment

and

1987,

abetted

statement

material

small

5,

JIM GUY TUCKER and

aided

material

June

a $300,000
CMS that

the

a company
and
loan

rather

in

fact,

would

not

as
Bank

to

MARKS, SR.
States
Section

Code,

Section

2.

9

AMLHICAN

pVERSIGHT

18-1621-000031

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 31

COUNT THREE

Introduction

At various

1.

Defendant

Little

Rock,

cable

television

of

the

Management,

owned

in

and

Limited

the

Corporation,

Little

Rock,

1987,

corporation
the

WILLIAM J.

attorney

in

involved

he owned

called

individual

MARKS, SR.

television
the

stock

industry.
of

100

in

the

percent

Cablevision

general

partner

was

a businessman

In early

Planned

he was president

Defendant

a practicing

of

Partnership.

of

and

indictment:

a businessman

In early

was

cable

18 percent

3.

He was also

an Arkansas

Inc.,

this

JIM GUY TUCKER was

Defendant

involved

to

industry.
of

Cable

2.

material

Arkansas.

stock

County

times

of

Cable

that

1987,

he

Systems

corporation.

JOHN H. HALEY was a practicing

attorney

in

Arkansas.

4.

Donna

5.

The

Marks

was

the

wife

of

Defendant

WILLIAM J.

MARKS,

SR.

Congress

that

Internal
governs

Revenue
the

Code

ascertainment,

is

legislation
computation,

passed

by

assessment

10

AMFnlCAN

VERSIGHT

18-1621-000032

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 32

and

collection

of

States

Government,

of

United

the

Revenue

States

The

generally

is

on the

asset,

of

asset.

the

7.

the

for
of

the

or

"gain"

as

must

domestic

by the

Service

is

administers

the

as

owner

paid

reflect

the

pay

tax

the

adjusted

on the

United

the

agency

Internal

is

same

with

the

is

to

the

the

for

depreciation

the

sale

price

Generally,

Code

entities.
referred

distributed

income

Basis

expenditures

basis.

Revenue

is

asset.

capital

the

to

as a "C

is

later

generally

treats

A corporation

by a C corporation

income

purposes

gain.

Internal

C rules

S of

for

an asset

tax-paying

income

tax

deductions

of

by the

corporations,"

corporations

income

subsequent

sale

earned

the

Subchapter
business

to

subchapter

If

for

reflect

C of

Income

again

to

reduced

corporation,

"small

that

the

independent

under

corporation.

that

on the

asset

corporation."

9.

taxes,

Revenue

an asset

downward

Subchapter

operating

taxation

of

amount

an asset

corporations

the

income

Internal

Government

upward

The

8.

of

the

"basis"

may be adjusted

seller

and

including

Code.

6.

paid

revenue,

taxed

to
is

to

the

shareholders

subject

to

shareholder.

Internal
which

no more

Revenue
are

than

defined

Code

applies

to

as certain

35 shareholders

or

more

11

AM HICAN

pVERSIGHT

18-1621-000033

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 33

than

one

class

of

treated

as an

If

an election

such

subject
or

to

not

stock.

"S corporation"

the

is

to

the

10.

the

beginning

owned

At the

11.

Corporation

tax.

Revenue

generally

Corporate

shareholders,

of

is

taxed

is

only

to be

Code.

income,

Cable

beginning

of

not

whether
once

as

and

Management,

owned

100 percent

cable

television

Limited

1987,

was an Iowa

Corporation

Cablevision

CMI managed

by County

("PCS")

1987,

S corporation

JIM GUY TUCKER.

in Arkansas

Internal

corporation

income

was an Arkansas

Defendant

the

the

may elect

shareholders.

At the

("CMI"),

Meredith

to

corporation

under

made,

corporate

distributed

income

An eligible

by
systems

Partnership.

Planned

Cable

C corporation

18 percent

Inc . ,

Systems

owned

by Defendant

82 percent

by

WILLIAM J.

MARKS, SR.

12 .

In 1987,

Meredith

corporation.

In addition

PCS,

held

Meredith

obligated
money
sell

its

approximately

13.

owning
note

Meredith

by Meredith
82 percent

to

an income

PCS to pay
lent

Corporation

of

to

82 percent
("the

$7.9

PCS.

("Meredith")

PCS stock

Income

million,

In early
and

the

of

plus
1987,
Income

was an Iowa
the

stock

Note")

that

interest,
Meredith
Note

of

for
wanted

to

for

$6 million.

Fleet

National

Bank

("Fleet")

was a commercial

bank

12

AMERICAN

pVERSIGHT

18-1621-000034

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 34

headquartered

14.

in

State

headquartered

15.
Texas

in

Mikado

corporation
president
business

the

Prior

Leasing

in

was a commercial

Inc.,

November

1987,

and

in

had owned

("Mikado

1971.

from

bank

1972

11

)

("LMS")
LMS had

no tangible

was a
issued

no

assets.

was an Arkansas

Defendant

JOHN H. HALEY was

to

Mikado's

1987.

primary

automobiles.

Cablesystems
with

of

Florida

headquarters

The Plantation

located

Company

Systems,

Company

company

company

18.

to

no business,

American

television

Trust

Management

was leasing

17.

&

Island.

Massachusetts.

incorporated
of

Rhode

Bank

Boston,

Landowners

had done

16.

it

Street

C corporation.

shares,

system

Providence,

cable

Plantation,

("ACF")

was a cable

.

in Massachusetts.

system

was a cable

_F-lorida.

At the

television

beginning

of

1987,

was owned by PCS.

19.

The Trophy

Club,

cable

systems

were

located

these

systems

were

owned

20 .

In 1987,

Sattech,

Roanoke,
in Texas.

Las

Brisas,

At the

and Carrollton
beginning

of

1987,

by PCS.

Inc.

was an Ohio

corporation

owned

50

13

AMERICAN

pVERSIGHT

18-1621-000035

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 35

percent

Defendant

by

21.

In early

WILLIAM J.
in

the

Defendant

television

their

22.

1987,

MARKS, SR. met

cable

equally

WILLIAM J . MARKS, SR.

and

business

about

GUY TUCKER signed

March

a "Stock
to

its

stock

82 percent

that
and

the
that

of

On or

to

the

about

be sent

Fleet

or

more

in

about

a Debt

Approximately

the

Meredith's

collateral

for

the

stock

in

television

assets

of

PCS and

which

for

Income

JIM

Defendant

$6 million
Note.

JIM GUY TUCKER
Memorandum
of

could

Fleet

over
be

and

stating

$10 million,

increased

to

the

sum of
of

PCS and

the

Defendants
to

Fleet

CMI.

State

Street

JIM GUY TUCKER and

proceeds

loan,

MARKS, SR. pledged

system

Defendant

of

the

the

a value

-1987,

MARKS, SR.

$6 million

pVERSIGHT

divide

year.

to

WILLIAM J.

AM HICAN

venture

Defendant

in

Meredith

Placement

that

10,

lent

and

Defendant

had

next

June

"Fleet")

from

1987,

of

WILLIAM J.

the

a joint
would

Meredith

PCS and

value

market

(collectively

of

in

the

Defendant

they

Agreement"

purchase

May 15,

to

1987,

system

On or

purchase

1,

cable

24.

to

in which

Plantation

$12 million

to undertake

Purchase

JIM GUY TUCKER agreed

caused

agreed

profits.

On or

23.

JIM GUY TUCKER and Defendant

all

$8.5

million.

this
Income

loan

were

Note.

used
As part

JIM GUY TUCKER and
of

As additional

the

cable
collateral,

14
18-1621-000036

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 36

Defendants

JIM GuY TUCKER and

$500,000

cash

of

was

which

(placed

in

funded

WILLIAM J.

an escrow

account

by a $300,000

Telecommunications,

Inc.

MARKS, SR.

loan

by Capital

at

pledged

Fleet),

purportedly

a portion
made to

Management

Services,

D&L

Inc.

("CMS").

On or

25.

Purchase

Agreement

transferred
stock

to

of

about

Agreement

Defendant
his

of

SR.

the

27.

provisions

in

1,

1987,

Meredith

accordance

JIM GUY TUCKER its

10,

1987,

in

1,

1987,

and

March

under

Income

about

$3.3

amount

On or
of

of

about

the

loan

After

the
of

merger,

CMI, and

Defendant

that

Note

TUCKER and WILLIAM J.

president

1987,

March

June

of

rights

the

amount

CMI.

10,

JIM GUY TUCKER to

endorsed

in

of

Defendant

On or

Purchase

of

June

with

sold,

the

Stock

assigned,

82 percent

of

and
the

PCS.

26.

part

about

to

Purchase

Defendant
and

June

10,

1987,

MARKS, SR.

caused

Defendant
Defendant

MARKS, SR.,

of

Meredith
the

WILLIAM J.

MARKS,

million.

·in

with

Stock

by

Agreement,

Defendant

$4.6

agreement

the

JIM GUY TUCKER in

to

approximately

with

an Assignment

WILLIAM J.

Stock

million,

accordance

accordance

Fleet,
the

WILLIAM J.

with

Defendants
merger

of

the
JIM GUY
PCS into

MARKS, SR. was

JIM GUY TUCKER was

secretary

of

CMI.

15

AMERICAN

pVERSIGHT

18-1621-000037

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 37
28.

On or

provisions
merger

of
of

about

the

June

loan

PCS into

agreement

CMI,

CMI,

to

29.

On or

the

surviving

about

June

entity,

of

the

stock

merger,

of

Florida

30.
several

the

and

several

On or

about

months,

Defendant
Plantation

cable

31.

On or

wrote

to

contemplating
on or

a sale

about

tax

32.

October

consequences.

On or

about

TUCKER and WILLIAM J.
Plantation

cable

CMI owned
in

as

part

of

the

of

PCS and

the

from

1987,

of

the

system.

1987,

offered

system

saying"

need

will

to
to buy

the

[w]e

1987,

said

are

assets

to occur

a calculation

of

be $15 million."

Defendants

discussed

They

over

JIM GUY TUCKER

Florida

price

3,

wrote

Defendant

We urgently

MARKS, SR.

MARKS, SR.

$15 million.

-

September

by Defendant

discussions

Florida

formally

Texas,

sale

PCS into

cable

following

Plantation,

1987.
The

and

31,

Dallas,

of

50 percent

Plantation

of

CMI for

in

merger

WILLIAM J.

the

Cablesystems

August

1,

the

Texas.

24,

MARKS, SR.

about

after

by Defendant

August

system

accountants

1987,

systems

American

WILLIAM J.

10,

CMI, was owned

As a result

the

and

the

Note.

50 percent

the

Fleet

with

JIM GUY TUCKER and WILLIAM J.

CMI all

JIM GUY TUCKER and

in

in accordance

with

Defendants

MARKS, SR. contributed
Income

1987,

10,

JIM GUY

a prospective
that

they

would

sale

of

make a

16

AMERICAN

pVERSIGHT

18-1621-000038

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 38

profit

of

to

a tax

pay

$13 million

33.

of

from

$4 million

On or

about

and

Plantation
of

Sale

cable

$14.75

of

competition

on the

Assets"

in

from

$12.75

payments

to

and

that

they

did

not

want

sale.

25,

1987,

of

CMI,

on behalf

system

million:

sale,

September

WILLIAM J . MARKS, SR.,
Purchase

the

which

signed

Sattech,
plus

Defendants

Defendant

an

ACF agreed

CMI and

million,

ACF and

"Agreement

to

of

purchase

Inc.,

for

$1 million

the

a total

each

in

non-

JIM GUY TUCKER and WILLIAM J.

MARKS, SR.

34.
Texas,

On or

notified

with

the

gain

October

accountants

Defendant

Plantation

about

9,
in

1987,

Little

JIM GUY TUCKER that

cable

system

on a sale

of

accountants
Rock,

the

tax

was approximately
the

system

for

in

Arkansas,
basis

Dallas,
working

of

the

$1.75

million,

and

$15 million

would

be over

that

$13 million.

35.
received

On or
from
that

Plantation

cable
of

November

accountants

reflecting

on a sale

about

the

in

a corrected
system

of

system

for

~8,

1987,

Dallas,

Defendant

Texas,

JIM GUY TUCKER

a facsimile

calculation

showed

a basis

approximately

$1.26

million,

$15 million

of

over

in

the

and gain

$13 million.

17

AMrfllCJ\N

VERSIGHT

18-1621-000039

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page
39

The

36.
being
and

Beginning

unknown

to

including

Arkansas

MARKS, SR.,

and

other

and

with

Grand

Grand

Jury,

Department

in

of

the

The purpose

Plantation
through

cable

of

system

a fraudulent

designed

to

corporate

(1)

tax

ability

of

to

would

be due

further

purpose

S corporations

sale

Internal

of
other

the
of

the
the

basis
the

was

the

the
assessment

transfer

of
to

to
the
transfer

owned

the

JIM GUY TUCKER

Texas

system,
and

Service

systems

of

taxes.

to

in

system,

conspiracy

of

Conspiracy

in

sale

the

lawful

Service

income

to

purpose

computation,

proceeding

subsequent

cable

for

wit,

each

and unknown

Revenue

the

and

with

~y PCS to Defendant

Revenue

this

agree

known

conspiracy

owned

increase

on any

of

bankruptcy

on the

the

the

of

willfully,

and

ascertainment,

revenue:

up to

District

and defeating

The Purpose

37.

Eastern

States

Internal

the

date

thereafter

unlawfully,

both

United

the

exact

JIM GUY TUCKER, WILLIAM J.

obstructing
of

the

confederate

the

the

1987,

continuing

in

individuals

defraud

collection

1990,

conspire,

functions

Treasury

and

Defendants

impairing,

government

October

Jury,

October

other

to

than

JOHN H. HALEY, did

combine,

and

the

elsewhere,

knowingly

impeding,

no later

about

and

Conspiracy

that
(2)

(3)

avoid

impede

collect

taxes

system.

It

to

by PCS as

was

the
that
was a

individuals
of

June

or
1,

18

AML~ ICAN

VERSIGHT

18-1621-000040

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 40

1987,

in order

Service

to

sales

of

to

impede

the

taxes

that

collect

those

The manner
be accomplished

would

It

including

cable

39.

of

the

by which

included,

among others,

of

in

on the

was

this

the

Revenue

on any

subsequent

of

conspiracy
the

and

for

sale

Conspiracy

conspiracy

fraudulent

a further

chart"

PCS and

bankruptcy
cable

Means

the

the

part

JOHN H. HALEY and

step

between

Internal

was sought

to

following:

that
sham

the

Defendants

transactions,

purpose

of wrongfully

Plantation

cable

system

and

systems.

It

Defendants

the

be due

and means

engage

taxes

a "ten

would

a sham bankruptcy,

avoiding
other

and

was a part

and did

of

systems.

Manner

38.

ability

of

to

demonstrate

television

merged
assets

conspiracy

a "rescission"
of

PCS into

entity,
of

this

that

JIM GUY TUCKER would

CMI, a merger

the

of

and

PCS to

and did
of

another

the

the

merger

corporation,

distribution

Defendant

devise

of

a

the

JIM GUY TUCKER and

CMI.

40.
agreement
would

It

was a further

rescinding

and did

declare

the
that

part

of

this

merger

of

PCS and

the

82 percent

conspiracy

that

CMI, the
of

the

in an

Defendants

stock

of

PCS

19

AM HICAN

pVERSIGHT

18-1621-000041

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 41

that

was purchased

transferred
Donna

without

Meredith

by Defendant

consideration

to,

and

JIM GUY TUCKER was

thereafter

owned

by,

Marks.

It

41.

rescission
would

was a further

of

the

and did

completely

It

result

of

Defendants

has

It

did

of

to

CMI,

that

the

in

the

Defendants

be recreated

this

conspiracy

merger
it

between

appear

PCS and

part

of

attempt

to

a corporation

and assigned

that
not

this

that

PCS and CMI, the
Defendant

a shareholder

conspiracy

locate

and

that

has

as a

that
acquire

been

JIM GUY
of

PCS .

the
a "shelf

incorporated

operations.

was a further

in Texas

Note

the

of

JOHN H. HALEYwould
corporation"

of

a creditor

or

conspiracy

PCS and

part

make

and

this

JIM GUY TUCKER.

did

namely,

no assets

44.

between

was a further

would

corporation,"

and

of

Income

rescission

TUCKER was only

Defendants

part

was a further

the

It

the

Defendant

would

43.

merger

cause

to

42.

but

from

and

part
did

of

acquire

called

this

conspiracy

control

Landowners

of

that

Defendant

a "shelf

Management

Systems,

conspiracy

that

Inc.

( II LMSII) •

45.

Defendants

It

was a further

would

and

did

part
cause

of

this

82 percent

of

the

stock

the
of

LMS to

20

AMl HICAN

VERSIGHT

18-1621-000042

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 42

be

issued

to

Mikado

Leasing

of

LMS to

be

issued

to

46.

It

was a further

Defendants
Mikado

would

Leasing

47.

It

Defendants
for

of

designate

this

of

the

stock

MARKS, SR.

conspiracy

Donna

and

did

part

would

and
in

District

did

the
of

of

cause

was a further

bankruptcy

Northern

part

was a further

would

48.

percent

18

WILLIAM J.

Defendant

did

and

Marks

that
as

the

president

of

Company.

It

Defendants

and

Company,

the

part

United
Texas,

conspiracy

merger

of

cause

this

this

LMS to
States

of

PCS into

conspiracy
file

Falls

the
LMS.

that

the

a fraudulent

Bankruptcy

Wichita

that

Court

Division

petition
for

the

( 11bankruptcy

court").

49.

It

Defendants
of

was a further

would

Reorganization

petition

in

listed

in

50.
WILLIAM J.

and

did

that

bankruptcy

the

It

part
create

president

of

LMS.

a fraudulent

purported

by all

that

the

"pre-packaged"

court

to

filing

of

Plan

the

creditors

who were

schedules.

MARKS, SR. would
LMS, and

conspiracy

prior

was a further

of

this

was approved

bankruptcy

president

of

testify

part

of

and
in

did

this

conspiracy

sign

bankruptcy

that

bankruptcy
court

Defendant

pleadings
as

as

the

21

AMERICAN

PVERSIGHT

18-1621-000043

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 43

51.

It

Defendants
in

was a further

would

bankruptcy

claim

of

Income

and

court

as

It

this

conspiracy

Defendant

only

was a further
and

bankruptcy

court

that

system

from

cancellation

of

53.

It

Defendants

million

that

the

JIM GUY TUCKER to

secured

would

creditor
based

and

did

of

on the

appear

LMS with

a

recreated

part
cause

"effective

the

Reorganization

ownership

of

to

the

JIM GUY TUCKER in

the

Plantation
exchange

for

of

this

CMI to

LMS with

conspiracy

10,

part

of

the

appear

in

bankruptcy

a claim

of

$1.15

pursuant

June

that

to

1987,"

court

million

a Management
but

which

was created

1987.

It

was a further
and did

bankruptcy

court

that

systems

55.

of

that

Note.

advanced

would

of

conspiracy

a Plan

Defendant

of

Defendants

cable

this

transfer

Income

on funds

dated

November

54.

would

LMS to

the

of

propose

creditor

in part

Agreement

did

part

was a further

an unsecured

based

debt

of

Note.

would

in

the
$8.85

Defendants

as

cause

approximately

52.

cable

did

part

$1.15

It

from
million

propose

would

LMS to

a Plan

transfer
CMI in

part

conspiracy
of

exchange

that

Reorganization

ownership

purportedly

was a further

this

for

of

this

to

conspiracy

the

Texas

cancellation

owed by LMS to

of

certain

the

of

the

CMI.

that

the

22

AMl HICAN

VERSIGHT

18-1621-000044

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 44

Defendants

would

court

Meredith

that

Leasing
sold

Company

of

It

would

court

the

that

and
fair

had
for

million,

signed
$12.75

non-competition

$6

million.

of

value

because

the

Plantation

million,

plus
to

knew

American
to

the

that

the

an additional

Mikado

Meredith

Note

to

that

the

bankruptcy
cable
the

system

fair

Cablesystems

purchase

Defendants

PCS to

conspiracy
to

Defendants

of

Income

falsely
of

bankruptcy

knew that

the

this

the

stock

Defendants

represent

the

to

the

PCS and

an agreement

payments

of

of

part

did

when

was $14.75

Florida

market
of

Plantation

cable

$1 million

each

in

JIM GUY TUCKER and WILLIAM

MARKS, SR.

57.

It

was a further

Defendants

would

and

did

court

there

had

been

that

Defendants
the

the

stock

market

million,

$8.85

system

when

$1,

the

falsely

82 percent

was a further

Defendants

value

represent

JIM GUY TUCKER for

56.

was

did
sold

for

82 percent

Defendant

J.

and

Plan

Defendants

of

Defendants

It

was a further

would

represent

falsely

to

the

part

that

the

in

between

MARKS, SR.
the

of

falsely

this
to

television

led

to

when the
WILLIAM J.

business.

conspiracy
the

that

bankruptcy,

JIM GUY TUCKER and
cable

the

bankruptcy

negotiations

proposed

in

conspiracy

WILLIAM J.

Defendants

partners

this

arms~length

Reorganization
knew that

of

represent

JIM GUY TUCKER and

MARKS, SR. were

58.

part

bankruptcy

that

the

court

that

23

AMLHICAN

pVERSIGHT

18-1621-000045

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 45

Defendant
assets

JIM GUY TUCKER held
held

Bank

had

those

by LMS, when the

a first

cable

lien

systems

transferred

to

59.

It

Defendants

on all
owned

LMS in

not

the

the

into

LMS, or

that

60.

was a further

merger

It

of

not

Plantation

cable

system,

and

ownership

of

the

61.

It

was a further

the

Purchase

Defendant

agreed

and

of

of

cable

for

to

pay

did

of

the

$3 million

in

62.

It

is,

were

that

Fleet

all

later

the

National

that

Bank

PCS was merged

conspiracy
to

transferred

of
to

this

as

to

that

the

the
that

a bankruptcy.

that

the

a new Agreement

cable

of

system

the

Cablesystems

Defendant

of

Florida,

conspiracy

one

the

buyer

of
in

be signed

American

non-competition

TUCKER and WILLIAM J.

this

Plantation

and

National

LMS.

Cablesystems

been

part

million

to

disclose

American

Sale

that

conspiracy

disclose

not

cause

$11.75

1987

PCS into

this

Fleet

the

bankruptcy.

part

and did

system,

June

in

by LMS, that

CMI was rescinded,

had

of

held

assets

JIM GUY TUCKER was named

Plantation

plus

would

system

the

not

LMS filed

would

interest

knew that

part

PCS and

Defendants

security

Defendants

merger

and did

that

only

by PCS as of

was a further

would

Defendants

the

in

sellers
of

for

which

of

the

Florida

JIM GUY TUCKER and CMI,

payments

to

Defendants

JIM GUY

MARKS, SR.

was a further

part

of

this

conspiracy

that

of

the

24

AMl HICAN

VERSIGHT

18-1621-000046

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 46

million

$14.75

Defendant
and
in

paid

by ACF for

the

Plantation

JIM GuY TUCKER would

and

did

Defendant

WILLIAM J.

non-competition

It

63.

Defendants

was a further

least

It

64.

Defendants

would

and

of

sale

transfer

of

system,

would

million,

$11.75

receive

the

$3 million

and
of

the

that

any

of

pay

this
tax

1987

JOHN H.

as

that

returns

income

cable

no corporate

tax

cable

Defendant

conspiracy

Plantation

the

that

fees.

of

report

conspiracy

did

legal

cause

not

this

and

part

did

would

transfer

in

was a further

LMS that

or

part

$100,000.00

PCS and

cable

receive

system,

payments.

JIM GUY TUCKER would

HALEY at

or

MARKS, SR.,

cable

to

the

be

gain

system

or

the
filed

from

for
the

any other

would

be paid

on the

systems

owned

in

by PCS or

of

conspiracy

1987

sale

LMS.

65.

It

was a further

JIM GUY TUCKER would
Plantation

cable

66.
result

of

Defendant

It
the

part

and

system

did
on his

was a further
distribution

JIM GUY TUCKER in

TUCKER would
approximately

and

did

$7.28

r~port

claim
million

1988

part
of

of
the

the

the

sale

or

individual

this

that

bankruptcy,
in

the

a gain

of

Defendant

transfer
tax

conspiracy

Plantation

a basis
and

this

cable

of

the

return.

that

as

system

Defendant
Plantation
approximately

a
to

JIM GUY
system

of

$4.47

25

AMl HICAN

VERSIGHT

18-1621-000047

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 47

million

from

the

sale

GUY TUCKER knew

that

system

for

computed

$1.26

million

resulted

and

in

67.

of
the

that

return

1988

It

returns

more

sale

of

was a further

1988
with

and
the

the

of

would

this

the

Carrollton

of

the

tax

system.

conspiracy

that

on his

Defendant

individual

payments

Plantation

Defendant

individual

cable

report

the

have

that

on his

non-competition

purchase

would

conspiracy

report

did

cable

gain.

did

and

JIM

was approximately

basis

and

of

Defendant

Plantation

bankruptcy

taxable

part

1989

of

the

part

would

MARKS, SR.

for

connection

the

to

ACF, when

pre-bankruptcy

was a further

MARKS, SR.

WILLIAM J.

the

to

basis

PCS prior

WILLIAM J.
for

system

actual

substantially

It

68.

the

tax

made by ACF in

cable

system.

;
69.
Defendant
agents
of

of

CMI for

It

was a further

of

this

JIM GUY TUCKER would

and

did

the

Service

Internal

1988

owned

70.
Defendant
Internal
to

It

Revenue

that

JIM GUY TUCKER and
he had

part

there
PCS,

82 percent

when
of

be provided

with

to

the

tax

between

1990
to

return

Defendant

JIM GUY TUCKER knew that

stock

part

of

this

and

did

cause

the

tax

the

LMS bankruptcy

from

in

be represented

examining

Defendant

examining

documents

that

the

JIM GUY TUCKER would
Service

cause

was . no relationship

was a further

Revenue

conspiracy

of

PCS.

conspiracy

that

in

of

the

agents
return

of

CMI for

1990

1988

proceeding

26

AM HICAN

pVERSIGHT

18-1621-000048

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 48

to

support

entries

71.

It

on the

CMI tax

was a further

JIM GUY TUCKER would
documents

referring

Plantation

cable

part

and
to

did

the

of

tax

committed

72.
of

of

73.
of

about

chart"

PCS to

Arkansas,

presented

the

On or

to

that
the

Defendant

destruction

on the

sale

of

of
the

October

about

step

the
of

and

the
of

in

and

overt

the

12,

1987,

District

of

the

in

to

accountants

5,

1987,

the

merger

corporation,

distribution

JOHN H. HALEY and
chart"

were

elsewhere:

Eastern

another

JIM_GUY TUCKER and

October

objects

acts

and

rescission

the

the

JIM GUY TUCKER devised

PCS into

entity,

effect

Arkansas,

12~ 1987,

demonstrate

to

following

JOHN H. HALEY and

Defendant

"ten

Acts

District

merged

Defendants
the

cause

computations

conspiracy,

Defendants

of

to

conspiracy,

PCS and CMI, a merger

bankruptcy
assets

the

Eastern

On or

step

between

the

the

Arkansas,

a "ten

of

of
in

conspiracy

system.

In furtherance
purposes

the

attempt

Overt

and

return.

of

a

the

CMI.

Eastern

District

JIM GUY TUCKER
in

Little

Rock,

Arkansas.

74.

On or about

November

in

the

Eastern

District

27

AMERICAN

pVERSIGHT

18-1621-000049

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 49

of

Arkansas

and

telephone

with

possible

Arkansas,

the

Texas

which

attorney

11 bankruptcy

about

bankruptcy

showed

to

76.
of

Arkansas,

the

Texas

bankruptcy

Defendant

of

the

November

be

"Rescission
stock

of

District

transmitted

to

Agreement,"

PCS would

be

"PCS II."

8,

1987,

in

JIM GUY TUCKER and
attorney

Eastern

and

with

firm

the

Eastern

District

JOHN H. HALEY met with

two attorneys

concerning

from

a Chapter

11

Eastern

District

be sent

to

proceeding.

77.

On or

Arkansas,

about

November

Defendant

bankruptcy
the

to

JOHN H. HALEY'S law

bankruptcy

1987,

a draft

a

Texas.

JOHN H. HALEY caused

called

Defendants

in

by

concerning

the

82 percent

about

Texas,

in

an entity

On or

in

7,

attorney

that

JOHN H. HALEY conferred

filing

November

Defendant

transferred

and

a bankruptcy

On or

of

Texas

Defendant

Chapter

75.

of

elsewhere,

of

1987,

in

the

JOHN H. HALEY caused

to

attorney

distribution

9,

a diagram
the

that

Plantation

depicted
cable

the

a bankruptcy

system

to

Defendant

JIM GUY TUCKER.

78.
advised
bankruptcy
Systems,

On or
the

before

Texas

bankruptcy

proceeding
Inc.,

or

November

NCS,

would

9,

1987,

attorney
be named

that

Defendant
the

Neighborhood

JOHN H. HALEY

debtor

in

the

Communication

Inc.
28

AMERICAN

pVERSIGHT

18-1621-000050

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 50

79.

On or

indicated

to

percent

of

Defendant

the

the

to

Systems,

Inc.

81.

debtor

1987,

law

firm

the

debtor

about

November

notify

be the

1987,

Defendant

On or

the

Texas

and arranged

called

9,

Texas

bankruptcy

be Landowners
Cable

about

drafting

1987,

of

82

of

Systems.

November
of

12,

1987,

said

Defendant

JIM GUY TUCKER, and

stepson

of

by Defendant

83.

On or

Arkansas,
to

WILLIAM J.

about

November

Defendant
send

to

Texas

Eastern

another

attorney

District
member

that

Systems,

the

Inc.,

Defendant

Systems,

82 percent

of

his

name of
rather

JOHN H. HALEY

concerning
Inc.,

of

a

which

draft

LMS was owned

18 percent

of

by

a

LMS was

MARKS, SR.

13,

1987,

in

JOHN H. HALEY caused
the

an

Management

the

Statement

Statement

Management

that

acquire

11

a Disclosure

Landowners

JOHN H. HALEY

to

in

Management

Disclosure

firm

owner

stepson

Landowners

of

law

the

would

bankruptcy

of

JOHN H. HALEY

that

JOHN H. HALEY caused

the

would

9,

November

Defendant

to

82.

in

about

''Neighborhood

owned

Defendant

attorney

corporation

corporation"

On or

Arkansas,

caused

9,

bankruptcy

an individual
"shelf

than

Texas

On or

inactive

of

November

JIM GUY TUCKER.

80.
spoke

about

bankruptcy

the

Eastern

another

attorney

District

member

of

his

a draft

29

AMLHICAN

_pVERSIGHT

18-1621-000051

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 51

"Management
agreement

Agreement"
was

84.

"entered

On or

about

MARKS, SR. signed
Assignment"
system

to

85.

PCS and

CMI, which

into

of

10,

as

November

as president

that

conveyed

Defendant

On or

between

13,
of

the

WILLIAM J.

about

June

November

1987,

16,

TUCKER and JOHN H. HALEY conferred
bankruptcy

86.
of

Arkansas,

the

Texas

Landowners

87.

On or

about

November

Defendants
bankruptcy

WILLIAM J.

of

the

Sale

and

Carrollton

cable

individually.

Defendants

JIM GUY

by telephone

with

On or

attorney

about

regarding

financial

On or

1987,

Eastern

regarding

Systems,

Inc.

November

19,

with

the

information

about

conferred

by telephone

regarding

revisions
Statement

18,

in

JIM GUY TUCKER and

Management

by telephone

Disclosure

of

1987,

the

the

Texas

attorney.

conferred

88.

Defendant

MARKS, SR.

that

1987."

PCS a "Bill

ownership

said

to
to

the

1987,

-Texas

the
Plan

20,

1987,

Texas
of

be filed

in

bankruptcy

Defendant

to

the

Reorganization

action

of

JIM GUY TUCKER
attorney

LMS bankruptcy.

Defendant

bankruptcy

the

District

JOHN H. HALEY met with

bankruptcy

related

November
with

the

the

JIM GUY TUCKER
attorney
and

LMS bankruptcy

the
action.

30

AMLHICAN

pVERSIGHT

18-1621-000052

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 52

89.

On or

MARKS, SR.

signed

Shareholders

Board

which

Defendant

November

"Minutes

and

Corporation,"

and

about

and

merger

of

which

On or

MARKS, SR.

Inc.

Inc.

and

Donna

that

authorized

necessary

about

as

prepare

Management

Systems,

around

merger

percent
Defendant

of

Inc.,
the

AMi-=nlCAN

pVERSIGHT

of

"Donna

Marks,

of

of

11

execute

WILLIAM J.
identified

Mikado

Management
Leasing,

MARKS, SR.

a petition

a

Inc.

that

Mikado

documents

Company,

PCS approved

Defendant

Landowners
of

PCS as

Leasing

Systems,

1987,

Systems

individually

Mikado

Resolution

late

November

MARKS, SR.

that,

Systems,

Inc.,

to

for

take

of

and

actions

Chapter

on behalf

signed

of

Planned

Cable

(2)

transfer

to

stock

in

rights

PCS that

to

1987,

among other

JIM GUY TUCKER, and

TUCKER exclusive

shareholders

of

11
Landowners

Inc.

Agreement"

Management,

Cable

Management

necessary

TUCKER and WILLIAM J.

the

Meeting

shareholders

20,

WILLIAM J.

Planned

WILLIAM J.

and

other

In or

the

President

Defendant

and

"Rescission

that

a shareholder

bankruptcy

and

November

Marks

of

shareholder

a "Corporate

as

to

91.

the

Defendant

Joint

the

Landowners

signed

Leasing,

Special

MARKS, SR.

stated

1987,

Director

of

PCS into

90.

rescind

of

representative

Inc.,"

of

identified

WILLIAM J.

as

20,

the

Defendants

a document
things,

Systems
Donna

was purchased

(3)

grant

recreated

to

entitled
purported

and

Marks

JIM GUY

(1)

Cablevision

ownership
from

Defendant

Income

to

Note

of

the

Meredith

82

by

JIM GUY
owed by PCS.

31
18-1621-000053

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 53

92.

In or

MARKS, SR.
between

around

signed,

PCS and

93.

late

as

president

CMI that

On or

November

about

was

of

November

22,

JOHN H. HALEY conferred

bankruptcy

attorney.

On or

MARKS, SR.
Systems

an

"Agreement

signed

the

with

On or

conferred

on or

HALEY caused

benefit

AMLHICAN

bankruptcy

about

to

about

assigned

November

of

Jim

pVERSIGHT

with

the

November

that
as

1987,

June

10,

of

1987,

with

the

Cable

System,

regarding

Texas

WILLIAM J.

Planned

Defendant

1987."

JIM GUY

Defendant

Management

attorney

Agreement

Defendants

of Merger

24,

WILLIAM J.

Inc."

JIM GUY TUCKER
pleadings

to

be

court.

be deleted

a statement

of

by telephone

Landowners

bankruptcy

as

1987,

24,

November

by telephone

97.

been

about

Texas
the

96.

Affairs

and

On or

met with

had

November

Corporation

95.

filed

about

Defendant

PCS, a Management

"effective

TUCKER and

94.

1987,

from

24,

Texas

Defendant

bankruptcy

24 or

25,

a draft

accounts

security"

1987,

Fleet

attorney.

1987,

Defendant

Statement

of

and other
[t]o

JOHN H. HALEY

Financial

receivables
National

JOHN H.

Bank

of

LMS

for

the

Guy Tucker."

]2

18-1621-000054

 FOIA RD 56806 (URTS 16302) Dodd: 70104908 Page 54

98.

On or

TUCKER and
attorney
of

MARKS, SR.

bankruptcy

the

shares

and

18 percent

be

about

executed

the

MARKS, SR.

to

On or

filed

believes"

owned

system

is

Plantation

the

foreclosure

on the

the

Texas

Statement

bankruptcy

1987,

bankruptcy

WILLIAM J.

Statement

to

other

be filed

things,

WILLIAM J.

MARKS, SR.,

(2)

to

recreated

(3)
"J.

value

of

LMS had

Note

in

held

(1)
Inc.,

Plantation

"negotiated"

G. Tucker"

Income

the

with

that

Leasing,

market

Plan

court.

Defendant

among

and

by Mikado

and

system

JIM GUY

82 percent

fair

$8,850,000,
cable

25,

the

Disclosure

stated,

by Defendant

"management

Defendants

Disclosure

which

LMS were

the

with

a final

1987,

met with

to

November

court,

of

25,

revisions

Reorganization

cable

November

WILLIAM J.

regarding·

99.

the

about

lieu

to

sell

of

by Defendant

JIM

GUY TUCKER.

100.

On or

about

conferred

by telephone

regarding

the

to

be

filed

101.
MARKS, SR.
of
the

On or

"Meredith

the

about

executed,
Affairs

bankruptcy

with

Statement

with

Financial

November

court,

Corporation

of

27,

the

Texas

November

and

sold

27,

1987,
of

accompanying
stated,
its

Affairs

JIM GUY TUCKER
attorney

and

other

documents

court.

penalty

which

Defendant

bankruptcy

Financial

bankruptcy

under

1987,

Defendant

perjury,

a final

Schedules
among

82% stock

other
in

WILLIAM J.

the

to

Statement

be filed

things,
corporation

with

that

(1)
to

] J

AMFRICAN

pVERSIGHT

18-1621-000055

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 55

Mikado

Leasing

Company,

TUCKER was the

sole

approximately

102.
be

in

District

In re:

Chapter

be

Code,

and

of

LMS with

of

the

JIM GUY

a claim

of

for

Systems,

list

Inc.,

Plan

United

of

to

pleadings
Tax
Petition

Affairs,

to

caused

Northern

an Original

a Disclosure
Reorganization

States

9,

1987,

in

the

JIM GUY TUCKER caused

to

the

various

Financial

the

Defendants

Bankruptcy

Reorganization.

Cablesystems

contract

be modified

Court

Ballots

December

of American
that

of

11 of

Plan

the

including

of

Chapter

about

1987,

Management'

a Statement

Defendant

representative

system

Defendant

(2)

Division,

75-2001914,

Under

Arkansas,

30,

Falls

Solicitation

On or

proposing

of

Bankruptcy

Landowners

a Debtor's

103.

November

Wichita

11,

and

Filed

and

$1,"

creditor

States

No.

Statement
to

about

United

Identification
Under

secured

of Texas,

captioned

for

$9,000,000.

On or

filed

Inc.,

for

sale

of
of

Defendant

Eastern
to

be sent

Florida

the

District
to

a

a letter

Plantation

cable

JIM GUY TUCKER as one of

the

sellers.

104.

On or

MARKS, SR.
in
was
Plan

the

testified

bankruptcy

proposed
was

11

about

18,

on behalf
court

in good
(t]o

December

keep

that

faith,

of
the

and

Mr. Tucker

1987,
the

debtor,

debtor's
that
from

Defendant

his

Plan
purpose

foreclosing

WILLIAM J.

LMS, at
of

a hearing

Reorganization
in

proposing

on the

the

assets."

]4

AMi-=nlCAN

pVERSIGHT

18-1621-000056

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 56

105 . On or
appeared

as

about

the

bankruptcy

only

court

December
secured

18,

1987,

Defendant

JIM GUY TUCKER

at

a hearing

in

creditor

t·o confirm

the

Plan

of

the

Reorganization

proposed

by LMS.

106.
appeared

On or
in

about

the

December

bankruptcy

18,

court

1987,

as

Defendant

the

attorney

JOHN H. HALEY
for

Defendant

JIM GUY TUCKER.

107.

On or

about

December

TUCKER and WILLIAM J.
that

a new Agreement

Plantation

cable

September

25,

108.
signed

of

On or

about

to

TUCKER and

CMI for

purchase

$3 million

in

for

On or

a check
"Plantation

and

JIM GUY

an Agreement

Sale

supersede

of

28,

Purchase

of
the

the

1987,

with

Assets

for

earlier

Plantation
of

Defendant

and Sale
cable

of

ACF
the

agreement

of

payments

JIM GUY TUCKER

Assets

system

$14 . 75 million:

non-competition

about

for

December

a total

TUCKER and WILLIAM J.

wrote

Defendants

signed

Purchase
would

1987,

1987.

a new Agreement

109.

MARKS, SR.

system

ACF agreed

plus

28,

in which
from

$11.75
to

Defendant

million,

Defendants

JIM GUY

MARKS, SR.

February

$100,000

& LMS --

to
partial

8,

1988,

Defendant
payment

Defendant

JIM GUY TUCKER

JOHN H. HALEY's
of

legal

fees

law

firm

&

expenses."
35

AMFRICAN

pVERSIGHT

18-1621-000057

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 57

110.

On or

about

March

Arkansas,

Defendant

Defendant

JOHN H. HALEY and

Defendant

WILLIAM J.

preparation
Leasing

and

111.
wrote

to

his

purchased
owned

Income
in

On or

returns

years
the

for

1987 and
sale

cable

or

the

August

returns

with

that
for

PCS,

soon

as possible.

2,

1988,

Defendant

from

Little

Meredith

to

a copy

to

June

for

LMS, and Mikado

JIM GUY TUCKER

Rock stating
in

of

responsibility

as

in

District

a memorandum

stating

preparer

Note

Eastern

that

1987,

and

he

that

"I

PCS.

August

to

be filed

Landowners
1988,

25,
with

of

the

of

Defendant

the

Management

neither

transfer

1988,

which

Plantation

Internal

WILLIAM J.
Revenue

Systems,

Inc.,

reported

taxable

cable

system

Service

for

the

gain

on

or other

systems.

113.

On or

about

August

to

be filed

with

for

neither

MARKS, SR. caused
two

tax

about

MARKS, SR. caused
tax

of

return

no stock"

in

accountants,

MARKS, SR.,

about

tax

the

112.

three

be determined

On or

1988,

JIM GUY TUCKER wrote

filing

should

30,

1987

transfers

of

114.
caused

tax

to

returns
cable

On or

PCS,

1988,
the

Defendant
Internal
of

WILLIAM J.
Revenue

which

reported

Service
sales

or

systems.

about

be filed

26,

with

August
the

25,

1988,

bankruptcy

Defendant
court

JIM GUY TUCKER

a Chapter

11 Post-

36

AMrfllCJ\N

VERSIGHT

18-1621-000058

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 58

Confirmation

and Accounting

115.
and

On or

about

WILLIAM J.
that

losses

from

future

operations,"

116.
Arkansas
filed

they
the

previous

Tax Return

for

caused

Service

his

Revenue
this

Defendants

well

as

1989,

October

to

be filed

in

the

profits

and

Income

19,

1989,

a United

and

losses

the

Eastern

a

District

Tax Return

for

Defendant
States

from

Marks."

JIM GUY TUCKER caused

Individual

about

Understanding

"may be termed
of

in

JIM GUY TUCKER

profits

agreement

.

of

equally

interest

12,

LMS bankruptcy

of

to be
1988.

WILLIAM J.

Individual

Income

1988 ·.

In or

CMI or

as

Defendant

States

1989,

share

the

June

elsewhere,

On or

to

that

about

caused

to

and

the

a Memorandum

sales

On or

MARKS, SR.

Revenue

wish

or partnership

a United

118.

"both

12,

signed

stock

and

117.

January

MARKS, SR.

stating

'phantom'

regarding

around

July

asked

Defendant

what

was

when agents

tpe

to

"None.

of

the

Internal

ownership/relationship

JIM GUY TUCKER, Defendant

accountant

Service,

1990,

represent

to

CMI managed

agents
certain

of

PCS

JIM GUY TUCKER
of

the

cable

Internal
properties

for

entity."

119.

On or

MARKS, SR. caused

about

October

to

be filed

22,

1990,

a United

Defendant
States

WILLIAM J.

Individual

Income

37

AMLHICAN

pVERSIGHT

18-1621-000059

 FOIA RD 56806 (URTS 16302) Docld:
70104908 Page 59

Tax Return

for

120.

attempted
to

the

that
the

1989 .

In about

the

fall

to

the

destruction

sale

cause
of

calculated

the
the

Plantation

of

Plantation
gain

cable

Basis

claimed

Actual

basis

tax

system,

=

system,

on the

in

GUY TUCKER

Te~as

including

post-bankruptcy

and one page

that

relating

one

page

sale

of

stated:

7

6

1.926

in violation

JIM

= __ l_

Risk

All

Defendant
of documents

cable

and

=

1990,

of Title

+penalties+

18,

United

interest

States

Code,

Section

371.

A TRUE BILL.

)

,/t:~J) ul.;i;.1.,
1fENNETH

W.

STARR

INDEPENDENT COUNSEL
Dated:

June

7,

1995.

38

AM(-=RICAN

VERSIGHT

18-1621-000060

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page
60

rN THE UNITED STATES DISTRJCT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF Afv1ER1CA

V.

NO. LR-CR-95-117

JIM GUY TUCKER, WILLIAM J.
MARKS, SR., and JOHN H. HALEY

MEMORANDUM
OPINION
Separate defendant Jim Guy Tucker has moved to dism
iss the indictment in this case
on the ground that the Independent Counsel exceeded
his jurisdiction.

The Independent

Counsel, by way of response, asserts: (I) that the indic
tment of the defendants in this case
falls within the scope of his prosecutorial jurisdiction
; and (2) that even if does not, the
referral of the matter to him, as independent counsel,
is not subject to judicial review.

I. The Original Authorization for the Investigation of the
Defendants.
The Ethics in Government Act of 1978, as amended
by the Independent Counsel
Reauthorization Act of 1994, 28 U.S.C. §§ 591-599 (here
inafter the "Independent Counsel
Act"), permits the Attorney General to request that indep
endent counsel be appointed when
preliminary investigation discloses that certain high offici
als in the Executive Department
may have violated the law. 28 U.S.C. § 59l(b). Othe
r persons can come within the ambit
of the Act if they cannot be investigated and prosecuted
by an officer of the Department of
Justice without the appearance of a personal, financial,
or political conflict of interest. 28

U.S.C. § 59l(c)(2).

AML~ ICAN

VERSIGHT
.

.

EXHIBIT

4

18-1621-000061

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 61

An independent counsel is appointed by a special three-judge court of the
United ._
·
States Courts .of-Appeals for the District of Columbia, called the "Special
Division." It is
significant that the Special Division defines the independent counsel's
prosecutorial
jurisdiction. This is clear from the first sentence of 28 U.S.C. § 593(b)(3):
"In

defioin2the

independent counsel's prosecutorial jurisdiction, the division of the court shall
assure that
the independent counsel has adequate authority to fully investigate and prosecu
te the subject
matter with respect to which the Attorney General has requested the appoin
tment of the
independent counsel, and all matters related to that subject matter." (Emphasis
added.)
Congress reauthorized the original Ethics in Government Act on June 30, 1994,
with
a few changes.

However, prior to the reenactment of the Independent Counsel Act, the

Attorney General had conducted an investigation into a land development
venture called
"Whitewater"

in which President Bill Clinton and Mrs. Hillary Rodham Clinton were

investors, along with another partner, James McDougal. Because there was
no independent
counsel act in effect at the time, the Attorney General herself named Robert
B. Fiske,
Esquire, as independent counsel to further investigate the Whitewater venture
.
After the reenactment of the Independent Counsel Act, the Special Division
replaced
Mr. Fiske with Kenneth Starr, Esquire, and authorized a continuation of
the Whitewater
. investigation in the following terms:
Upon consideration of the application of the Attorney General pursuant
to 28 U.S.C. § 592(c)(l)(A) for the appointment of an independent
counsel with authority to exercise all the power, authority and
2

AMi-=nlCAN

pVERSIGHT

18-1621-000062

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 62

obligations set forth in 28 U.S.C. § 594, to investigate whether any
individuals or entities have committed a violation of federal criminal
faw, other than a Class B or C misdemeanor or infraction, relating in
any way to James B. McDougal 's, President William Jefferson
Clinton's, or Mrs. Hillary Rodham Clinton's relationships with
Madison Guaranty Savings and Loan Association, Whitewater
Development Corporation, or Capital Management Services, Inc.; it is
ORDERED by the Court in accordance with the authority vested in it
by 28 U.S.C. § 593(b) that Kenneth W. Starr, Esquire, of the District of
Columbia bar, with offices at Kirkland and Ellis, 655-15th Street, NW,
Washington, DC 20005, be and he is hereby appointed Independent
Counsel with full power, independent authority, and jurisdiction to
investigate to the maximum extent authorized by the Independent
Counsel Reauthorization Act of 1994 whether any individuals or
entities have committed a violation of any federal criminal law, other
than a Class B or C misdemeanor or infraction, relating in any way to
James B. McDouga.l's, President William Jefferson Clinton's, or Mrs.
Hillary Rodham Clinton's relationships with Madison Guaranty
Savings and Loan Association, Whitewater Development Corporation,
or Capital Management Services, Inc.
The Independent Counsel shall have jurisdiction and authority to
investigate other allegations or evidence of violation of any federal
criminal law, other than a Class B or C misdemeanor or infraction, by
any person or entity developed durin2 the Independent Counsel's
investi2ation referred to above and connected with or arisin2 out ofthat
investi2ation. (See Exhibit A.) (Emphasis added.)
Such was the jurisdictional authority defined by the Special Division, which h~d the sole
--

·•·- ·•-- .

statut_ory duty to define such jurisdiction.
In affixing this limitation on the jurisdictional

grant, the Special Division was

undoubtedly mindful of the caveat of the Supreme Court of the United States in Morrison
v, Olson:

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[W)e do not think that Congress may give the Division unlimited
discretion to determine the independent counsel's jurisdiction. In order
for the Division's definition of the counsel's jurisdiction to be truly
"incidental" to its power to appoint, the jurisdiction that the court
decides upon must be demonstrably related to the factual circumstances
that gave rise to the Attorney General's investigation and request for
the appointment of the independertt counsel in the particular case.
487 U.S. 654,679 (1988) (Emphasis original).
What "gave rise to the Attorney General's

investigation

and request for the

appointment of the independent counsel in the particular case" was that the President was a
"person" requiring appointment of an Independent Counsel. [28 U.S.C. § 59l(b)(l).]
The subject matter of the indictment at issue here bears no relation whatsoever to the
Clintons or James McDougal or their relationship with Madison Guaranty Savings and Loan
Association, Whitewater Development Corporation, or Capital Management Services, Inc. ·
The following affidavit of Governor Tucker, dated July 7, 1995, and attached to his motion
to dismiss the indictment on jurisdictional grounds has not been controverted:
Jim Guy Tucker, on oath, states as follows:
1.
I am not and have never been a part of the Executive Branch of
the United States Government.
2.
I have examined the indictment in this case. To my certain
knowledge no member of the Executive Branch of the United
States Government participated in any transaction to which the
indictment refers.
3.
To my certain knowledge neither the President of the United
States nor his First Lady have had any connection whatever with
the business matter called, in the indictment, "LMS,"
Cablevision Management, Inc. ("CMI") or any other entity to
which the indictment refers.
Further Alliant sayeth not. Isl Jim Guy Tucker. (See Exhibit B.)
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The Independent Counsel has come forward with no evidence to refute facts recited
in the affidavit- _1:"l_?r
has he alleged a connection of any kind between Governor Tucker and
President Clinton. This is not surprising . The Court takes judicial notice of the fact that
President Clinton and Governor Tucker were political opponents during the years covered
by this indictment.

In 1982, Tucker opposed Clinton in the Democratic primary for

Governor of the State of Arkansas. In 1990, when President Clinton made his last race for
Governor of Arkansas, Tucker threatened to oppose him until virtually the last moment and
then decided to run for Lieutenant Governor. The fact that these two men have been leaders
of opposing factions in the Democratic party in Arkansas is well-known. That they would
have been connected in any type of business venture in the period covered by the indictment
would be highly unlikely, and Tucker's uncontroverted affidavit establishes this.
In fact, in his response to defendant's motions attacking jurisdiction,_ independent
counsel conceded that there is no connection between the facts alleged in the indictment and
the Clintons, McDougal and Capital Management Services, Inc. "Although the facts do not
. . ... ----...
link Defendants to a specific relationship ~ong

CMS, the Clintons, or James B. McDougal, _

the Attorney General reasonably concluded that the LMS [Landowners Management System,
subject of Count III of the indictment] matter was 'related to the independent counsel's
_prosecutorial jurisdiction' under Section 594( e) sufficiently to fall within that jurisdiction."
(Response of the United States to Defendants' Motion to Dismiss Indictment for Lack of
Jurisdiction, p.38.) How can it be said that the Attorney General

reasonably
concluded

that

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there was a connection between the matter in the indictment and the Clintons and McDougal,·
if there was no actual connection? The position of the Independent Counsel is that whether
the Attorney General's conclusion was reasonable or not, such conclusion is not subject to
review by a district court, or by any court for that matter. This issue will be dealt with infra.

II. The Grant of Supplemental Authorization.

The Independent Counsel went back to the Attorney General with the request that the
Attorney General seek authorization under 28 U.S.C. § 594(e) from the Special Division to
investigate matters alleged in Count III of the indictment.

1

_

F?r .some unknown reason, no

request was ever made regarding the allegations contained in Counts I and II of the
indictment. The Attorney General responded to the Independent Counsel by letter dated
September 2, 1994:

,,i
f ,, I

,1 .

• ;- • ~ r
'
I
,: ·

'1'

.,·, ~•

••

\

Il

! .

·!

The Attorney General has received your letter of August 3 I, 1994
requesting that the Department of Justice refer to the Office of
Independent Counsel/Madison Guaranty Bank related matters pursuant
to 28 U.S.C. § 594(e). After reviewing _ro~r._de_s~n.p~ion
of the
information developed in th~ course ofthe investigation conducted by
the Office oflndependent Counsel,_she~as concluded that these matters
are related to your investigation and that referral to your Office would
be appropriate. We therefore refer investigative and prosecutorial
jurisdiction over the following matters to your Office:
( 1)
Whether any person committed any federal crime relating
to the bankruptcy action entitled lo Re: Landowners

1

Section 594(e) deals with referral of "other matters" to an independent counsel.
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ManaeernentSystem. Inc .. Tax Identification No 75-2001914.
Debtor,United States Bankruptcy Court, Northern District of
Texas, Case No. 787-70392 (Chapter 11 ) ... (See Exhibit C.)
TI1e Special Division issued an order of December 19, 1994, and this order provided
in pertinent part as follows:
,Upon consideration of the Application for Order of Referral and Order
of Jurisdiction of Independent Counsel filed under seal, it is
HEREBY ORDERED that investigative
over the following matters be referred
Kenneth W. Starr and to the Office
(hereinafter collectively "the Office") as
U.S.C. § 594(e):

and prosecutorial jurisdiction
to the Independent Counsel
of the Independent Counsel
related matters pursuant to 28

Whether any person committed any federal crime relating to the
bankruptcy action entitled In Re: Landowners Manaeement System,
Inc.. Tax Identification No 75-2001914,Debtor, United States
Bankruptcy Court, Northern District of Texas, Case No. 787-70392
(Chapter 11)... (See Exhibit D'.)
However, this order contained the following limitations after the grant of authority
mentioned above:
IT IS FURTHER ORDERED that, as a result of the referral of the
above-described matters and the jurisdictional grant made by this Court
on August 5, 1994, Kenneth W. Starr has full power, independent
authority, and jurisdiction to investigate to the maximum extent
authorized by the Independent Counsel Authorization Act of 1994
whether any individuals or entities have committed a violation of any
federal criminal law, other than a Class B or C misdemeanor or
infraction, relating in any way to James B. McDougal's, President
William Jefferson Clinton's, or Mrs. Hillary Rodham Clinton's
relationships with Madison Guaranty Savings and Loan Association,
Whitewater Development Corporation, or Capital Management
Services, Inc.
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The Independent Counsel further has jurisdiction and authority to
investigate other allegations or evidence of violation of any federal
criminal law, other than a Class B or C misdemeanor or infraction, by
any person or entity developed during the Independent Counsel's
investigation referred to above and connected with or arising out of that
investigation ... (See Exhibit D.)
Obviously, from the Special Division 's own order, the supplemental investigation was
required to be ''connected with or arising out of that investigation."

"That investigation" is

the investigation of the Clintons and McDougal mentioned in the preceding paragraphs.
In placing such a limitation on the jurisdiction of the independent counsel, the Special
Division may well have had in mind the Supreme Court's interpretation of 28 U.S.C. §
594(e) in

Morrisonv, Olson.:
In our view, this provision does not empower the court to expand the
original scope of the counsel's jurisdiction; that may be done only upon
request of the Attorney General pursuant to § 593(c)(2). At most.

594(e)authorizes
thecourtsimplyto refermattersthatare"relate[d]
to the independentcounsel'sprosecutorialjurisdiction,"as already
defined.
§

487 U.S. 654, 680, n.18 (1988)(Emphasis added).

III. The Power to Review the Attorney General's Referral of the
Matters Contained in Count III to the Independent Counsel.
It is obvious that the matters contained in Count III of the indictment, which the
_Attorney General has referred to the Independent Counsel, are completely unrelated to the
Clintons and McDougal. Even though 28 U.S .C. § 594(e) under which the referral was made
requires that the Attorney General "refer to the independent counsel matters related to the
8

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independent counsel's prosecutorial jurisdiction," the Attorney General and Independent
·
Counsel argue that the referral is not reviewable. It is not reviewable even if completely
·
wrong and without support in the statute or in the order of the Special Division.
I cannot accept the proposition that a citizen can be put on trial in my court for a loss
of his liberty and that no court has the power to determine whether there is jurisdiction
to
proceed in the matter.
The Attorney General argues on page 18 of her brief: "Under the terms of Section
594(e), the process does not even require the involvement of the Special Division."

While

the wording of28 U.S.C. § 594(e) may be susceptible to such an interpretation, the Suprem
e
Court has indicated that referrals under this section are a part of the powers and duties of the
Special Division:
The Act also vests in the Special Division various powers and dl;ltiesin
relation to the independent counsel that, because they do not involve
appointing the counsel or defining his or her jurisdiction, cannot be said
to derive from the Division's Appointments Clause authority. These
duties include . . . referring matters to the counsel upon request,
§ 594(e) ....

Morrisonv, Olson,487 U.S. 654, 680.
But even assuming that the Independent Counsel is correct and that it is not necessary
for the Attorney General to seek approval of the Special Division before referring matters
to
the Independent Counsel, the Attorney General faces the same jurisdictional obstacles as the
Special Division. 28 U.S.C. § 594( e) requires referral only as to "matters related to the

9

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independent counsel's prosecutorial jurisdiction."
Significantly, the Attorney General, through Mr. Keeney, the Acting Assistant
Attorney General, made the following statement in the letter of September 2, I 994, to Mr.
Starr, in regard to the bankruptcy matter:
,

To the extent you determine that aspects of these matters which might
fall technically within the broad scope of your jurisdiction are not
sufficiently related to your mandate to warrant handling by your office,
you may refer those aspects back to the Department of Justice for
handling pursuant to 28 U.S.C. § 597(a).

.

•'-c. .f

I

:

... -

· t ;., • •

Thus, we have clear recognition by the Attorney General that the matters in the
indictment must be "sufficiently related to your mandate."

Not only were the matters

contained in the indictment insufficiently related to the mandate, they were not related at all.
r.J...J...'
, I

In the matter at bar, the Attorney General did not attempt to proceed without the <'{VAt_.µ-1
.

..

:~~

involvement of the Special Division. Even so, there are limits on the scope of prosecutorial / ~~/,.
·,
Vl" ;,---

jurisdiction which the Special Division can confer:

~-

We emphasize, nevertheless, that the Special Division has no authority
to take any action or undertake any duties that are not specifically
authorized by the Act. The gradual expansion of the authority of the
Special Division might in another context be a bureaucratic success
story, but it would be one that would have serious constitutional
ramifications .... [T]he Division's exercise of unauthorized powers
risks the transgression of the constitutional limitations of Article III that
we have just discussed.

Morrisonv, Olson,487 U.S. 654, 684-685 (Emphasis original). In a footnote to the last
sentence, the Court stated: "After all, in order to decide whether to refer a matter to the

10

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counsel, the court must be able to determine whether the matter falls within the scope of the .
original grant. See n.18, mw:.a."
487 U.S. at 685 n.18. (Footnote 18 is quoted in its entirety,
Surely the Independent Counsel and Attorney General do not suggest that there can

supra.)

be no judicial review of prosecutorial jurisdiction of an independent counsel. If this were
so, the Special Division would be virtually the only court in American jurisprudence, save
the Supreme Court of the United States, whose decisions are subject to no judicial review
whatsoever, regardless of whether those decisions are patently contrary to law. Such a
precedent would be both novel and dangerous.
The Independent Counsel finds a nexus to the Clintons and McDougal to satisfy the
above requirements in the fact that, while investigating their relationship to Capital
Management Services, Inc., counsel fortuitously stumbled across the defendants' alleged
violation of the law. (See Response of United States to Defendants' Motions to Dismiss
Indictment for Lackof Jurisdiction. p.36.) In support, the Independent Counsel quotes from
~

·-·· - .,

United States v. Secord,: "To determine that one occurrence is 'related' to another, one need
only show that there is a reasonable causal or logical connection between the two, some
tenable correlation between events." 725 F.Supp. 563, 566 (D.D.C. 1989). The relation
between the indictment herein and McDougal or the Clintons falls far short of this test.
The facts demonstrating the alleged relationship are stated by the Independent
Counsel as follows: "Infonnation that Defendant Tucker may have asserted a claim as a
creditor in a fraudulent bankruptcy filed by Landowners Management Systems, Inc., was first
ll

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1

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provided to Independent Counsel Fiske by a witness in the investigation of Capital ·
Management Services, Inc. Additional investigation determined that an allegedly fraudulent ·
loan from Capital Management Services was used as collateral to finance the purchase of
cable television interests .... " (See Response of United States, supra, p. 37.)
This argument is without merit because the "original jurisdiction order" only deals
with Capital Management Services, Inc. in the following context: " ...

whether any

individuals or entities have committed a violation of federal criminal law ... relating in any
way to James B. McDougal's, President William Jefferson Clinton's, or Mrs. Hillary
Rodham Clinton's relationships with Madison Guaranty Savings and Loan Association,
Whitewater Development Corporation, or Capital Management Services, Inc." (See Exhibit
A, order of Special Division, dated August 5, 1994.)
The original grant thus was only in reference to the Clintons' and McDougal's
relationship to Capital Management Services, Inc., not to anyone else's relation to this entity.
For another individual or entity to be related, such individual or entity would necessarily
have to be involved in the Clintons' or McDougal's relationship to Capital Management
Services, Inc.
The Independent Counsel goes on to say: "These facts show that the matters under
. indictment are related to the subject matter of the Independent Counsel's investigation."
These facts show nothing of the kind, which Independent Counsel concedes in the next
sentence: "Although the facts do not link Defendants to a specific relationship among CMS,
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the Clintons or James 8. McDougal. . . ."
In a footnote on page 38 of his brief on jurisdiction, the Independent Counsel argues
that there is a relation in the fact that Capital Management Services, Inc. is one of the entities
listed in the grant of original jurisdiction and the Count III allegations were discovered
during the investigation of this entity. As stated above, the record is devoid of evidence
of
fill):'.

relationship or connection between the Clintons and McDougal and any of the matters

alleged in the indictment.
Admittedly, certain actions of the Attorney General are not subject to review. The
decision to refer or not to refer a matter to the Independent Counsel is not subject to review.
Whether to investigate a person and whether to require appointment of an independent
counsel is not subject to review. The cases cited on this issue are not on point and are thus
not persuasive. Dellumsy Smith,797 F. 2d 817 (9th Cir. 1986) involved a suit by a membe
r
of Congress and two private citizens over the Attorney General's failure to conduct
a
preliminary investigation of a particular allegation. The Ninth Circuit held that, "failure
to
discharge these duties is not subject to federal court challenge by private citizens."
In

Banzhafy,Smith,737 F. 2d 1167, 1170 (D.C. Cir. 1984), the question was whether refusal
to conduct a preliminary investigation is reviewable.
All of these situations are a far cry from the question of whether the trial court has
jurisdiction -- whether the Attorney General and the Special Division completely exceede
d
their authority in referring a non-related matter to the Independent Counsel. In at least one
13

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instance, the action of the Attorney General in referring a matter to the independent counsel
was reviewed by the Special Division. The Special Division found that the matter had been
improperly referred by the Attorney General because of lack of prosecutorial jurisdiction.
See,

In Re: Meese,907

F. 2d 1192, 1199-1201 (D.C. Cir. 1990). The

MeeseOpinion

includes a quote from the Application to Define Jurisdiction of Independent Counsel made
by James C. McKay, independent counsel in that case:

It does not appear [under the Act], however, that the Acting
Attorney General has the power to define the prosecutorial
jurisdiction of an independent counsel, See 28 U.S.C. § 593(c).
That power is vested only in this court, which has not
formalized a definition of Independent Counsel McKay's
prosecutorial jurisdiction in the Meese matter.
Application to Define Jurisdiction of Independent Counsel, In re
Nofziger/Meese, Div. No. 87-1 (Aug. 6, 1987) ....

Meese907
, F.2d at

1200-01 (Emphasis original). This comports with the plain meaning of

the statute, as examined and noted earlier in this opinion.

IV. Conclusion.

The Independent Counsel, in his brief at page 29, asks: What is the harm if the
. Independent Counsel handles this investigation rather than the Attorney General? What
difference does it make? It makes a great deal of difference if the statute and the Suprem
e
Court plainly state that only matters related to the Independent Counsel's original
14

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prosecutorial jurisdiction are to be handled by him. In the first place, criminal statutes and
criminal procedures must be faithfully followed. To gloss over and shortcut the requirements
of criminal statutes is the first step toward tyranny. If the statute says that the Independent
Counsel should not make the decision to prosecute in an unrelated matter, but that this
decision shall be made by the Attorney General, it makes a great deal of difference.
Few would disagree with Justice Scalia's statement in his dissent in

Morrisonv.

Olson,supra, at 708 that: " ... the balancing of various legal, practical and political
considerations, none of which is absolute, is the very essence of prosecutorial discretion."
The vast power and immense discretion the Independent Counsel seeks to wield in this case
must find its genesis in the statute or in the courts' interpretation of the statute. I do not find
it here.
The words of Justice Robert Jackson, in an address, The Federal Prosecutor,
delivered at the Second Annual Conference of United States Attorneys April l, 1940, were
quoted by Justice Scalia in his dissent in Morrison
v. Olson,supra, at 728. These words bear
repeating here:
What every prosecutor is practically required to do is to select the cases
for prosecution and to select those in which the offense is the most
flagrant, the public harm the greatest, and the proof the most certain.

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If the prosecutor is obliged to choose his case, it follows that he can
choose his defendants. Therein is the most dangerous power of the
prosecutor; that he will pick people that he thinks he should get, rather
than cases that need to be prosecuted. With the law books filled with
a great assortment of crimes, a prosecutor stands a fair chance of
finding at least a technical violation of some act on the part of almost
anyone. In such a case, it is not a question of discovering the
commission of a crime and then looking for the man who has
committed it, it is a question of picking the man and then searching the
law books, or putting investigators to work, to pin some offense on him.
It is in this realm -- in which the prosecutor picks some person whom
he dislikes or desires to embarrass, or selects some group of unpopular
persons and then looks for an offense, that the greatest danger of abuse
of prosecuting power lies. It is here that law enforcement becomes
personal, and the real crime becomes that of being unpopular with the
predominant or governing group, being attached to the wrong political
views, or being personally obnoxious to or in the way of the prosecutor
himself ...
It is certainly true that the United States Attorney or the Attorney General may find

in their discretion that these defendants have violated the law and that they should be indicted
and prosecuted.

However, such discretion is theirs to exercise.

It is not granted to an

independent counsel under the statutes or decisions of our courts in this particular matter.
While the Supreme Court has upheld the constitutionality of the Ethics in Government
Act, Morrison v, Olson, supra, cannot

beread

without drawing the conclusion that the

Supreme Court meant that the authority and jurisdiction of an independent counsel should
be confined to a narrow channel and not be expanded beyond the explicit wording of the
statute. A thoughtful commentator has pointed out that:
. . . congressional committee requests for independent counsel
investigations of particular named executive officials bear a frightening
16

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resemblance to Bills of Attainder. Bills of Attainder, however,
traditionally required at least the approval of the entire legislature (like
all other "legislation"). In contrast, independent counsel requests may
be triggered by just a few members of Congress serving on a particular
committee with an axe to grind. See 28 U.S.C. § 592(g)(l) ( 1988).
Once a partisan request for the appointment of an independent counsel
has been made, the Attorney Genual and the Special Division which
oversees such investigations may find it very difficult to avoid
appointing a counsel just to clear up the "impressions" that were
created by the request having been made. And once a counsel is
appointed, the pressures to prosecute or to force a plea bargain (as
happened with Michael Deaver and Webster Hubbell) are not
insignificant. Accordingly, the EIGA independent counsel system is
not as far removed from the traditionally hated and unconstitutional Bill
of Attainder as many may think.
S.G.Calabresi, "Some Normative Arguments for the Unitary Executive," 48
Ark.L.Rev.,
p.93, n.164. (This statement is attributed to Walter Dellinger, III.)
Since its original enactment, the Independent Counsel Act has been used extensi
vely,
some would say, including Justice Scalia, that it has been abused. The Arkansas
law Review
article, cited supra, at n.163, points out its wide use:
During the two years of the Carter Administration that the Ethics in
Government Act was in effect, two Independent Counsels were
appointed: Arthur Christy investigated White House Chief of Staff
Hamilton Jordan and Gerald -Gallinghouse investigated White House
staffer Timothy Kraft. During the eight years of the Reagan
Administration, seven Independent Counsels were appointed: Leon
Silverman investigated Secretary of Labor Raymond Donovan; Jacob
Stein investigated White House Counselor Edwin Meese III; Alexia
Morrison investigated Assistant Attorney General Theodore Olson;
Whitney North Seymour investigated White House aide Michael
Deaver; Laurence Walsh investigated a number of officials for their
involvement in Iran-Contra; James McKay investigated LynnNofziger,
Attorney General Edwin Meese III, and others; and former Judge Arlin
17

AMi-=nlCAN

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 •.

,.''

'

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 77

Adams investigated HUD Secretary Samuel Pierce, Jr. During the
three years and 11 months of the Bush Administration that the statute
~ in effect, one additional Independent Counsel was appointed:
Joseph DeGenova investigated Secretary of State James Baker and
other State Department aides involved in the illegal search of Bill
Clinton's passport file. Independent Counsels Laurence Walsh and
Arlin Adams continued their investigations throughout this period.
During the first two months of the Clinton Administration that the
statute has been back in effect, Attorney General Janet Reno has sought
the appointment of two Independent Counsel: the first request
concerned the Whitewater Investigation and led to the appointment of
Kenneth Starr to replace Robert Fiske; the second request concerned
Agriculture Secretary Mike Espy and led to the appointment of Donald
Smaltz.
During the Clinton Administration, citizens of the State of Arkansas have undergone
wide-ranging investigations by two independent counsel. Some of these, on the surface at
least, would seem to have dubious connection with the original or supplemental grant of
prosecutorial jurisdiction.
The history of independent counsel investigations is not reassuring to this Court.
Perhaps the most questionable example was the indictment of Defense Secretary Weinberger
in the Iran-Contra investigation by an independent counsel. Weinberger was one of two
cabinet officials who opposed the Reagan-Administration's involvement in the Iran-Contra
affair. Yet, he was the only cabinet official who suffered an indictment.
While Justice Scalia's dissent did not carry the day in Morrisonv,

Olson,supra, he

made some highly pertinent observations about the officials having supervision over the
independent counsel. He or she is responsible to no elected officials, but only to a panel of

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three appointed members of the Federal Judiciary.
As J~Scalia

points out the highly successful Teapot Dome and Watergate

investigations were carried out by independent counsel named by the Attorney General
.
Elected members of the Executive Department were ultimately responsible to the electora
te
for the manner in which these investigations were carried out. Not so with the independent
counsel under the current statute. "It seems to me not conducive to fairness. But even if
it
were entirely evident that unfairness was in fact the result - the judges hostile to the
administration, the independent counsel an old foe of the President, the staff refugees from
the recently defeated administration - there would be no one accountable lo the public
to
whom the blame could be assigned."

(Morrison
v. Olsonsupra,
,
at 731, Scalia, J., dissenting)

(Emphasis original.)
I am not suggesting that there has been unfairness in the case at bar on the part of the
Independent Counsel or the Special Division. I do believe, as does Justice Scalia, that the
potential is present in the Independent Counsel Act. I have no idea what the proof will
be
on this indictment. I am firmly convinced, along with the majority in Morrison
v.

Olson,

supra, that the prosecutorial jurisdiction of the Independent Counsel must be strictly
contained within its statutory bounds.
There are, undoubtedly, situations that may justifiably call for the appointment of
independent counsel. At any rate, Congress has made such a determination. The wisdom
of this statute is not for me to decide. This does not mean that the judiciary is not the proper
19

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department of our government to delineate the bounds of the statute's prosccu
jurisdiction.~

at least empowered initially lo make this determination.

If we are to

remain a government of laws and not of men, it must ever be so. 2
It is evident from this opinion that I am convinced that the Independent Counsel had
.__

no jurisdiction to present the matters contained in this indictment to the gra~d jury~. In my
view, this jurisdiction was vested in the Attorney General or the United States Attorney for
the Eastern District of Arkansas.

It was within their sole jurisdiction to exercise their

discretion as to whether the indictment should be obtained in this matter.

It, therefore, follows that this indictment must be quashed as to all defendants .
Parenthetically, I add that I deal with an important issue in this case. Fortunately, all my
decisions are subject to higher review.
I will do everything in my power to have an expeditious appeal of this decision to the
Court of Appeals and to the Supreme Court. In this endeavor, I can pledge the support of my
clerk and court reporter. The defendants have stated that they seek a quick disposition of this
matter. I am sure the government joins in these sentiments. I can assure all concerned that

I am also anxious for a quick resolution .
It would be foolish to put these parties to an extensive and expensive trial when there
. exists a serious, and in my view, fatal defect of jurisdiction.

Lack of jurisdiction can be

2

I had never realized until reading Justice Scalia's opinion in Morrison
v, Olson,supra,
that the origin of this principle is to be found in the Massachusetts Constitution of 1780. [487
U.S. at 697.]
20

AMl HICAN

VERSIGHT

18-1621-000080

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 80

successfully raised at any point in litigation. How patently unfair would it be
after the stress .
and expensc~ng

trial to have a determination made at a later stage of the proceedings ·

that there w~ no jurisdiction in the first place?

An order will be entered in confonnity with this opinion quashing this indictment
in
its entirety ~ to the three defendants. All other motions except those relating
to jurisdiction
are rendered moot.
DATED this

L;2fl_

day of September, 1995.

21

AMi-=nlCAN

pVERSIGHT

18-1621-000081

 F01/id1i/4/i:3o<idocld:

EXHIBIT

70104908 Page 81

Unite~s a es_ urtot/W.Qeal
for ttie Districtof Colomoia
Clrcoit

~

fltED~~~

UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Division
Appointing
Ethics
In re:

Madison
Savings

O 5 l9S4

RO.N~N

for the Purpose
of
Independent
Counsels

in Government

Act

of

1978,

Guaranty
& Loan Association

As Amended

Division

No. 94-1

Order Appointing
Independent
counsel
Before:
Judges.

Presiding,

SENTELLE,

and

BUTZNER and

Senior

SNEED,

Circuit

-✓-

,,.·· Upon consideration
pursuant

to

28

independent

u.s.c.

counsel

authority

and

investigate
of

misdemeanor

federal
or

Mcoougal's,

set

William

Rodham Clinton's

relationships

Loan Association,

Whitewater

in

Court

by 28 U.S.C.

S 59J(b)

it

Esquire,
Kickland
be and

o

c

the

and Ellis,
he

is

or

of

all

in

Jefferson

Clinton's,

than
any

Madison

the
S

have

r~lating

power,
594,

to

committed

a Class
way

an

to

or

B

or

B.

Hillary

Savings

corporation,

C

James

or Mrs.

Guaranty

a

and

Capital

is
with

Kenneth

that

of Colwrbia

655-lSth

Stceet,

and

appointment

entities

other

in accordance

appointed

General

u.s.c.

28

law,

District

h eLeby

Attorney

exercise

Development
it

the

in

with

Inc.;

ORDEREDby the

of the
for

to

individuals

infraction,

Services,

(A)

forth

criminal

President

·Management

(1)

authority

obligations
any

application

592(c)

§

with

whether

violation

of the

juLisdiction

authority

vested

W. Starr

bar,

NW, Washington,

Independent

the

with

offices

at

full

poweL,

DC, 20005

Counsel

with

to _ i.nvestiqat.e

18-1621-000082

to

the

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page
82

-,., ;::z=

maximum

~~ent

authorized

Reauthorization
have

Act

committed

a Class
James

of

a violation

B or

Rod.ham
&

Capital

Management

· federal
infraction,

by

Independent
with

or

any

The Independent
to

investigate

obstruction
false
in

testimony
connection

the

that

or

shall

any

than

any way to
or Mrs.

Madison

Guaranty

Corporation,

jurisdiction

evidence

or

and authority

of

violation

a Class

B or

entity

developed

have
of

of

any

c misdemeanor

or

during

to above

the

and connected

jurisdiction

and authority

u.s.c.

28

administration

or statement
with

in

Clinton's,

with

referred

violation

due

other

investigation./

counsel

any
of

than

person

of

Jefferson

have

investigation

out

relating

Development

or

other

counsel's

arising

shall

allegations

law,

law,

entities

Inc.

Counsel

criminal

or

criminal

infraction,

Whitewater

Counsel

individuals

f·ederal

William

Services,

other

Independent

relationships

Loan Association,

investigate

any

President

The Independent
to

whether

or

Clinton's

Savings

the

of any

C misdemeanor

B. McOougal's,

Hillary

1994

by

of

justice,

iri violation

of

investigation

S

of

or

any

or any material

federal
the

1826,

criminal

matters

law,

described

above.
The Independent
to

seek

Counsel

indictments

and

involved

in any of the

believed

to have
out

engaged

in an unlawful

of such

to

matters,

have

jurisdiction

prosecute

matters

committed

arising

shall

any

described

a violation
including

conspiracy

above,
of

any

persons

or who have
2

and authority

persons

or

who are
federal

reasonably

criminal

or entities
aided

entities

law

who have

or abetted

any

18-1621-000083

 FOIA RD 56806 (URTS 16302) Docld:
70104908 Page 83

~

federal

i"':zSL

o{re~e.
The

Independent

authority

provided

of

It

1994.

Counsel
by the

by

jurisdiction

to fully
to

subject

and

matter,

federal

misdemeanors

Fiske,

Jr.,

appointed

be
would

Court

the

to

the

reaches

apparent

not

that

as

well

as

an

part

Counsel,

of
or

because

the

reflected,

"(t]he

intent

of

special
of

of

other

the

accompanying

I

determined

any

on

integrity

has

Court

independence

Report

the

the

justice,

Robert

the

actual

prosecutor
Attorney

above

that

purposes

Act

c

The court,

investigation.

Senate

impugn

of

General

the

that

B or
the

of witnesses.

As the

to

to

and prosecute

obstruction

Counsel.

not

related

of

the

the

and

forth,

out

independence

conclusion

set

may

with

of

the

Class

arise

matter

requested

as

Independent

conclusion

subject

classified

Attorney

on the

actual

as

may be

perjury,

of the

the

to investigate

those

be consistent

this

acts

as

prosecutorial

as hereinbefore

of authority

no conclusion

either

necessary

Act

Counsel,

have

General

and intimidation

the·motion

reflects

and

Reauthorization

shall

whose

including

reviewed

This

counsel,

infractions)

of evidence,

this

powers

Independent

Attorney

than

having

lacks

I

(other

matter,

that

the

and prosecute

the

inclusive

or

destruction

A(

which

the

594,

investigate

individuals

crimes

described

Counsel

that

§

of independent

matters

Court

u.s.c.

28

respect

all

all

is

authorized

appointment

have

Independent

FURTHERORDEREDby the

with

shall

the

that

B.

Act.
Fiske

attribute
Rather,

the

contemplates

an

the

part

1982

of

enactments

provisions
General

the

or

is
the

'-J

pVERSIGHT

)

18-1621-000084

 FOIA RD 56806 (URTS 16302} Doc
ld: 70104908 Page 84

Department

of

against
reflecting

conflicts."

added).

integrity

reflect

the

not

on
496,

the

Act

is

that

with

who are
2d Sess.

not

our

actor

further

appearing

to

General's

motion

heretofore

disclosure

of her

application

U.s.c.

S 592{e)

in this

matter,

identity

the

it

in the

in

made ' for

the

for

and of the

ongQing

that

in the

it

and prosecutorial

is

this

best

jurisdiction

to

against
incumbent
interest

Act

that

a

administration

light

of

of the

be·

Attorney
of

pursuant

proceedings

interests

the

authorization

appointment

public

impugn

rather

best

by the

incumbent

court

but

to

6 (1982)
to

by the

appointed.
It

at

be protected

contemplated
the

subject

intent

was appointed
deems

justice,

of interest

appointee,

the

therefore

of

conflicts

Cong.,

General's

independence

affiliated

system

parties

It

As Fiske

Court
of

the

97th

Attorney

of

the

appearance

person

our

or perceived

so here.

of conflict.

administration,
of

the

intent

perceptions

No.

Just

of

the

actual

adversely

s. Rep.

(emphasis
the

Throughout

~

safeguards~
without

Justice.

the
to

28

and interest

of justice
Independent

to be disclosed,

for

the

Counsel

IT IS SO ORDERED.

Ron Garvin,

AMLf\lCAN

pVERSlGH

T

Clerk

4

18-1621-000085

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 85
STATE

OF ARKANSASl

0._J;rJ
1frfl

§§

COUNTYOF PU~~KI)

AFFIDAVIT OF JIM GUY TUCKER

Jim Guy Tucker,
1.

I am not

Branch

of the

2.

United
which

States
the

J.

United
whatever

to which

the

Further

of the

in this

Executive

participated

First

business

Executive

case.

Branch

To my
of the

in any transaction

to

neither

the

President

of the

Lady have had any connection
matter

Manag~ment,

indictment

Affiant

indictment

knowledge

nor his

"LMS", Cablevision

a part

refers.

To my certain

the

been

no member of the

indictment

with

as follows:

Government.

the

Government

States

never

States

examined

knowledge

states

and have

United

I have

certain

on oath,

called,

,Inc.

in the

("CMI"}

indictment,

or any other

entity

refers.

sayeth

LL-

not"LC

_J.:::;.i_m-1r-G_u_y_T.;;;;.u_c_k_e_r_7-+-----------

July,

SUBSCRIBED AND SWORNto me before
1995.

AMrfllCJ\N

VERSIGHT

this

the

7f~

day of

18-1621-000086

 FOIA RD 56806 (URTS 16302) Doold,Jr0i1G4i908

Er/4//c
Offi.:c of the An1sun1 Auorncy CcncrJI

Criminal

Dear
/

I

Division

GOVERNMENT
EXHIBIT
2

Uushington, VC. 105JO

september

Mr . Kenneth W. Starr
Two Financial
Centre
10825 Financial
Centre
Suite
1J4
Little
Rock, _Arkansas

.Paggs~Pc

2, 1994

Parkway
72211

Mr. Starr:

The Attorney
General
has received
your letter
of August Jl,
1994 requesting
that
the Department
of Justice
refer
to the
Office
of Independent
counsel/Madison
Guaranty
Bank
related
matters
pursuant
to 28 u.s.c.
§ 594(e).
After
reviewing
your
description
of the information
developed
in the the course
of the
investigation
conducted
by the~ffice
of Independent
counse
l,
she
has concluded
that
these
matters
are related
to your
investigation
and that
referral
to your Office
would be
appropriate.
We therefore
refer
investigative
and prosecutorial
jurisdiction
over the following
matters
to your Office:
(1)
Whether
any person
committed
any federal
crime relating
to the bankruptcy
action
entitled
In Re:
Landowners
Management
System,
Inc.,
Tax Identification
No 75-2001914,
Debto
r,
United
States
Bankruptcy
court,
Northern
District
of Texas,
Case
No.
787-70392
(Chapter
11); and
REDACT

. REDACT

REDACT

Your jurisdiction
affords
you necessary
flexibility
in
structuring
your investigation.
~o the extent
you
determ
ine
that
aspects
of these
matters
which might fall
technically
within
the
broad scope of your jurisdiction
are not sufficiently
related
to
your mandate
to warrant
handling
by your office,
you
may
refer
those
aspects
back to the Department
of Justice
for handling
pursuant
to 28 U.S.C . §597(a).
Should
you wish at any time to consult
with the Department
of Justice
concerning
Departmental
policies
with respect
to these
criminal
tax or other
matters,
28 u.s.c.
§ 594(f) (1),
I
invite
you to contact
Lee J. Radek,
Chief,
or Jo Ann Farrington,
Deputy
Chief,
Public
Integrity
Section,
Criminal
Division,
who
will
put
you in touch with the appropriate
Departmental
officials.
They
can be r-eached at (202) 514-1412 .

AMrfllCJ\N

VERSIGHT

18-1621-000087

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 87
To complete
our files,
I would
appLeciate
your
pLoviding
ML. Radek with
a copy of your
notification
to the Special
Division
of the ·court
of this
referral.
28 u.s.c.
§ 594{e).
Please
let
me know if I can be of any further
assistance
to
in the course
of your
investigation.
g§j
I

Sincerely,

J hn c. Keeny
cting
Assistant
criminal
Division

AMi-=nlCAN

pVERSIGHT

you

ttorney

General

18-1621-000088

 pf,,c7)l:
C4,9o3 Page 88

FOIA RD 56806 (URT~09)

GOVERNMEN
EXHIBIT
]

ll.nlle4~ Coort~~~-

filD~ CXstr1d
9(~ ~

UN I TED STATES
~ THE DISTRICT

Division
Appointing
Ethics

In re:

COURT OF APPEALS
OF COLUMBIA
CIRCUmE

of the Purpose
of
Independent
Counsels

in Government

Madison
Savings

oEc, 9

D

Act

of

1978,

RON..GAffil.lN
CCER~

As 1\rt\e~ded

Guaranty
& Loan Association

1994

Division

No.

UNDER

94-1

SEAL

ORDER

Upon
and
it

Order

consideration
of

of

Jurisdiction

the
of

Application

Independent

for

Order

Counsel

filed

of

Referral

under

seal,

is

HEREBY ORDERED that
jurisdiction

over

Independent

Counsel

Independent

Counsel

related

matters

the

investigative

following

Kenneth

matters

W.

Starr

(hereinafter

pursuant

to

28 U.S.C.

REDACT

-

pVERSIGH

to

J.

prosecutorial

referred
the

"the

Off ice

to

the

of

the

Office")

a_L

§ 594(e):

REDACT

REDACT

T

and

be

collectively

REDACT

AMLf\lCAN

and

REDACT

REDACT

-

18-1621-000089

 FOIA RD 56806 (URTS 16302) Docld: 70104908
Page 89
REDACT

REDACT

~~het.her
re]at.ing

to

Management
Debtor~

any

the

bankruptcy

Systems;
United

Texas ·, Cas~

commic.t.ed

act.ion

Inc.,

States

No.

person

REDACT

Tax

entitled

Court;

(Chapter

REDACT

federal

In

Identification

Bankrup;cy

787-70392

any

re:

No.
Northern

11);

-

75-2001914,

REDACT

REDACT

, REDACT

REDACT

of

.,.,.

REDACT

REDACT

Landowners

District

REDACT

REDACT

crime

REDACT

REDACT

REDACT

\

IT

the

this

rs

FURTHER ORDERED,

above-described
Court

on

independent.

maximum

matters
August

authority,
extent

5,

that,
and

1994,
and

pVERSIGHT

the

a result

by

2

the

to

the

referral

g~ant

W. Starr

jurisdict.ion

aut.horiz.ed

of

jurisdictional

Kenneth

-

AME.HICAN

as

has

investigate

Independent

full

of

made

by

power,
t.o

the

Counsel

-

18-1621-000090

 FOIA RD 56806 (URT
S 16302) Docld: 7010
4908 Page 90
Reautho~ization_Ac~
of 1994 whether
any
individuals
or entities
have commicced
a violation
of any federal
criminal
law, other
a Class
than
B or~sdemeanor
or infraction,
relacing
io any way to
James B. McDouga
l'
s, President
William
Jefferson
Clinton'3,
.or Mrs .
Hillary
Rodham
Clinton's
relationships
~ich
Madison
Guaranty
Savings
& ·Loan Association,
Whitewater
Development:
Corporation,
Capital
or
Management
Services,
Inc.

The Independent.
co

investigate

federal

other

criminal

inf race

ion,

limited

any

Counsel's

or

arising

further

allegations

law,

by

Independent
with

Counsel

has jurisdiction
or

other

than

person

or

investigation

out

of

evidence
B

entity

developed

investigation,

co:

REDACT

Management

any

person

bankruptcy

Systems.

accion

Inc .. Tax
-

AMEJ~ICAN
GHT

VERSI

committed

)

entitled

Identification

any

or

during

above

the

and connected

includ:ing,

but

not

REDACT

REDACT

REDACT

Whether
the

of

C misdemeanor

REDACT

REDACT

to

to

or

REDACT

REDACT

. relating

of.violation

a Class

ref erred

that

and authority

REDACT
any _ federal
In

crime

re:

Landowners

No.

7S-2001914,

-

18-1621-000091

 FOIA RD 56806 (URTS
16302) Docld: 701049
08 Page 91

Debtor.

U_nited

Texas,

CaGe

St.aces

No.

Bankrupc.cy

787-70392

Court,

(Chapter

REDACT

Norc.hern

District

REDACT

REDACT

REDACT

REDACT

REDACT

of

11);

REDACT

REDACT
REDACT

REDACT

The

Independent

investigate

of

the

any
due

testimony
connection

of

the

and

matters

of

in

to

prosecute

described

including

o~

of

any

f.ederal

persons

or

pVERSI

'1

or

authority

any

any

material

federal

criminal

the

matters

described

and

authorit.y

or entities

involved

reasonably
criminal

entities

to

obstruction

of

jurisdiction

who are

-

AME.n1cANGHT

or

any persons
above,

and

§ l.826,

justice,

violation

has

REDACT

jurisdiction

CJ_s.c.

28

of

Counsel

a violation

matters,

has

any investigation

Independent

committed

such

violation

statement

with

indictment

Counsel

administration

or

The

REDACT

believed
law

who have

arising
engaged

false
law,

in

above.
to seek
in any
to

have

out

ot

in an

-

18-1621-000092

 u;,lawful

offense.
The

I~ndent.

provid~d

by

The

subject

appointment

of
than

those

disclose,

of

referred

c.o

portions

of
(1)

redacced

this

A

a

copy

~ham

persons

Order
to
of

Class
of

of

the

justice,

that
who

Independenc

person

from
co

c.hose

the

and

out:

.ORDERED,

are

this

pages
disclosure

l

Order

chrough
is

is

from
4

made;

and

t.hat:

described

all

those

and

matter,

federal

above

permitted

requested

subjec1::

C

crimes

misdemeano

rs

or

matter,

of evidence
,

Counsel
of

their

the

matters

B or

subjects

which

except:

all

prosecute

and

co such

whom disclo
s1:1re

and

subject

§ S94, -~as

General

Independenc

the

authority

prosecute

destruction

the

Counsel

rclacing

Attorney

federal

Act-=-of.. 1
994.

and

to

witnesses.

FURTHER
to

the

related

as

and

by 28 U.S
.C.

investigate

investigate

arise

powers

on

counsel,

be

obstruction

intimidation
IS

to

may

perjury,

IT

may

any

Reauthorizati

to which

classi.fied

that

including

receive

acts

abet:t.ed

r.he

auth~rized

independent

authority

infractions)

person

of

as

or

all

t:o fully

respect

whose

inclusive

and

Counsel,

with

aided

Counsel

jurisdiction

individuals

have

has

Independent

Independent

matter

(other

who

Counsel

t.he

prosecutorial

the

06 'URTS 1
104908 Pag
6302) oocld
e 92
: 70
'
or

i:

568
\A
cohspQ
1.racyRD

c.he

matters

counsel,
provided

may

those
that:

c.o be mad
e

shall

matters

will

pertaining

to

be
the

- s -

18-1621-000093

 FOIA RD 56806 (URTS
16302) Docld: 701049
08 Page 93
Each
recipient
of
the
redacted
Order
shall
sign
of
Acknowledgement.
and
Consent:
in
the
form
-~
attached

(2)
Statement.

hereto.

IT
Dated:

Pee

Cuciam

for

t:he

Ron

Gacvin,

a

CoL:rt:

IS SO ORDER.ED.

~JOj~~'------'=:;..._19 -'94
/9'-

--,

-

AME.n1cANGHT

pVERSI

6

Cleek

-

18-1621-000094

 '-

.
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 94

F'

-

. ·:; ·

IN THE UNITED STATES DISTRICT C60RT . ' ';- J°;, ,>i .·•:·:,:.:~-;As
EASTERN DISTRICT OF ARKANSAS - . ;-, , .-· .·,;·
WESTERN DIVISION
'·'•-•. c. __
, 1~,~.)
I

UNITED STATES OF AMERICA
Plaintiff

v.
JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

)
)
)
)
.)
)
)

• .

· •-•-·•·--

...... , .. .

LR-CR-95-173

)
)

ORAL ARGUMENTREQUESTED

MOTION OF DEFENDANT TUCKER TO DISMISS

INDICTMENT

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
( 3 1:2..) 3 7 2 - 7 813

James J. Lessmeister
- AR #94038
ARNOLD, GROBMYER & HALEY
124 W. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171
ATTORNEYS FOR JIM GUY TUCKER

AM HICAN

pVERSIGHT

18-1621-000095

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 95

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA,

)
)
)

Plaintiff,

)
)
)

v.
JAMES B. MCDOUGAL,JIM GUY
TUCKER, and SUSAN MCDOUGAL,

No.

LR-CR-95-173

)

)
)
)

Defendants.

MOTION OF DEFENDANT TUCKER TO DISMISS

Comes

Jim

Guy Tucker,

Dismiss

the

Indictment

Counsel

and,

in

Federal

Rules

Amendment

V to

for

the

of

by

Constitution

The Independent

"Act")

begins

applies:

it

with

USC 591(b).
the

Those

President,

cabinet

level,

Commissioner
the

President's
2.

covered
Division
is

a panel

Counsel

Vice

President,

Director

to

appoint
of three

the

of
Grand

United

to

Independent

Rule
Jury

States

6 of

the

clause

of

states:

those

591,

persons

covered
by the

persons"
offices

certain

the

whom the

Act

listed
they

high

Central

and the

to

et seq,

in 28

hold,

officials

of

Intelligence,

chairman

are

the

and treasurer

of

campaign.

provides

that,

Attorney

upon

General

an independent
judges

the

motion

in

(28 USC Sec.

of

Revenue,
recent

The Act also
person",

of

defined

most

the

Act

persons,

of Internal

violations

his

LACK OF JURISDICTION

"certain

the

for

and

to those

the

for

jurisdiction

of

a definition

applies

and

of

Procedure

PART I:
1.

lack

alternative,

Criminal

the

counsel,

INDICTMENT

appointed

investigating

may

counsel.
for

the

petition

a "certain
the

The Special
sole

purpose

Special
Division
of acting

AMl HICAN

VERSIGHT

18-1621-000096

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 96

under

the

counsel,

Act.

and must

3.

The

resulting
Act

4.

Morrison

Executive

(Affidavit,

to

v.

under

Olson,

Ex.

Independent

the

Division,
powers

and

granted

the

Act.

its

constitutionality

in this

of

independent
(28 USC §593)

those

487 US 654

Defendants

select

Special

only

preserve

branch

Tucker,

5.

have

then

jurisdiction.

the

duties

so as

None of the

the

General,

their

must

or her

counsel

construed
form).

Division"
his

Attorney

performing

narrowly

of

define

independent

in

prior

The "Special

The Act

the

by the
has

been
(in

a

(1988).

case

have

United

ever

States

been

part

Government.

1).
Counsel

was

appointed

under

the

Act

to

investigate;
"Whether
any individuals
or entities
have committed
a
violation
of any federal
criminal
law ... relating
in any
way to James
B. McDougal's,
President
•.. Clinton's
or
Mrs .... Clinton's
relationship
with Madison Guaranty ... ,
Whitewater
Development
Corp.,
or Capital
Management
Services,
Inc."
6.
is

the

This
only

5.

that

press

is
The

demonstrate
alleged

Independent

or
in

the

person"

mentioned

factual
even

indictment

Department

of

the

United

Indictment

to

the

President.

in

of

and

the

relation

any

No allegation

in

2) .

the
That

Counsel.
do

between
of

No reference

States.

case

Indictment

official

quoted

as to the

(Ex.

on Independent

any

order

this

indictment.

allegations
indicate

The President

in the

involved

this

binding

President.

made an announcement

wa~ -not

announced

factually

the

involve

Counsel

Clinton

that

announcement

not

covered

President

release

7.

does

"certain

in paragraph
fact

case

the
is

is

the

matters
Executive

made

made

not

as

in

the

to

any

2

AMl HICAN

VERSIGHT

18-1621-000097

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 97

connection
and

or concert

the

Independent

indictment,

to

does

not

"certain

the

covered

Defendant
II,

upon

return

of

any

filed

a

principle

the

with

the

jurisdictional

between
in

Act,

in

the

Clause

2,

is
of

this

Sec.

case

and

59l(a)

and

scope

of the

and

of

the

with

the

set

of

of

the

forth

and
this

Constitution,

President's
of

as

the

limitations

violation

powers,

rights

Act

Article

authority

constitutional

in

the

memorandum

motion.
the

Memorandum

do respectfully

has

constitutional

interferes

and

WHEREFORE, for
in

Starr
That

beyond

the

clause

separation

this

defined

Appointments

prosecution

of

as

the

Clinton.

2,

II

Mr.

any connection

violates

Section

Article

and

any event

case.

of cases

Order

and such

filed

or

required,

this

person"
Mr.

under

Article

under

in

The prosecution

Whitewater

III,

any defendant

authority.

demonstrate

especially

9.

is

his

statement

statement

and

Counsel

publish

jurisdictional

(b),

between

President.

8.

any

of action

pray

reasons
which

that

stated

we file
the

in this
in

part

support

Indictment

of this

of

this

be dismissed

motion,

motion,
for

want

we
of

jurisdiction.
PART II:

FOR PREJUDICIAL INTERFERENCE WITH THE GRAND JURY

(In

9.

Independent

Grand

Jury

before

this

in

this

here.
Grand

Mr.
Jury

the

alternative

Counsel

did,

Starr,

and

so as to

to
upon
his

cause

part

his

appointment,

deputies,
the

I)

return

brought
of

the

convene

a

evidence
indictment

case.
3

AMl HICAN

VERSIGHT

18-1621-000098

 ....
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 98

10.
Grand

Independent

Jury

Counsel

relating

to

return

of the

indictment

-117.

A copy

of

as

Exhibit

1995,

3.

and this

conspiracy
false

to June
In

the

to

document

to engage

and to the

first
and

under

number
to

August

17,

the

LR-CR-95

this

motion
June

1995.

Counsel

same

to

3) was returned

Independent

Mr.

repay

a

7,

Evidence

on both

of Tucker

was

cases

accused

unlawfully,

Services,

bankruptcy,
with

Tucker

loan

Management

connection

knowledge

the

leading

attached

(Ex.

indictment

in a fraudulent
In

to

at

1995.

to Capital

indictment.

is

was returned

7,

obtain

court

indictment

of

evidence
matters,

in this

indictment

by deputies

prior
11.

first
first

presented

unrelated,

filed

indictment

was presented
times

other,

that

The

also

Inc.,

a

and conspiracy

as set

forth

obtaining

that

first

counsel,

a

submitting

all

and his

of

in the

first

indictment,

Independent

Counsel

did:
a.

Call

b.

Present
evidence
relating
to every substantive
allegation
of the indictment,
all of which evidence
was intended
to
be unfavorable
to
Tucker,
as
shown
by the
first
indictment
itself.

c.

Present
the argumentsof the prosecutors
that
an indictment
should
be returned,
arguments
necessarily
accused
Tucker
of
alleged
in the
first
indictment,
and
necessarily
depreciated
Tucker.

12.

On September

that

Independent

first

case.

The

Court's

appearance

witnesses

A copy
ruling
before

before

5,

Counsel
of the

the

1995,
had

another
no

Court's

Grand

Jury.

Judge

of

jurisdiction
ruling

establishes,
the

Grand

as
Jury

by

is

to
attached

a matter
Independent

of

to the effect
all
of which
wrongdoing,
as
all
of which

this

Court

proceed

ruled
in

the

as Exhibit

4.

law,

that

Counsel

each
or

his

4

AMERICAN

pVERSIGHT

18-1621-000099

 '-

.
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 99

deputies

in obtaining

beyond
law,

the

and his

jurisdiction,

and the

Tucker

was indicted,

jurors

were

then

existed

to

indict

jurors

had

received

effect

that

Tucker

14.

obliged

in this,

testimony

in

"Attorneys

for

jurisdiction.
15.

second,

their

Rule

that

the

the

of

Government"

presentment

by the

beyond

Tucker

was

authority

appearing

his

presenting

evidence

as

prosecute.

Defendant

was prejudiced,

in

this

influenced

case

was

by the

to

made
evidence

by

crimes

a

grand

presented

of

had

Grand
no

a

charging

jury

that

was

matter

fair

Counsel
Jury

and

authority

the

the

not

without

of Independent

he

and

were

to

in that

in

4),

Jury.

right

the

the

Criminal

Jury

Grand

before

which

the

before

acting

his

actions

grand
to

(Ex.

Grand

the

deprived

by the

deputies

attorneys

be in

Grand Jury

Those

Rules

the

cause

matters.

Federal

but
to

probable

authority

before

They had no right
Defendant

and his

that

same grand

argument

on unrelated

the

persons

Those

and

acting

Tucker

indictment.

juri~dictional

6 (d)

to

or not

exhibits

of Mr. Starr

of their

by lawyers

3.

whether

and

FRCrP.

in excess

in Exhibit

was a lawbreaker

of

Procedure,

forth

by

by Independent

prejudicial

to consider

Tucker

Jury,

of witnesses

sufficiently

as set

was beyond

violation

acting

was

G(d),

appearances

Grand

presentation

The appearances

Jury

the

authority,

unauthorized

of Rule

ex parte

before

was without
Counsel,

violation

of those

deputies

jurisdiction

indictment

Independent

in direct

without

Grand

of

The effect

Counsel

first

jurisdiction

and therefore
13.

in

the

to

decision
necessarily

of

the

first

indictment.
5

AM HICAN

pVERSIGHT

18-1621-000100

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 100

16.
Grand

The

Jury

presence

was

substantially

of this

Motion

in

the

of the

the

in that

while

not

prosecuting

an

the

prays

rights

United

this

6(d)

of the

Jury

were
clause

of

the

this

case.

Mr.

of Amendment

attorney

was making
with

the

Grand Jury.

Amendment

V to
from

to prejudice
actions

V to the

United

jurisdiction

the
the

Tucker

Starr's

charging

part

of Criminal

prejudice

operated

Starr

the

influenced

in this

Rules

before

(Ex.3)

clause

Mr.

described

case
of

may have

Federal

that

before

indict.

Counsel

in

first

case,
to

persons

Grand

persons

also
States

decisions

in

a

to

act

for

Part

I of

this

motion,

be dismissed

for

the

entity.

WHEREFORE, and
Defendant

decision

the

due process

Constitution
case

Jury's

Rule

consideration

violated

in

Constitution,

presentation

unauthorized

which,

unauthorized

violated

states

these

of Independent

violated

in that

actions

United

Grand

The actions

Procedure,
His

conduct
the

17.

of

of

States

that
Tucker

in

the

the

alternative

Indictment

under

Rule

6,

to

FRCrP,

and

violation

Amendment

V to

of
the

Constitution.
Respectfully

submitted,

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 w. Capitol,
suite
2000
Little
Rock, AR 72201
(501)

376-2011
6

AMERICAN

PVERSIGHT

18-1621-000101

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 101

George B. Collins
- AR #53032
COLLINS& . BARGIONE
#1 North LaSalle
street,
#2235
Chicago,
Illinois
60602
(312) 372-7813
James J. Lessmeister
- AR #94038
ARNOLD, GROBMYER& HALEY
124 W. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by ir__.,_$,.Mail,
postage
prepaid
to the below named parties
.on this~
day of
September,
1995.
Mr. Kenneth W. Starr
Mr. Hickman Ewing
Mr. Steve Colleton
Office
of Independent
Counsel
10825 Financial
Centre
Parkway
Two Financial
Centre,
Suite
134
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 W. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 W. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

f

AMl HICAN

VERSIGHT

rnes J.

~e s

i

7

18-1621-000102

 -

•'

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 102

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

v.

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

)
)
)
)

JMv1ES
t''/•
Oy:

I\A,~ca"~
i11;-11\C'
.•

i:11.,,

LR-CR-95-173

..
'., ''I
V -tf-ll(

•

.

-":::--·
-~-·--·
O.:f-> CU.:HK

)

)
)
)

MOTION TO DISMISS BASED ON THE
UNCONSTITUTIONALITY OF THE UNDERLYING ACT

ORAL ARGUMENTREQUESTED
By:

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813
James J. Lessmeister
- AR #94038
ARNOLD, GROBMYER& HALEY
124 W. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171

AMERICAN

PVERSIGHT

18-1621-000103

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 103

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff
v.

)
)

LR-CR-95-173

)

)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

)
)
)
)

MOTION TO DISMISS BASED ON THE
UNCONSTITUTIONALITY OF THE UNDERLYING ACT
Comes Jim
1.
has

Pursuant

the

power

2.
Court

Guy Tucker,

to

provided
3.

Under

allow

duties

the

are

Special

Act

Olson,

of

487 U.S.

654

Act

1987

the

1987,

Division

the

of

a narrow
§

Division

(1988),

(2)

power
to

the

Supreme

was constitutional

construction.

596(b)

the

Special

counsel.

who was unwil~ing

the

Division

violates

independent

under

states:

§ 596(b)(2)

was given

Special

Under

5.

(2)

and

was interpreted

to

remove

to

an

acknowledge

his

or her

complete.

reappoint

Act

Thus,
the

of

now has

an already

independence

Af'v1cr11

the

counsel

4.

v.

provision

independent

of

terminate

596(b)

the

u.s.c.

28

In Morrison
held§

only

to

by counsel,

this

the

existing
new power

limitations
of the

1994,

§ 596(b)

power

given

under

was revised

periodically

independent

of Article

judiciary

to

(2)

to

so the

review

and

counsel.
the

Special

Division

III

by compromising

the

Doctrine

of

the

Separation

Powers.
.1t-\1

PVERSIGHT

18-1621-000104

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 104

6.

Section

Office

of

support

and

7.
under

the

594(1)
United

guidance

Section
Article

(2)

provides

that

States

Courts

shall

to

Independent

594(1)
III

the
(2)

violates
the

Administrative

provide

administrative

Counsel.
the

by compromising

the

Separation

of

Powers

independence

of

the

judiciary.
WHEREFORE, Jim
dismissed

because

Guy Tucker
the

prays

underlying

that

act

is

the

indictment

be

unconstitutional.

Respectfully
submitted,
JIM GUY TUCKER,
Defendant

By:

w1~9
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501)
376-2011
George
B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North
LaSalle
street,
#2235
Chicago,
Illinois
60602
(312)
372-7813

Les
eister
- AR #94038
OLD,
OBMYER & HALEY
124 W. Capitol,
Suite
875
Little
Rock, AR 72201
(501)
376-1171
CERTIFICATE

OF SERVICE

I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by U.S. Mail,
postage
prepaid
to the below named parties
on this
day of
September,
1995.

'ci5"

18-1621-000105

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 105

Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 W. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 W. Capitol,
suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

AMERICAN

PVER _
SIGHT

-3-

zjjl 117

18-1621-000106

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 106

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

)

v.

LR-CR-95-173

)
)
)
)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

'A~"rS
,1.1c ti/. McC0",,~,,11
C''
Cy: I :111 ;·,,
CLERK
v

)

I'):::-:::--_µ-. ·-

--

CLER!<

)
)

MEMORANDUM
BRIEF IN SUPPORT OF MOTION
TO DISMISS BASED ON THE UNCONSTITUTIONALITY
OF THE UNDERLYING ACT

I.

THE 1994
REVISION
UNCONSTITUTIONAL

Comes Jim Guy Tucker,
Counsel

Reauthorization

unconstitutional

under
is

the

revised
Act of

487

The

U.S.

u.s.c.

654

"Act

of

U.S.C.

asserts
(hereinafter

law.

In the

the

Special
under

the
"Act

Act

of

holding

IS

Independent
of 1994")

is

1994 Congress

The new§
Division

the

596 (b) (2)

§

that

§ , 596(b){2).

permissible

Independent

(hereinafter

of

1994 grants

constitutionally

Olson,

Act of 1994

28

28

by counsel,

as a matter

specifically

OF

596(b)(2)

more power
of Morrison

than
v.

(1988).
Counsel
1987

11 )

§

Reauthorization
~96(b)

(2)

Act

of

1987

provided:

Termination
by division
of the court.
The division
of
the court,
either
on its own motion or upon the request
of the Attorney
General,
may terminate
an off ice of
independent
counsel
at any time,
on the ground that the
investigation
of all
matters
within
the prosecutorial
jurisdiction
of such independent
counsel
or accepted
by
such
independent
counsel
under
§ 594{e)
(28 u.s.c.
§ 594 (e)],
and any resulting
prosecutions,
have been
completed
or so substantially
completed
that
it would be
appropriate
for the Department
of Justice
to complete
such investigations
and prosecutions.
At the time of
-1-

zjjl-116

AMLHICAN

pVERSIGHT

18-1621-000107

 FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 107

such
final

termination,
the
report
required

594 (h) (1)

In

order

Rehnquist

for

1987,

provision
v.

determining
Chief

granted

the

Special

independent

and

is

not

Special

the

Justice

the

Olson

to
held

be

the

§

constitutional,

provision

counsel.

682.

In

Justice

Justice

was subject

"to

487 U.S.
the

public
but

is

of

1987,

at

Justice

it

682

is

more

the

the

only

counsel

resign.

Id.,

made the

the

to

a

the

counsel

Morrison,

487

constitutional

The
under
U.S.

the

appropriate
Justice

Chief

here."
Rehnquist

to remove

served

487 U.S.

at

his

from
or her

683.

of § 596 (b) (2) under
following

at

constitutional

mechanism
who has

of

"judicial"

independent

is

of

office

powers.

from

Act

provision

typically

omitted).

as a safety

the

traditional

construction

constitutionality

Rehnquist

not

[§596(b)(2)]

(citation

to

be

that

"terminate"

nature.
to

an independent

unwilling

In scrutinizing

a power

to terminate

a narrow

provision

payroll

to

in

under

concerned

a court's

save

596(b)(2)

power

§ 596 (b) (2)

••. we think

interpreted

purpose

to

for

held

Morrison,

the

administrative

order

infirmities

was

Such

power

is

of§

Rehnquist

analogous

(2)

validity

Division

Division's

§ 596(b)

Act

this

the

interpretation.
In

the

file

u.s.c.

(B)].

in Morrison

narrow

independent
counsel
shall
by § 594(h) (1) (B) [28

the

observations:

First,
the Act as it currently
stands
gives
the Special
Division
itself
no power to review
any of the actions
of
the
independent
counsel
or any of the actions
of the
Attorney
General
with
regard
to counsel.
Accordingly,
there
is no risk
of partisan
or biased
adjudication
of
claims
regarding
the independent
counsel
by that
court.
Second,
the Act prevents
members of the Special
Division
from participating
in 'any judicial
proceeding
concerning
-2-

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a matter
which involves
such independent
counsel
while
such independent
counsel
is serving
in that
office
or
which involves
the exercise
of such independent
counsel's
official
duties,
regardless
of whether
such independent
counsel
is still
serving
in that
office.'
Id.,
487 U.S. at 683-84 citing
omitted)
(emphasis
in original).
Furthermore,

Chief

u.s.c.

28

Justice

§

Rehnquist

49{f)

(other

citation

accentuated:

We emphasize,
nevertheless,
that
the Special
Division
has no
authority
to take any action
or undertake
any duties
that
are
not specifically
authorized
by the Act.
The gradual
expansion
of the authority
of the Special
Division
might
in another
context
be a bureaucratic
success
story,
but it would be one
that
would have serious
constitutional
ramifications.
Id.,

487 U.S.

at

Thus

majority

in

Morrison

under

the

of

1987 be given

would

not

exceed

the

limits

Under

the

Act

596{b)

(2)

provision
and

the

684

(emphasis

Act

in

compromise

1994

§

v.

the

of Article
of

original).

III

596(b)

Olson

held

a narrow

independence
of
(2)

our
has

that

provided§

construction
of

the

the

Judiciary

Constitution.
been

revised

to

state:

Termination
by division
of the court.
The division
of
the court,
either
on its own motion
or upon the request
of the
Attorney
General,
may termin _ate
an office
·of
independent
counsel
at any time,
on the ground
that
the
investigation
of all
matters
within
the prosecutorial
jurisdiction
of such independent
counsel
or accepted
by
such independent
counsel
u~der
section
594(e),
and any
resulting
prosecutions,
have
been
completed
or
so
substantially
completed
that
it would be appropriate
for
the Department
of Justice
to complete
such investigations
and prosecutions.
At the time of such termination,
the
independent
counsel
shall
file
the final
report
required
by section
594 (h) {1) (B).
If the Attorney
General
has not
made a request
under this
paragraph,
the division
of the
court
shall
determine
on
its
own motion
whether
termination
is appropriate
under this
paragraph
no later
than
2 years
after
the appointment
of an independent
counsel,
at the end of the succeeding
2-year
period,
and
thereafter
at the end of each succeeding
1-year
period.

-3-

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In
they

a conference

were

aware

596(b)

(2)

this

provision

in

of

23 reprinted

Congress
consistent
Abraham
it

a leg.

to

the

House

Supreme
v.

Olson

and

did

not

violate

H.R.

conf.

Rep.

state

the

with

the

Lincoln
If

so,

revised§

said,

declared

No.

Attorney

that

the

Court's

narrow

prepared

statement

806.

(2)

calling

a tail

It

is

the
v.

a dog

Reno

did

not

join

(2) did

not

violate

596(b)

interpretation

in

Attorney

General

have,

Morrison
Reno

v.

1st

Sess.

a fallacy
of

Olson.

a leg

of

narrow

Act

does

revised§

revision

Court's

under

Morrison

General

of§

103 Cong.,

in

"how many legs

the

Supreme

748,

stated

construction

that

103-511,

596(b)

just

Representatives

narrow

the

restrictions

once

of

Court's

in 1994 u.s.c.c.A.N.

Moreover,
confidence

the

Morrison

interpretation.
at

report,

does

for

1994

is

For

as

not

make

five?"
in

Olson.

Congress'
the

Supreme
In

her

stated:

The Senate
bill
next
proposes
that
there
be a periodic
reappointment
of Independent
Counsel
by the Special
Division
of the Court,
based
on an assessment
of the
status
of the
investigation.
We believe
that
this
procedure
would
constitute
too
great
an intrusion
by the
Court
into
the
investigative
responsibilities
of the
Independent
Counsel.
While the current
limited
role of the court
in appointing
the
Independent
counsel
is appropriate,
any continuing
oversight
function,
particularly
oversight
of the progress
or scope of
the investigation,
is constitutionally
suspect
and unwise
as
a matter
of policy.
The Department
therefore
recommends
against
this
provision.

s. 24, The Independent
Counsel
Reauthorization
Act of 1993, Hearing
before
the Committee
on Governmental
Affairs,
United
States
Senate,
to reauthorize
the
independent
counsel
law for
an additional
5
years,
and for other
purposes,
s. Hrg. 103-437,
103 Cong.,
1st
Sess.
at p. 29 (prepared
statement
of Honorable
Janet
Reno, United
States
Attorney
General).
The new§

596(b)

(2)

under

the

-4-

Act of

1994

is

unconstitutional

zjjl-116

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because

it

exceeds

the

the

compromises
limits

statutory

of

power

counsel

which

in

investigation.

the

separate
expansion
within

of
its

gives

special

the

citing
the

In re
1987 Act,

the

In

an

the

the

to

Case,

(2)

"broad

the
See

This

476,

triggered
regardless

is

the

a change

participate

to

and

which

takes

the
682

Under

independent

and the

the

will

at

1988).

by a lingering

(2)

of

487 U.S.

{DC Cir.

not

596{b)

depth

Morrison,

which

the

matters

and rapier"

by time

on

unconstitutional

revised§

pace

of

now has

independent

to

Division

515

and

intrusion
an

sword

was triggered

Division,

power

is

In effect

control

is

of the

the

Special

838 F.2d

(2)

actions

and

judiciary
Division

unwarranted

activities.

counsel.

confines
II.

of

division

§ 596{b)

Special

is

the

Special

Division

scope.

Now, § 596{b)

independent
the

Sealed

The

Executive,

powers

counsel's

counsel.
of

the

of

any of the

This

division

independent

III.

Special

constitutional

the

enable

Article

the

of

the

independence

to review

gives

power

the

discretion

actions
the

of
Act

the

beyond

of Morrison.
THE 1994 ADDITION OF§

1994

Congress

added

594{1)

for

the

(2)
first

IS UNCONSTITUTIONAL
time

the

following

provision:
(1) cost
controls
and
(2)
Administrative
Administrative
Office
provide
administrative
independent
counsel.
Administrative
Office

administrative
support.
of the United
support
No officer
of the United

-5-

support
The
Director
of
the
States
Courts
and shall
and
guidance
to
each
or
employee
of
the
States
Courts
shall

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disclose

information
related
to an independent
personnel,
or
administrative
arrangements
without
the authorization
of the
Counsel.

counsel's
acts
or
Independent

expenditures,

Both
agreement

the

Senate

report

that

administrative
103-511,
Supreme
Olson,

103 Cong.,
Court

of the

and

guidance

the

administrative

there

not

three

United

States

been

the

Congress

believes

not

a

address

21 (May 19,
this

conference

the

issue

of

H.R.

Rep.

No.

Thus,

the

Morrison

v.

1994).

issue.

give
and

this

is

See

actions.
off ice

been

doing

cannot

remain

only

states

with

for

the

594(1)

(2)

that

Congress

decision

making

of

the

personnel,

Congress

and

responsibility

Second,

federal

taken

but

administrative

"support

"actions

-6-

§

clear

provide

Yet,

words
exercise

the

feels

it

that

many years
basis

requirements.

needed."
the

for

notes

responsibility.

on complying

uses

Congress

this

makes

not

support

Congress

statutory

provision
should

Administrative

administrative

First,

offices'

"sorely

the

Congress

procurement

office

having

provide

explicit

guidance

594 (1) (2)

for

duties.

the

administrative

counsel's

has
any

office

administrative

in

counsels."

counsel.

administrative

administrative

specific

upon

Courts

offices'

guidance

at

reasons

office

clarifies

although

p.1

independent

not

but

law did

independent

ruled

gives

administrative

services

for

acknowledge

654 (1988).

to

has

1987

2d Sess.,

has

Congress

House

"The

support

487 U.S.

Office

and

believes

states

that

guidance"

the

authority

for

by an Independent
the

Independent

zjjl-116

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Counsel

in

charge."

Third,
Office

from

others

seek

Id.,

H.R.

Congress

asserts

conflicts

that

information

Rep.

No.

Essentially,
Administrative

this.

such

and

of

guidance

doctrine

of

Constitution
In his
Administrative

§

Rep.

may arise

103-511

to

has
is

Separation
by compromising
prepared
Office

statement,
of

the

the

Administrative

Congress,

the

Counsel's

press

or

activities.

done

Congress

is simply

this

should

provide
§

Powers
the

it

By having

Counsels
of

21-22.

22.

Courts

Independent

at

shields

when

absurd.

States

103-511

Independent

at

Office

United

No.

594 (1) (2)

about

reasoning

the

H.R.

by rationalizing,

the

Office

Id.,

under

594 (1) (2)

United

States

the

Courts

do

support
violates

Article

Mecham,

to

Administrative

administrative

of

since

continue

the

independence
L.Ralph

saying

III
the

the
of

our

judiciary.

Director

of the

stated

In essence,
this
bill
would task an entity
within
the Judicial
Branch
of government
to support
an entity
- the Independent
counsel
- that
has a prosecutorial
function.
The Judicial
conference
has
concluded,
and I concur,
that
this
is
an
inappropriate
function
for
the
Administrative
Office
to
perform
and we respectfully
request
that
you delete
us from
the bill ... the Administrative
Office,
on a volunteer
basis,
has provided
administrative
support
to Independent
Counsels
for several
years.
This was carried
out under
an agreement
between
subordinates
and. ·my predecessor
and
the
Justice
Department.
I am sure this
agreement
was entered
into
in an
effort
to accommodate
the Justice
Department
and provide
a
temporary
service.
However,
in practice,
it has not worked
well
at all,
especially
in recent
years.
The administrative
office
is caught
in a 'Catch
22'
position.
First,
we have no authority
whatsoever
to
enforce
compliance
with Federal
laws and Executive
Branch
regulations
as they apply to Independent
Counsels
on such
matters
as payment
for hotel
accommodations,
per diem,
first-class
travel,
contract
laws, personal
regulations,
accounting
procedures,
and an array
of other
regulatory
-7-

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requirements.
Yet, the first
audit
report
of the General
Accounting
Office
on the
Independent
counsel
program
criticized
the Administrative
Office
for not enforcing
the laws and regulations,
even though we have no lawful
power to enforce
them.
We have taken a series
of steps
to correct
the administrative
deficiency
cited
by GAO. But the fundamental
problem
is that
the
Independent
Counsels
are
not
answerable
to
the
Administrative
Office
and cannot
be compelled
to follow
any
guidance
we might give them.
Yet, we are expected
to issue
checks
and to keep the balances
and the Independent
Counsels
are completely
free
to ignore
any questions
that
we might
raise.
We are
Branch
Executive
rubs up
between

concerned
that
the proposal
to involve
a Judicial
entity,
the
Administrative
Off ice,
in a typically
Branch
function,
prosecutions,
at the very
least
against
traditional
notions
of separation
of powers
the branches.

S.24. The Independent
Counsel
Reauthorization
Act of 1993, Hearing
before
the Committee
on Governmental
Affairs.
U.S. Senate,
S.Hrg.
103-437,
103rd
Cong.,
1st
Sess.,
p.l
at
99-100.
(May 14,
1993) (Statement
of L. Ralph Mecham) (Emphasis
Supplied).
Mr. Mecham states
is

ill-suited

Independent

three

to provide

reasons

why the

administrative

Administrative

support

Office

and guidance

to the

Counsels:

First,
statutes,
regulations,
policies
and procedures
of the
Executive
Branch differ
in significant
ways from those of the
Judicial
Branch.
Our staff
are not experts
on the Executive
Branch
regulations
and it is costly
to require
them to be
trained
to apply two sets-bf
laws and regulations.
second,
the Administrative
Off ice has no means of enforcing
compliance
with
the
applicable
regulations.
It
cannot
supervise,
regulate,
or compel compliance
with law and regulations
by the
Independent
Counsels.
Finally,
even if the legislation
is
revised
to place
more responsibility
and accountability
with
the Office
of the Independent
Counsel
itself,
there
is no way,
short of establishing
an ongoing,
independent
support
unit,
to
build
in the needed
internal
controls
within
each Office
of
Independent
Counsel.
Id.,

S.Hrg.

103-437,

103rd

Cong.,

-8-

1st

Sess.,

p.l

at

100.

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Congress

is

Administrative
it

Administrative

has

done

should

do

Office

Justice

Appeals

for

better

suited

administrative
at
It
practice

self

of

Powers

Act should
that

be declared

the

it

is

of

in
the

a matter

U.S.

created

103rd

of

guidance

are

2d Sess.,
767.

improper

Separation

Judiciary

and

of
the

rationalization
to

Independent

was

of

Counsel

the

continue
to

convenience

Court

748,

the

the

should

such

agency

Cong.,

of

violates

the
well.

Independent

Congress'

Office

of

entities

codification

Office

and

other

1994 u.s.c.c.A.N.

unconstitutional.

services

worked

of the

of

( 1),

not

or a newly

independence

Administrative

administrative
because

the

Clerk

the

a matter

For

has

103-101,

reprinted

Administrative

by compromising

it

since

as

future.

Office

that

past,

has suggested

See S.Rep.

1994)

that

the

states

the

evident

the

the

of Columbia,

needs.

is

in

it

handle

22 (May 19,

in

GSA, GAO, the

District
to

this

Office

Department,
the

rationalizing

candidly

the Administrative

as the

p.l

for

Office

convenience,

Second,

wrong

admonished

provide
Counsels

by Justice

Brandeis:
The doctrine
of the separation
of powers was adopted
by the
convention
of 1787 not to promote
efficiency
but to preclude
exercise
of arbitrary
power.
The purpose
was not to avoid
friction,
but, by means of the inevitable
friction
incident
to
the
distribution
of the
governmental
powers
among
three
departments,
to save the people
from autocracy.
Myers

v.

U.S.,

272 U.S.

WHEREFORE, Jim
dismissed
limitations

on

the

52,

Guy

grounds

of Article

III

293

(1926) (Brandeis,

Tucker
that

the

VERSIGHT

that
Act

by compromising
-9-

AMrfllCJ\N

prays

of
the

J.
the
1994

dissenting)
indictment

be

violates

independence

the
of the

zjjl-116

18-1621-000115

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 115
judiciary.
Respectfully
submitted,
JIM GUY TUCKER,
Defendant

~1w~U-

By:

iliarn~
Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 w. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7 13

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by U.S. Mail,
postage
prepaid
to the below named parties
on this :l S'"
h day of
September,
1995.
~
Mr. Kenneth
W. Starr
Mr. Hickman Ewing
Mr. Steve
Colleton
Office
of Independent
Counsel
10825 Financial
Centre
Parkway
Two Financial
Centre,
Suite
134
Little
Rock, AR 72211

AMLHICAN

pVERSIGHT

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ij j l · 116

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Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
~600 W. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 W. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

-11-

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I

J

. -~.t

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA,

)
)
)
)
)
)
)
)
)
)

Plaintiff,

v.
JAMES B. MCDOUGAL,JIM GUY
TUCKER, and SUSAN MCDOUGAL,
Defendants.

No.

. :t\ ·31i3
.. '

1:.

LR-CR-95-173

MOTION TO ADOPT MOTION OF J. MCDOUGAL
TO DISMISS INDICTMENT

Comes
motion

Jim

filed

indictment
Sec.

591 et

Guy Tucker,
in

this

cause

by
the

on the

ground

that

seq.,

was not

validly

to an expired

law,

In support

1.

The motion,
by this

counsel,
James

is
this

and its

brief,

would

not

a valid

defendant
are

moves

McDougal

Independent

hereof,

defendant

and

re-enacted,

and therefore

Congress.

briefing

by

before

to

to

Counsel
but

adopt

dismiss
Act,

the
the

28

USC

was an amendment

and existing

Act of

states:
the

Court.

Further

be redundant.

Respectfully-

submitted,

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501)
376-2011

AMLHICAN

pVERSIGHT

18-1621-000118

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 118

George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813
James J. Lessmeister
- AR #94038
ARNOLD, GROBMYER& HALEY
124 W. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by
q~~ Mail,
postage
prepaid
to the below named parties
on this~
day
of
September,
1995.
Mr. Kenneth w. Starr
Mr. Hickman Ewing
Mr. Steve Colloton
Office
of Independent
Counsel
10825 Financial
Centre
Parkway
Two Financial
Centre,
Suite
134
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 W. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 W. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

AMLHICAN

pVERSIGHT

2

18-1621-000119

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 1ig

·· . . . ,:_)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
' '~. ". .:..-:S
l''- , . r.:!
.._..r--,1~J
,"":'--.~L·"tL•.
~"".r,,
L r .·~. ..
'J; ,_
._,~
·• 1
UNITED STATES OF AMERICA,
CJ: ____
_
)

----L···-_::• -, --~

)
)
)
)
)
)

Plaintiff,

v.
JAMES B. MCDOUGAL,JIM GUY
TUCKER, and SUSAN MCDOUGAL,

r·•
-u!.-t:i~I{

No.

LR-CR-95-173

)
)

Defendants.

)

MOTION AND MEMORANDUM
OF DEFENDANTJIM GUY TUCKER FOR
PRODUCTION OF ALLEGED CO-CONSPIRATOR STATEMEN'rS AND FOR
SUPPRESSION OF ANY SUCH STATEMENTSWHICH FAIL TO MEET
THE CRITERIA OF F.R.EVID.,
RULE 801(d) (2)(E)

Comes the
Court

for

an order

alleged

that

Federal
1.

will

This

of

course

meet

Evidence

alleged

the

counsel

and

to

criteria

and,

in

and moves

support

that

to produce

suppress

of Rule

any

80l(d)

hereof

the

all
such

(2) (E)

of

states:

Independent

co-conspirator

the

statements

Counsel
during

the

made during

the

discovery

of

case.

in

furtherance

This

motion

statements
and

meeting

by counsel,

Independent

anticipates

Such statements

3.

trial

of

to

Defendant

its

and

these

fail

the
statements

numerous

2.

not

requiring

Rules

utilize

course

at

Jim Guy Tucker,

co-conspirator

statements
the

Defendant,

are

the

admissible

of the
requests

in advance
to

not

suppress
requirements

conspiracy.
that

of trial
any

unless

such

the

Court

to avoid
statements

allow

needless
as to

interruption
this

Defendant

above.

AMERICAN

pVERSIGHT

18-1621-000120

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 120

MEMORANDUM

Rule

80l(d)2)

(E)

"A statement
conspirator
furtherance
This

Defendant

statements

the

of

In order
the

"during

that

the

or its
United

the

have

been

Cir.

1975).

The more

difficult

has

held

when the
(i.e.,

not

the

statement
something

declarant's

"in

(8th

cir.

the

statements

1983).

to

United

be

more

the

than

merely

of,

held

to
are

has

failed

Krulevitch

v.

(1949).

attempts

to

prevent

v.

Smith,

520

however,

is

the

that
"casual

only

conspiracy

listener

Snider,

the

Circuit

satisfied

of the

F.2d

is

The Eighth

objective

held

that

790

States

v.

court

93 L.Ed.
of

informing

its

against

conspiracy

be addressed,

also

of

continues

admissible.

States

have

one

generally

requirement

merely

contain

the

conspiracy

716,

the

will

and in furtherance

conspiracy."

furtherance"

The courts
must

not

United

of the

activities).

the

furtherance

question

than

of,

is

somehow advances
more

satisfy

requirement

69 s.ct.

admissible.

in furtherance

must

(E).

are

in

count

80l(d)2)

as

by a coand
in

to be admissible

made after

440,

11

that

of"

achieved,

made

1245

of

by Rule

made

336 U.S.

are

course

provides:

case

in

statements

statements

detection

meaning

Evidence

prosecutor's

Counsel

course

statements

(8th

these

statements

States,

Similarly,

for

Independent

whereas

goals

of

co-conspirators

as required

The

Rules

the

were made in the

conspiracy

admissible,

that

alleged

statements

mean

Federal

is not hearsay
if ... a statement
of
a party
during
the
course
of the conspiracy.

Defendant,

these

the

anticipates

indictment.
this

of

720

of

the

F.2d

985

to be admissible,
comments"

not

2

AMERICAN

pVERSIGHT

18-1621-000121

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 121

intended

to

F.2d

154

(8th

{9th

Cir.
It

further
Cir.

should

be noted,

their

admission

that

Moreover,

in

admissible,

the

furtherance
it

pre-trial

Defendant

does

the

to

the

order

v.

Eubanks,

Green,

600

F.2d

591

513

of the
the

if

not

government
that

for

a review

by the

court

to

construed

as

an

to

to

it;

(b)

conspiracy;

furtherance

disclosure
to
not

of the
hereby
of

.Jim

been
if
alleged

introduce,

to
(a)

it

at

rather

statements
conspiracy,
and

519.

than

sufficient

any

was

was made

supra,

laid

be

there

statement

(c} that

the

the
to
are
this

all

other

evidence.

Guy Tucker,

of co-conspirator

satisfy

the

court,

asserts

such

present.

that

that

of the

even

Defendant,

are

Eubanks,

Thus,

produced

statements

and

has

and

be

preliminarily

foundation

admissibility

do

to have

co-conspirator

responsibility

waive

intends

motion

conspiracy.

this

in

this

admissibility

be established

course

is the

of

alleged

defendant

pre-trial

statements
80l{d)

states

v.

not

elements

of the

WHEREFORE, the

Court

is

testimony.

produced

defenses

must

determine

the

that

statements

for

of

Furthermore,
to

however,

other

order
there

made during

admit

States

admissibility
the

a connection

jury,

United

United

1979);

co-conspirator

determine

in

conspiracy.

1979).

any alleged

is

the

and
the

to

requests

that

statements
suppress

requirements

the
which

all

such

of

Rule

(2) (E).

)

AMERICAN

pVERSIGHT

18-1621-000122

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 122
/

,,?

.

,--.:;
· <-·HJ

~lliam
H. ~utton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
1 N. LaSalle
St.,
#2235
Chicago,
IL 60602
(312) 372-7813
James J. Lessmeister
- AR #94038
ARNOLD, GROBMYER& HALEY
124 w. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171

4

AMi-=nlCAN

pVERSIGHT

18-1621-000123

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 123

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by qJ:i_. Mail,
postage
prepaid
to the below named parties
on this~
day of
September,
1995.
Mr. Kenneth w. Starr
Mr. Hickman Ewing
Mr. Steve Colloton
Office
of Independent
Counsel
10825 Financial
Centre
Parkway
Two Financial
Centre,
Suite
134
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 W. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

AMl HICAN

VERSIGHT

5

18-1621-000124

 ,-

~.
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 124
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

)
)
)

v.

LR-CR-95-173

)
)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

)
)

)

DEFENDANT TUCKER'S MOTION TO RESERVE THE RIGHT TO
FILE ADDITIONAL PRETRIAL MOTIONS OR REQUESTS

Comes now Defendant
through
the

his

right

attorneys,
to

as grounds,
1.
acts

additional

in

this

case

a significant

was returned

by the

grand

on August

2.

Thereafter,

the

1995

as

when Tucker's

Time

Filing

several

the

become

to

pretrial

voluminous

After

date

On September
of

6,

motions

information,

reviewing
necessary

1995

for

to

and

concern

alleged

and

reserve

requests

and

case
and

The

the

Western

Magistrate

filed

1995.

has

to

for

pretrial

documents

Tucker

time.

criminal

1995.

Tucker

materials

of

jury

States

25,

Counsel's
the

17,

United

September

Independent

motion

motions

period

of Arkansas

filed.

his

by and

states:

over

the

("Tucker"),

files

pretrial

The allegations

District

Guy Tucker

and hereby

therefore,

indictment

in

file

occurring

12,

Jim

begun

motions

Tucker
the

to

has

task

investigating
additional

to

be

Extend

now filed

of

material,

in preparation

September
were

a Motion

and other

assert

set

for
the

reviewing
developed
trial.
case,

it

may

motions

AMERICAN

VERSIGHT

18-1621-000125

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 125
including,

but

motions

to

effort

and

Counsel's
This

to

that

the

Independent

counsel

motions

after

and

additional
all

motions

other

proper

requests

motions

that

now filing

right

motions

WHEREFORE, for

further

other

is

his

pretrial

to,

for

disclosure,

may arise

from

the

responses.

Defendant

preserve

additional

requests

limited

dismiss,

Independent
3.

not

to

foregoing

Court

permit

has
Tucker

seek

after

the

instant

leave

the

of

motion

reasons,

court

Tucker

responses

investigate

as may be deemed

motion

date,

him additional

provided
has

the

to
if

the

appropriate,

an

file
necessary.

respectfully

time,
to

in

after

Tucker's
case,

to
and

the

pretrial
file
for

any

and

relief.
Respectfully
submitted,
JIM GUY TUCKER, ~
Defendant?HIJI,(

By:
Wi~sui:ton
- AR #59
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011

George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,

(312)

CERTIFICATE
I,
served

James J. Lessrneister,
a copy of the foregoing

Illinois

372-

60602

13

OF SERVICE

do hereby
pleading

certify
that
I have
by U.S. Mail,
postage

AMERICAN

pVERSIGHT

-2-

zj j l-118
18-1621-000126

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 126
prepaid
to
September,

the below
1995.

named

Mr. Kenneth
w. Starr
Mr. Hickman Ewing
Mr. Steve Colloton
Office
of Independent
10825 Financial
Centre
Two Financial
Centre,
Little
Rock, AR 72211

Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

parties

on this@/-

day

of

Counsel
Parkway
Suite
134

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 w. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

AMl HICAN

VERSIGHT

-3-

zjjl-11818-1621-000127

 FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 127
. .,
·'

' . .:

IN

.

: ..i .. ';

.0

THE UNITED STATES DISTRICT
COURTc~ :-:/'. .. . '._,· . · ,- :~::__
EASTERN DISTRICT
OF ARKANSAS
· · - - - ,.··.; i·,:;;;;/ -/: : ::~1,~
WESTERN DIVISION
.,,, ;_,

t>L. : ;::_.2., L. _:J

UNITED

STATES

OF AMERICA

)

)

Plaintiff

)
)

v.

i'.-..,-

)
)
)
)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL

..

., ____

LR-CR-95-173

)

)'
)

Defendants

MOTION TO SET RETURN DATE FOR TRIAL
SUBPOENAS PRIOR TO DATE OF TRIAL

Comes the
motion

pursuant

Procedure
1.
use

Defendant,

at

Jim

to

Rule

states

as

follows:

This

Defendant

trial,

inspection

which
and

Guy Tucker,

17(c)

of

may seek

so

Federal

to subpoena

documents,

examination

the

by counsel

it

is

as

to

Rules

certain

of

for

his

Criminal

documents

anticipated,
be

and

will

for

require

able

to

complete

Court,

in

accordance

trial

preparation.
WHEREFORE, this
Rule

17(c),

to set

be submitted
before

trial.

thirty

days

by the

Defendant
a date

subpoenaed

Defendant
before

prior

prays

asks
to

the
trial,

parties,
that

upon

which

to be inspected
the

return

date

documents

with
may

by counsel
be at

least

trial.
Respectfully
submitted,
JIM GUY TUCKER,
Defendant
By:

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 w. Capitol,
Suite
2000
-1-

zjjll02

AM HICAN

pVERSIGHT

18-1621-000128

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 128

Little
(501)

Rock, AR 72201
376-2011

George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813

#94038
Suite
72201

875

CERTIFICATE OF SERVICE

I, James J. Lessmeister,
do hereby
certify
that
I have served
a copy of the foregoing
pleading,,.p¥,
U.S. Mail,
postag
e
prepaid
to
the below named parties
on this~
day of September,
1995.
Mr. Kenneth w. Starr
Mr. Hickman Ewing
Mr. Steve Colleton
Office
of Independent
Counsel
10825 Financial
Centre
Parkway
Two Financial
Centre,
Suite
134
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 w. Capitol,
suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

-2-

zjjl102

AMLHICAN

pVERSIGHT

18-1621-000129

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 129

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA

)
)
)

Plaintiff

)

v.

LR-CR-95-173

)
)
)
)
)
)
)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

MEMORANDUM
IN SUPPORT OF MOTION FOR
DISCLOSURE OF EVIDENCE FAVORABLETO DEFENDANT
MAY IT PLEASE THE COURT:

Since
Illinois,

Brady

v.

360 U.S.

Maryland,
264 (1959)

the
to

disclose

evidence

favorable

disclose

favorable

evidence

which
U.S.

that
667

error

is prejudicial

1312,

rule

1319

has

83

(1963),

prosecution
the

are

has

and

The

the

outlined

and

been

defendant.

error,

continuing

(2d Cir.

Napue

required

to

failure

to

circumstances

in U.S.

v.

v.

under

Bagley,

473

1988)

life.
sums

it

Miller
up when

v.
it

Angliker,

848

says:

"It
is by now well
established
crime has a due process
right
turn over to him any material
possession."

that
a person
accused
of a
to require
the prosecution
to
or exculpatory
evidence
in its

This

in

applies

interest,

including

including,

as

the

is

U.S.

(1985).

The Brady
F.2d

3737

to

all
the

in Miller

issues
credibility

evidence

which
of

the

of a special

a

defendant
witnesses

defense

has

an

and

even

available

to

defendant.
We do not

write

at

inordinate

length

on our

Brady

motion;

we

AMERICAN

VERSIGHT

18-1621-000130

 FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 130
are

certain

believe

that

due process
which

that

the

the

has

prosecutors

clause

we bring

court

this

We respectfully

had
will

of Amendment

long

experience

understand
V to

our

with

their

duty

Constitution,

Brady,

and

under

the

pursuant

to

motion.
pray

that

our

Brady

motion

be granted.

Respectfully
submitted,
JIM GUY TUCKER,
Defendant
By:

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 w. Capitol,
Suite
2000
Little
Rock, AR 72201
( 501),1376-2011

/<c/4✓1/C-~

, ·Geor~.
Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813

2

AM HICAN

pVERSIGHT

18-1621-000131

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 131
CERTIFICATE

OF SERVICE

I, James J. Lessmeister,
do hereby certify
that
I have served
a copy of the foregoing
pleading
J?~.u.s. Mail, postage prepaid to
the below named parties
on this~
day of September,
1995.
Mr. Kenneth W. Starr
Mr. Hickman Ewing
Mr. Steve Colloton
Office
of Independent
10825 Financial
Centre
Two Financial
Centre,
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

Counsel
Parkway
Suite
134

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 w. Capitol,
suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

3

AMERICAN

pVERSIGHT

18-1621-000132

 !Court Sealed!

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 132

AMl HICAN

VERSIGHT

18-1621-000133

 !Court Sealed!

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 133

AMl HICAN

VERSIGHT

18-1621-000134

 !Court Sealed!

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 134

AMl HICAN

VERSIGHT

18-1621-000135

 I

·~ .
.

.

FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 135

.- -·· .. :··· '"!

.,

.

i .: ,i_
_J
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS cc t ::'i:',;;:iT
.,:i:J.c':}/,~TJJ
AS:.
WESTERN DIVISION
i: .L

UNITED STATES OF AMERICA

)
)
)
)
)

Plaintiff

v.
JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

LR-CR-95-173

)
)
)
)

MOTIONFOR DISCLOSUREOF EVIDENCE FAVORABLETO DEFENDANT
Comes Jim Guy Tucker
for

his

Motion

for

Favorable

to these

373 U.S.

83 (1963)

Constitution,
1.

by Independent

defendants,

as required

grand

Counsel

United

cause

juries

has conducted
before,

of documents,

from other

sources,

by subpoena

2.

In addition,

witnesses

who are

evidence

was either

of Evidence

states

not called

and favorable

Under the

law of conspiracy

and well

from .defendants

and

and informally.
Counsel

before

has

of benefit

whose

Counsel's

of a defendant.

exculpatory

of this

many

to Independent

to Independent

to or exculpatory
evidence

interviewed

the Grand Jury,

was adverse

exculpatory

two

many witnesses

not considered

contentions

a lengthy

is believed,

obtained

Independent

or whose evidence

is also

it

and involving

pages

"defendant"

counsel

and

by Brady v. Maryland,

and Amendment V to the

in this

100,000

Counsel

by counsel,

states:

investigation

over

Defendant,

Disclosure

Independent

different

("Tucker"),

of any

defendant.

AMFnlCAN

VERSIGHT

18-1621-000136

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 136

3.
evidence
Maryland,

Defendants

believe,

is exculpatory
supra,

and allege,

to defendants

and therefore

that
under

specifically

much of this
the

test

of Brady v.

request;

(a)
All evidence,
including
statements
of individuals,
Forms 302, handwritten
notes,
or documents of any kind
which contradict
any of the specific
allegations
of the
indictment.
(b) All documents obtained
from any source
Independent
Counsel which tend to contradict
specific
allegations
of the indictment.

by
any of the

(c) All witness
statements
taken from witnesses
as to
matters
related
in Counts I, II, III,
IV, VIII, IX, X,
XI, XII, XX, XXI which contradict
the eventual
testimony
of those witnesses
before the grand jury or
in any final statement
taken from the witnesses,
including
the initial
field notes prior to preparation
of Form 302 statements
taken by agents of Independent
Counsel.
(d) All evidence
indicating
Independent
counsel witness

that any prospective
has a criminal
record.

(e)
All evidence
indicating
Independent
Counsel witness
the laws of any jurisdiction
the proposed witness
has not

that any prospective
has committed a crime under
or government
for which
been convicted.

(f)
All evidence
indicating
that any document
purporting
to bear the signature
of any defendant
the wife of any defendant
does not actually
bear
genuine signature
of that defendant,
or the wife
that defendant.
(g)

A11 evidence

Independent
Counsel
any occasion.

indicating

witness

(h) All evidence
indicating
Independent
Counsel witness
to Independent
Counsel.
(i)

Redacted

and filed

VERSIGHT

any

prospective

may have lied

under

oath

on

that any prospective
told inconsistent
stories

separately.

(j)
All evidence
relating
to the grand jury.

AMFnlCAN

that

or
the
of

-2-

to any voir

dire

questions

zjjll06
18-1621-000137

 ...
FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 137

(k) All
favorable

other evidence
of any kind or description
to or exculpatory
of the defendant.

(1) All documents including
any oral or written
testimony
and interviews
conducted
by agents of
Independent
Counsel and Resolution
Trust Corporation
("RTC") of persons
charged in counts I, II, IV, X, XI,
XII of the Indictment
which;
(i)
Indicate
or demonstrate
Tucker did not have a
fiduciary
duty to David L. Hale, Capital
Management Services,
Inc. ("C?-15") or Madison
Guaranty Savings & Loan ("MGSL");
(ii) Indicate
or demonstrate
that
made a case by case determination
of each ·borrower;

David L. Hale
of eligibility

(iii)
Indicate
or demonstrate
that David L. Hale
personally
and solely
determined
and reported
the
"use of proceeds"
information
as reported
on SBA
Form 1031.
(iv) Indicates
that Tucker
involvement
in information
SBA on a Form 1031.

had no knowledge or
allegedly
submitted
to

(v) Indicate
or demonstrate
that David L. Hale
solicited
qualified
borrowers
from his Small
Business
Investment , Corporation
("SBIC").
(vi) Indicate
or demonstrate
that
MGSL to Tucker were bona fide.

the

loans

from

(vii)
Indicate
or demonstrate
that Tucker had no
fiduciary
duty to Deal Paul, Ltd. regarding
the
$825,000 loan to Dean Paul, Ltd. from MGSL.
(viii)
Indicate
or demonstrate
that Tucker did
not make or cause.to
be made any alleged
false
entries
with the intent
to defraud
in the books,
reports
and statements
of MGSL. Specifically,
any
oral or written
statements
by, but not limited
to,
John Latham, Steve Cuffman, Greg Young, Don
Denton, and Sarah Hawkins.
(ix) Indicate
or demonstrate
that Tucker did not
make or cause to be made any alleged
false entries
with the intent
to defraud
in the books, reports
and statements
of CMS. Specifically,
any oral or
written
statements
by, but not limited
to, David
L. Hale, Caron Ross, William Watt, Steve Smith and
any accountants
or auditors.

AMFnlCAN

VERSIGHT

-3-

zjjll06
18-1621-000138

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 138

(x)
Indicate
or demonstrate
that TUcker did not
make or cause to be made alleged
false statements
for the purpose of making fraudulent
loans at CMS,
specifically
any oral or written
statements
by,
but not limited
to, David L. Hale, Caron Ross,
William Watt, Steve Smith and any accountants
or
auditors.
(xi) Indicate
or demonstrate
that TUcker was not a
nominee for the property
at 1308 Main Street,
Little
Rock, Arkansas or indicating
that he
legally
owned the property.

(xii)

Indicate
or demonstrate
that after March,
Tucker had no involvement
or knowledge of
transfers
of ownership of 1308 Main Street,
Little
Rock, Arkansas property.
1985

(xiii)
Indicate
or demonstrate
that TUcker had no
knowledge or involvement
of the $825,000
Dean Paul
Ltd. loan including
but not limited
to alleged
overvalued
appraisals,
fraudulent
real estate
transactions
or loan funds being used to increase
the capitalization
of CMS.
(xiv)
Indicate
or demonstrate
that TUcker had no
knowledge of an involvement
in the $143,000
loan
from CMS to Larry E. Kuca d/b/a Campobello Realty
Co.
(xv) Indicate
or demonstrate
that Tucker had no
knowledge or involvement
in the $65,000
loan from
CMS to Steve Smith, d/b/a The Communication
Company.
(xvi)
Indicate
or demonstrate
that Tucker had no
knowledge or involvement
in the alleged
generated
inflated
profits
for Madison Finance corporation
("MFC")

from

the

$1.05

csw.

mil.l.ion

l.oan

from

MGSL to

(xvii)
Indicate
or demonstrate
that TUcker had no
knowledge that Susan H. McDougal received
a
commission on the sale including
any document
purporting
to bear the signature
of TUcker which
does not actually
bear the genuine signature
of
Tucker.
(xviii)
Indicate
or demonstrate
that Tucker had no
knowledge or involvement
in a loan of $300,000
from CMS to Susan H. McDougal d/b/a Master
Marketing.

AMFnlCAN

VERSIGHT

-4-

zjjll06
18-1621-000139

 FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 139

(xix)
Indicate
or demonstrate
that MGSL knew and
approved of how the loan proceeds would be used or
disbursed
in the $260,000 loan from MGSL to Tucker
for 145th Street
property
including
payment to
Savers Bank.
(xx) Indicate
or demonstrate
that Tucker was not a
participant
in the alleged
October,
1985 meeting
with Jim McDougal and David L. Hale wherein the
alleged
infusion
of approximately
$500,000 of
capital
into CMS was allegedly
discussed.
(xxi)
Indicate
or demonstrate
that Tucker had no
knowledge or involvement
regarding
David L. Hale's
receipt
of $502,000 in net proceeds
from the
alleged
fraudulent
Dean Paul Ltd. real estate
transaction.

(xxii)
Indicate
or demonstrate
that Tucker
knowledge or involvement
regarding
alleged
in the $100,000 loan from CMS to Southloop.

had no
fraud

m.
All documents including
any oral or written
testimony
and interviews
conducted by agents of
Independent
Counsel and RTC of persons
relating
to
charges Count II of the indictment
which:
(i)
Indicate
or demonstrate
that Tucker did not
cause or cause to be made an alleged
wire transfer
of funds from the United States
Department of
Treasury
to CMS' account at Pulaski
Bank & Trust
in Little
Rock, Arkansas on or about May 20, 1986.
n.
All documents including
any oral or written
testimony
and interviews
conducted
by agents of
Independent
Counsel and RTC of persons
relating
to
charges
in Count III of the indictment
which:
(i)
Indicate
or demonstrate
that Tucker did not
cause or cause to·be made an alleged
wire transfer
of funds from the United states
Department
of
Treasury
to CMS' account at Pulaski
Bank & Trust
in Little
Rock, Arkansas on or about September 11,
1986.

o.
All documents including
any oral or written
testimony
and interviews
conducted
by agents of
Independent
Counsel and RTC of person relating
to the
charges
in Count VIII of the indictment
which:
(i)
Indicate
or demonstrate
that Tucker had no
knowledge or involvement
in obtaining
an alleged

AM HICAN

pVERSIGHT

-5-

zjjll06
18-1621-000140

 FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 140

fraudulent
River note

loan from CMS to pay off
at Worthen.

the Kings

(ii) Indicate
or demonstrate
that Tucker had no
knowledge or involvement
in the submission
of the
alleged
false and fictitious
loan proposal
to CMS.
p.
All documents including
any oral testimony
and
interviews
conducted
by agents of Independent
counsel
and RTC of persons relating
to the charges
in count IX
of the indictment
which:
(i)
Indicate
or demonstrate
that Tucker had no
knowledge or involvement
in the alleged
misapplication
of monies and funds belonging
to
CMS.

q.
All documents including
any oral or written
testimony
or interviews
conducted by agents of
Independent
counsel and RTC of persons relating
charges in Count X of the indictment
which:

to the

(i)
Indicate
or demonstrate
that Tucker had no
knowledge or involvement
in the alleged
false
entry (hiring
a new employee) as to the purpose of
the loan to Steve A. Smith d/b/a The Communication
Company. ·
r.
All documents including
any oral or written
testimony
or interviews
conducted by agents of
Independent
counsel and RTC of persons
relating
to the
charges in Counts XX and XXI of the indictment.which:
(i)
Indicate
or demonstrate
that Tucker did not
knowingly or willfully
"allow" David Hale to
retain
any proceeds
from the sale of the 32 Pine
Manor property.
(ii) Indicate
or demonstrate
that the Southloop
Construction
Company, Inc. loan is a legitimate
loan with legitimate
terms and interest
rates and
was not a personal
payback from Hale to Tucker.
(iii)
Indicate
or demonstrate
that the loan
proceeds purportedly
to be a personal
payback from
Hale to Tucker were used for legitimate
business
expenses and that Tucker did not retain
the
proceeds personally.
(iv)
Indicate
or demonstrate
that
deceive CMS or the SBA auditors.

AM HICAN

pVERSIGHT

-6-

Tucker

did not

zjjll06
18-1621-000141

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 141
This motion
is supplementary
to the motion
to require

4.

Independent

Counsel

witnesses,
to

refer

to

Mr Fiske,

to

filed

this

any

agent

disclose
date.
or

a non-statutory

accord

disclose
with

Amendment

the
V to

specifically

all

of

United

Brady

States

and

as

intended

counsel,

that

or of

Counsel.

Independent

in

its

v.

Maryland,

possession,

constitution,
it

with

is

Independent

pray

material"
of

Counsel"
Independent

respectfully

"Brady

requested

of

predecessor

requirements
the

and deals

"Independent

associate

WHEREFORE, Defendants
Counsel

arrangements

in

supra,

both

and

as

may exist.

Respectfully
submitted,
JIM GUY TUCKER,

Defendan~u
By:

~'

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 w. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813

meister

GRO

ER

&

- AR #94038

HALEY

124 W. apitol,
Suite
Little
Rock, AR 72201
(501) 376-1171

875

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby
certify
served
a copy of the foregoing
pleading
by
prepaid
to the below named parties
on this
September,
1995.

JSh

AMLHICAN

pVERSIGHT

-7-

that
I have
Mail,
postage
day of
.

zjjl106
18-1621-000142

 .
FOIA RD 56806
Kenneth
w. Starr
Hickman Ewing
Mr. Steve
Colloton
Office
of Independent
10825 Financial
Centre
Two Financial
Centre,
Little
Rock, AR 72211

{URTS 16302} Docld: 70104908 Page 142

Mr.
Mr.

Counsel
Parkway
Suite
134

Mr. Bobby McDaniel
400 S. Main
Jonesboro,
Arkansas
72401
Attorney
for Susan McDougal
Ms. Jennifer
Horan
Federal
Public Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 W. Capitol,
Suite 3821
Little
Rock, AR 72201
Attorney
for James McDougal

-8-

zjjll06

AMFnlCAN

VERSIGHT

18-1621-000143

 ..
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 143

r:
f!

r---·-~~:·:r.1·?,

!:·· ::-;

-!

-.

-·-,1'-V

,.

IN THE UNITED STATES DISTRICT
COURt:AS"i~rJ,,1;;,:~r:r-;r_c&,~T
EASTERN DISTRICT OF ARKANSAS
·- . ',-i,,Tl-,1..., 11 -RK~NSAS.
WESTERN DIVISION
UNITED STATES OF AMERICA,

)
)
)
)
)
)
)
)

Plaintiff,

v.
JAMES B. MCDOUGAL,JIM GUY
TUCKER, and SUSAN MCDOUGAL,

No. LR-CR-95-173

)
)

Defendants.

DEFENDANT
JIM GUYTUCKER'SRULE16 DISCOVERY
REQUEST
Comes now Defendant,
by and

through

Independent
of

the

Jim

his

undersigned

Counsel

to do the

Federal

Rules

of

Guy Tucker,
attorneys

STATEMENT OF DEFENDANT:

1.

Disclose
or

statements

photographing:

made by Tucker

conspirator

or

possession,

custody,

existence

of

may become
written

agent

known,

response

co-conspirator

AME:til.1AI

known,
the

PVERSIGHT

relevant

or-by

the

made

the

by

the

the

Rule

16

or

of
that

of

any

a co-

within

the

Counsel,

the

due

Grand

for
Jury

diligence

portion

of

relevant

co-conspirator
acting

recorded
been

thereof,

exercise

substance

inspection,

to have

Counsel;

of the

agent

Tucker

with

for

Independent

by any person

Tucker

requests

written

copies

or any alleged

or
to

available

claimed

or
of

or recording

Disclose

statement

any

Independent

interrogation

alleged

make

control

made by Tucker
to

and

TUcker,

containing

transcript

oral

is
to

and the

2.

of

record,

in accordance

or any persons

or

which

record

statement

Tucker

"Tucker"),

Procedure:

A.

copying,

of

following,

Criminal

to

(hereinafter

any
oral

or agent
the

in

Plaintiff,

testimony

of any

of Tucker.

the

substance
or

any

of

alleged

any

other

relevant

co-conspirator

of

18-1621-000144

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 144

Tucker

in response

acting

for

intends

to use that

B.
the

the

to

interrogation

benefit

of

criminal

statement

record

conspirator

or

possession,

custody

existence

if

the

agent

of which

of
or

is

requests

the

any

Independent

control

record

if

of

claimed
any,

the

or by the

Independent

to Tucker

person

TUcker,

known,

criminal

exercise

Counsel.

Independent
TUcker's

defense

as evidence
to Tucker
agent

buildings

Counsel,

papers,
or

in chief

places,

are

intended

at the

or to any person

the

counsel,

the

Tucker to inspect

documents,
or

the possession,

and which

or are

within

of David L. Hale.

books,

which are within

co-

TUcker particularly

or

thereof,

a

of due diligence

copy

objects,

Counsel

be

is

Independent

DOCUMENTS
ANDTANGIBLEOBJECTS: Permit

tangible

by or

such copy of
to

as

c.

photograph

employed

at trial.

of

may become known, to the

copies

custody

material

photographs,
or

or control

to the

or were obtained

alleged

of the

preparation

for use by the Independent

trial,

portions

of

Counsel

from or belong

to have been a co-conspirator

or

of Tucker.
D.

inspect
or

Plaintiff

DEFENDANT'SPRIOR RECORD: Furnish

any

and

by any person

REPORTS OF EXAMINATIONS

and copy or photograph

mental

including

examinations,
handwriting

the possession,
existence

custody,

of which

may become

known,

is
to

any results

and of
analyses,

the

Permit

tests

or copies

thereof,

Independent

exercise
Counsel,

to

of physical

or experiments,
which are within

of the Independent

or by the

TUcker

or reports

scientific

or control
known,

AND TESTS:

Counsel,

the

of due diligence
and

which

are

2

AMFnlCAN

VERSIGHT

18-1621-000145

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 145

material

to the

by the

Independent

E.

the
at

Independent

the

bases

qualifications.

and

Tucker

exhibits

prepared

to Tucker

a written

intends

summary
the

expert

at

the

therefor,

of

witness

use

trial.

its

the
and

copies

for

summary of expert

describe

requests

any

intended

to use during

must

reasons

also

by

or are

in chief

Counsel

This

defense

as evidence

Disclose

trial.

opinions,

of the

counsel

EXPERTS:

testimony
chief

preparation

in

witnesses'

the

witnesses'

any

for

case

explanatory

trial

use

or

Rule

16

demonstration.

CONTINUING
DUTYTO DISCLOSE: In

F.

of the

Federal

trial,

the

material

Rules

of Criminal

Independent
previously

discovery
shall

or

of the

prays

that

least

forty-five

requested

inspection

promptly

existence

Counsel

notify

Tucker's

additional

compliance
days

Procedure,
discovers
or

under

Rule

prior

16,

with

prior

to or during

additional
which
the

evidence

or

subject

to

is

Independent
or

the

or material.

Independent
to

if,

ordered,

· Attorneys

evidence

by the

accordance

Counsel

Counsel

court
Tucker

of

the

further

be completed

at

trial.

Respectfully

submitted,

JIM GUY TUCKER, Defendant

3

AMFnlCAN

VERSIGHT

18-1621-000146

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 146

William

H. Sutton - AR #59018
FRIDAY, ELDREDGE& CLARK

400 w. Capitol,
Suite 2000
Little
Rock, AR 72201
(501) 376-2011

George B. Collins
- AR #53032
COLLINS & BARGIONE
1 N. LaSalle
st.,
#2235
Chicago,
IL 60602
(312)

372-7813

James J. Lessmeister
- AR 194038
ARNOLD, GROBMYER& HALEY
124 w. Capitol,
Suite 875
Little
Rock, AR 72201
(501)

376-1171

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby certify
that I have served
a copy of the foregoing
pleading J>~.u.s. Mail, postage
prepaid
to
the below named parties
on this~
day of September,
1995.
Mr. Kenneth w. Starr
Mr. Hickman EWing
Mr. Steve Colloton
Office of Independent
Counsel
10825 Financial
Centre Parkway
TWo Financial
Centre,
Suite 134
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
72401
Attorney
for Susan McDougal·
Ms. Jennifer
Horan
Federal
Public Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 w. Capitol,
Suite 3821
Little
Rock, AR 72201
Attorney
for James McDougal

4

AMl HICAN

VERSIGHT

18-1621-000147

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 147
r ....
, ,., ~, f:"''"' ,....
THE UNITED STATES DISTRICT
COURT
!::');r!_J·
-:,) J
EASTERN DISTRICT
OF ARKANSAS
_ c-;~--\:\
F\ .f.t~~'.}
·r:;::-.
i)F?.T··.
WESTERN DIVIS ION
EA ... · ,_.•.•.• D,::i 11•,,c,T , JV~ANSAS

IN

UNITED

DEP2 5 1995
STATES

OF AMERICA

)

Plaintiff

•!M,•ES l'! . tt:CORt11,C:(, CLER!<

)
)

v.

r.:y : ----------

LR-CR-95-173

)

D::.P CLEF
~K

)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

)
)

)
)

DEFENDANTJIM GUY TUCKER'S MOTION TO REQUIRE INDEPENDENT
COUNSEL TO GIVE NOTICE OF ITS INTENTIONS
TO INTRODUCE RULE 404(b)
AND RULE 608(b)
EVIDENCE

Comes now Defendant
his

undersigned

Counsel
Rule

to

1.

That

the

of motive,
identity,
nature

of
2.

notice

absence

any

such

regarding

the

intent
the

with

608(b)

it

Independent
to

witness

being

of

or
of
cross

intention

and

the

to
any

witness'

to

proof

general
at

trial.

Tucker

its

608(b)

material

character

concerning

the

witness
has

offer

knowledge,

introduce

provide

examined

to

goes

plan,

to

another

introduce

Tucker

that

evidence
the

to

its

accident

into

to

case-in-chief:

provide

intends

concerning

or untruthfulness

its

through

Independent

intention

preparation,
or

by and

the

evidence

counsel

introduce

truthfulness

witness

trial

of mistake

or untruthfulness,

the

Co~nsel

intent,

evidence

of
in

character

truthfulness

character

notice

of

("Tucker")
request

evidence

advance

404(b)

opportunity,

That
of

in

any

or

record,

Independent

notice

evidence

Guy Tucker

of

Tucker

and Rule

reasonable
into

attorneys

provide

404(b)

Jim

for

character
as

to

for

which

testified.

AMLHICAN

pVERSIGHT

18-1621-000148

 ..
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 148
3.

That

of

intention

in

its

be used,

the
to

Independent
introduce

case-in-chief,

prevent

to

provide

the

(a)

The specific

(b)

Statements

(c)

Any document

contending

(d)

With

respect

to

which

the

Independent

Defendant
prejudicial

and

for

to

and Rule
to

Tucker

608(b)

Tucker,

if

notice
evidence

intended

to

following:
details
of

is

such

alleged

conduct;

or

404(b)

evidencing

evidence,
Counsel

such

the

issues

believes

the

conduct;
on

relevant.

Tucker

other

of any

any participants;

requests

surprise

all

provide

404(b)

with

WHEREFORE, Defendant
motion

Rule

and

evidence
4.

Counsel

at

said

information

so as to

trial.

Tucker

prays

relief

to

for

which

an order
he

is

granting

entitled

his

to.

Respectfully
submitted,
JIM GUY TUCKER,
Defendant
By:
Wi~
FRIDAY, ELDREDGE & CLARK
400 w. Capitol,
Suite
2000
Little
Rock, AR 72201

( soi)

376~2011

George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372- 813

smeister
- AR #94038
ARNOLD, GR BMYER & HALEY
124 w. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171

AMLHICAN

pVERSIGHT

-2-

zjjlllO
18-1621-000149

 ,

I

_ ,
•

FOIA RD 56806 lURTS 16302} Docld: 70104908 Page 149
CERTIFICATE OF SERVICE
I, James J. Lessrneister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by d~,:_Mail,
postage
prepaid
to the below named parties
on this.
day of
September,
1995.
Mr. Kenneth
W. Starr
Mr. Hickman Ewing
Mr. Steve
Colloton
Office
of Independent
10825 Financial
centre
Two Financial
Centre,
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

Counsel
Parkway
suite
134

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr. Sam T. Heuer
425 w. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

AMFnlCAN

VERSIGHT

-3-

zjjlll0
18-1621-000150

 ·,. •

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 150

IN THE UNITED STATES DISTRICT COUR,'T',
_fi~,:i.I~.L,,f-:T:EjQ)1
.~~
t..-\~' •.•:'\l
EASTERNDISTRICT OF ARKANSAS'A.ST
'.-::H~-J
Dl;C;TRICTf,11:{ANSAS
WESTERNDIVISION
--

UNITED STATES OF AMERICA
Plaintiff

)
)
)
)
)
)
)
)
)

v.
JAMES B. MCDOUGAL,

JIM GUY TUCKER, and
SUSAN H. MCDOUGAL

Defendants

rn,-1!:
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t1., CLEnK
n

l"1.

JH •

. f1.Jil/·\

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CLEfx;(

LR-CR-95-173

MOTION FOR BILL OF PARTICULARS

Comes Defendant,
for

his

the

Federal

Motion

counsel

for

Rules

be required

Jim Guy Tucker
Bill

("Tucker"),

of Particulars

of Criminal

pursuant

Procedure

to furnish

by counsel,

to this

prays

and

to Rule 7(f)
that

Defendant

of

Independent
the

following

particulars:
AS TO COUNT ONE

As to paragraph
Defendants
the

are

lending

alleged

limit

As to paragraph
contention

Set

of Capital
1(k):

Set

it

is alleged

~orth

Counsel

Loan ("MGSL") and any of the

which

the

that

manner
to cause

Management

to David L. Hale,

As to paragraph

forth

to have conspired

of Independent

representation
&

l(i):

Services,

whether
Tucker

Inc.

counts

it

is the
legal

Guaranty
in the

Set

the

specific

Tucker

had a fiduciary

duty

in

("CMS").

provided

l(k):

forth

an increase

or not

CMS or Madison
alleged

as to which the

savings

indictment.

matters

in

to David Hale,

CMS or MGSL.

AMl HICAN

VERSIGHT

18-1621-000151

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 151

As to paragraph
L.

Hale,

with

2:

contention

2:

persons,

alleged

the

forth

of the

date,

Counsel

than

David

to have conspired

time

the

other

who

indictment.

time

and place

as to the

formation

of
of the

conspiracy.

contention

2(a):

intended

credits

of Madison

fraud

2(b):

as to which the

and willfully

institution

the

Counsel

savings
set

date,

and deceive

the

the

are

date,

alleged

intent

Federal

of

Defendant's
funds

Loan Association

&

the

and place

of monies,

time,

and

("MGSL").
place

and

to have knowingly

to be made false

of MGSL with

time

as to the

forth

Defendants

made or caused

and records

forth

or misapplication

Guaranty

As to paragraph
manner

Set

of Independent

alleged

books

at

of Independent

As to paragraph
the

Set

the

are

Grand Jury

As to paragraph

alleged

forth

whom Defendants

were known to the

the

Set

entries

in the

to defraud

the

Home Loan Bank Board

("FHLBB").
As to paragraph
manner

2(c):

in which the

received

directly

and benefits
to defraud

Defendants

forth

alleged

institution,

the time,

allegedly

and indirectly,

of the
the

Set

the

knowingly
money,

transaction
and the

place,

profit,

States

and

and willfully
property

of MGSL with
United

date

the

intent

and an agency

thereof.
As to paragraph
manner

in which the

misapplied

or cause

2(d):

Set

Defendants

forth

the

allegedly

to misapply,

the

date,

time,

knowingly

monies,

funds

place

and

and willfully
and credits

of CMS.

AMFnlCAN

VERSI

HT

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18-1621-000152

 I,

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 152

As to paragraph
manner

in which the

2(e):

Set

Defendants

to be made false

and statements

of CMS with

common agency

auditors

applications

thereof,

2(f):

date,

knowingly

entries

in the

intent

place

and

and willfully

books,

to defraud

and officers,

Set

of influencing

fraudulent

forth

the

Defendants

made and caused

purpose

reports

the

United

examiners

and

specific

allegedly

to be made false

the

actions

loan
knowingly

statements

of CMS and the

and

for

the

making of

loans.

As to paragraph
in which the
the

available

affairs

funds

who assisted

Set

Defendants

forth

the ·date,

allegedly

time,

decided

of MGSL and CMS to generate
the

place
to

and

fraudulently

readily

joint

ventures

or those

them.

allegedly

assist

As to paragraph
dealings

3:

to be used by them,

~s to paragraph
did

the

in which the

willfully

conduct

time,

thereof.

As to paragraph

manner

the

allegedly

made or caused

States,

forth

3:
the
4:

Set

forth

Defendants
Set

which were allegedly

forth

those

persons

in their
the

business

specific

f~audulently

who would and
ventures.

financial

structured

by the

Defendants.
As to paragraph
auditors

dealings

Set

forth

the

names of the

4:

Set

forth

the

manner

examiners,

and others.

As to paragraph
Defendants

4:

allegedly
with

conspired

to structure

as to which the
fraudulent

financial

MGSL and CMS.

AMERICAN

PVERSIGHT

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18-1621-000153

 I..

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 153

As to paragraph
transactions

5:

forth

the

which were allegedly

generating

fraudulent

auditors

Set

the

true

profits

nominee

fraudulent

for

or disguising

ownership

As to paragraph

specific

of the

the

purpose

from examiners

of
and

assets.

5:

Set

forth

the

names of examiners

5:

Set

forth

the

time,

and

auditors.
As to paragraph
manner

in which

fraudulent

the

nominee

Defendants

"land

in which the
flip"

manner

6:

in which

the

Set

forth

Defendants

and other

As to paragraph

conspired

Set

time,

allegedly

fraudulent
7:

the

forth

the

manner

in which

L. Hale control
business

the

8:

and

to engage

in

Defendants

conspired
the

allegedly

majority
the

of the
business

("MFC")".

time,

place

conspired

stock

and

to have James

Corporation

the date,

of_the

place

and

to have David

of CMS and direct

its

affairs.

As to paragraph

9:

dealings

and investments

involved

opportunities

As to paragraph
which

forth

the majority

place

time,

and control

Financial

Set

date,

date,

allegedly

influence

of MGSL and Madison

As to paragraph

in

transactions.

Defendants

of MGSL and direct,

affairs

and

to engage

· conspired

B. McDougal and Susan H. McDougal control
stock

place

transactions.

As to paragraph
manner

allegedly

date,

the

Defendants

Set
that
for

10:

forth

allegedly

specific

were of mutual

share

Set

the

"various

business

interest

or

profits."

forth

the

conspired

specific

transactions

to generate

in

fraudulent

AMl HICAN

VERSIGHT

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 '·

.. -·
FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 154

paperwork
with

the

so as to make the
sound business

As to paragraph
which the

Defendants

fraudulent

fraudulent

loans

or business

11:

Set

and existing

forth

allegedly

to be consistent
regulations.

any and all

conspired

11:

Set

forth

which benefited

associates

As to paragraph
and fraudulent

on behalf

practices

appear

alleged

steps

in

to have CMS make

loans.

As to paragraph

"false

transactions

of nominee,

of the
11:

Set

loan

the
the

specific

alleged

Defendants,

their

friends

Defendants.
forth

specifically

applications

borrowers,

the

alleged

and proposals,

and secured

submitted

by insufficient

collateral."
As to paragraph
fraudulent

loan

the

As to paragraph
contention
of the

As to paragraph
financial

As to paragraph
contention

12:

wh~ther

State

Counsel

that

specific

alleged

conspired
or not

it

to arrange.
is

the

TUcker had any knowledge

loan.

13:

Set

13:

State

of Independent

of CMS's application

"fraudulent

the

forth

the

specific

"various

ventures."

As to paragraph
contention

forth

allegedly

fraudulent

As to paragraph

Set

Defendants

of Independent

alleged

business

12:

Counsel

to the
15:

~hether

Set

forth

of Independent

counsel

alleged

MGSL, MFC, and CMS."

whether
that

is the

_funds.

any and all
with

State

it

TUcker had any knowledge

SBA for matching

transactions
15(a):

that

or not

or not

Tucker

it

is the

had any knowledge

AMFnlCAN

VERSIGHT

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18-1621-000155

 - ,.
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 155

of the

alleged

Arkansas

transfers

property

from one nominee

As to paragraph
Defendants

are

grand

at the

jury

15(a):

alleged

Defendants

are

grand

at the

alleged
time

15(c):

d/b/a

with

As to paragraph
to Tucker

The Communication

of the

loan

fraudulently

generate
Susan

million

inflated

persons

with

whom

known to the

..

indictment.
whether
that

or not

Tucker

it

is the

had any knowledge

from CMS to Larry

specifically

the

from CMS to Steven

State

whether

Counsel

that

or not

Tucker

misrepresented
Set

Defendants

E.

benefit

Smith,

d/b/a

forth

the

a~Jegedly

for

it

is the

had any knowledge

loan
date,

application.
time,

conspired

from MGSL to Castle

profits

Sewer

MFC and commissions

place

and

to have a
&

Water

( 11CSW11 )

to Defendant

H. McDougal.

As to paragraph
manner
loan

known to the

who are

Set .forth

15(e):

in which the

of $1.05

whom

Company.

15(d):

As to paragraph
manner

the

conspired

of $65,000

of Independent

alleged

with

Company.

As to paragraph
contention

persons
who are

of $143,000

15(d):

from a loan

the

forth

State

Realty

Rock,

indictment.

Counsel

a loan

Campobello

forth

Set

of the

Little

to another.

conspired

to have

of Independent

or involvement
Kuca,

of the

15(b):

As to paragraph
contention

Set

to have

time

As to paragraph

jury

of 1308 Main Street,

15(h):

in which the

of $100,000

Defendant

Set

Defendants

forth

the

allegedly

from CMS to Southloop

Jim Guy Tucker's

interest

date,
conspired

to conceal

in the

time,

place

to create

and
a

and hide

loan.

AMl HICAN

VERSIGHT

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18-1621-000156

 -

•·

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 156

As to paragraph
conveyed

by Tucker

16(b):
for

As to paragraph
contention
of the

selected

As to paragraph
contention

alleged

estate

by James

State
Counsel

alleged

deed

1308 Main Street.

that

or not

Tucker

it

is the

had any knowledge

B. McDougal.
I

whether
that

or not

Tucker

of fraudulent

16(f):

of $143,000

it

is the

had any knowledge

appraisals

of real

state
Counsel

whether
that

or not

it

is the

TUcker had any knowledge

from CMS to Larry

E. Kuca d/b/a

Campobello

Company.

As to paragraph
contention

16(g):

of Independent

of a loan
d/b/a

16(d):

of Independent

of a loan

whether

specific

B. McDougal and David L. Hale.

As to paragraph
contention

State

by James

preparation

the
at

Counsel

of Independent

of the

forth

property

16(b):

of Independent

nominee

Realty

the

Set

in the

contention

that

or not

it

is the

TUcker had any knowledge

from CMS to Steven

A. Smith,

Company.

16(h):

of Independent

an $825,000
subsequent

Counsel

whether

amount of $65,000

The Communication
As to paragraph

State

state
counsel

whether
that

or not

Tucker

loan

from MGSL to Dean
- . Paul
purchase
of falsely
appraised

is the

had knowledge

. and

Ltd.

it

real

the

of

alleged

estate

from David

L. Hale.
As to paragraph
contention

16(k):

of Independent

State
Counsel

whether
that

knowledge

that

David L. Hale

received

from the

alleged

fraudulent

Dean Paul

or not

it

is the

Jim Guy Tucker
$502,000
Ltd.

real

in net

had any
proceeds

estate

transaction.

AMLHICAN

pVERSIGHT

-7-

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18-1621-000157

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 157

As to paragraph
contention
that

16(1):

of Independent

State
Counsel

David L. Hale caused

whether
that

or not

Tucker

CMS to apply

it

was the

had any knowledge

to SBA for

leverage

funding.
As to paragraph
contention
of the

of Independent

alleged

McDougal for
Master

16(m):

false

Counsel

whether
that

and fraudulent
loan

$300,000

contention

Tucker

loan

it

is the

had any knowledge

application

from CMS to Susan

16(n):

of Independent

alleged

State

by James

B.

McDougal d/b/a

Counsel

that

fraudulent

to Susan McDougal d/b/a

Master

Marketing.

contention
of James

16(0):

of Independent
B. or Susan

fraudulent

State

Counsel ,that

Marketing

alleged
loan

loan

or not

Tucker

it

from CMS

is the

had any knowledge

deposit

into

is the

had any knowledge

$300,000

whether

H. McDougal's

Master

it

Tucker

of the

As to paragraph

oJnot

whether

proceeds

of the

or not

Marketing.

As to paragraph

of the

State

of proceeds

their

joint

account

at MGSL.
As to paragraph
contention

16(p):

of Independent

State

Counse~ that

that

Susan H. McDougal received

role

in the

sale

conspired

or not

Tucker

with

16(q):
whom the

Set

forth

Defendants

who were known to the

it

is the

had any knowledge

in commissions

$85,000

of MFC Sewer & Water System

As to paragraph
David L. Hale,

whether

the

persons,

are

Grand Jury

through

the

her

CSW.
other

alleged
at

for

than

to have
time

of the

indictment.

AMi-=nlCAN

pVERSIGHT

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18-1621-000158

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 158

Respectfully
submitted,
JIM GUY TUCKER,
Defendant

1iif£;rvJ·*
S7IL

By:

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK

400 W. Capitol,
Suite
Little
Rock, AR 72201
(501)

2000

376-2011

George

B. Collins

- AR #53032

COLLINS & BARGIONE

#1 North
Chicago,
(312)

LaSalle
Illinois

street,
60602

#2235

372-7813

(2
C ARNOLD,

ssmeister

- AR #94038

OBMYER& HALEY

124 W. Capitol,
Suite 875
Little
Rock, AR 72201
(501) 376-1171
CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby certify
that I have
served a copy of the foregoing
pleading
by U.S. Mail, postage
prepaid
to the below named parties
on this ~J...... day of
September,
1995.
Mr. Kenneth W. Starr
Mr. Hickman Ewing
Mr. Steve Colleton
Office
of Independent
Counsel
10825 Financial
Centre Parkway
Two Financial
Centre,
Suite 134
Little
Rock, AR 72211
Mr. Bobby McDaniel
400 s. Main
Jonesboro,
Arkansas
72401
Attorney
for Susan McDougal
Ms. Jennifer
Horan
Federal
Public Defender
600 W. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal

AMFnlCAN

VERSIGHT

-9-

zjjll03
18-1621-000159

 -.
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 159
Mr. Sam T. Heuer
425 W. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

AMERICAN

PVERSIGHT

-10-

zjjll03
18-1621-000160

 1,-

;

.

:-:·

;
FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 160

INTE~s,r"i'iiii"'E
o"/5o"xii:ic
~sA"s00RT
";c,,,r,/'.'
_h½~
) .·;;i1,
WESTERN DIVISION

UNITED STATES OF AMERICA
Plaintiff

· '·• ·'1t3AS

)

)

v.

)
)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

.'.\
.. •·\:"t

LR-CR-95-173

r,,,
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· ..f :1uL,,
,., .. ,.~",

1

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____ ...

·•·-

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)
)

)
)

AFFIDAVIT IN SUPPORT OF MOTION FOR BILL OF PARTICULARS
STATE OF ILLINOIS)
)

COUNTY OF COOK
I,

George

B. Collins,

I am the

1.

the

)

defendants

affidavit
order

in

in

support

directing

the

being

attorney
the

for

above
of

duly
Jim

sworn,
Guy Tucker

entitled

the

{"Tucker"),

action,

motion

Independent

state:

of

and make this

Defendant

Counsel

to

one of

file

Tucker

for

a bill

of

an

particulars.
2.
alleges

The
that

B. McDougal
unindicted
and

other
3.

existed
4.
locatfons

indictment

filed

Defendant

Tucker,

and Susan

The
during
The
at

on August

with

to

1995,

co-defendant

and an unstated

conspired

17,

violate

James

number
18

of

u.s.c.

§

371

statutes.

indictment
the

case

together

H. McDouga~

co-conspirators,
specific

in this

further

period

from

indictment

fails

which,

the

and

alleges

that

1985 through
to

dates

state

with

and times

such

conspiracy

1987.
particularity
when,

the

the
various

AM HICAN

pVERSIGHT

18-1621-000161

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 161

defendants

and co-conspirators

committed

the

5.

alleged

joined

overt

The indictment

acts

which

defendants

which

overt

acts,

th overt

acts

alleged

conspiracy
conspiracy,
introduce

evidence

fails

the

of other

with

or co-conspirators

which

objects

committed

of the

alleged

in furtherance

Independent
overt

and

thereof.

to state

were committed

and whether

conspiracy

in furtherance

further

particularity

the

Counsel

acts

of the

intends

not alleged

to

in the

indictment.
6.

The indictment

particularity

the

the

other

bill

of particulars.

7.

There

could

to trial
select

theory

9.

whether
of other
10.

defendant

in this

to provide
requested

him of the

nature

also

similar

The information
Tucker

Independent
theories

adequately

motion

for

in this

case,

Counsel

might

Tucker

and therefore

fails
Counsel

which he

of evidence.

Counsel
fails

of the

charge

to inform
intends

The

as to the

Independent

and scope

Independent

so-called

Defendant

case,

The indictment
or not

the

of presentation

on which the

specific

in the

examination

any one of several

time

with

innocent.

nature,

to inform

or theories

inform

is presumed

under

fails

in this

information

of this

at the

indictment

rely

Tucker

In a case

proceed

fails

has been no preliminary

and Defendant
8.

further

specific

intends

to

to adequately
against

Defendant
to present

him.
Tucker

of

evidence

offenses.
requested

is essential

to prepare

for

to enable

and proceed

to trial

case.

AMERICAN

PVERSIGHT

-2-

zjjl-113

18-1621-000162

 .

..
FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 162
Without
the requested
information,
Defendant
Tucker

11.
defense
time

counsel
and money

Independent
theory

in

to

enable

evidence
on and

Defendant

Tucker

Defendant

introduction

and will

focus

save

12.

The requested

avoid

surprise

at

extremely

likely

that

the

trial,

due

possibility
during

counsel

to

that

defense
time

trial.

such

trial

therefore
and the

issues

to

of

the

be tried,

will

and

enable

such

be long
there

would

information,
periods

is

have

Defendant

of

Tucker
it

is

delay

during

a substantial
to

request

a continuance

trial.

FURTHER

Dated:

17:;
r;~T~:?J~
~
ifeorge

this

avoid

will

time.

will

defense

actually

The granting

actual

Without

there

of which

and will
for

trial.

on the

information

surprise,
the

at

of

information
to

preparation

trial

possible

and money,

evidence

significant

every

Counsel

and

parties

amounts

regardless

The requested

of

great

investigate

Independent

Tucker's

the

expend

present.

of defense

will

to

issues,

the

expenditures

facilitate

to

evidentiary

rely

unnecessary

motion

be compelled

attempting

Counsel

and which

intends

to

will

and

SUBSCRIBED AND SWORN to
~J ✓ day of September,

before
1995.

Notary
My Commission

B. Collins
me,

'
a Notary

Public,

Public

Expires:

Nrv_ J J
"OFFICIAL SEAL"
Darle1!e Colbr:1orc

AM

V

Noiarv Pl!l1 !i: , S:.itc of Illinois
(,tyC::n;::,s,i;i,1Exp:r~s i\0v. 23.I 997

-3-

zjjl-113

18-1621-000163

 - .,..

.-.

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 163

r--·n ~, r,,..,..
.

fr l)=J·:;fi)
"-U~~}~1
CJRic
0

IN THE UNITED STATES DISTRICT COURT
:i c'.o:iR
EASTERN DISTRICT OF ARKANSAS
C:A-,,1::Rc,, Dk,Tmcr r.r-1
:(.:1,
T~sAs, ·
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

,..,;.,~:~ t·

~ ""·--~ ·'1. M:COot-./i,1C'
·' "l,..i:'J•

)

)

v.

Lly: ------

- .. ,

V

C11 \

:-.·=------CU:RX:

LR- CR- 9 5 -1 7 3

)

C-.~?

)
)
)
)
)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

MEMORANDUM
IN SUPPORT OF DEFENDANT
TUCKER'S MOTION FOR BILL OF PARTICULARS
MAY IT PLEASE THE COURT:
Rule
provides

7(f)

of

that

the

the

Federal

Court

Rules

of

may "direct

Criminal

the

Procedure

filing

of

a bill

of

particulars".
There

is

no requirement

provision

having

decision

in U.S.

later

Justice,

facts

Smith,

Whittaker

upon
at

which
372.

Cir.

identify

(MD Fla.

the

cause,

by amendment

16 F.R.D.

wrote

that

that

the

pleader

See,

also,

obvious

unindicted

793 F.Supp.
434

of

372

that

following

the

(WO Mo. 1954)

(Judge,

the

presumption

defendant

founds

his

Fontana

of

"is

ignorant

charges".

vs.

U.S.,

innocence
of

the

Smith,

262 Fed.

16

283,

286

1919).

The most

432,

eliminated

an assumption

F.R.D.
(8th

vs.

a showing

Whittaker).

Justice
requires

been

of

57,
(D.Conn.
1986).

use

of

the

Bill

of

co-conspirators.
60

(N.D.N.Y.
1990);

These

Particulars

See,

1992);

U.S.

vs.

Williams,

U.S.
precedents

would

e.q.,
vs.

apply

is
U.S.

White,

to
vs.

Longo,

753 F.Supp.

113 F.R.D.
particularly

177,

179
to

AMLHICAN

pVERSIGHT

18-1621-000164

 - ~·
FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 164

paragraphs
James

of count

One which

B. McDougal and Susan

persons

both

charges

Defendants

H. McDougal with

Jim Guy Tucker,

conspiring

with

known and unknown to the Grand Jury.

The identity

of "co-conspirators"

defines

conspiracy,

and non disclosure

prejudicial

and of no use to Independent

until

trial

the

alleged

would be both
Counsel

except

surprise

at trial.
The complexity
Bill

of this

of Particulars.
Equipment.

prosecution

there

should

including

be informed

involved,

and the

defendants

did

adequately

defended

This
U.S.

required

of each

the
the

necessary
ask that
particulars

that

the

court

require

particulars

vs.

1989).

In this
the

time

a

The

as to each
case

we

persons

The vagueness

by the

opinion

of claims
cannot

of Judge

177 (W.O. Ark.
of .Justice

that

be

been omitted

Miller

1966).

Whittaker

to identify

a tax

Bill

for

was U.S.

1 (D.o.c.

charges,

need for

information.

opinion

with

case

some undefined

to have

to prepare
the

at

prosecution

charged

We submit

exact

254 F.Supp.

item claimed

an attorney

to give

involved.

is supported

following

complex

the

names and accounts.

without

Anderson,

Miller,
supra,

dates

demonstrates

711 F. Supp.

as to the

some act

point

vs.

Inc.,

was required

claimed,

also

An equally

Recognition

payment

case

the

in

Judge
in Smith,

payer

from the

and amount

tax

return

of

crime.

of Particulars

and defend
Independent

requested

against

this

counsel

is

indictment,
to furnish

and
the

requested.

AM HICAN

pVERSIG

T.

-2-

zjjl10918-1621-000165

 .- ,,
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 165

Respectfully

submitted,

JIM GUY TUCKER, Defendant

By:

~~
-Aiifuo1s

William

H. Sutton

FRIDAY, ELDREDGE & CLARK

400 w. capitol,
Suite
Little
Rock, AR 72201
(501) 376-2011

2000

George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813

#94038

CERTIFICATE OF SERVICE

I, James J. Lessmeister,
do hereby certify
that I have
served a copy of the foregoing
pleading
by U.S. Mail, postage
prepaid
to the below named parties
on this 6)5h
day of
September,
1995.
Mr. Kenneth W. Starr
Mr. Hickman Ewing
Mr. Steve Colloton
Office
of Independent
Counsel
10825 Financial
Centre Parkway ·
Two Financial
Centre,
Suite 134
Little
Mr.

Rock,
Bobby

AR 72211

McDaniel

400 s. Main
Jonesboro,
Arkansas
72401
Attorney
for Susan McDougal
Ms. Jennifer
Horan
Federal
Public Defender
600 w. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal

AMLHICAN

pVERSIGHT

-3-

zjjl 109

18-1621-000166

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 166
Mr. Sam T. Heuer
4 ~ 5 W. Capitol,
Suite
3821
Little
Rock, AR 7 2201
Attorney
for James McDougal

AMl HICAN

VERSIGHT

-4-

zj jl 109

18-1621-000167

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 167
.

,,· ,-,r, ,,
..•
....,.,,, 1.1 r:,,:,,~

IN THE UNITED STATES

DISTRICT

EASTERN oisTRICT

·

WESTERN DIVISION

UNITED STATES OF AMERICA;

)
)

Plaintiff,

JAMES B. MCDOUGAL, JIM GUY
TUCKER, and SUSAN MCDOUGAL,

Defendants.

•V

01srRicVt~H/:'
..\, _,.
,NSAs
ttP 2 5 i'•.-,,J
•.u ·

T,:~t -J

r,,...

JAMESl1/.

Dy·

)
)
)
)
)
)
)
)

v.

C!..:~/e1½~~:{;f;;,J'~

COU¥::f,:-

oF ARKANsAs

· ------

· fAcCGaMAr~•r
C

"·•· . LERK

L:2 (;Uj{K
·

No. LR-CR-95-173

MOTION FOR DISCLOSURE OF ARRANGEMENTSWITH WITNESSES
Comes the
Motion

to

require

arrangements,
states

as
1.

deals,

Services,

by David

B.

Directors
real

estate

division
2.
to

crimes

sentenced,
Further,

Counsel

and

to

for

his

disclose

and immunities

Inc.

regarding

with

("CMS") and/or

&

a

small

L. Hale.

its

witnesses,

loan

McDougal

was

MFC and
broker

Madison

business

association

Financial

Defendant

who worked

Susan
for

by

Corporation
corporation
federally

Defendant

James

of MGSL.

Chairman

of

H. McDougal

Madison

Savings

chartered,

owned subsidiary
and

Capital

Guaranty

investment

owned

President

with:

Madison

MGSL was a state

MFC was a wholly

of

transactions

("MGSL") and/or

savings

James

is

CMS was

McDougal.

Independent

("Tucker")

follows:

( "MFC") .

insured

Guy Tucker

transactions,

Loan Association

controlled

Jim

the

The indictment

Management
&

Defendant

Real

B.

Defendant

the

Board

of

was a licensed

Estate

Company,

a

of MFC.
David

L. Hale

relating

to

although

a

Hale

has

resided

was known to have
CMS,

upon

significant
away from

entered

which

he

period
his

of

usual

a plea
has
time
place

of guilty

not

yet

has
of

been

passed.
abode

for

AMl HICAN

VERSIGHT

18-1621-000168

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 168

more

than

Counsel's

a year,
expense

Independent

with

Hale

has

unrelated

significant

criminal

4.
of

for

The

but

not
a.

its

be

living

at

and other

offenses

in

Tucker,

for

penalties,

unless

relieved

to be given
Counsel

Independent
benefits

which

be

or other

be complete,

from

operation
he

Tucker.

to

arrangements

-Counsel,

face

penalties

Defendant

disclose

with

include

all

including

of

will

of those

required

and should

by Ind~pendent

the

against

should

and immunity

upon Hale
limited

serious

Defendant

should

Hale.

benefits

specifically,

to;

Immunity
any

from

for

whether

benefits

any

formal

crime

or

or payments,

or

from

the

use

informal.

including

tax

benefits

or

deferrals.

Any benefits
to

prosecution

evidence,

Financial
tax

c.

to

of immunity

testimony

financial

of
b.

promises

Independent

The disclosure
conferred

believed

committed

to

as compensation

all

is

Counsel.

3.
CMS,

and

visit

by way of
a friend,

services,

legal

such

services

or

as transportation
other

services

of

any kind.
d.

Any benefits
for

the

by way of intervention

prosecution

including
Pulaski

specifically
County,

authority
have
include,

with

(of

legal

and
any

difficulty.
but

not

other

prosecutorial

the

Prosecuting

including

State)

limited

by any person

any other

with

which

This

paragraph

to the

Hale

Internal

acting

authorities,
Attorney
Federal

or State

would
is

of

or might

intended

Revenue

to

Service

2

AMl HICAN

VERSIGHT

18-1621-000169

 -.
FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 169

("IRS")

,

Small

Business

Trust

Corporation

Resolution
Insurance
State
e.

Corporation

prosecutor

to

protect

the

any
Hale

any

,

Deposit
Federal

or

by

Independent
by other

committed

by Independent

authorities
of

in which

prosecution
with

Any communications

to

efforts

made on Hale's

protect

Hale

from

attempts

by

Hale

of Arkansas.

cooperation

authority,

to

crimes

undertaken

deferral

continued

and

Federal

from prosecution

for

citizens

any prosecuting

g.

David

Any negotiations

obtain

to

authorities

against
f.

("FDIC") ,

relating

prosecuting

("RTC"),

("SBA")

anywhere.

Any evidence
Counsel

' Administration

of

Hale

. behalf

said

purpose

Hale

with
was to

pending

his

Counsel.

or his

counsel

by Independent

prosecution

whether

the

Independent

David

Counsel

by any

other

communications

are

of

the

Counsel

to

prosecuting
in writing

or

oral.
h.

Any communications
relating

i.

to

Counsel

prosecuting

authorities.

(In

duty

responding,

to

Any

benefits

on

include

investigate
before
by

or
of

please

to

jurisdiction

to

subj~ct

Independent

authorities

j.

the

by,

Hale

efforts

behalf

or
of

or

Hale

"other

any official

having

any court
of

any criminal
in the

shielding

his

counsel

intervention

consider

or prosecute

way

with

United
Hale

with

by
other

prosecuting
the

right
act

or

in any

States.]
from

civil

3

AMFnlCAN

VERSIGHT

18-1621-000170

 ----------------------------------------

•'

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 170

liabilities,

whether

assets,

k.

by

concealment

avoidance

of

service

Hale

the

IRS.

with

Any payment
claimed
Hale,

of

to
or

in

of

Hale,

or

of

civil

process,

expenses

have
any

assisting

or

been

as

assisting

Hale
or

or

of
in

the

assistance

reimbursement

incurred

payment

concealment

for

actually

to

expenses

incurred

compensation

or

for

by

living

expenses.
1.

Any act

done

employee

of Independent

by

be of benefit

the

m.

Any medical

s.

Hale

SBA Act,

Independent

Counsel.

between

assurances
Hale

6.

to

all

Defendant

Counsel's

counts

of the

Tucker
deals

of

committed

known to
TU.cker

the

is,

any

agent

or was,

or

or may

requests

or arrangements

indictment,

including

kind

to

Hale.

numerous

violations

of

SBA and,

therefore,

to

information

relating

successor

also

any

requests

negotiations

and SBA, or RTC as

Defendant

Independent

or .coverage

are

or

which

or

Hale.

to have

of which

Counsel,

Counsel,

benefits

is believed

all

settlements,

to

Independent

or

to

such

receiver

as

to

matters

of CMS.

all

information

with

other

but

not

as

witnesses
limited

to

to
as
the

following:
Bessie
Aunspaugh
Lisa Aunspaugh
Robert
Betts
Steve Cuffman
Don Denton
Jim Gardner
Richard
Grasby
Pat Harris
Bill
Henley and any other
Pat Heritage

relative

of Susan

McDougal

4

AMLHICAN

pVERSIGHT

18-1621-000171

 -----------------------------------FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 171

Larry Kuca
John Latham
Guy Maris
Sheffield
Nelson
Robert Palmer
Dean Paul
Caren Ross
Steve Smith
Sue Strayhorn
Thomas Trantham
Seth Ward
William Watt
Greg Young
Any other person upon whom the Independent
to rely for evidence
herein.
7.

These requests

are made pursuant

Amendment V to the United
decisions

in

Maryland.
allow

U.S.

373 U.S.

Defendant

and demonstrate

v.

Giglio,

83 (1963).

Tucker
bias,

interest

its

Independent
deals

and arrangements

and whether
simple

counsel

formal

to due process

Constitution,
405 U.S.

150

and

set

of

to the
Brady

v.

so as to
witnesses,

of credibility.
prays
forth

with witnesses,

or informal,

(1972)

is required

TUcker respectfully
to produce,

clause

Hale and other

and lack

plans

and pursuant

The information

to cross-examine

WHEREFORE,Defendant
· order

States

Counsel

and whether

that

this

court

and identify

whether

written

by binding

all

of

or oral,

contract

or

assurance.

Respectfully

submitted,

JIM GUY TUCKER, Defendant

(

5

AM HICAN

pVERSIGHT

18-1621-000172

 ---------------------------------------FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 172

William
H. Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
1 N. LaSalle
st.,
#2235
Chicago,
IL
60602
(312) 372-7813
James J. Lessmeister
- AR #94038
ARNOLD, GROBMYER& HALEY
124 w. Capitol,
Suite
875
Little
Rock, AR 72201
(501) 376-1171
CERTIFICATE OF SERVICE

I, James J. Lessmeister,
do hereby
certify
that
I have served
a copy of the foregoing
pleading
~ ~.s.
Mail,
postage
prepaid
to
the below named parties
on this
day of September,
1995.

5

Mr. Kenneth W. Starr
Mr. Hickman Ewing
Mr. Steve Colleton
Office
of Independent
10825 Financial
Centre
Two Financial
Centre,
Little
Rock, AR 72211
Mr.

Bobby

Counsel
Parkway
Suite
134

McDaniel

400 s. Main
Jonesboro,
Arkansas
Attorney
for Susan

72401
McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 W. Capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal

Mr. Sam T. Heuer
425 W. Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal

6

AMERICAN

PVERSIGHT

18-1621-000173

 ----------------------------------------

1 :-

• .

FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 173
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

)

)
)

v.

)
)
)
)
)
)

JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

MEMORANDUM
BRIEF IN SUPPORT OF
JIM GUY TUCKER'S MOTION FOR DISCLOSURE
OF GRAND JURY VOIR DIRE QUESTIONS

I.

APPLICATION OF LAW TO THE CASE AT BAR

The issue
is

not

which

bar

requesting
are

only

at

governed

363 n.7

U.S.

354

Grand

Counsel's
is

grand

359,

citing

Guy Tucker

material

Rather

Tucker

("Tucker")

and evidence
is

requesting

dire.
to

an unbiased

Costello
Pierre

The Supreme

Jim

Jury

6.

voir

entitled

jury.

(1956)

(1939).

because

by F.R.Cr.P.

citizen

constituted

unique

traditional

Independent
Every

is

Cqttrt

v.

United

v.

State
has

and

legally

States,
of

350

Louisiana,

u.s.
306

warned:

If the Grand Jury is to accomplish
either
of its
functions,
independent
determination
of probable
cause
that
a crime has been committed
and protection
of
citizens
against
unfounded
prosecutions,
limits
must be
set on the manipulation
of grand
juries
by overzealous
prosecutors.
United

States

v.

Samango,

607 F.2d

877,

882

(9th

Cir.

1979).

AMFnlCAN

VERSIGHT

18-1621-000174

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 174
As Justice
greatest

dangers

men of

zeal,

Olmstead

J.

Brandeis

v.

to

stated

liberty

well

meaning

United

States,

over
lurk

but

fifty

in

insidious

without

ago,

"[t]he

encroachment

by

understanding."

U.S.

277

years

438,

479

(Brandeis,

(1928)

dissenting).
Tucker

is

will

reveal

dire
parte

voir

entitled

to

the

dire

of

an unbiased

fairness
the

of

grand

Counsel's

opportunity

obtain

the

jury.

Counsel's

voir

validity

of

grand
dire

the

is

voir

impermissible

racial,

the

selection

of the

the

voir

the

which

dire

is

dire

(N.D.

U.S.

338,

1979)

by the

that

Tucker

441

dire_-is

to

assess

whether

or

not

will

to

Independent

Tucker

were
the

prevent

the

used

in

release

of

an inquiry

" •.. intentional
grand

jurors
v.

possibly

States

v.

citing

United

States

a grave
474 U.S.

an "arbitrary
if

United

is

Hillery,

especially

that

Independent

must

satisfy

Supreme Court

Northwest,

wish

Gold,

controlled
470

v.

and
by

F.Supp.

1336,

Calandra,

414

(1974).

We anticipate
argue

they

factors

Vasguez

action"

Counsel.

343

of

See

The voir

Ill.

Court

selection

governmental

1345

the

By preventing
Counsel

Supreme

trespass."

Independent

allow

the

what

of

The ex

required.

by the

(1986).

process.

obtain

political

jury.

Independent

constitutional

oppressive

or

grand

in the

262

to

The voir

increases

by determining

social

discrimination

254,

only
to

necessary

jury.

selection

Disclosure

constitutionally

As stated

the

jurors

Independent
from

grand

U.S.

the

in Douglas
211,

222

Counsel
three

may be tempted
step

test

Oil Co. v. Petrol

(1979).

The Douglas

to

established

Stops
test

is

AMl HICAN

VERSIGHT

-2-

18-1621-000175
zjjll05

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 175

irrelevant

in the

traditional

grand

asking

for

There

present
jury

case

since

material

a transcript

Tucker

is not

and evidence.

of Independent

requesting

Tucker

Counsel's

is only

voir

dire.

is a difference.

II.

TUCKER HAS AN UNQUALIFIED RIGHT TO INSPECT THE
INDEPENDENT COUNSEL'S VOIR DIRE QUESTIONS PURSUANT TO

28 u.s.c.

1867(f)

§

The Supreme Court

has stated:

This provision
[1867{f)]
makes clear that a litigant
has
essentially
an unqualified
right to inspect
jury lists.
It
grants
access in order to aid parties
in the 'preparation'
of motions challenging
jury selection
procedures.
Indeed,
without
inspection,
a party almost invariably
would be
unable to determine
whether he has a potentially
meritorious
jury challenge.
Thus, an unqualified
right to
inspection
is required
not only by the plain text of the
statute,
but also by the statute's
overall
purpose of
insuring
'grand and petit
juries
selected
at random from a
fair cross section
of the community.'
Test
§

v. United

States,

420 U.S.

2'8, 30 {1975)

28 u.s.c.

citing

1861.

In United
district

States

court

information

the

entitled
motion

Eighth

to stay

Moreover,

the

grand

Circuit

Eighth

actually

776 F.2d

reversed

and copy jury
under§

Circuit
basis

in the

1985)

the

for

chosen,

773.

Relying

on

and stated

the

defendant

is

records

in order

1867(a)

and to comply with

stated
the

cir.

at

of a sworn statement

on the

of merit

771 (8th

amended motion

jurors

Id.,

or dismiss

be denied

probability

defendant's

requirement
the

776 F.2d

the

or excluded.

to inspect

§ 1867(d)'s

cannot

denied

regarding

disqualified
Test,

v. Alden,

the
alleged

proposed

jury

to make his

of facts.

defendant's
facts

motion
fail

challenge.

to show a
Id.,

776

AMFnlCAN

VERSIGHT

-3-

18-1621-000176

zjjll05

 FOIA RD 56806 (URTS 16302} Docld: 70104908 Page 176

F.2d

at

773-74

questions,

and

III.

omitted).

answers,

should

and John

States

H. Haley,

Henry

Jim

Guy Tucker,

Case

No.

LR-CR-95-117,

Woods ordered

on August

not

require,

at

this

dire

be furnished

to

Tucker,

for

furnish
in

to

camera

In the
initially

the

if
to

Independent

Counsel's

WHEREFORE, Tucker

entitled

by the

alternative,
entitled

the

Grand

Jury

that

the

the

Court

1995

the

of

voir

dire

the

of the

do an in camera
voir

dire.

prays

that

this

Court

any

other

voir
11

1 11 •

dire
.

Tucker

dire

voir

directed

jury

is

then

to

the

not

Tucker

inspection

release

relief

Court

herewith

that
voir

District

the

Exhibit

decides

Sr.

of the

grand

See

jury

for

States

"While

is

grand

and

Marks,

transcript

Court."
Court

J.

United

government

a transcript
the

William

9,

a transcript

inspection

requests

of

time,

court

respectfully

dire

the

be supplied.

v.

will

to

By analogy,

ALTERNATIVELY, THE COURT IS ENTITLED TO FIRST INSPECT
THE TRANSCRIPT OF VOIR DIRE

In United

Judge

(citation

of

voir

which

he is

to.
Respectfully
submitted,
JIM·GUY TUCKER,
Defendant
By:

C&Jii. ~

WilliaH.
Sutton
- AR #59018
FRIDAY, ELDREDGE & CLARK
400 W. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312) 372-7813

AM HICAN

pVERSIGHT

-4-

zjjllOS

18-1621-000177

 FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 177

'~
(James~
e smeister
- AR #94038
ARNOLD, GROBMYER& HALEY
124 W. Capitol,
suite
875
Little
Rock, AR 72201
(501)

376-1171

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by U.SkMail,
postage
prepaid
to the below named parties
on this
;l~ day of
September,
1995.
Mr. Kenneth w. Starr
Mr. Hickman Ewing
Mr. Steve Colloton
Office
of Independent
10825 Financial
centre
Two Financial
Centre,
Little
Rock, AR 72211
Mr.

Bobby McDaniel
Main
Jonesboro,
Arkansas
Attorney
for Susan
400

Counsel
Parkway
Suite
134

s.

72401

McDougal

Ms. Jennifer
Horan
Federal
Public
Defender
600 w. capitol,
Room 108
Little
Rock, Arkansas
72201
Attorney
for Susan McDougal
Mr.

Sam T. Heuer
Capitol,
Suite
3821
Little
Rock, AR 72201
Attorney
for James McDougal
425

w.

AMFnlCAN

V.ERSIGHT

-5-

zjjl105

18-1621-000178

 ..

,.,

#

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 178

FILED

U.S. DISTRICT COURT
EASTERN DISTRICT ARKANSAS

AUGO9 1995
IN IBE UNITED STATES DISTRICT COURTJ 8~~ES~~
EASTERN DISTRICT OF ARKANSAS
o c
WESTERN DIVISION

UNITED STATES OF AMERICA

V.

NO. LR-CR-95-117

JIM GUY TUCKER, WILLIAM J.
MARKS, SR., and JOHN H. HALEY

ORDER
Defendant Jim Guy Tucker has moved for a disclosure of the grand jury voir dire.
The government has now responded to this moµon. While the Court will not require, at this
time, that the transcript of the voir dire be furnished to Tucker, the government is herewith
directed to furnish to the Court a transcript of the grand jury voir dire for in camera
inspection by the Court.
DATED this

1-

day of August, 1995.

S DISTRICT JUDGE

ENTERED ON THE DOCKET IN ACC
WlTH R E 55, FRCrP, ON~~..r.-r-~...__.__.,

BY---1.~~r:;,;.~~µ~--AMERICAN

PVERSIGHT

DEFENDANT'S
EXHIBIT

,. ,1..,
,,

18-1621-000179

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 179

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

v.
JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

)
)
)
)
)

LR-CR-95-173

)
)
)
)

ORAL ARGUMENTREQUESTED

- AR #59018
H. Sutton
William
FRIDAY, ELDREDGE & CLARK
2000
suite
400 w. capitol,
Rock, AR 72201
Little
(501) 376-2011
- AR #53032
George B. Collins
COLLINS & BARGIONE
#2235
Street,
#1 North LaSalle
60602
Illinois
Chicago,
(312) 372-7813
- AR #94038
James J. Lessmeister
ARNOLD, GROBMYER& HALEY
875
Suite
124 w. Capitol,
Rock, AR 72201
Little
(501) 376-1171
ATTORNEYS FOR JIM GUY TUCKER

AMFfllCAN

VE S GHT

18-1621-000180

 ,

,,,
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 180

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

)
)

)
)
)
)
)

v.
JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

LR-CR-95-173

)
)

JIM GUY TUCKER'S MOTION FOR DISCLOSURE
OF GRAND JURY VOIR DIRE QUESTIONS
Comes the
motion
as

for

Defendant,

disclosure

Jim

Guy Tucker

of grand

jury

("Tucker"),

voir

dire

and

questions

for

his

states

follows:

1.
were

Tucker

asked
2.

used

to

has

reason

of the

grand

Questions

can

eliminate

to

believe

jurors
have

grand

that

voir

in March,

questions

1994.

a prejudicial

jurors

dire

effect,

who might

have

and

been

can

fair

be

to

Tucker.
3.
grand

Unfair

grand

jurors

by the

to

improve

intended
obtain
4.
presented

what

to

the

the

wished

Grand

of voir
grand

questions

Independent

The material

transcript
actual

they

jury

dire

and

Counsel,

Independent
to

obtain

selection

ex parte,

can

Counsel's
from

sought

by Tucker

Jury.

Rather,

questions

an unfair

and

the
is

only

opportunities
grand

not

Tucker
responses

be
to

jury.

evidence
is

of

that

requesting
of

was
the

potential

and

jurors.

AMERICAN

PVERSIGHT

18-1621-000181

 .,

,,.

FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 181

5.

Only by disclosure

Defendant
motion

Tucker

to dismiss

makeup and its
questions
charged
the

be able
the

of the
to determine

indictment

selection.

United

States

grand

asked

whether

To deny Tucker

jury,

questions
or not

will
to make a

access

substance

to the

of the

as guaranteed

its

right

to be

by Amendment V to

Constitution.

WHEREFORE,Jim Guy Tucker
questions

jury

by way of challenging

would be to deny him the
by a fair

grand

by Independent

prays

that

this

Court

disclose

the

Counsel.
Respectfully

submitted,

JIM GUY TUCKER,

Defendant
By:
Wi~~9018

FRIDAY, ELDREDGE& CLARK
w. Capitol, Suite 2000
Little
Rock, AR 72201
400

(501)

376-2011

George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
(312)

372-7813

CERTIFICATE OF SERVICE
I, James J. Lessmeister,
do he .reby certify
that I have
served a copy of the foregoing
pleading
by U.S\.....Mail, postage
prepaid
to the below named parties
on this
Q...5 day of
September,
1995.

AMFnlCAN

VERSIGHT

-2-

zjjll00
18-1621-000182

 ,.

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 182
Mr. Kenneth W. Starr
Mr. Hickman Ewing
Mr. Steve Colleton
of Independent
Office
Centre
10825 Financial
Centre,
Two Financial
Rock, AR 72211
Little
Mr. Bobby McDaniel
400 s. Main
Arkansas
Jonesboro,
for Susan
Attorney

Counsel
Parkway
134
Suite

72401
McDougal

Horan
Ms. Jennifer
Defender
Public
Federal
Room 108
600 W. Capitol,
72201
Rock, Arkansas
Little
for Susan McDougal
Attorney
Mr. Sam T. Heuer
3821
Suite
425 w. Capitol,
Rock, AR 72201
Little
for James McDougal
Attorney

AMFfllCAN

PVERSIGHT

-3-

zjjll00
18-1621-000183

 .

.;-

FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 183

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

v.
JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

)
)
)
)
)
)
)
)
)

LR-CR-95-173

ORAL ARGUMENTREQUESTED

- AR #59018
H. Sutton
William
FRIDAY, ELDREDGE & CLARK
2000
suite
400 w. capitol,
Rock, AR 72201
Little
(501) 376-2011
- AR #53032
George B. Collins
COLLINS & BARGIONE
#2235
Street,
#1 North LaSalle
60602
Illinois
Chicago,
( 312) 372-7813
- AR #94038
James J. Lessmeister
ARNOLD, GROBMYER& HALEY
875
suite
124 w. Capitol,
Rock, AR 72201
Little
( 501) 376-1171
ATTORNEYS FOR JIM GUY TUCKER

AMFfllCAN

VERSIGHT

18-1621-000184

 ,

,,
FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 184

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
UNITED STATES OF AMERICA
Plaintiff

)
)

)
)
)
)
)
)
)

v.
JAMES B. MCDOUGAL,
JIM GUY TUCKER, and
SUSAN H. MCDOUGAL
Defendants

LR-CR-95-173

JIM GUY TUCKER'S MOTION FOR DISCLOSURE
OF GRAND JURY VOIR DIRE QUESTIONS
Comes the
motion
as

for

Defendant,

disclosure

Jim

Guy Tucker

of grand

jury

("Tucker"),

voir

dire

and

questions

for

his

states

follows:
1.

were

Tucker

asked
2.

used

to

has

reason

of the

grand

Questions

can

eliminate

to

believe

jurors
have

grand

that

voir

in March,

questions

1994.

a prejudicial

jurors

dire

effect,

who might

have

and can

been

fair

be

to

Tucker.
3.
grand

Unfair
jurors

by the

to

improve

intended
obtain

what
4.

they

jury

to

transcript

the

the

wished

Grand

of voir
grand

questions

dire

and

Independent
to

an unfair

Counsel,~

Independent

The material

presented

actual

grand

obtain

Counsel's
from

sought

by Tucker

Jury.

Rather,

questions

parte,

and

the
is

selection
can

of

only

opportunities
grand

not

Tucker
responses

to

jury.

evidence
is

be

that

requesting
of potential

was
the
and

jurors.

AMERICAN

PVERSIGHT

18-1621-000185

 .

,;

FOIA RD 56806 {URTS 16302} Docld: 70104908 Page 185

5.

Only

Defendant

by disclosure

Tucker

motion

to

makeup

and

be able

dismiss

the

its

selection.

questions

would

be to

charged

by a fair

the

United

asked

deny

grand

determine

jury

whether

or not

will
to make a

by way of challenging

To deny

Tucker

him the

substance

jury,

questions

access

to

of

the

as guaranteed

its
the
right

by Amendment

to

be

V to

Constitution.

WHEREFORE, Jim
questions

to

indictment

grand

States

of the

Guy Tucker

by Independent

prays

that

this

Court

disclose

the

Counsel.
Respectfully

submitted,

JIM GUY TUCKER,

Defendant
By:
Wil iam
FRIDAY, ELDREDGE & CLARK
400 w. Capitol,
Suite
2000
Little
Rock, AR 72201
(501) 376-2011
George B. Collins
- AR #53032
COLLINS & BARGIONE
#1 North LaSalle
Street,
#2235
Chicago,
Illinois
60602
{312) 372-7813

CERTIFICATE

OF SERVICE

I, James J. Lessmeister,
do hereby
certify
that
I have
served
a copy of the foregoing
pleading
by U.S~Mail,
postage
prepaid
to the below named parties
on this
+5 day of
September,
1995.

AMFnlCAN

VERSIGHT

-2-

zjjllOO
18-1621-000186

 FOIA RD 56806 (URTS 16302) Docld: 70104908 Page 186

w. Starr
Mr. Kenneth
Mr. Hickman Ewing
Mr. Steve Colloton
of Independent
Office
Centre
10825 Financial
Centre,
Two Financial
Rock, AR 72211
Little
Mr. Bobby McDaniel
400 s. Main
Arkansas
Jonesboro,
for Susan
Attorney

Counsel
Parkway
134
Suite

72401
McDougal

Horan
Ms. Jennifer
Defender
Public
Federal
Room 108
600 w. Capitol,
72201
Rock, Arkansas
Little
for Susan McDougal
Attorney
Mr. Sam T. Heuer
3821
suite
425 w. capitol,
Rock, AR 72201
Little
for James McDougal
Attorney

AMF-HICAN

,OVERSIGHT

-3-

zjjll00
18-1621-000187

 ~

G-R/t-Nb£

~·J'c\'1 ·zr~oase@lei Gt1[h9f;l-· gjl{fR;Ai

FOIA RD 56806 (URTS 16302 Doc

-

,.,

:

Screened by NARA (RD-F) 07-25-2018
FOIA RD 56806 (URTS 16302)DOCID:
70104898

18-1621-000188

.

 FDIC

FOIA RD 56806 (URTS 16302) Dodd: 70104898 Page 2
Office of Investigations
Office of Inspector General

Federal Deposit Insurance Corporation
Waehington,

O.C. 20429

MEMORANDUM

OF INTERVIEW

INTERVIEWOF

DATE OF INTERVIEW

INTERVIEWEDBY

JAMES T. CLARK

June 10, 1996

SA E.P. HUSOK/Sr.Attorney
FRED GIBSON

INTERVEW HELDAT

PEOPLE PRESENT

N/A
Washington, D.C.
,
tates ffice o t e omptro ler o t e urrency (
. LARK, at1onal ank xammer, mte
A
Kalamazoo, Michigan Duty Station, was interviewed on June 10, 1996 by Special Agent E.P. HUSOK and
Senior attorney FREDGIBSON. CLARK had been identified as the Examiner in Charge of the 1996 examination
of MADISON GUARANTY SAVINGS AND LOAN (MGSL) that was conducted by the Federal Home Loan Bank
Board (FHLBB). CLARK was advised that he was to be questioned concerning activities of MGSL he may have
become aware of during the examination.
CLARK said that he was employed by the FHLBB from 1973 to approximately 1986 as a Senior Field Examiner
at the FHLBB 6th District at Indianapolis, Indiana. From approximately 1986 to approximately 1989, he was
administratively transferred to the Federal Home Loan Bank of Indianapolis and performed the same duties.
After .the enactment of FIRREA, his position was transferred to the Office of Thrift Supervision (OTS) in
Indianapolis. In December, 1990, he left for private industry. In January, 1992, he began work with the OCC
as a National Bank Examiner.
CLARK recalled the examination of MGSL commenced on the first business day after March 4, 1986. He
stated that he was the Examiner in Charge of the examination and, as such, spent time on site at the
institution. He said that a request letter would have been sent to the institution prior to the arrival of the
examiners advising them of the pending examination. CLARK said that it was standard policy to set the "as
of" date, that date on which any transactions or documents in institution files would be subject to review,
would be the last day of the previous month. CLARK said that in this case that date would be February 28,
1986, and he believed that the request letter would have advised MGSL of that "as of" date.
CLARK said that he wrote three approximately monthly interim reports and a final report detailing the findings
of the examination.
CLARK was asked whether he was familiar with a purchase of property or assets referred to as IDC by MGSL
or its affiliate MADISON FINANCIAL CORPORATION (MFC) from the examination. He stated that he was. He
recalled that the IDC was an independent developer that owned property, some industrial buildings, and a
water and sewer system south of Little Rock. He also recalled that there were some non-contiguous parcels
held by IDC. CLARK said that he understood that by the mid 1980's, the industrial development was not doing
well, and that MADISON purchased it as a part of a workout agreement. CLARK said that, as an entity of
MADISON, he knew the entire IOC property that had been purchased as CASTLE GRANDE.
CLARK said that soon after the examination began, he observed from institution records that a lot of loans
were being made in the area directly surrounding MGSL, the QUAPAW Quarter. CLARK said that when loan

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FORAOENCYUSE ONLY
FILENUMBER

DATE TRANSCRIBED

WA-94-0016

June 11, 1996

PAGE 1 OF 10

AOENTS SIGNATURE(SI

FOR OFFICIAL USE ONLY

18-1621-000189

FDIC OIG FORM 86 -131

 Page 3
FOIA RD 56806 (URTS 16302) Docld: 70104898

PAGE 2 OF 10

CONTINUATION SHEET
lfJ'ERVIEW OF

JAMES T. CLARK

DA TE OF INTERVIEW

June 10, 1996

FILE NUMBER

WA-94-0016

payment and
many of the requisite documents, such as down
files began to be reviewed, it was noticed that
1308 Main
as
n
know
ct
proje
a
He said that it was decided that
disbursement documents were not in the files.
file, so
the
in
not
were
s
ment
a number of relevant loan docu
Street was chosen for a review. He said that
m.
syste
ssing
proce
check
the
wing
companies, and by revie
they began to track down the information at title
rty.
prope
the
of
disclosed a "series of flips"
He said that the review of the financial situation

1
2

3
4
5
6
7
8
9
10
11
12
13
14

loped a theory
first three weeks of the examination, he deve
CLARK said that from what he had seen in the
scheme, by
off"
rake
e
hous
he considered it a "ratchet and
concerning the operation of MGSL. He said that
institution
the
ing
allow
ed,
book
cts, the profits from sales were
which deposits were put into development proje
institution
time,
same
the
at
continue the cycle; while
to increase its net worth, obtain more deposits and
institution entities.
insiders had money flowing to them through other
CREEK, and
NDE and the developments known as MAPLE
CLARK said that to test the theory, CASTLE GRA
15
12th and MAIN were chosen for review.
16
He
TE.
ESTA
REAL
ISON
s of MGSL, such as MFC and MAD
17
CLARK said that he was familiar with subsidiarie
d
owne
anies
comp
rate
that the subsidiaries were actually sepa
18
said he was initially advised by people at MGSL
·
19
by people he had come to believe were insiders.
20
have
would
he
as
L,
MGS
rate records of the subsidiaries at
CLARK said that when he tried to locate corpo
expanded to 21
he could not. He stated that the search was
22
suspected them to be maintained, he found that
indicators
found
he
that
a money flow to insiders. He said
23
sources outside of the institution, trying to trace
nt
geme
mana
1986
29,
real existence." He said that at a May
24
that the subsidiaries were "shams ..• shells ..• no
sent
repre
could
s
, he advised MCDOUGAL that the subsidiarie
25
conference attended by MCDOUGAL, see below
that
so
s,
entitie
L
OUGAL that the subsidiaries were really MGS
26
a conflict of interest, and was then told by MCD
effect doing business with itself.
27
in dealing with the subsidiaries, MGSL was in
28
)
antive
subst
was
examiners in approximately early March, 1986
29
CLARK said the first interim report done by the
to that date.
and reported these and the other findings made
30
31
had
AL
OUG
MCD
AL on questions concerning MGSL when
32
CLARKwas asked why he dealt with MCDOUG
that
said
K
CLAR
a 1984 examination of MGSL by the FHLBB.
33
ceased to be an officer of MGSL subsequent to
d
staye
had
and
B, was still the primary stockholder in MGSL,
34
g
MCDOUGAL had not been removed by the FHLB
amon
shell
rate
he was not able to ultimately pierce the corpo
35
as President of MFC. CLARK said that although
group
olling
contr
that MCDOUGAL and the HENLEY's were the
36
MGSL and the subsidiaries, his contention was
at MGSL.
37
38
said
He
d.
atten
AL
nt meeting, he requested that MCDOUG
39
CLARK said that, at least for the May manageme
sted
reque
have
see below, someone from the institution may
40
that at an April 11, 1986 management meeting,
41
that MCDOUGAL attend.
42
a
on
him
with
THAM as the President of MGSL, and had met
43
CLARK said that he was familiar with JOHN LA
he
but
L,
MGS
that he felt that LATHAM spoke on behalf of
44
regular basis during the examination. He said
AL.
45
believed that decisions were made by MCDOUG
46
that
believed
WARD. He said that he was. He said that he
CLARK was asked if he was familiar with SETH
LE GRANDE. 47
MFC and MCDOUGAL for the purchase of CAST
WARD may have acted as the go between with

FOR OFFICIALUSE ONLY

FDIC OIG FORM 96-131A

18-1621-000190

 FOIA RD 56806 (URTS 16302) Docld: 70104898 Page 4

PAGE 3 OF 10

CONTINUATION SHEET
1'4TERVIEW OF

DA TE OF INTERVIEW

FILE NUMBER

JAMES T. CLARK

June 10, 1996

WA-94-0016

He said that he was also aware that WARD had acted as a •straw" buyer of CASTLE GRANDE property on
behalf of MFC.
CLARK was asked what he meant by a "straw" buyer. He said that a straw buyer is a •puyer who has no real
monetary or other interest in the property but who is acting as a front for the real purchaser who does have
an interest ."
He was asked what banking regulation would be violated by a •straw• purchase, and said that it would be a
violation if it caused false loan documents to be produced. He said that it would depend on the specific loan,
and said that he did not believe that MGSL was cited in the 1986 examination for "straw" purchases
singularly.
CLARK was asked what banking regulation would be violated by the institution in utilizing a "straw" buyer.
He said that general regulations addressed a transaction with an affiliated person, and that a specific regulation
called for all transactions to be executed with the safety and soundness and best interests of the institution
in mind.
CLARK was asked if he had encountered "straw" purchases at any of the examinations at other institutions
that he had examined and said that he did not believe that he had.
CLARK was asked whether he was aware during the MGSL examination of any restrictions on direct
investments in subsidiaries by the institution. He said that there was a direct investment restriction on
federally chartered thrifts, which MGSL was not. He recalled that at some time during the examination he
learned that there was an Arkansas state restriction on direct investments.
CLARK was asked if he recalled the issue of potential direct investment violations coming up in the MGSL
examination. He recalled that had MGSL purchased CASTLE GRANDE directly, they would have exceeded their
direct investment limit.
CLARK was asked what effect violating a state regulation would have on a federal examination. He said that
internal FHLBB procedures called on an institution to be in compliance with state regulations . He said that
violating the state regulation would mean that the instutition was not operating safely and soundly.
CLARK was shown a copy of April 30, 1986 handwritten notes titled •Reconciliation of Service Corporation
Investment". He recognized the handwriting as his. He was questioned concerning a note at the bottom of
the page that indicated that MGSL was not subject to the state direct investment limitation, but that there
apparently was a state restriction limiting the allowable investment to 6% of gross assets. The note also
indicated that LA THAM reported that the state limitation had been waived at MGSL by state authorities.
CLARK said that he did not specifically recall the reported conversation with LATHAM, but did recall
attempting to track down the ARKANSAS regulation. He said that if he had been told that the state regulation
had been waived he might ask for documentation, but could not recall if he had done so in this matter.
CLARK was asked why an institution might use a "straw" purchaser when it is lending all of the money and
said that avoidance of direct investment regulations could be one reason. CLARK was asked if he was ever
told that the CASTLE GRANDE purchase was structured to avoid a direct investment limitation and said he had
not been. He said that if he had mentioned direct investment in one of the interim or final examination report,
18-1621-000191
FOR OFFICIAL USE ONLY

FDIC OIG FORM 95-131A

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PAGE 4 OF 10

CONTINUATION SHEET
INTERVIEW OF

JAMES T. CLARK

DATE OF INTERVIEW

June 10, 1996

FILE NUMBER

WA-94-0016

or that he had seen it in institution records.
it would have been because someone told him
that •ward apparently
of the May 8, 1996 interim report that read
CLARK was shown a passage from page 11
from Madison
cial's investment and the attendant borrowing
warehoused this land to reduce Madison Finan
are avoided."
n
catio
Guaranty's investment in its service corpo
Guaranty. In this way, limitations on Madison
lection of WARD's role in the purchase.
CLARK said that was consistent with recol
d that the three
interim report, the examination had determine
CLARK said that by the time of the May 8, 1986
.
seriously impair the net worth of the institution
projects that had been under review would
iners would not seek
investigation, he had decided that the exam
CLARK said that in the initial stages of the
ds would be hidden or
concerns that they had for fear that recor
direct responses to questions or advise of
asked if he had
were evident to institution personnel. He was
destroyed if the areas they considered problems
did not. He said that
hidden or destroyed at that point and said he
any specific knowledge of documents being
have been added
loan files, and suspected that documents may
they had some trouble in obtaining requested
n or destroyed, but
ific recollection of documents being hidde
or removed. He repeated that he had no spec
the information was
documents that he questioned why all of
recalled that some files were so devoid of
put in the file and he
the documents existed, they were never
missing. He also recalled feeling that if
remove or destroy files
d not comply with basic regulations might
questioned whether an institution that woul
that were present.
ucted. He said he
he thought the examination was being obstr
CLARK was asked if there came a time when
dealing with MGSL
just an accumulation of incidents involving
had no specific recollection, but that it was
to.
management when he felt he was being lied
of conducting the
m report, he decided to shift the manner
CLARK said that after the May 8, 1986 interi
erns were and what
OUGAL and LATHAM about what their conc
examination to more direct contacts with MCD
so required quite
ions could be noted. He said approval to do
react
their
that
so
in
sted
intere
were
they
s
area
was a restriction in
Texas, who oversaw MGSL, because there
s,
Dalla
in
B
FHLB
the
with
n
tiatio
nego
of
a bit
prior to FHLBB
loan classifications with institution personnel
ssing
discu
on
time
that
at
office
that
at
place
authorized to discuss
ination reports. He said he was eventually
exam
the
on
off
ng
signi
nnel
perso
ry
rviso
supe
were tentative.
as it was made clear that the classifications
the classifications at the institution as long
gement meeting
file memorandum from him concerning a mana
CLARK was shown a copy of a May 29, 1986
orandum, CLARK
AL and LATHAM. At page one of the mem
he reportedly held on that date with MCDOUG
lopment projects,
in the examination; losses on real estate deve
wrote that they discussed his primary concerns
further indicated that
ted persons or affiliates. The memorandum
and substantial payments to apparent affilia
asset classification
•we w£re recommending losses under the
MCDOUGAL and LATHAM were advised that
•
on just the three projects reviewed to date.
regulations that exceeded Madison's net worth
officers or employees
came a time during the examination when
there
that
ht
thoug
he
if
d
aske
was
K
CLAR
d be closed or that
there was a possibility that the institution woul
of MGSL may have reasonably believed that
ved.
certain officers or employees would be remo
He said they had
ved that some people were getting "antsy".
CLARK said that by early May, 1986, he belie
CLARK referred
.
ution
instit
asking questions of people in the
not drawn any conclusions, but that they were
dated May 12,
entry
an
In
while the examination was underway.
to a copy of handwritten notes he had made
FOR OFFICIAL USE ONLY

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FDIC OIG FORM 86-131A

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CONTINUATION SHEET
INTERVIEW OF

DATE OF INTERVIEW

FILE NUMBER

JAMES T. CLARK

June 10, 1996

WA-94-0016

1986, he wrote that LATHAM had questioned him as to how long the examination would continue, and when

the examination could be discussed with management. LATHAM reportedly told him that employees felt
frustrated that there had been no general grading of the association by the examiners, and that two had
threatened to quit.
CLARK also noted the May 29, 1986 management meeting reported in the memorandum of that date. He said
that he might not have said that the institution was in bad shape or that supervisory agents might take action,
but felt that having pointed out that the three projects reviewed were classified as losses greater than net
worth rendering the institution insolvent, and that they "certainly by May 29 knew" the institution was "in
serious trouble."
CLARK said that at that time, closings or removals were occurring at institutions. He said that the regulation
enabling examiners to classify loans had come into being in late 1985, and that examiners were using the
regulation to render institutions insolvent. He said that the use of that regulation was the genesis of the FHLBB
Dallas directive against discussing classifications with examiners.
CLARK was asked who at MGSL at that time might have reasonably expected a possibility of removal and he
replied LATHAM and MCDOUGAL. He was asked whether he thought Chief Loan Officer DON DENTON might
have the same concerns and he said that it was possible. He also said that at some point, probably in June,
1986, the institution received a letter from the FHLBB Supervisory Agent advising them that a meeting would
be held in DALLAS on July 11, 1986.
CLARK was questioned about a reference at page three of the May 29, 1986 memorandum stating that
"Latham stated that a subordinated debt issue had been held back because of the difficulty in finding an
underwriter for such a small issue ($3 to 4 million)".
CLARK did not recall the statement in any more detail than reported in the memorandum. He said that he
recalled that MGSL planned to increase its net worth by growing the institution, but that regulations required
greater capital first. He said that he believed that the debenture issue may have been discussed with FHLBB
Dallas previously, and that the institution may have submitted a growth plan or business plan in furtherance
of the plan.
CLARK was asked if he was aware of any previous plans by MGSL to raise capital. He recalled that MGSL
considered a number of ideas, "none practical". He said that it was his belief at the time of the examination
that the plans were an attempt to forestall supervisory action of one type or another so that more funds could
be diverted from the institution. CLARK stated that the longer the "meter runs" in a "ratchet and rake-off"
scheme, it would be in the "McDougal/Henley group's interest to keep it running because the longer it ran, the
more money out" and that "delay for them" was "a tactic that could be used".
CLARK was asked if he recalled any law firm working on any such capital raising issue for MGSL and said he
could not. He said that if he had been told about attorneys working on such an issue he may not have
considered important to note the attorney's names.
CLARK was asked if he recalled any discussions with state regulators in any of the capital raising plans. He
said he could recall no such discussions.

A

CLARK said that at some time after the May 29, 1986 conference with LATHAM and MCDOUGAL, he
18-1621-000193

C
FEDERAL DEPOSIT INSURANCE CORPORATION

FOR OFFICIAL USE ONLY

FDIC OIG FORM 96 - 131A

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FOIA RD 56806 (URTS 16302)
PAGE 6 OF 10
SHEET
CONTINUATION
INTERVIEW OF

JAMES T. CLARK

DA TE OF INTERVIEW

June 10, 1996

FILE NUMBER

WA-94-0016

1
transactions and documents
bringing into the scope of review
6,
198
2
30,
il
Apr
to
date
of"
forwarded the "as
3
ruary 28, 1986.
first at the institution after Feb
4
ting
ues
req
HAM
to LAT
e 3, 1986 letter that he wrote
Jun
d
date
5
r
.
lette
a
ting
of
mee
y
t
cop
men
a
age
1986 man
CLARK was shown
by the examiners in the May 29,
ted
ues
6
req
n
for
bee
ts
sly
ues
viou
req
pre
e
documents that had
time he had decided to mak
7
with his recollection that by that
CLARK said it was consistent
8
ing.
information in writ
9
the
In
r.
lette
the
recalled
r from LATHAM to him. CLARK
lette
6
198
10
5,
e
tion
Jun
a
rma
of
y
info
cop
the
a
CLARK was shown
ve, and said that some of
11
Jur.e 3, 1986 CLARK letter, abo
the examiners. In the letter,
letter, LATHAM referred to the
to, and was in the possession of,
d
vide
pro
n
12
he
bee
that
ady
alre
said
had
dly
d
had reporte
CLARK had provide
ion with CLARK wherein CLARK
uss
disc
6
198
13
21,
May
a
to
him a list.
LATHAM also referred
and asked that CLARK provide
ted,
ues
req
14
tion
rma
info
the
of
had not received all
15
ted,
ues
req
wherein LATHAM
6 letter from LATHAM to him
198
6,
e
16
Jun
a
of
y
".
cop
aws
a
"str
wn
e
E that wer
CLARK was also sho
list of all sales at CASTLE GRAND
a
him
17
vide
pro
RK
CLA
that
among other things,
18
HAM
LAT
to
r
10, 1986 lette
onded to those letters in a June
resp
he
19
that
d
sen
said
to
He
d
rs.
nde
lette
gs, that he inte
CLARK recalled the
ised LATHAM, among other thin
adv
he
wn,
20
sho
had
was
that
RK
s
ject
CLA
In that letter, which
would involve the three pro
21
al information, the first of which
with the information
him two letters requesting addition
not want to provide LATHAM
did
he
that
said
22
RK
d.
CLA
tore
doc
d.
be
files could
previously been reviewe
" to LATHAM for fear the loan
aws
"str
e
wer
ght
23
thou
he
s
tion
concerning which transac
24
e
aus
bec
al
rather than verb
to written request of LATHAM
go
to
ided
25
dec
had
get
he
to
,
time
still waiting
CLARK said that by that
said that at that time he was
also
RK
CLA
g.
26
ngin
e
cha
t
mor
kep
ng
was becomi
the responses from MGSL
management. He said LA THAM
SL
MG
with
es
27
issu
n
ions
atio
clus
sific
, and what con
authority to discuss the clas
wanted, why they wanted them
ers
min
exa
the
28
nts
ers
ume
min
doc
t
ions the exa
aggressive questioning wha
M wanted to know what conclus
THA
LA
that
d
eve
29
-,
beli
he
that
they were coming to. He said
directly on issues in contention.
las
Dal
BB
FHL
tact
con
30
ld
cou
were coming to so that they
31
cific
spe
uested
him to LA THAM wherein he req
from
r
lette
6
198
17,
e
32
lled
Jun
a
reca
of
s. CLARK
CLARK was shown a copy
of CASTLE GRANDE related loan
ber
num
a
ing
cern
con
33
.
tion
to LATHAM
information, including informa
to in his June 10, 1986 letter
rred
refe
had
he
r
lette
34
first
the
the letter. He said that it was
35
and
t,
down paymen
t purchases were financed, the
wha
on
tion
rma
info
36
of
ted
se
ues
cha
req
pur
the initial
CLARK was asked why he
RD loan, #2962, that financed
WA
the
g
udin
incl
37
s,
h
cas
loan
l
the
era
d after tracing
the source of funds for sev
were the loans that they believe
e
thes
e
aus
bec
38
was
it
that
CASTLE GRANDE. He said
39
s.
were "straw• loan
40
to
was
it
proceeds of the loan and said that
41
the purpose for the use of the
ted
ues
req
he
why
ed
ask
was
He
ey.
mon
its
for
e
valu
any
42
ived
rece
determine whether MGSL
43
of
boundaries
other drawings that showed the
and
eys
surv
e
tgag
mor
s,
44
plat
had
the examiners
He was asked why he requested
He said that it was because
.
IDC
from
C
MF
and
45
e
RD
but that ther
the property purchased by WA
actually bought what property,
who
e
rmin
dete
to
s
tion
46
sac
tran
attempted to trace the series of
le.
ilab
ava
e
wer
that
s
tion
crip
des
47
ty
had been overlap on the proper

FOR OFFICIAL USE ONLY

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PAGE 7 OF 10

CONTINUATION SHEET
INTERVIEW OF

DA TE OF INTERVIEW

FILE NUMBER

JAMES T. CLARK

June 10, 1996

WA-94-0016

CLARK was questioned concerning notes he made June 20, 1986 concerning CASTLE GRANDE. In the notes
is a comment that the CASTLE GRANDE files had been rearranged since their earlier review by the examiners.
The comment indicated that the rearrangment may have occurred while institution employees were preparing
a response to examiners.
CLARK recalled that the files had been rearranged, and that memoranda dated June 2 and June 13, 1986 that
were attached to his notes, had not been in the file when it was originally reviewed. The memoranda, which
concern CASTLE GRANDE appraisals, were attached to CLARK's notes.
CLARK was shown a copy of a June 24, 1986 letter from LATHAM to him that was a response to CLARK's
letter of June 17, 1986. Included in the response was a statement that WARD loan #4027 would be repaid
"From the sale of real estate that is under option to Madison Financial Corporation; if option is not recognized,
from sale of real estate to other investors". CLARK recalled the letter. CLARK said he had asked for an
explanation of the source of the funds for repayment because he was trying to trace the source of funds going
into and out of the project. The letter also contained a response concerning the disbursements of the proceeds
of WARD loan were used in part to make a loan to the WILSON company. CLARK said he conducted an
analysis of the responses by LATHAM in a file memorandum dated June 26, 1986.
CLARK was shown a copy of the June 26, 1986 analysis and recalled that it was the analysis he performed.
CLARK said that he thought that he thought that a series of transactions between MGSL, MFC, WARD and
WILSON was designed to channel! funds into MFC in a manner to disguise that it was an actually a direct
investment of MGSL in MFC. He wrote in his analysis that the response to his inquiry in the above decribed
June 24, 1986 letter from LATHAM confimed in part his belief that the transactions were an attempt to
disguise a direct investment.
CLARK also wrote in the analysis that the property descriptions of CASTLE GRANDE property were not
concise, and that information provided by LATHAM in the June 24, 1986 letter were not sufficient to clarify
the boundaries. CLARK explained that in April, 1986, the examiners had been attempting to construct concise
property descriptions and found that they could not. He said they were using the information provided by the
institution when the "as of" date for materials was February 28, 1986, and did not believe they had tried to
trace meets and bounds descriptions. CLARK was shown a copy of the property description of 27 and 28
Holman Acres that had been attached to the mortgage securing Ward loan 4027. He said that he had no
particular recollection of the description.
CLARK said that it was only after the "as to" was changed from from February 28, 1986 to April 30, 1986
that he first became aware that loans had been made to WARD during the examination. He said that it was
decided then to go back and review CASTLE GRANDE transactions for evidence of land flips.
CLARK was asked if he thought the fact that the WARD loan 2962 was paid off with funds from the sales of
property to FULBRIGHTand CASTLE SEWER AND WATER all occurred on February 28, 1986, the day before
the initial "as of" date may have been done to place the WARD loan into a paid off status to lessen the chance
of examiner's scrutiny. CLARK said that he thought it reasonable.

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CLARK was asked if he became aware duiring the examination that WARD believed that he had commissions
due to him from the sale of CASTLE GRANDE property.
CLARK said that the first time he became aware of commissions due to WARD was in approximately mid-May,
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FDIC OIG FORM 96-131A

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PAGE 8 OF 10

CONTINUATION SHEET
INTERVIEW OF

DA TE OF INTERVIEW

FILE NUMBER

JAMES T. CLARK

June 10, 1996

WA-94-0016

the institution employees had
1986. CLARK said at that time, he and other examiners were at MGSL after
area to store their working
their
in
left for the day. He said that they were checking the drawers of desks
the documents and
reviewed
he
that
papers when an examiner discovered certain docunments. CLARK said
an agreement by
out
set
that
GAL
discovered one was a September 24, 1985 letter from WARD to MCDOU
1985 letter from
24,
e[
Septemb
a
of
which the IDC property would be purchased. CLARK was shown a copy
that letter was
said
CLARK
WARD to MCDOUGAL, that did not caveat that WARD would retain 22.5 acres.
commissions.
the
ng
concerni
had
he
among the documents discovered. He said that it was the first indication
memorandum, at page two,
CLARK identified a July 1, 1986 file memorandum as one he wrote. The
the September 24, 1985
discussed the discovery of the documents found in the desk drawer and identified
WARD to MCDOUGAL
from
letter as being among them. The memorandum also referred to a June 24 letter
nt was dated after
agreeme
reaffirming their CASTLE GRANDE agreement. CLARK wrote in the letter that the
purchases, and
"straw"
about
the May 29, 1986 management conference when he had discussed concerns
GRANDE.
CASTLE
and
WARD
the June 17, 1986 letter he sent to management requesting information about
WARD,
paid
ions
commiss
of
CLARK wrote that the examiners, through June, 1986 had found no evidence
a
evidence
to
ent
managem
and that he thought that the reaffirmation letter may have been an attempt by
recalled
and
ndum
the memora
continuing involvement in CASTLE GRANDE. CLARK confirmed that he wrote
written.
as
that the events occurred

1
2

3
4

5
6
7
8
9
10
11

12
13
14
15
16
17
18
19
20
the
of
y
discover
the
aware of
CLARK said that he believed that the first time institution people were made
that he was not certain if the 21
said
He
Dallas.
at
meeting
ory
supervis
986
1
11,
documents was at the July
22
raised, but believed that they
specific subject of the September 24, 1985 WARD letter or of commissions was
23
were.
24
25
the
d
containe
GAL that
CLARK was shown a copy of the September 24, 1985 letter from WARD to MCDOU
26
on
descripti
attached property
caveat concerning the 22.5 acres and was aske~ if he recalled seeing it or the
27
but
it",
recall ever seeing
in the Ward loan 4027 documents. He stated with reference to the letter •1 don't
·, 28
parcel.
acre
22.5
the
about
was knowledgeable at the time
29
option
an
30
ng
concerni
on
informati
2
h
paragrap
at
d
containe
that
CLARK was shown a single page of notes
MFC
31
that
someone
with
d
discusse
writer
the
that
indicate
notes
agreement on the 22.5 acre parcel. The
sale
the
32
would not consumate
wanted to purchase the WARD property, but that WARD had another buyer and
note
33
The
.
property
the
purchase
to
option
an
g
preparin
attorney
WARD
a
for tax purposes. The note refers to
34
on personal property.
also referred to a loan to WARD that was unconnected and was to pay off loans
35
36
pending
of real estate
The note also refers to a loan to MFC for $370,000 executed to guarantee the purchase
asked if he recalled 37
and
Ward
to
notes
MFC
the
of
copy
a
shown
was
the completion of the option. CLARK
He stated that his concern 38
them. He stated that he did. He was asked what he recalled about these notes.
by Madison Guaranty. He 39
as an examiner was whether the notes represented independent financing of MFC
rs would be concerned 40
would be concerned about where Ward came up with the cash and that the examine
concerned whether the loans 41
that the proceeds came from Madison Guaranty. The examiners would be
connected in some fashion. 42
were
l,
Financia
Madison
to
between Ward and Madison Guaranty, and from Ward
43
44
different
in
note
a
is
page
the
of
bottom
the
The note from the examination workpapers is not dated. At
to DON DENTON about the 45
handwriting. That note is dated April 29, 1986. It indicates that "Darlene" spoke
get it to the examiners. 46
would
he
that
but
,
option and had been told that the option had not yet been prepared
47
The note also referred to two notes that would not be funded.
FOR OFFICIAL USE ONLY

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FOIA RD 56806 (URTS 16302)

PAGE 9 OF 10

CONTINUATIONSHEET
INTERVIEWOF

JAMES T. CLARK

DATl: OF INTI:RVIEW

June 10, 1996

FILE NUMBER

WA-94-0016

1
s in
e of the attorney that appear
nam
the
t
tha
said
RK
CLA
e.
2
te the first not
discussion, but recalled the
CLARK confirmed that he wro
t he did not recall the specific
tha
3
said
He
il,
.
LL"
BBE
"HU
is
and $73,000 from WARD in Apr
00
parenthisis in his notes
0,0
$30
ed
row
bor
had
C
MF
4
MGSL
e aware that
nected to the $400,000 loan
situation. He said that he becam
con
was
ing
row
bor
the
r
the
5
determine whe
ries that the notes were not
1986 and was attempting to
that he was told during his inqu
d
6
alle
rec
e,
He
sur
6.
not
198
was
31,
RK
rch
ancial. CLA
made to WARD on Ma
the Ward loan to Madison Fin
to
ted
7
rela
not
was
27
#40
connected and that loan
wrote the notes.
8
he
n
whe
N
NTO
DE
to
ing
but believes he was talk
9
who
DARLENE FORD, an examiner
was
t
tha
said
He
e."
rlen
"Da
10
all the notes by
w up on what he had been
CLARK did not specifically rec
he may have asked FORD to follo
t
tha
d
11
eve
beli
He
n.
atio
min
assisted him on the exa
12
told about the option.
13
loan
n
wee
bet
ship
relation
time of the examination of the
the
at
14
ding
tan
e
ers
wer
s
und
loan
his
the
line
t
was told tha
CLARK was asked to out
CLARK stated again that he
.
loan
15
ial
anc
rdFin
Wa
n
the
diso
to
Ma
ted
to
t connec
#4027 and the Ward
loan #4027 was that it was "no
for
e"
cus
16
"ex
e"
n's
cus
diso
"ex
Ma
n's
ls".
diso
ed that Ma
•completely separate dea
er loans or debts. CLARK stat
oth
off
17
pay
,
to
ent
RD
eem
WA
agr
ble
ion
ena
g to write opt
MFC" loan, but was to
land from Ward, they're goin
buy
to
18
ts
of
wan
C
ess
"MF
fulln
the
was
note -- in
for the Ward-MFC loan
and that is the reason for this
ion,
opt
the
19
on
e
be
anc
will
e
form
not
per
the
then, and
Ward wants a guaranty of
be exercised and WARD paid
will
ion
20
opt
the
e
kes
aus
"Ma
it
bec
t
tha
ded
time, note will not be fun
arrangement, and he responded
whether this was an unusual
ed
ask
was
RK
was the same land subject 21
CLA
"
ed.
cell
can
property securing loan #4027
the
n
whe
22
lly
ecia
exp
",
now
no sense at the time, less
23
to the option.
24
and
7
402
n WARD loan
cerning the connection betwee
con
M
HA
25
LAT
by
He
ny
s.
imo
sion
test
WARD commis
CLARK was read portions of
loan 4027 was a way to pay
the
t
tha
26
and
C,
wn,
MF
to
kno
RD
had
that if he
the two notes made by WA
tion between the loans. He said
nec
con
d
27
orte
rep
e
t
hav
tha
of
uld
re
sho
t MGSL
said that he had not been awa
in MFC by MGSL. He said tha
ent
stm
inve
ct
28
dire
a
ny
imo
tion
test
sac
ed that the
he would have called the tran
ounts receivable. CLARK stat
acc
as
ks
boo
29
ir
the
on
d
liste
shown the notes from WARD
.
ers
min
exa
30
the
to
"
said
"cannot jibe with what was
31
ct
dire
a
it
ed
ld have call
s, at the very least he wou
sion
mis
32
com
the
ld
ut
wou
abo
he
wn
and
gations,
He said that if he had kno
SL would be funding MFC's obli
MG
e
aus
33
bec
C
MF
her
furt
into
a
n
ty
ran
bee
s would
investment by Madison Gua
sions, and that the commission
mis
com
the
34
n
ear
de
to
ma
n
did
bee
RD
had
the loan
have been asking what WA
purchase. He also said that if
IOC
the
in
35
er
buy
ate
viol
aw"
ld
"str
a
wou
it
stated
indication that WARD was
"deceptive on its face." CLARK
loan
the
36
red
is
side
ure
con
e
nat
hav
true
ld
ir
so that the
to pay commissions, he wou
and completely documented
fully
37
be
to
s
was
tion
ny
sac
imo
tran
test
l
d
t the tria
regulations that require
said that there was no way tha
RK
CLA
.
38
else
y
one
ver
any
the
and
was
"connection
apparent to the examiners
mination. CLARK stated that
exa
the
ing
39
dur
n
told
upo
n
ed
bee
bas
t
had
indicated tha
consistent with what he
mination -- no." CLARK also
exa
the
in
40
ing
-say
was
it
y're
r
the
-- whateve
point he was seeking and
er to conceal the connection
ord
"in
d
ate
cre
41
was
ion
opt
what he had now learned the
42
.
FC"
between #4027 and Ward-M
43
for
ty
per
for the pro
6 option to establish a value
198
,
1
y
Ma
the
of
44
use
e
ion
sibl
pos
ed on the opt
CLARK was asked about the
not have credited the value bas
uld
"wo
he
45
t
tha
ed
stat
RK
CLA
the benefit of the examiners.
46
price".
47
RD
a note by FO
May 1, 1986 option that had
the
of
sion
ver
a
of
e
pag
t
the fron
CLARK was shown a copy of
FOR OFFICIAL USE ONLY

FORM96-1 31 A

FDIC OIG
18-1621-000197

 FOIA RD 56806 (URTS 16302) Dodd: 70104898 Page 11

PAGE 10 OF 10

CONTINUATION SHEET
~RVIEWOF

DA TE OF INTERVIEW

FILE NUMBER

JAMES T. CLARK

June 10, 1996

WA-94-0016

He had no particular recollection
indicating thet she had talked to DENTON about the description being wrong.
of the note or the circumstances.
personal liability on three of his loans
CLARK was asked whether he was aware of WARD being released from
releases because the •as or date
the
seen
in June, 1986. He said he had not been, and likely would not have
at that time was April 30, 1986.
examination.
CLARK was asked whether he dealt with any state regulators during the
and Loan Supervisor. He said that
He recalled the involvement of BEVERLYBASSETT, the Arkansas Savings
officials and FHLBB supervisory
MGSL
shortly before the July 11, 1986 meeting at FHLBB Dallas between
had requested that she attend
TT
agents, he was told by supervisory agent CHIP KEISWETTER,that BASSE
because in other cases, Texas
ed
the meeting. CLARK said that KIESWETTERindicated that he was concern
CLARK was asked if it was
ons.
regulators had attended the meetings and had taken the side of the instituti
instance was the only one
this
that
common for state regulators to attend the supervisory meetings. He said
districts.
FHLBB
in other
he was involved in Texas, but that the practice was relatively common

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

of the examiners involved in the
CLARK said that on another occasion shortly before the meeting, one
sly done work for MGSL on the
examination had indicated a concern to him that BASSETT had previou
that the examiner had thought it
CAMPOBELLO project, specifically concerning an interstate issue, and
working at MITCHELL, WILLIAMS
represented a conflict for BASSETT. He recalled that BASSETT had been
concern to KEISWETTER, and that
when that occurred. CLARK said that he believed that he relayed that
what the result was, but recalled that
KEISWETTERbrought it to BASSETT's attention. CLARK did not know
she did attend the meeting.

17
18
19
20
21
22
23
24

25

.,

FOR OFFICIAL USE ONLY

116-131A

FDIC OIG FORM
18-1621-000198

 ----~----------~--------------------------------------------~-------

1:

Screened by NARA (RD-F) 07-25-2018
~OIA RD 56806 (URTS 16302) DOCID:
70104902

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18-1621-000199

  

 

page: 5! @4614?



FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 2

 

 

  

18-1621-000200

. 7v

08/17/94

-It

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COMMITTEE ON GOVERNMENT
OPERATIONS

CAIIO\TII W, """-ONEY, NEW1'0111{
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MRIIETT,WISCQfcSIN

...'"''"'t.AOTil H. FI.M.f. NEWTOM,
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1994

_.G,.,._'l'EXA8

The Honorable Kenneth Starr
Independent counsel
U.S. Department of Justice
Washington,
o.c. 20530

Dear Kr. Starr:
Zn Febru5ry,
1994, z instructed
the minority
stat~ ot the
Committee on Government Operations
to initiate
a probe into the 1
death of White House aide Vincent w. Foster,
Jr.
This probe
included
both a review of the u.s. Park Police
investigation
into
the cause ot death and the activities
of White House staff
in the
days following
the discovery
ot Kr. Foster's
body.
During
the past several
months Special
Counsel Robert 8.
Fiske,
Jr. has cooperated
to help ensure that my probe did not
interfere
with bis own investigation.
On several
occasions
my
staff
even provided
his ottice
with names of individuals
who may
have relevant
information
on this matter.

I am en~losing
for your information
a summary report
released
on August 12 regarding
the first
phase of my review.
This report
endorses
the conclusions
ot both the Park Police and
Hr. Fiske that Vincent
Foster committed suicide
in Fort Marcy
Park, Virginia
on July 20, 1993.
My probe on the actions
by
White House stat!
to prevent
the U.S. Park Police
from conducting
a thorough
investigation
into this matter will continue.
It is my hope that we can work together
to ensure that my
efforts
do not interfere
with your ongoing investigation.
I
would be pleased
to meet with you, as I did with Bob Fiske,
to
discuss
this
matter fully.

A

Enclosure

FOIA RD 56806 (URTS 16302} Docld: 70104902 Page 3

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18-1621-000201

 13:33

003

ONE HUNDREDTHIRD CONGRESS

Q:ongrt.s.s
of tht tinittd ~tatr.s
tloust orRqrrumtati\JtJ

COMMITTEE ON GOVERNMENT OPERATIONS

2157 RAr1uRH HOUSE OFFICE 8UILOING
WASHltCGTON,DC 20616-e143

SUMMARYREPORTBY

WIWAM F. CLINGER, JR
Ranking Republican
Committee on Government Operations
U.S. House of Representatives

on the

DEATHOF WHITE HOUSEDEPUTYCOUNSEL

VINCENT
W, FOSTER,
JR,

August 12, 1994

Jr, ~ Jtc:piNicn
Pcp,Nicee Slaffl>u.aur
K.cwiaN.S-0,~0cac:nlC.-C,
Lill Odlt Jayfmea, Rq,-,Nicee Spdll C-,
W'&lliw P. Cliap,

NaWl,cw Fkldacr,

A~

FOIA RD 56806 {URTS 16302} Docld: 70104902 Page 4

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18-1621-000202

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004

BACKGROUND
On February 24, 1994, I began a probe inlo the death investigation of White House
Deputy Coumel Vincent W. Foster, Jr. In part, this investigation was prompted by the
numerous conflicting acoounts reported by various news agcncics. 1
What I have found during our extensive review is that a significant number of those
news accowtts were simply untrue or otherwise easily CAJ>lained.In the final analysis, I
reached the same conclusion as that of the U.S. Park Police and Special Counsel Robert B.
Fiske, Jr.; namely, that on July 20, 1993, Vincent W. Foster, Jr. died from a self-inflicted
gunshot wound to the mouth while at Fort MarcyPark (Fairfax County), Virginia.
As part of our probe,

my staff or I interviewed emergency medical personnel from

Fairfax County, Virginia, law enforcement officials, and other persons involved in the U.S.
Park Police investigation of Mr. Foster's death. ln addition, the Government Operations
Committee was provided access to the theretofore undisclosed U.S. Park ~olice Report on
the Foster death along with photographs taken at both tbe scene and the autopsy.
I initiated this investigation in my role as Ranking Republican to the Committee on
Government Operations. It was conducted under the authority of Rule X of the Rules of
the House of Representatives, which charges the Committee on Government Operations
with responsibility for conducting reviews of the management and effectiveness of
government operations and activities. Also, pursuant to 5 U.S.C. Sec. 2954, executive branch
agencies are required to provide "any information. . . relating to any matter within the
jurisdiction of the committee" when requested by any seven members of the Committee.
The purpose of this report is to provide a summary of this probe into the
investigation of the death of Vincent Foster to my colleagues on the Government ,
Operations Committee and in the House of Representatives. I also hope that this summary
report, along with the detailed findings of Special Counsel Roben Fiske, will put to rest any
lingering questions regarding the events of July 20, 1993.

FORENSICEVIDENCE SUPPORTSSUICIDE
RespectedPathologyPanel ReviewsPhysicalEvidence
A review of the facts surrounding the death of Mr. Foster must start with (1) the

overwhelming amount of forensic evidence supponingthe conclusion that he died of a
suicide, and (2) the stature of those brought in to review the autopsy results. Contrary to
the belief of some commentators, the forensic pathology team ("Pathology Panel") working
with Special Counsel Roben B. Fiske, Jr. did not rely solely on the autopsy conclusions of
the Northern Virginia Medical Examiner, Dr. James C. Beyer.2 Rather, the Pathology

AMERICAN

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P VERSIGHT

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005

13:34

Panel independently concluded that Mr. Foster committed suicide on July 20, 1993 at Fort
Marcy Park, Virginia after their own review of the available evidence. 3
The determination of the Pathology Panel organized by Special Counsel Fiske was
based on independent observations and testing of Mr. Foster's soft palate, a review of the
photographs taken at Fort Marcy Park and during the autopsy, a review of FBI lab reports,
and an examination of Mr. Foster's clothing. The same or comparable evidence was
available to the Pathology Panel as would have been available had they been present at the
original autopsy. The Pathology Panel determined that the decedent's body did not need
to be exhumed because numerous tissue samples were saved and available for examination.

Evidence
of Forensic
Slimroao:
It is indisputable that the gun was fired while in Mr. Foster's mouth. This conclusion
is supported by the nature of the wound in the mouth and head as w~ll as the smoke
and gun powder residue found in the soft palate of the mouth. The report issued by
Special Counsel Fiske discusses this forensic evidence in considerable detail. That
being the case, one of two conclusions remain: (1) Mr. Foster committed suicide,
(2) Mr. Foster was forced to put the gun in his mouth and pull the trigger.~

o~r.
~ -r:;lk,-,
'11

~~

The uncontested evidence supports the conclusion_that Mr. Foster placed the gun
his mouth himself. There were no signs of a struggle at Fort Marq Park, no bruises
on Mr. Foster's body or tears in his clothing, and no broken teeth. Moreover, Mr.
Foster was not under the influence of any controlled substances or alcohol that may
have been used to render him helpless. Lab reports reveal that no alcohol or
5
controlled substances were found in Mr. Foster's bloodstream.

The conclusion that Mr. Foster committed suicide is also supported by the marks left
on Mr. Foster's thumb and forefinger. Consistent with the testimony of the Fairfax
County paramedics, Mr. Foster's thumb was trapped by the trigger guard. The
remaining mark is consistent with the rebound of the trigger. Because the
indentation on Mr. Foster's thumb matches exactly with the rebound of the trigger,
it would have been virtually impossible to artificially make such a mark. Similarly,
the imprint on Mr. Foster's forefinger is identical to the imprint on the back of the
gun. The powder bum.s also support a finding of suicide.
Along with select members of my staff, I had complete access to photographs taken
at Fort Marcy Park and during the Northern Virginia Medical Examiners autopsy.
These photographs support statements by the U.S. Park Police and the Pathologist
Panel regarding the location of the body, trigger guard marks, and gunpowder
·
residue.

AMFfllCAN

2
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 006

13:35

NO EVIDENCESUPPORTS
MOVEMENT
OF BODY
Although the forensic evidence indicates that Mr. Foster committed suicide, several
issues not addressed in satisfactory detail by Special Counsel Fiske have been of concern
to some commentators. They are addressed below:

Movement
of the FosterBody
First, a major concern is the possible movement of Mr. Foster's body after he died.
As reported, the amount of blood on and surrounding Mr. Foster's body at Fon Marcy Park
was not substantial.
It is apparent that the lack of a substantial amount of blood was the direct result of
the position of Mr. Foster's body at the time of death. Because Mr. Foster was lying
on an angle, the blood drained downward instead of encompassing his entire body.
However, the paramedics who lifted Mr. Foster's body and placed iJ in the body bag
for transpon to the hospital recorded that the body was "drenched with blood" once
it became level. By the time the body bag was opened at the hospital, Mr. Foster•s
shirt and undershin were covered in blood.
'
The bloodspiin on the right shoulder of Mr. Foster's shirt is admittedly difficult to
explain but not determinative that the deceased was moved after he committed
suicide. Any number of facts would explain the bloodstain; perhaps the head was
moved by the Park Police or emergency personnel on the scene. Regardless of what
caused the bloodstain, however, it cannot be disputed that if the body was moved
into the park additional signs would suppon that conclusion. Mr. Foster's clothing
was drenched with blood once he was moved to the hospital. His clothing would
have been equally drenched if he had been moved into the park.
Commentators have also made issue with the lack of skull fragments found at the
scene suggesting it also supports the conclusion that Mr. Foster was moved to the
park. The scene was not searched for bone fragments, however, until approximately
nine months after Mr. Foster's death. Although it is not surprising that numerous
objects were found at the scene, such as Civil War anifacts, skull fragments are
animal matter. As such, they could have been moved by scavenging animals or even
washed away. TI1ere was not a large amount of fragments that were missing as the
exit wound was only 1 1/4 by l inch in diameter. Likewise, the bullet was never
found, but one need only visit Fon MarcyPark to understand that the bullet could
have fallen anywhere in the park. The fact that it was not located is not
determinative in light of the previously discussed forensic evidence.
The lack of fingerprints on the gun found in Mr. Foster's hand has also been used
to suggest that he did not fire the weapon or that his body had been moved and the

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gun was later placed in his hand. Pathologists · have suggested, however, that
fingerprints are not always identifiable. Other factors, such as the amount of oils on
the decedents fingers, the humidity, and the temperature may result in fingerprints
not remaining on an object.

Statementsby "CW'Contradicted
or Easily'&l)lained
Recent statements of the so•calletl Confidential Witness ("CW') appears to be in
question. CW is the reference to the man driving a white van who initially found Mr.
Foster's body in Fort Marcy Park around 6:00 p.m. He has asked that his identify be kept
confidential.
A comparison of CW's statements to FBI agents working for Special Counsel Fiske,
as reflected in the Fiske report, and those statements given under oath to Representatives
Dan Burton, John Mica and Dana Rohrabacher reveal that the substance of each statement
is very similar, if not identical.
In both instances, CW insists that the palms of Mr. Foster were facing upward and
there was no gun in Mr. Foster's hand when CW found the body. 6 However, in bo~
instances, CW acknowledged that from the position he was standing, it was possible
that if Mr. Foster had a gun in his hand, CW could have missed it. Special Couns
Fiske's repon states, "CW acknowledges that, because of his position at the top of
tbe berm and the heavy foliage, there could have been a gun in the man's hand that
he did not see. "7
CW reiterated this point in his sworn statement when he acknowledged that "'a
trained policeman standing at the top of the hill that (sic) even when he [the .
policeman] was told he [Mr. Foster] had a gun in his hand still did not see it [the
gun]. I cannot ... say, I would have seen it [the gun]."' Because my staff and I had
access to photographs taken at Fon Marq Park, we carefullyreviewed a photo taken
from roughly the same location that CW claims to have stood. Because of the dense
foliage that was clearly seen in the picture, Mr. Foster's hands could not possibly
have been seen without moving to his side. CW admits that he did not move to Mr.
Foster"s side to examine Mr. Foster's hands.
Questions have also been raised about the alleged existence of a wine cooler bottle
near Mr. Foster's body and a stain on Mr. Foster·s shirt which appeared to be a
combination of wine and vomit. These assertions were made by the CW. The lab
reports conducled on Mr. Foster's shirt reveal that the stain was purely blood and no
traces of wine or vomit were found. The U.S. Park Police asserts that no wine
coolers were found near Mr. Foster's body, but wine coolers were in an automobile
located in the parking lot but not belonging to Mr. Foster. Additionally, no alcohol
was found in Mr. Foster's bloodstream.

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008

Questions have been raised regarding a discrepancy between CW's recollection of the
various contents of the two cars located in the parking lot at Fort Marcy Park the
afternoon of Mr. Foster's death. All parties involved agree that there were two cars
in the parking lot -- one belonged to Vincent Foster and was grey in color and the
other was a white Honda. According to CW, inside the white Honda were two wine
coolers and a jacket that matched the pants CW saw on Vincent Foster.
In contrast, the U.S. Park Police investigation (at the time of the death) and Special
Counsel Fiske's investigation (nine months later) both determined, based on
information from the owner and passenger of the white Honda, that the wine coolers
were in fact in their car. As well, no jacket was in their car despite the testimonyof
the CW. Toe U.S. Park Police found the jacket matching Mr. Foster's pants in the
car belonging to Mr. Foster.
Also of concern is the statement by CW that the ground at the bottom of the berm
where the body was found was trampled and worn. It would "t?eimpossible to
determine, however, whether the ground was trampled by the footsteps of Mr. Foster
pacing back and forth or by the footsteps of others.

OtherEvidencof
e Mar~naValue
l
Several commentators have questioned the origin of carpet fibers found on Mr.
Foster's body or clothes. Although the origin of those fibers and hair have not been
substantiated, a determinative finding of the origin is not practical nor necessary in
light of other overwhelming forensic evidence. Specifically, carpet fibers may be
transmitted from almost any source. It would be impossible to determine when or
where the carpet fibers found on Mr. Foster's clothing would have originated.
Rumors have also arisen concerning a blond hair found somewhere on Mr. Foster's
Prior to beginning the autopsy, Mr. Foster's
clothing was removed and commingled together. Therefore, it is impossible to
detennine which piece of clothing the hair was originally attached.

body, possibly on his undershorts.

The blond hair found on Mr. Foster could have come from anyone. Possibly, the
hair belonged to his daughter who has long blond hair. The day of his death, Mr.
Foster was driving the car typically driven by his daughter. Moreover, the morning
of his death, Mr. Foster drove his daughter to work, leaned over and kissed her
good-bye -- an ace whereby a hair could have easily been transmined.
The hair
could have also belonged to anyone of the guests at the swearing-in ceremony of FBI
Director Louis Freeh which took place in the Rose Garden the day of Mr. Foster's
death. Because the forensic evidence so conclusively points to a suicide, the origin
of the blond hair is hardly relevant.

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009

Another area of concern seems to be the existence of semen found on Mr. Foster's
undershorts. Those who suggest that the presence of semen demomtrates that a
sexual liaison occurred on the afternoon of Mr. Foster's death ignore the testimony
of medical experts who suggest that it is not uncommon for an individual, at the time
of death, to defecate, urinate, or even ejaculate.
•·

Finally, some have questioned why Mr. Foster's body was not exhumed. Based upon
the uncontroverted forensic evidence coupled with the pain such a procedure would
understandably cause the Foster family, it was determined that Mr. Foster's body
need not be exhumed. As suggested above, the Pathology Panel reasonably
determined that sufficient evidence was preserved to allow them to conduct their own
independent review.

CONCLUSION
I must agree that not evecy question regarding the death of White House aide
Vincent Foster has been definitively answered. ~onetheless, I have reached the conc1usion
that all available facts lead to the undeniable conclusion that Vincent W. Foster, Jr. took
his own life in Fort Marcy Park, Virginia on July 20, 1992.

Perhaps the unexpected deatl1 of any bigh government official will needlessly bring
cries of conspira')' from many in our society. That is unfortunate. The death of Mr. Foster
has been reviewed in detail by the experienced professionals at the U.S. Park Police, who
were performing their tasks under extremely difficult circumstances. Special Counsel Roben
Fiske took that investigation one step further by establishing a panel of noted forensic
pathologists who reviewed all of the available evidence and reached the same conclusionas
that of the Park Police. I reviewed the work of these two organizations and, with this ·
report, support their findings.
Accordingly, this report closes the Government. Operations Committee minority
investigation on this stage of the death of Vincent Foster. The focus of this probe will now
tum to the second portion of the investigation dealing with the handling of Mr. Foster's
documents and the potential obstruction of justice by White House staff in the days
following Mr. Foster's death.

Myspecial thanks to officials of Fairfax County, Virginia, the U.S. Park Police, and
the Office of Special Couruel Robert B. Fiske, Jr. for their assistance in conducting this
review.

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010

ENDNOTES
1,

Despite an early determination by the U.S. Park Police that Vincent Foster had
committed suicide, numerous news stories began to appear in early 1994 suggesting
that lhe Park Police did not thoroughly perform their job or that the White House
staff had improperly impeded the police investigation. These articles include:

•

Post reporter Michael Isikoff reports that .
On January 13, 1994. WashiD'19D
DoJ and FBI agenu have begun retracing the original handling of the Foster
probe in a search for evidence that would shed light on his state of mind at
the time of his death. IsikofI further reports that this effon began because
the investigators were concerned that top White House aides may have
hindered the U.S. Park Police from obtaining key evidence.

•

On January 27, 1994, the NewYork Post's Chris Ruddy repQrts that some of
the first people to discover the body of Foster have raised new questions
about the conclusion that it was a suicide. According to Ruddy, "The
still
questions involve the position of Foster's body; the fact that the gun
and
on
blood
of
amount
small
in Foster's hand and had no blood on it; the
near the body; and the swiftness with which the death was declared a suicide."

was

2.

•

In late January, 1994,the WallStreetJournalfiled suit in U.S. District Court
to "force the release of reports on White House lawyer Vincent Foster's
death. The DoJ had earlier planned to release these reports.

•

On February 3, 1994, the N,w York Post reports that former FBI Director
William Sessions said that the FBI 'was kept out of the investigation into .
Vincent Foster's alleged suicide because of a 'power struggle within the FBI
and the Department of Justice•·. Sessiora ..said the FBI did not get involved
in the probe for political reasons."

•

On February 4, 1994, ABC New's Jim Wooten reports that Secret Service
records "show that the day after Foster died Nussbaum did take a photograph
from the office and one of his assistants returned a trash bag previously
removed from the office."

The autopsy was performed by Dr. Beyer. The autopsy was authorized by Dr.
Donald Haut of the Office of the Chief Medic.a] Examiner, Northern Virginia
District, Commonwealth of Virginia. The Medical Examiner's Certificate, better
known as a death cenificate, is signed by Dr. Haut and lists the cause of death as
''self-inflicted gunshot wound mouth to head."

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,

3.

The Forensic Pathologist Panel included four experienced and respected forensic
pathologists. They include:
(a)

Dr. Charles S. I-IiTiich. Chief Medical Examiner for the aiy of New York.

(b)

Dr. James L Luke - Forensic Pathology Consultant, FBI Investigative Support
Unii FBI Academy.

(c)

Dr. Donald T. Reay - Chief Medical Examiner for

King County, Seattle,

Washington.
(d)

Dr. Charles J. Stahl - Distinguished Scientist and Armed Forces Medical
Examiner, Armed Forces Institute of Pathology, Washington, D.C.

No evidence has been presented which would c:ballcnge the integrity of these experts.

4.

Several commentators have argued that Mr. Foster's body, after he died, was moved
to Fort Marcy Park. This issue will be addressed below.
'

5.

Small traces of an anti-depressant, which Mr. Foster was known to have taken, was
found in Mr. Foster's bloodstream.

6.

Fiske report at 30; Deposition at 43.

7.

Fiske report at 30.

8.

Deposition at 19.

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•.

•

ONE HUNDRED TMIRO CONliAESS

€ongrts.sof tht iinittd ~tatts
tton.&torRqnu~titla

COMMITTEEON GOVERNMENTOPERATIONS
215 7 RAr11.11u,
Hou,,
WASHIICGTOII,

Off'1GE Bu11.111Na

0C 20616-8143

SUMMARY
REPORTBY

WIWAM F. CUNGER1 JR

RankingRepubHcan
Committee on Government OperaUons
u_s_House of Representatives
the

on the
.••

....,

DEA]lf OF WHITE HOUSEQEPUJYCOUHSEL

VINCENTW,•FQSIER,
JR,

~gust

12, 1994

llr.Diaal p_ CliaaF,~.. 111..--c~
NaWlar Flddac,r, Pcp • fne lcaD°~

JVCIWXma N. S-0. P,qz:+um- Oatcra10-...::I

'If Cir' ua Odk

X • v'mrs, 'flq-Mirm

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 Panel independent11 concluded that Mr. Foster committed suicide on July 20, 1993 at Fort
· ,rcy Park, Virginia after thc:ir own rc~iew of the available evidence. 3
by Special C.Ounsel Fiske was
The determination of the Pathology Panel org~d
based on independent observations and testing of Mr. Foster's soft palate, a review of the
photographs taken at Fort Marcy Park and during the autopsy, a review of FBI lab reports,
and an P-xamioa.tion of Mr. Foster's clothing. The same or comparable evidence was
available to the Pathology Panel.as we>uldhave been available had they been present at th~
origiual autopsy. The Pathology Panel detennined that the decedent·s body did not need
to be exhumed because numerous tissue samples were saved and available for Cl'.amination.

of forensicByidence
S»mroao:
It is indisputable that the gun w& fired while in Mr. Foster's mouth. This conclusion
is .supported b)' the nature of the wound In the mouth and head ~ well Wi the smoke
and ~runpowder residue: found in the soft palate of the mouth. The rcporL issued by
Spetial Counsel Fiske discusses this fqr~nsic evidence in considerable detail. .That
being the case, one of two conclusions·remain: (1) Mr. Foster committed suicide, or
(2) Mr. Foster was forced to put the gun in his mourh and pull the trigger.'

-

The uncontested evidence suppons the a:>nclusion that Mr. Foster placed the gun in
hi$ mouth himself. There were no signs of a struggle at Fort Mar')' Park, no bruises
on Mr. Foster's body or tears in his clothing,and no broken teeth. Moreover, Mr.
Foster was not und~r the influence of any controlled .substances or alcohol that may
have been used to render him helpless. Lab reports reveal that no alcohol or
5
conuolled substances were found in Mr. Foster's bloodstream.

The conclusionthat Mr. Foster committedsuicide is also supported by the marks left
on Mr. Foster's thumb and forefinger. Consiste~t with the testimony of the Fairfax
County paramedics, Mr. Foster•s thumb was tripped by the trigger guard. The
remaining mark ; is consistent with the rebound of the trigger. Because the
indentation on Mr. Fosiel"'s thumb matches e.lactly with the rebound of the trigger,
it would have been virtually impossible to anificially make such a mark. Similarly,
the imprint on Mr. Foster·s forefinger is identical to the imprint on the back of the
gun. The powdc:r bums also support a finding of suicide.
Along with select members of my staff, I had complete acc.ess to photographs taken
at Fon Marcy Park and during the Northern Virginia Medical Examiners autopsy.
These photograpm support statements· by the U.S. Park Police and the Pathologist
Panel regarding the location of the body. trigger guard marks, and gunpowder
·
residue.

2

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.,&,~

•

~....J

NO KVIDENCE
SUPPORTS
MQYEMENT
Of BODY
Although the forensic evidence indicates that ~r. Foster committed suicide:.,several
issues not addressed in satisfactory detail by Spe~ial Cou05el Fisk~ have been of concern
to some commentators. They are addressed below:

Movementof the FosterBodJ
First, a major concern is the possible movement of Mr. Foster's bodyafter he di~d.
As reported, the amount of blood on and surrounding
Mr. Foster"s body at Fon Marcy Park
was not substantial.

.

It is apparent that the lack of a substantial amount of blood was the direct result of
the position of Mr. Foster's body at the time of death. Because Mr. Poster w~ lying
on an angle, the blood drained downward instead or encompassing his entire body.
However. the paramedics who lifted Mr. Foster's body and placed it in the body bag
for transpon to the hospital recorded that the body was "drenched with bloocr once
it became level By the time the body pag w~ opened at the hospital, Mr. Foster"s
shirt and undersbin were covered fo'blood.
·

The bloo~tain on the right shoulder of Mr. Foster's shirt is admittedly difficult to
explain but not determinative that the deceased was moved after he committed
suicide. Any number of facts would explain the bloodstain; perhapsthe head was
moved by the Park Police or emergency personnel on the scene. Regardless of what
Qused the bloo~tain, however, it cannot be disputed that if the body was moved
inLo I.he park additional signs would support that conclusion. Mr. Foster's clothing
was·drenched ~Ui blood once he was moved to the hospital, His clothing would
have been equally drenched if he had been moved into the park.
Commentators have also made issue with the lack of skull fragments found at the
scene suggesting it also supports the conclusion\that Mr. Foster was moved to the
park. The scene;was not searched for bone fragments, however, until approximately
Dine months after Mr. Foster's death. Although it is not surprising that numerous
objects were founa at the scene. such as Civil War artifacts, skull fragmentS are
animal matter. & such. they could have been moved by scavcnpn, animals or even
washed away. n1ece w-4.5 not a large amount of fragments that were missing as the
exit wound w~ only 1 1/4 by l inch in diameter. Likewise, the bullet was never
found, but one need only visit Fort Marcy Park to understand that the bullet could
have fallen anywhere in the park. The faa that it was not located is not
determinative in light of the previously discussed forensic evidence.

The lack of fingerprints on the gun found in Mr. Foster's hand has also been used
to suggest that he did not fire the weaponor that his body had been moved and the

3

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...

J....J•~~

'i
;

gun was later placed in his hand. Pathologists have suggested, however. that
fingerprints are not alwaysident~fiable. Ocher factors, :suchas the amount of oils on
the decedents fingers, the humidity, and the t~mpcrature may result in fingeiprints
not remaining on an objecL

Statemcats12)'"CW:Contradictedor EasilyExplained
.
Recent statcm~nts of the so•called Confidential Witness C-CW'")appears to be in
question. CW is the reference to the man driving a white van who initially found Mr.
Foster's body in Fort Marcy Park around 6:00 p.m. He has asked that his identify be kept

confidential.

A comparisonof CW's statements to FBI agents working for Special Counsel Fiske,
as reflected in the Fiske report, and those statements given under oath to Representatives
Dan Bunon, John Mica and Dana Rohrabacher reveal that the substance of each statement
is very similar, if not identical.
In both instances, CW insists that the:p.alms of Mr. Foster were facing upward and
there wa.s no gun in Mr. Foster's hand when CW found the body. 6 However, ia both
instances, CW aclcnowledged that from the position he was standing, it was possible
that if Mr. Foster had a gun in his hand, CW could have missed it. Special Counsel

Fiske's report states, "CW acknowledgesthat. because of his position at the top of
the berm and the heavyfoliage.there could have been a gun in the man's hand that
he did not sec." 7

CW· reiterated t4ispoint in his sworn statement when he acknowledged that "'a
trained policeµ1an standing at tbe top of the hill that (sic] even when he (the
policeman] was told he [Mr. Foster] had a gun in his hand still did not see it [the

gun]. J cannot ... say, I would have seen it (the gun]..... Because my staff and I had
a.cccss to phoLographstaken at Fort MarcyPark. we care.fullyrevieweda photo taken
from roughly the same location that CW claimsto have stood. Because of the dense

foliage that w~ clearly .seen in tbe picture, Mr. Foster's hands could not possibly

have been seen withom moving to his side. CW admits that he did not move to Mr.
Foster's side to examine Mr. Foster's hands.
,.f

Questions have also been raised about the alleged existence of a wine cooler bottle
near Mr. Foster's body and a stain on Mr. Foster's shin which appeared to be a
combination of wine and vomiL These assertiom were made by the CW. The lab
reports conducled on Mr. Foster·s shirt.reveal that the stain was purely blood and no

traces of wine or vomit were found. The U.S. Park Police assc~ that no wme
coolers were found near Mr. FosLer'sbody, but wine coolers were in an automobile
located in the parking lot but not belonging to Mr. Foster. Additionally, no alcohol

was found in Mr. Foster's bloodsueam.

4

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 ,,

Questions have been raised regarding a discrepancy between CW's recollection of the
various contents of the two cars located in the parking lot at Fort Marc:y Park the
afternoon of Mr. Foster·s death. All parties in:.'olved agree that there were two cars
in the puking lot - one belonged io Vincent Foster and was grey in color and tbe
other-was a white Honda. According 10 CW, inside the white Honda were two wine
coolers and a jacket that matched the pants CW saw on Vincent foster.
In contrast, the U.S. Park Police investigation (at the time of the death) and Special
CoUDSel F~ke's investigation (nine months later) both determined, based on

information from the owner and passengerof the white Honda,that the winec:ool~rs
were in fact in their car. As well, no jacket wasin their car despite the testimony of
the CW. The U.S. Park Police fpund the jacket matching Mr. Foster's pants in the
car belonging to Mr. Foster.

or

Also of concem is the statement by CW that the "'ound at the bottom
the berm
where the body was found was trampled and worn. It would be impossible to
dctcrmin~, bowevet",whether lhe ground was trampled by the footsteps of Mr. Foster
pacing back and forlh or by the fot>~t~ps of others.

QrbecEvldcncc
of MarginalValue
Several commentators have questioned the origin orcaipct fibers found on Mr.
Fost~r•s body or clothes. Although the origin of those fibers and hair have not been
substantiated, a determinative finding of the origin is not practical nor necessary in
light of other overwhelming forensic evidence. Specifically.carpet fibers may be
transmitted from.,,wmost any source . It would be tmposslble to determine when or
where the carpet fibers found on Mr. Foster's clothing would have originated.
Rumors have also arisen concerning a blond hair found somewhereon Mr. Foster's
body, possibly on his undershorts.
Prior to begillningthe autopsy,Mr. Fostefs
clothing was ICJ?,Ov~d and commingledcoiethcr_ Therefore, it is impossible to
detennine which piece of clothing the hair was originallyattached,
The blond hair found on Mr. Foster could have com~ from anyone. Po5$ibly,the
hair belonged to bis daughter :who h~ long blond hair. Toe day of his death, Mr.
Foster was driving the car typically driven by his daughter. Moreover, the morning
bis death. Mr. Foster drove his daughter to work, leaned over and kissed her
good-bye -- an act whereby a hair a>uld have easily been transmfned.
The hair
could have also belonged to anyone of the guesis at the swearing-in
ceremony of FBI
Director Louis Preeh which took place in the Rose Garden the day of Mr. Foster's
death. Because the forensic evidenceso conclusively
pointSto a suic:ide,the origin
of the blond hair is hardly relevant.

or

5

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13:36

Another area of concern seems to be the existence of semen found on Mr. Foster's
undershoru. Those who suggest that the presence of semen demonstrates that a
sexual liaison oa;urrcd on the afternoon of Mc. Foster's death ignore the testimony
of medical e~erts who suggest that it is no't uncommon for an individual, at the time
of death,to defecate, urinate, or even ejaculate.
Finally, some have questioned why Mr. Fosters body w~ not exhumed. Based upon
the uncontrovencd forensic cvidcn~ coupled with the pain such a procedure would
understandably cause the FosLcrfamily,It was determined that Mr. Foster's body
need not be exhumed. As suggested above, the Pathology Panel reasonably
detennined that sufficient evidence was preserved to allow them to conduct their own
independent review.
I

CONCLUSION
I must agree that not every question regarding the death of White House aide
Vincent Poster has been definitively amw(;:rcd. "Nonetheless, I have reached the conqusion
that all available facu lcacl to the undeniable conclusion
that Vincent W. Foster, Jr. took
his owu life in Furt Marcy Park, Virginia on July 20, 1992.
Perhaps the unexpected dcalb of any high government official will needlessly briag
ries of conspiracyfrom many in our society. lbar Js unfonunate. The death of Mr. Foster
Jas been reviewed in detail by the experienced prof~ionals at the U.S. Park Police, who
were p~rfonning their ta.Sksunder extremely difficult cirwmstances. Special Counsel Roben
Fiske took that investigation one step further by establishinga panel of noted forensic
pathologists who reviewed all of the available evidence and reached the same conclusion as
that of the Park Police. I reviewed the work of these two orga.n.izadonsand. with this
report, suppon their findings.
Acc:ordingly, this report closes the Oovernme~t. Operations Committee

minority

investigationon thJs stage of the death of Vincent Foster. The focus of this probe will now
turn to the second portion of the investigation dealing with the handling of Mr. Foster·s
documents and the potehtial obstruction of justice by White House staff in the days
following Mr. Foster's death.
My special thanks to officials of Fairfax County. Virginia., the U.S. Park Police. and
the Office of Special Counsel Robert B. Fiske, Jr. for their assistance in conducting this

review.

6
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ENDNOTES
1.

2.

Despi~ u.n early determination by ihe U.S. Park Police that Vincent Poster had
committed suicide, numero~ news stories began to appear in early 1994 suggesting
that th~ Park Poli~ did not thoroughly p~rform their job or that the White; Howe
staff had improperly impeded the poli~ investigation. These articles include:
•

On Januazy13, 1994. Wa3hinpon
Postreporter MichaelIsikoff reports that _
Do1 and FBI agents have begun retracingthe originalhandling of the Foster
probe ma search for evidence that would shed li;ht on his state of mind at
the tim~ of his death. hikoff further reports that tlm cffon began because
the investigatorswere concerned that top White House aides may have
hindered the U.S. Park Police from obtaining key evidence.

•

On January 27, 1994, the NewYorkPos(i Chris Ruddyr~pons tbat some or
the first people to discover the body of FosteJ" have raised new questions
about the conclusion that ~t.w.as
a suicide. According to Ruddy, ,-nte
que.nions involve the position of Foster's body; the fact that the gun w~ still
in Foster's hand and had no .bloodon it; the small amo1.1nt
of blood on and
Dear the body; and the swiftne~ with which the death was declared a suicide."

•

In late January,1994, the WallStreetJournalfiled suit in U.S. District Court
to "force the release of reports on White House lawyer Vincent Fosters
death. The DoJ had earlier planned to release these rq,orts.

•

On February 3, 1994, the ~ reports that former FBI Director
William Sessionssaid that the FBI "'was kept out of the invc.stigation into
Vincent Foster's alleged ~uicide because of a 'power struggle within the FBI
and the Department orJustice•·: Sessio~ "said the FBI did not get involved
in the probe for political reasons."
·.

•

On February 4. 1994, ABC NewsJim Wooten reports that Secret Service
records "show that the day after Foster died Nussbaum did take a photograph
from the office and one or his assistants returned a trash bag previously
removed from the office."

The autopsy was performed by Dr. Beyer. The autopsy was authorized by Dr.
Donald Haut of the Office of the Chief Medical Examiner, Nonhem Virginia
District, Commonwealth of Virginia. The Medical Examiner's Certificate, better
known as a death cenlficat~, is signedby Dr. Haut and lists the cause death as
"selC-inflictedgunshot wound mouth to head."

or

7

AMFnlCAN

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~.

The Forensic Pathologist Panel included four experienced and respected forensic
pathologists. They include:
(a) . .. Dr. Charles S. Hin.ch• Chief Medical Examiner for the City of New York.

{b)

Dr. James L Luke• Forew;icPathologyConsultant,FBI Investigative:Support
Unit. FBI Academy.

(c)

Dr. Donald T. Reay ... Chief Medical Examiner for King C:Ounty, Seattle,
Washington.

(d)

Dr. Charles J. Stahl • Distinguish~d Scientist and Armed Forces Medical
Examiner. Armed Forces Institute of Pathology,Washington. D.C.

No evidenceha.sbeen presentedwhichwould c:hallcngcthe integrityof these experts.
4.

Several commentators have argue<Jthat Mr. Fostct's body, after he died, was moved
to Fort Marcy Park. This issue will 'be addressed below.

S.

Small tra'-C:Sof an anti-dcprcssant, .which Mr. Foster was known to hav~ iak~D,was
found in Mr. Foster's bloodstream.

;).

Fiske report at 30; Deposition at 43.

7.

Fiskerepon at 30.

8.

..•
Deposition at 19~

\

AMf-HICAN

VERSIGH
Ono~

8
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INDEP COUNSEL

315012218707
TOICAN
COMM-REPUBL
BANK
09-26-94Ol:44PMFROM

•••

OIC DC

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P002/006

•

ON BANKING,HOUSING,AND
COMMITTEE

.AFFAIRS
URBAN
DC 20510-8076
WASHINGTON.

September

26, 1094-

Mr. Kenneth Starr, Esq.
Independent Cuwisel
2 Financial Center
1082GFinancial Center Parkwny
Suite 134
Little Rock, Arkansas 72211

I

I

i

i

I
I

D0t1rMr. Sts.rr:

I

i

j

is
t.n Sena.r.e Resolution 229. the Sttnale Ballking Co$ittee
PuTA1111nt
nnd
~tlll'o
the
s,
subject
ether
condur.ting M investigation and hearings in Lu,among
of communications between ufficiKl::.uf the Wmte House and the Dqpcrtmcnt
E'!'.21:Ant
of the Treasury· oc the Resolution Tru~t Corporntion ("RTC") relati~g to the
ation and the Madison Gur.?runty Savings ja:idLoan
t
Whitewater Devtslupme11Corpor
ds nf
A:s~ociation. The Committee's investigntion iucluded reviewing thotjsan
hA:uing~.
docwucnts 1 dep08Ulgmany knowlcdgC4blo witneeses, and conducting public

hsi~ developed evidJce which ·
In the course of the proceedings, the (.;ommitt.P.P.

iss.
JJb:nngly suggests that certain individuals may h~ve purposely misled bongre
ny
i.estuuo
Accordingly, we request that you and youTJt.aff review the accuracy uf Lhe;,
ns
given to this ComJnittee on Fehnu1ry24, 1994, and more recently cluring df positio w
wi:Jh
m;.y
you
,
review
youc
of
ion
and hearing,g in July and August. At the conclus
ng
consider whet.hRr criminal charges should be bruut.(ht. While we are still re~ewiover
uuw w1itiug to ,expreH cox{cern
Jean
the testimony of Treasury Deparlweul. witnesses Mr. Roger .Altman, lMa.
Hanson. and Mr. Joshua SL~u1~r.
the t,p"c:itimonyof White House officials, w~

tt.et!

i

II

~TMAN TESTIMONY

i

ed
On February 24, 1994 lleputy Secretary nfr.he Treasury Roger AltmJ1 teet11'1
RTC.
the
onl
i.=i
hearint{
ht
bofore this Committee, as part t'.\f nur ~P.mi•annual oversig
~xtent
he11ring, Mr . Altman was·qucstionodext4ilrusivt!ly uu thenature~nn
Durin,; Lh.i:91
the
that
~o
rcfcrra.
011 t.he handling of criminal
of ci,nt.;1ctRwith the White House,1:1.ntl
Mr.
that
The evidence ie ovo:whelmi.njJ
RTC had made that mentioned I.he Clinton.."'!!.
lete. In addition t.o concealing the
incomp
and
rate
inaccu
were
!
..ll's answer
AlL,u&
Altman
number of' contacts between the White House and 'l'reMmTy or RTC, Mr.

H IA
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concoaledthe na.turoofthe contacts.Mr.Altman's attempt to mislead the Cpmmittee
continued through a series- of lP.ttenihe sent to the Committee which p~ortcd
I
co1Tect his earlier testimony.

.

to

I

Pursuant to Senate Resolution 229, in July and August 1994, Altman was
depostd by Counsel for the Committee and also testified at public hearingsJ On both
occa:iiom, Mr. Altman .was under oath. Altman'.s testimony on critical 1pointa is
contradicted by the testimony of other witnesses o.nd the doeumcntciry cviacncc. It
appcora thllt AltmQn did not testify truthfully at hie deposition or at tHeae more
!
roccnt hearings.
i
Here are several example.a: On February 24, Altt:nl!T'It.~t:ifiAd th~t. ~hA "~nlP."
WRRto cii~cufilAtije ~t11tut.P.
p~ose ofaFeb:ruary 2, 1994 mAAting atthe WhitA Ho11.i:zP.
of limitations as it applied to the Madisoncase. [Feb. 24 Hearing, page 631 Altman
dP-qcribed the ''whole conversation" as pertaining only to a generic discussion of the
statute of limitations. In response to a direct qut:!~tion,ht! tstat.ed l.h.at.ilhe "one
question'' he was asked by White House officials uL the February 2ui.l w~~Li.u~ wc:i.:1
wheLh~r pdva~ cuwuittl fur Uu::1,1w"lit:~wuultl bt, n~c~v.iu.)I;a :w.uiliU' udt=UUJ::,(Ft:L.
on e9ideuce develope:,diii our· investigation, we now ~ow that
24, pi:igt! 55-56] B~
let:!Liwunyw~ i.wequivoeally false. A14e~en ?,fr. Altman has recently 41dmitted,
t.h..i1:1
the truth is that at the February 2nd meeting there was an extensive ma4ussion of
whether Altman should recuse humelf. White House officials asked Altuian many
questions about reeusal and a.bout who would ho the dec:iaion..maker in tho Ma.diaon
Whitewater coao if Altmon withdrew from tho co.sc. They alao render~d advice
regarding his decision. Indeed. Joshua Steiner reported in .his diaries that the White
House told Altman that his dec:iaion to recuse hinu1elf was "unacceptable",! and that
Altman was under "intense pressure" from the Whit.I:!Hnmu~ nnt. 1.o r~u1o1~ll,im11~1r.

th~

Fe~nia.ry 24th hearing RQVe:ralSenators also put probing qu~stions to
At
Altman aimed at determining whether there were any other White Hous~ contacts

apart from that contact on February 2nd. Senator Gramm speci:ficallvaskekl Altman
whether he or bis staff had •a11ycummunicatiou" with the: Wliite l·Iouee.![Feb. 24,
page 55] Altman ili8cluse<lonb the F~urwu-y 2nd meeting. Senator D'Am~to asked:
'Was there any other meeting that may have been requested". Altman s?id: "No.''
[Feb. 24t page 61]. Yet, it is now undisputed that there were numerous contacts
which .hltman (ruled to diitcloec. O.nc of the moro significant meetingil wnic;)iAltman
concealed occurred on Fcbrutllj' 3rd when Altman himself requested a meeting at the
'White House to a.nnounoe taat he would not recus~ himi;olf. Altman hasi 6ffered no
credible explanation for why h~ denied this contact when responding t~ Sena.tor
D'Amato's direct question.

!

i

In addition, during the February 24 hearing. Mr. Altman was speci:fi.~ly al::lk.ticl
about the handling of criminal"rere::ri·&l~t.hat mentioned the Clintone. Mr. AltmcU1
l't:8µuuded that 11on11al procedw·ee we1·e being f'ollowod, and nobody at ~s agency
o.dvieed the White HoU8e irtaff of the e,;istence of tho rcfcrr~lo. [Fob. 2"'-, pagers -10-41.
!
69) To quote the hearing record:

AMF-f{ICA~

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Senator Bond: How wo.ethe White House notified of the refJn.al?

Mr, Altman:
knowledge.

I

They were not notified by the RTC. to the best of my

I
;

·

I

Sena.tor Bond: . Nobodyin your agency 1 to your knowledge, aJvised the
White House staff that thia was going to be a major -- this cbu!d be a
i
major source of cone.em?
t

!

Mr . Alt.man.: Not to my knowledge.

It has since come to lie-ht that there were at least two meetings in slptember
and October 1993 when Treasury Department official~ dhu:lo.sedt.he exh,tence, and
relevant details. of the aiminal referral~ wilh Wbite Hou.se officials. And
~ussed
there is highly credible evidence that these contacts were undertaken !with the
;
knuwl4:uge and at the direction of Mr. Altman. [Feb. 24, page 69]
I

At some points in his February 24th testimony Mr. Altman charact!rizcd his
on
Fcbruo.ry 2nd meeting, a.a c "oubat«mtivc con.t.Clot".SonAtor Domonioi ~ietod
11
probing whether the USOof the modifying term "eubstantiVQ implied the ~xistence
nf nthr.T"cnntn.ct.s, ed. asked. "you are not sugi:esting you had more than one lare you'/"
Altman answered "No. I am just saying that if you run into someone. in the hall. ;f
you eee that thing fa the paper this morning, 1 am not inelut.ling that." [FAhi 24. !)l'lftP.
met with White House officials on
70] '!'he undisputed fact th~t Altmll\n p1111,ni~P.ly
hfa TM.niut1 $1h~nlutelybelies his answers to Senator
1-'ebruary 3rd solely to di~r.11~~

I

lJnm1mid.
.

j

Altman's deception is exacerbated by the fact thQt he had tSeveral op},'urtun.iliea
Jettel"Sto the Committee. Rather
of11
to correct his testimony through U1etiUbmil:r.:liu
After
pon1ieited in ~ decepti~.
,
AlL.a11111.
than truthfully correc~ lilii Lesl.i.a1u11_y
rect:.iv ing notice from the WhiteHouse that his te8timony could be mislcaping, and
similar advice from Trea11ury General Counsel ,Tenn Hanson, Altman oubmitted
carefully worded letters to the Committeo purportini; to ' correct th~ tGcord.
Conspicuously absGnt from Altincn'e first two letters ie any mention of ''renisal'' or
"criminal referrals." In hie third letter to the Committee da~d MarchiI 11. 1994
Altman affirmatively misrepresented that in hijJ contacts with the White ffom1/!\hP.
did not "seek advic:e, nor was it giv~n••. Sworn te.stimnny fr-;,m at loa.st aix-lritnesses
establishes that Whita H.ouse Officials did Advi~P. Altman on his recusal. !

TESTIMONY
HANSON
A .second Treasuzy Dep~ent

:

I

toatimony merits ecruiny is Ma.
witnc:m who(~<:

I C~011n11P.I t.n
Dop:u-tm,mt. AA G~T1cars:i
lmowlcdge
her
to
that
R.~~ure
to
y
the Tro.ru:ury Department, Hanson hs.d respon!-!ihilit.
\:!t·,
evid~ncejhuw~v
The
f~lRP.information to Cung-ress.
Rog4:!r Altman did ti(lit. l)T"nviti~

Jean Ha.noon, General Counsel to the Tro~ury

fOIA
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rAVM Dl\J1n WMllll-r.trU11LH,J\('l

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indicar.P_cithR.t Hanson failed to act when confronttld wilh Alf.man's blatani attempt
evidenceshows that Httnijull.had kuowl~e at the
.
to rrri,dARrlthe C"..ammitteeThe
time of Altman's testimony thAt hf! wa~ testifying falsely. She also bad khowledge
that at least two lette.rJJ~Anthy Altman to the Senate Committee which she)reviewed
:
were not complete.
I
Hanson t.ll!ttifiP.da.t the recent hearings that she did not correct AltJdan at the
February 24th bearing because she had not thought about the earlier Treu~ry Whltti
However,
House contacts since the time of the Septemlx!r/October meetings.
TTnn~nn
th1'lt
estftblil'lh
Steiner,
JU21hua
uf
tvtttimony
sworn
documentary evidence,and
House
~te
prior
of
to pl'eparea chronology
in Deceinbe1·
was specificallyreque:iiLed
actual
the
contacts. Ont, ot th~ documents produced by the Treasury Department is
chronology Ilanson prepared in December. Also, a tom-up copy of the docuincnt wae
foU?-1din Treasury filea. It is apparent from the documents thElt, contrc.ry to !Ffonson'a
testimony, the subject of the Scpte:rnbcr/Octobcr White House contact8 was something
recently
which wa.s actively rccnllcd by her .ind others at the Treasury Department
l
hearings.
24th
Febnuu-y
the
aa December - lees than two months before

as
iI

nn t.h~ ;A.q11Anfwhy A~P. din nnt
It also appean that HttnFJon r~vQrs~ .t,~'1",:tP.lf
con-ect Altman•s false te8t.imnny nn 'F'Ahn1~ry24. At · her initial depositio~ Hanson
because at the time slie did not
testified that she did nnt r.nrrP.CtAltman·~ t.P.Atimony
the Senata LhaL11c,l..urm:J.
before
testifted
have an opportUnityto do so. Altman later
Allru...u1
to her during his Febrwuy 24th testimony to ask if his r~ponse WiU5co.r1,sctl.
I
even identified the point on Lhe videul.H.peaL which be turned to !Ian.son~ Hanson

was then re-deputied wid confronted wllh the videotape.
iiCkuowlw,c-

LlU:lt::ihc did

llAVC

Only the~ did she

a.n oppcll'twrlty to c;orrc<:t Altmc.n, and did

rotdo

30.

I

I
i

I

STEINERTESTIMONY

!

i

I

of the
Finally, the testimony of Joshua Steiner, Chief of Statt· to Secret~
evidence
!
dear
provided
diaries
Steiner's
TroQSury 1 also merits examination.
Wlth t:hA Whit.A Hnn.AP..
regarding certain. pertinent aspect& of the 'l'reasury r.ont.at'.t.R
wnuld h~ revealed
Ant.riP..IQ
rliRry
Obviously, Steiner did not anticipate that his canc1irf
Art- cx,1,t-f'lmrorftnP.OUR wTit.t.r.n record:,, con-obora.ted by •"+batantial
lo ulhers.
indepe.nd~nr. Av;dP.nce,the diary entries contain the most accurate descriptjon of the
, partinent events. Nevertheless. Steiner made. ~WP.TY~tt.einpt in th~ CUu.pie uf hi:::!
testimony at deposition and at the heariJ1g tu protect Altman and White House
officials by departing from tht, pl.iiu w~anini ()fhis diary entries. It appears that in
;
testifying Steiner departed from the truth.
CONCLUSION
'

We understand that these matters a.n: wiLltiu t.ln:: :scopo of yoJ ongoing
1nvest1gatton.Therefor!:!, w~ r~qut:.:il Lbat you examine the evidence before thio
i;

lA
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t!(V.M D/\fjl,

WMM-.t.tt'UJSLl1,;At,l

INDEP COUNSEL

'l'U JI ~uI~~ nrru·r

•••

OIC DC

~021/021

ruun1uub

•
1

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Conunittee to determine if criminal charges against the above-mentioned witnesses
respect
are wan-anted. Our Committee is £a.milia.rwith the salient issues raised witih
to the 'WhiteHouse and TressUI')·or RTCcontacts,and we have identified 4wnerous
passages of questionable testimony regarding those issues. We have identified
testimonial and documentary evidence which contradicbi the testimo.dy of the
Treasui-y witnesses. The above cxrunplos o( miele3.ding testimony arp merely
· illw,trative. Please let us know if we can be of aswtanee in briefing you or your staff
!
with respect to these matters.
I

We look forward to your comprehensiveexaminatinn nf thP.ciP. isisueJ.
.;•

P\l~I~'$GH

Sincm·ely •

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-----

'~-AM ERIC ~NIGHTFOIA RD 56806 (URTS
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- Docld: 70104902 -Page- 26 -18-1621-000224
-

 To:

The Team

From:

Denis

Date:

September

Re:

Possible

J.

Mclnerney
23,

1994

Congressional

Hearings

At Ken's suggestion,
I am circulating
the attached
memo
for your general
information.
I had prepared
it for Bob in March
in anticipation
of meetings
Bob was going
to have with
certain
members of Congress.
It discusses
various
thoughts
Julie
and I had
regarding
the
problems
inherent
in Congressional
hearings
on
matters
we are still
investigating.

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 27

P VERSIGHT

18-1621-000225

 To:

Bob

From:

Denis

Date:

March

Re:

Proposed

problems
list
to
I.

8,

1994
Congressional

Hearings

Here are some thoughts
Julie
inherent
in calling
virtually
testify
before
Congress:

General

and I had
any of the

regarding
the
people
on the

Points

(1) As a preliminary
matter,
it must be remembered
that
grand
jury
proceedings
are secret
for two very
good
reasons:
they are the most effective,
and fairest,
way to
find out the truth.
(Most
public

of

the points
set forth
below relate
to how
congressional
hearings
would not orily be
less
effective
than
grand
jury
proceedings
in
ferreting
out the truth,
they would affirmatively
impede that process.
But the fairness
point
should
not be glossed
over.
The Grand Jury's
traditional
function
of
"protecting
the
innocent
from
unwarranted
public
accusation,"
US v. Mechanik,
475
U. S. 66, 73 (1986)
(J. O'Connor,
concurring),
· is
perhaps
as
vital
in
the
investigation
the
Independent
Counsel
is presently
conducting
as it
has
ever
been
in
any
investigation.
If
the
proposed
congressional
hearings
are
held,
many
people
may have
their
names
unfairly
dragged
through
the mud, to the detriment
not only of those
people,
but of the nation
as well.)
(2)
One of the principal
reasons
for the proposed
congressional
hearings
is the fact
that
the Treasury
Department
had contact
with the White House regarding
various
RTC criminal
referrals.
A fundamental
problem
with the proposed
hearings,
however,
is that they would
result
in the very thing
that
caused
the uproar
in the
first
place
-- disclosure
of the contents
of strictly
confidential
criminal
referrals.

AM HICAN

pVERSIGHT

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 28

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 II.

Specific
Testify

Problems

Caused

By

Having

Any

Particular

Witness

( 3) Causing
Mr. Witness
to testify
at a public
(and
possibly
televised)
hearing
will almost certainly
inhibit
Mr. Witness
and cause Mr. Witness
to be less
frank
and
willing
to volunteer
information
than he would be in the
private
and strictly
confidential
setting
of a grand
jury.
(Such inhibited,
and thus incomplete
and possibly
untruthful,
testimony
will
surely
be used against
Mr.
Witness
if he eventually
ends up testifying
in a complete
and truthful
manner at a trial
down the road.
We can
alleviate
the pressure
on Mr. Witness
to a great
degree
by keeping
everything
in the grand jury,
where things
are
secret.)
Also, causing
Mr. Witness
to testify
now, before
we
have
had an opportunity
to
try
to obtain
his
cooperation,
may result
in Mr. Witnesi
deciding
to
perjure
himself
before
Congress.
Such action
by
Mr. Witness
would render
him virtually
useless
as a
witness
at a later
trial.

(4) Causing
Mr. Witness
to testify
at a public
(and
possibly
televised)
hearing
will
inform
all
other
potential
witnesses/subjects/targets
of Mr. Witness's
story
(thus letting
the others
know whether
Mr. Witness
is,
for example
(a) cooperating
fully
and telling
the
whole truth;
(b) cooperating
only partially
and lying
in
certain
areas;
(c) lying
in virtually
every
material
respect;
or (d) not cooperating
at all
and taking
the
Fifth)
This will
quite
possibly
result
in some of the
other
potential
witnesses/subjects/targets
tailoring
their
story's
to conform to Mr. Witness's
story.
(Clearly,
many of the witnesses
on the
proposed
list
are
central
and critical
to the
Independent
Counsel's
investigation.
It would be a
dream
come
true
for
many
potential
witnesses/subjects/targets
to hear the testimony
of
these
critical
witnesses
before
committing
themselves
under
oath
to a particular
story
or
producing
documents.)
- - This
could
their
particular
(a)

also
lead
position):

destroying

to

evidence

others
that

(depending

on

supports

or

2

AMLHICAN

pVERSIGHT

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 contradicts

Mr. Witness's

testimony;

(b)
fabricating
evidence
contradicts
Mr. Witness's
(c)

attempting

to

(d) attempting
witnesses;

to

that
supports
testimony;

or

Mr. Witness;

and

intimidate
intimidate

other

potential

(5) It is absolutely
critical
that the Government
be able
to keep strictly
confidential
who is cooperating
and who
isn't;
causing
crucial
witnesses
to
testify
at
congressional
hearings
will make that
information
public
and will
result
in the Government
losing
an essential
tactical
advantage
in a criminal
investigation

(6) Some of the witnesses
at the proposed
hearings
might
have political
axes to grind.
(Such witnesses
might be
more likely
to grind
those
axes
if they
had a public
televised
forum than if they were confined
to a sealed
confidential
setting
in a grand jury room.)

(7) Needless
disastrous.
III.

Miscellaneous

to

Other

say,

immunity

to

any

witness

would

be

Points

(8)
The timing
and order
in
which
the
Government
interviews
witnesses
and obtains
documentary
and other
evidence
is also critical
in any criminal
investigation.
These factors
weigh heavily
in the Government's
ability
to effectively
obtain
cooperation
from witnesses
and
collect
evidence
(before
any intimidating,
tampering
or
destruction
can occur).
Congressional
hearings
at this
time would deprive
the Government
of the control
over the
timing
and order
of witness
interviews
and document
collection
and analysis,
and thus
substantially
impair
our ability
to conduct
an effective
and thorough
criminal
investigation.

(9) Obviously,
be based
on

questioning
incomplete

at this
information

time by Congress
will
because
you do not

3

AM HICAN

pVERSIGH

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 30

18-1621-000228

 have the documents
we have.
You will
largely
be fishing
blindly
and
you
will
be creating
a very
sketchy,
incomplete,
and likely
inaccurate
record
on the basis
of
unrefreshed
recollections.

( 10)
Many of the witnesses
you propose
to call
are
absolutely
central
to everything
we are investigating.
If you are serious
about wanting
a thorough,
expeditious,
and fair
criminal
investigation,
let us do our jobs.

We do not think
it is really
possible,
or a good idea,
to
get into
specifics
on the various
proposed
witnesses.
I am sure
they would love for you to give an explanation
for why each witness
is critical
to your investigation
and how their
premature
testimony
before
Congress
would impact
on the investigation.
It would be a
very slippery
slope,
however,
which might result
in our tipping
our
hand too much with respect
to where we are in our investigation
and
where
we are
headed.
Moreover,
there
are
really
very
few
particularized
comments
that
would be appropriate
to make with
respect
to these
witnesses.
That being
said,
here is the list
of
witnesses
they want to call,
and any thoughts
we have specifically
on them:

4

AMLHICAN

pVERSIGHT

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18-1621-000229

 WITNESSES PROPOSED FOR HEARINGS

WITNESS

CONCERNS

McDougal,
James

absolutely
investigating

central

to

everything

we are

McDougal,
Susan

absolutely
investigating

central

to

everything

we are

Hale,
David

absolutely
investigating

central

to

everything

we are

indicted
trial

Nelson,
Sheffield

set

for

3/28

Hale

to

unfair

to

what

he says

will

force
certainly

might have political
against
Clinton
in
Breslaw,
April
(FDIC)

him to

take

Fifth

influence

ax to

grind;

ran

others
for

Governor

1990

(She went to
the litigation

bat

whole reason
the possible
referrals!

for the uproar
disclosure
of

every

referral

for Hubbel . on retaining
against
Frost)

Rose

in

Dudine,
James
(RTC)
Ausen,
Lee (RTC)

single

is

Office

would
these
akin
Iorio,
Richard
(RTC)

L.

Lewis,
Jean
(RTC)

be like
hearings
to

taking

having
the

the

in
the

being

the first
contents

place
of the

examined

by this

FBI Case

FBI reports

agent

testify

and publishing

is

at
them

[Same]

[Same]

5

AM HICAN

pVERSIGHT

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 32

18-1621-000230

 WITNESS

Caron,
Mike
(RTC)
Mackay,
Donald

CONCERNS

[Same]

He was principally
concerned
prosecution
of Hale;
calling
regarding
his investigation
the eve of Hale's
trial

with preparing
the
him wrt anything
would be improper
on

( if just
going
to ask him if Nussbaum called
him to
try to influence
things,
or find out information,
that
would probably
be OK)
Casey,
Paula

Same as with

Mackay

If going to
inadmissible
prejudicial
trial!

ask about
Plea Negotiations,
totally
(F.R.CR.P . ll(e)(6))
and unfair
and
to Hale,
especially
on the eve of

Patten,
Leslie

(One of

CPA's

Lyons,
James

What Lyons looked
to our inquiry

the

on the

Lyons

at

how they

and

Report?)
got

it

is

central

Tate,
Stanley
Roelle,
William
(FDIC)
McLarty,
Mack

If relevant
to anything,
relevant
to obstruction
justice,
which is a criminal
grand
jury
inquiry,
not a congressional
inquiry
(General
problems
that
his
disclosing
contents
of RTC
however,
this
is much less
White House witnesses
than
witnesses)

Nussbaum,
Bernard

[Same]

Ickes,
Harold

[Same]

Williams,
Margaret

[Same]

of

testimony
may result
in
referrals
- - obviously,
of a concern
with the
with the Treasury

6

AM HICAN

pVERSIGHT

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 33

18-1621-000231

 WITNESS

CONCERNS

Gearan,
Mark

[Same]

Lindsey,
Bruce

[Same]

Caputo,
Lisa

[Same]

Hanson,
Jean

[Same]

Steiner,
Josh

[Same]

Devore,
Jack

[Same]

BassettSchaffer,
Beverly

Crucial

Lasater,
Dan

witness

A number of other
people
at the Securities
Department
who will
be key witnesses
(Rose represented
- Hillary
conflict)

the

FDIC in

suing

Yes, Congress,
as w;~th everything
considering
holding
hearings
in,
into
this
also .
Young,
Greg

(CFO of

Madison

Critical
Denton,
Don

I

firm

(Chief

else
that
you
we are looking

are

Guaranty)

witness
Loan

Critical
Aunspaugh
Lisa

Lasater's

-

(Affiliated
Companies,
Critical

Officer

of Madison

Guaranty)

Witness
with a number of
including
Masters

Susan McDougal
Marketing)

Witness

Bowles,
Erskine
(SBA)
James,
Charles

(Accountant

for

Whitewater)

Witness

7

AM HICAN

pVERSIGH

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 34

18-1621-000232

 WITNESS

Strayhorn
Sue

CONCERNS

(McDougal's

secretary)

I

Key witness
Kulka,
Ellen
(RTC)
Hedges,
Jeremy

He is in the middle
actively
pursuing

of

an investigation

that

we are

Lindsey,
Clayton

He is in
actively

of

an investigation

that

we are

Stacy,
Ricki

(Remote

Altman,
Roger

They are asking
for all
to Madison!
This would
referrals!

documents
obviously

of RTC relating
include
the

Fiechter,
Jonathan

(Acting
Director
Supervision)

of

the

Office

Thrift

They are asking
to Madison!

for

all

documents

the middle
pursuing
Storage

Clerk

at

.::.~==

the

Rose

of

Firm)

of

OTS relating

·

8

AMLHICAN

pVERSIGHT

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18-1621-000233

  

 

 


RD 5680611JRT?1030i)Dotid? 70104602 Page 56?
18-1621-000234

 



-

-- --------t---

---

AMLHI(

--

FOIA RD 568 06 (URTS 16302} Docld: 70104902 Page 37

VERSIGH

w

18-1621-000235

 -

----

--------

----+---

- --

-------+---

-------

----

-t----

----

AM HI(

-

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 38

VERSIGH

~

18-1621-000236

-

 Office of the Independent Counsel

Memorandum
TO:

Judge

Starr

FROM:

Brett
Alex

DATE:

September

SUBJECT:

Talking
points
regarding
past congressional
accommodation
of ongoing
criminal
investigations
and prosecutions

M. Kavanaugh
M. Azar II
28,

1994

At this
point,
we have been able to study
the following
sources
of
historical
information:
Hirschberg,
et
al. ,
Congressional
Oversight
Investigations
(1984);
Jaworski,
The Right
and the Power (1976);
Hamilton,
The Power to Probe
(1976)
By far,
the Hamilton
book has proved the most useful
source
of information,
primarily
about the practices
during
Watergate.
We are attempting
to acquire
other
sources,
and will
update
this
memorandum as they
become available.
learned
•

•

the

From the sources
we have
following
information:

Senator
Ervin's
to accommodate

been

able

to

review,

Watergate
committee
made significant
the interests
of Congress
and the

we have

attempts
courts:

•

When Mitchell
and Stans
testified
soon after
their
indictments
were
case,
they were asked no questions

in televised
session
returned
in the Vesco
concerning
that
case.

•

The committee
postponed
its early
1974 public
hearings
as not to interfere
with the Mitchell
and Stans
trial.

•

The committee
al together
to
trials
and the

•

The committee
several
weeks
and sequestered.

cancelled
these
1974
public
avoid
impairing
the
upcoming
impeachment
inquiry.
delayed
to wait

release
of its
until
the Ellsberg

final
jury

so

hearings
Watergate
report
for
was chosen

Judge
Gesell
refused
to enforce
the
subpoena
of Senator
Ervin's
committee
for Nixon's
tapes
on the grounds
that
the
resultant
publicity
would prevent
a fair
trial
with unbiased
jurors
and run contrary
to the "priority
to the integrity
of
criminal
justice."
(Jaworski
had, however,
denied
this
claim
1

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 39

P VERSIGHT

18-1621-000237

 in

argument

before

the

court.)

•

When Senator
Ervin's
committee
applied
to the
court
for
immunity
powers
respecting
Dean and Magruder,
Cox implored
Ervin
to postpone
the public
hearings
temporarily
on the
grounds
that the testimony
would result
in pretrial
publicity
preventing
fair
trials.
When the
committee
denied
the
request,
Cox asked
Judge
Sirica
to
prohibit
radio
and
television
coverage
of the testimony.
(The court
denied
the
request.)

•

James Hamilton
(assistant
chief
counsel
to Senator
Ervin's
11
[I]t
is important
to recognize
committee)
has emphasized:
that
beyond
doubt
congressional
hearings
are
capable
of
producing
damaging
publicity
that
can prejudice
criminal
11
trials.
"Congress
must recognize
the problems
its
activities
pose for the criminal
process
and its concomitant
obligation
for self-regulation."

•

Senator
Ervin
has stressed
that
"where criminal
conduct
involved
and criminal
trials
which could
be prejudiced
imminent,
the
informing
function
[of
Congress]
must
exercised
with prudence."

•

Criminal
hearings.

prosecutions

have

been

impaired

by

is
are
be

congressional

•

Oliver
North's
conviction
was overturned
because
of
problems
relating
to Congress's
grant
to him of limited
use immunity
for his testimony.

•

Denis Delaney's
(internal
revenue
collector)
conviction
(1952) for bribery
was overturned
because
of prejudicial
publicity
surrounding
the
King
Committee's
hearings
regarding
his conduct
just
3 months before
his trial.

•

On the other hand, the Teapot
after
Congress
conducted
its

Dome prosecutions
probe into the

came long
scandal.

2

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 40

P VERSIGHT

18-1621-000238

 10/11/94 09:42:06

West Publishing Co.->

Page 002

202 514 BB02
Page

5 USCA § 2954
5 U.S.C.A. § 2954

1

UNITED STATES CODE ANNOTATED
TITLE 5. GOVERNMENT ORGANIZATION AND EMPLOYEES
PART III-EMPLOYEES
SUBPART A-GENERAL PROVISIONS
CHAPTER 29-COMMISSIONS, OATHS, RECORDS, AND REPORTS
SUBCHAPTER II-REPORTS
Copr.@ West 1994. All rights reserved.
Current through P.L. 103-321, approved 8-26-94
§

2954. Information to committees of Congress on request

An Executive agency, on request of the Committee on Government Operations of the House of
Representatives, or of any seven members thereof, or on request of the Committee on Government
Operations of the Senate, or any five members thereof, shall submit any information requested ofit
relating to any matter within the jurisdiction of the committee.

1977 Main Volume Credit(s)
(Pub.L. 89-554, Sept. 6, 1966, 80 Stat. 413.)

HISTORICAL AND STATUTORY NOTES
Derivation:

United
States
5 U.S.C.
105a

Code

Revised
May 29,

Statutes
and Statutes
1928, ch. 901, s 2,

at Large
45 Stat.
996.

Explanatory N ates
The words "Executive agency" are substituted for "executive department
establishment" in view of the definition of "Executive agency" in § 105.

and independent

The words "Committee on Government Operations of the House of Representatives" are
substituted for "Committee on Expenditures in the Executive Departments of the House of
Representatives" on authority ofH.Res. 647 of the 82d Congress, adopted July 3, 1952.
The words "Committee on Government Operations of the Senate" are substituted for "Committee
on Expenditures in the Executive Departments of the Senate" on authority of S.Res. 280 of the 82d
Congress, adopted Mar. 3, 1952.
Standard changes are made to conform with the definitions applicable and the style of this title as
outlined in the preface to the report.
5 U.S.C.A.
5USCA

§

§

2954

2954

END OF DOCUMENT

Copr. @West 1994 No claim to orig. U.S. govt. works

AMERIC

PVER

18-1621-000239

 1
!

III

'

103D CONGRESS
2D SESSION

:

'
l

:

i
- '
--\

S. RES.229

Authorizing oversight hearings by the Committee on Banki
ng, Housing, and
Urban Affairs.

IN THE SENATE OF THE UNITED STATES
Jur-..'E16 (legislative day, Jmrn 7), 1994
Mr. MITCHELLsubmitted the following resolution; which
was ordered to be
placed on the calendar
Jur-..'E21 (legislative day, JUKE 7), 1994
Considered and agreed to

RESOLUTION
Authorizing oversight hearings by the Committ ee on
Banking, Housing, and Urban Affairs.
1

Resolved,

2 SECTION 1. SCOPE OF THE HEARINGS.

'l :. :

3

The Committee on Banking, Housing, and Urban M4 fairs (referred to as the "committee") shall5

( 1) conduct hearings into whether improper

6

conduct occurred regarding-

7

AML~ ICAN

(A) communications between officials of

8

the White House and the Department

9

Treasury or the Resolution Trust Corporation

of the

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page
42

VERSIGHT

18-1621-000240

 -•·~· -

·-

-,

~ ,,

- -··•·.........._..,.,__ -.....- i·'

'

2

1

relating to the Whitewater Development Cor-

2

poration and the Madison Guaranty

3

and Loan Association;

Savings

4

(B) the Park Service Police investigation

5

into the death of White House Deputy Counsel

6

Vincent Foster; and

7

(C) the way in which White House officials

8

handled documents in the office of White House

9

Deputy Counsel Vincent Foster at the time of

10

his death; and

11

(2) (A) make such findings of fact as are war-

12

ranted and appropriate;

13

(B) make such recommendations, including rec-

:~;/i~~E

14

ommendations for new legislation and amendments

15

to existing laws and any administrative or other ac-

16

tions, as the committee may determine to be nec-

17

essary or desirable; and

18

(C) fulfill the Constitutional oversight and m-

19

forming function of the Congress with respect to the

20

matters described in this section.

21 The hearings authorized by this resolution shall begin on
22 a date determined by the Majority Leader, in consultation
23 with the Minority Leader, but no later than the earlier
24 of July 29, 1994, or within 30 days after the conclusion

AMrfllCJ\N

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 43

VERSIGHT

SRES229ATS

18-1621-000241

i;;:

 3

1 of the first phase of the independent counsel's investiga2 tion .
3 SEC. 2. MEMBERSHIP, ORGANIZATION, AND JURISDICTION

J
::

4

OF THE COMMITTEE FOR PURPOSES OF THE

5

HEARINGS.

6

For the sole purpose of conducting the hear-

(a)(l)

7 ings authorized by this resolution, the committee shall
8 consist of-

~i!i:i-~\'i{#c:,
:ii

9

(A) the members of the Committee on Banking,

10

Housing, and Urban Affairs, who shall, in serving as

11

members of the committee, reflect the legislative and

12

over~ight interests of other committees of the Senate

13

with a jurisdictional interest (if any) in the hearings

14

authorized in paragraph (1) of section 1 as provided

15

in subparagraph (B);

16
17
18

19

the Committee on Small Business;
(ii) Senator

Riegle and Senator

Roth from the -

Committee on Finance;

20

(iii) Senator Shelby and Senator Domenici from

21

the Subcommittee on Public Lands, Parks, and For-

22

ests of the Committee on Energy and Natural Re-

23

sources;

24
25

AMFnlCAN

(B)(i) Senator Kerry and Senator Bond from

VERSIGH

(iv) Senator :Moseley-Braun from the Committee on the Judiciary; and

FOi~~

~&.8iG§(URTS 16302) Docld: 70104902 Page 44

18-1621-000242

 4

1
2

(v) Senator Sasser and Senator Roth from the
Permanent Subcommittee on Investigations; and

3

(C) the ranking member of the Committee on

4

the Judiciary who shall serve for purposes of consid-

5

ering matters within the jurisdiction of the· Commit-

6

tee on the Judiciary, but shall not serve as a voting

7

member of the committee.

8

(2) For the purpose of paragraph 4 of rule :x:1..'Vof

9 the Standing Rules of the Senate, service of the . ranking

10 member of the Committee on the Judiciary as a member
11 of the committee shall not be taken into account.
12

(b )__
The jurisdiction of the committee shall encompass

13 the jurisdiction of the committees and subcommittees list~~il

14 ed in subsection (a)(l)(B), to the extent, if any, pertinent
15 to the hearings authorized by this resolution.
16

(c) A majority of the members of the committee shall

17 constitute a quorum for reporting a matter or rec18 ommendation

to the Senate,

except that the committee

19 may fix a lesser number as a quorum for the purpose of
20 taking testimony before the committee or for conducting
21 the other business of the committee as provided in para22 graph 7 of rule :x:1..'VIof the Standing Rules of the Senate.
23
24

SEC. 3. ADDITIONAL STAFF FOR THE COMMITIEE.

(a) The committee, through th e chairman, may re-

25 quest and use, with the prior consent of the chairman of

AM HICAN

pVERSIGHT

FOIA~?~~0B4URTS

~

16302) Docld: 70104902 Page 45

18-1621-000243

 5

1 any

committee

2 2(a)(l)(B),

or

subcommittee

listed

1n section

the services of members of the staff of such

3 committee or subcommittee.
4

(b) In addition to staff provided pursuant to sub-

5 section (a) and to assist the committee in its hearings,
6 the chairman may appoint and fix the compensation of
7 additional staff.
8 SEC. 4. PUBLIC ACTIVITIES OF THE COMMITTEE.

9

(a) Consistent '.vith the rights of persons subject to

10 investigation and inquiry, the committee shall make every
11 effort to fulfill the right of the public and the Congress

12 to know the essential facts and implications of the activi13 ties of officials of the United States Government with re-

14 spect to the matters covered by the hearings as described
15 in section 1.

(b) In furtherance of the public's and Congress' right

16

17 to know, the committee-

AMERICAN

18

(1) shall hold, as the chairman (in consultation

19

with the ranking member) considers appropriate and

20

in accordance with paragraph 5(b) of rule XXVI of

21

the Standing Rules of the Senate, open hearings

22

subject to consultation and coordination with the

23

independent counsel appointed pursuant to title 28,

24

parts 600 and 603, of the Code of Federal Regula-

25

tions (referred to as the "independent counsel");
FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 46

P VERSIGHT

SRES 229 ATS

18-1621-000244

 lI
I

I

6

1

2

(2) may make interim reports to the Senate as
it considers appropriate; and

3

(3) shall, in order to accomplish the purposes

4

set forth in subsection (a), make a final comprehen-

5

sive public report to the Senate of the findings of

6

fact and any recommendations specified in para-

7

graph (2) of section 1.

8 SEC. 5. POWERS OF THE COMMITTEE.

9

(a) The committee shall do everything necessary and

10 appropriate under the laws and Constitution of the United
11 States to conduct the hearings specified in section 1.
12

(b) The committee is authorized to exercise all of the

13 powers and responsibilities of a committee under rule
14 XXVI of the Standing Rules of the Senate and section
15 705 of the Ethics in Government Act of 1978 (2 U.S.C.
16 288d), including the following:
17

AMERICAN

pvERSIGH

( 1) To issue subpoenas or orders for the attend-

18

ance of witnesses or for the production of documen-

19

tary or physical evidence before the committee. A

20

subpoena may be authorized by the committee or by

21

the chairman with the agreement of the ranking

22

member and may be issued by the chairman or any

23

other member designated by the chairman, and may

24

be served by any person designated by the chairman ·

25

or the authorized member anvwhere within or with-

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 47
SRF.S

• ATil
22

18-1621-000245

 7

1

out the· borders of the United States to the full ex-

2

tent permitted by law. The chairman of the commit-

3

tee, or any other member thereof, is authorized to

4

administer oaths to any witnesses appearing before

5

the committee.

I·

Jl

I
!

i

~f~~

6

(2) Except that the committee shall have no au-

7

thority to exercise the powers of a committee under

8

section 6005 of title 18, United States Code for im-

9

munizing witnesses.

10

(3) To procure the temporary or intermittent

11

services of individual consultants, or organizations

12

thereof.

13

(4) To use on a reimbursable basis, with the

14

prior consent of the Government department

15

agency concerned, the services of personnel of such

16

department or agency.

17

18
19

or

(5) To report violations of any law to the ap- .
propriate Federal, State, or local authorities.
(6) To eA'Pend,to the eAi,ent the committee de-

20

termines

21

made available to such committee by the Senate to

22

conduct the hearings and to make the reports au-

23

thorized by this resolution.

necessary and appropriate,

any money

24

(7) To require by subpoena or order the attend-

25

ance, as witnesses, before the committee or at depo-

AM ERICAN

pvERSIGHT

FOIA RD 56806 (URTS 16302} Docld: 70104902 Page 48
SRES 229 ATS

18-1621-000246

 8

1
2
3

sitions, any person who may have knowledge or
information concerning matters specified in secti
on
1(1).

4

(8) To take depositions under oath anywhere

5

within the United States, to issue orders by the
chairman or his designee which require witnesses
to
answer written interrogatories under oath, and
to

6
7
8

make application for issuance of letters rogatory.

9

(9) To issue commissions and to notice depo
si-

10

tions for staff members to examine ,vitnesses and
to
receive evidence under oath administered by an indi-

11
12
13

14
15
16

vidual authorized by law to administer oaths. The
committee, acting through the chairman, may dele
gate to designated staff members the power to authorize and issue commissions and deposition notices.

17

(c)(l) Subject to the provisions of paragraph (2), the
18 committee shall be governed by the rules of the
Committee
19 on Banking, Housing, and Urban Affairs, exce
pt that the
20 committee may modify its rules for purposes
of the hear21 ings conducted under this resolution. The com
mittee shall
22 cause any such amendments to be published
in the Con23 gressional Record.

24

(2) The committee's rules shall be consistent with the
25 Standing Rules of the Senate and this resolutio
n.

. AME.HICAN

pvERSIGHT

FOIA RD 56806 (URTS 16302) Docld: 70104902
Page 49
SRES 229 ATS

18-1621-000247

~ .·

 9
1 SEC. 6. RELATION TO OTHER INVESTIGATIONS.

2
·i
'

. :!

3

4

In order to( 1) expedite the thorough conduct of the hearings authorized by this resolution;

:r

J

5

(2) promote efficiency among all the various in-

6

vestigations underway in all branches of the United

7

States Government; and

'

8

(3) engender a high degree of confidence on the

9

part of the public regarding the conduct of such

10

hearing,

11 the committee is encouraged12

(A) to obtain relevant information concernmg

13

the status of the independent counsel's investigation

14

to assist in establishing a hearing schedule for the

15

committee; and

16

(B) to coordinate, to the extent practicable, its

17

activities with the investigation of the independent

18

counsel.

19 SEC. 7. SALARIES AND EXPENSES . .

20

Senate Resolution 71 (103d Congress) is amended-

21

(1) in section 2(a) by striking "$56,428,119"

22
23
24

AMFnlCAN

VERSIGH

and inserting "$56,828,119"; and
(2) in section 6(c) by striking "$3,220,767"
and inserting "$3,620,767".

F O~~~ (URTS 16302) Docld: 70104902 Page so

18-1621-000248

 10
1 SEC. 8. REPORTS; TERMINATION.

2

(a) The committee shall make the final public report

3 to the Senate required by section 4(b) not later than the
4 end of the 103d Congress.
5

(b) The final report of the committee may be accom-

6 panied by whatever confidential annexes are necessary to
7 protect confidential information.
8

(c) The authorities granted by this resolution shall

9 terminate 30 days after submission of the committee's

10 final report. All records, files, documents, and other mate11 rials in the possession, custody, or control of the commit,.

12 tee shall remain under the control of the regularly con-

13 stituted Committee on Banking, Housing, and Urban Af14 fairs.
15 SEC. 9. COMMITTEE JURISDICTION AND RULE XXV.

16

The jurisdiction of the committee is granted pursuant

17 to this resolution notwithstanding the provisions of para18 graph 1 of rule n_rv of the Standing Rules of the Senate
19 relating to the jurisdiction of the standing committees of

20 the Senate.
21 SEC. 10. COMMITTEE FUNDING AND RULE XXVI.

22

The supplemental authorization for the committee is

23 granted pursuant to this resolution notwithstanding the
24 provisions of paragTaph 9 of rule Il7VI of the Standing
25 Rules of the Senate.

AMERICAN

pvERSIGHT

FOIA RD 56~

~~RT~1
6302} Docld: 70104902 Page 51
9
A

18-1621-000249

 11
1 SEC. 11. ADDITIONAL HEARINGS.

2

(a) In the fulfillment of the Senate's constitutional

3 oversight role, additional hearings on the matters identi-

i

4 fied in the resolution passed by the Senate by a vote of

'·t'•

5 98-0 on March 17, 1994, should be authorized as appro-

6 priate under, and in accordance with, the provisions of

7 that resolution.
8

(b) Any additional hearings should be structured and

9 sequenced in such a manner that in the judgment of the
10 two leaders they would not interfere with the ongoing in11 vestigation of Special Counsel Robert B. Fiske, Jr.
0

.•;,:;:~.<

AMERICAN

PVERSIGHT

FOIA.IOO5ts86(; (URTS 16302) Docld: 70104902 Page 52
18-1621-000250

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18-1621-000251

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FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 55

IGHT

18-1621-000253

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FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 56

18-1621-000254

 - [lvJ S

AM ERIC N

pVER

IGH

FOIA RD 56806 (URTS 16302) Docld: 70104902 ~age 57

18-1621-000255

 Office of the Independent Counsel

Memorandum
TO:

Judge

Starr

FROM:

Brett
Alex

DATE:

September

SUBJECT:

Talking
points
regarding
past congressional
accommodation
of ongoing
criminal
investigations
and prosecutions

M. Kavanaugh
M. Azar II
28,

1994

At this
point,
we have been able to study
the following
sources
of
historical
information:
Hirschberg,
et
al. ,
Congressional
Oversight
Investigations
(1984);
Jaworski,
The Right
and the Power (1976);
Hamilton,
The Power to Probe
(1976)
By far,
the Hamilton
book has proved the most useful
source
of information,
primarily
about the practices
during
Watergate.
We are attempting
to acquire
other
sources,
and will
update
this
memorandum as they
become available.
learned
•

•

the

From the sources
we have
following
information:

Senator
Ervin's
to accommodate

been

able

to

review,

Watergate
committee
made significant
the interests
of Congress
and the

we have

attempts
courts:

•

When Mitchell
and Stans
testified
soon after
their
indictments
were
case,
they were asked no questions

in televised
session
returned
in the Vesco
concerning
that
case.

•

The committee
postponed
its early
1974 public
hearings
as not to interfere
with the Mitchell
and Stans
trial.

•

The committee
altogether
to
trials
and the

•

The committee
several
weeks
and sequestered.

cancelled
these
1974
public
avoid
impairing
the
upcoming
impeachment
inquiry.
delayed
to wait

release
of its
until
the Ellsberg

final
jury

so

hearings
Watergate
report
for
was chosen

Judge
Gesell
refused
to enforce
the
subpoena
of Senator
Ervin's
committee
for Nixon's
tapes
on the grounds
that
the
resultant
publicity
would prevent
a fair
trial
with unbiased
jurors
and run contrary
to the "priority
to the integrity
of
criminal
justice."
(Jaworski
had, however,
denied
this
claim
1

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 58

P VERSIGHT

18-1621-000256

 in

argument

before

the

court.)

•

When Senator
Ervin's
committee
applied
to the
court
for
immunity
powers
respecting
Dean and Magruder,
Cox implored
Ervin
to postpone
the public
hearings
temporarily
on the
grounds
that the testimony
would result
in pretrial
publicity
preventing
fair
trials.
When the
committee
denied
the
request,
Cox asked
Judge
Sirica
to
prohibit
radio
and
television
coverage
of the testimony.
(The court
denied
the
request.)

•

James Hamilton
(assistant
chief
counsel
to Senator
Ervin's
committee)
has emphasized:
"[I]t
is important
to recognize
that
beyond
doubt
congressional
hearings
are
capable
of
producing
damaging
publicity
that
can prejudice
criminal
trials."
"Congress
must recognize
the problems
its
activities
pose for the criminal
process
and its concomitant
obligation
for self-regulation."

•

Senator
Ervin
has stressed
that
"where criminal
conduct
involved
and criminal
trials
which could
be prejudiced
imminent,
the
informing
function
[of
Congress]
must
exercised
with prudence."

•

Criminal
hearings.

prosecutions

have

been

impaired

by

is
are
be

congressional

•

Oliver
North's
conviction
was overturned
because
of
problems
relating
to Congress's
grant
to him of limited
use immunity
for his testimony.

•

Denis Delaney's
(internal
revenue
collector)
conviction
(1952) for bribery
was overturned
because
of prejudicial
publicity
surrounding
the
King
Committee's
hearings
regarding
his conduct
just
3 months before
his trial.

•

On the other hand, the Teapot
after
Congress
conducted
its

Dome prosecutions
probe into the

came long
scandal.

2

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 59

P VERSIGHT

18-1621-000257

 c·

C

Office of the Independent Counsel
1001 Pennsylvania Avenue , N. W
Suite 490-North
Washington, D.C. 20004
(202) 514-8688
Fax (202) 514-8802

July 19, 1995

The Honorable Alfonse M. D' Amato
The Honorable Paul S. Sarbanes
United States Senate
Committee on Banking, Housing and Urban Affairs
Washington, DC 20510

Dear Chairman D' Amato and Senator Sarbanes:
We have received your letter of July 18, which incorporates by reference the letter of July
11 sent to this Office by Mr. Chertoff and Mr. Ben-Veniste on behalf of the Committee. We
have given your request considerable thought in view of the importance of our respective
obligations.
In connection with the Committee's investigation into the handling of documents of
former Deputy Counsel to the President Vincent W. Foster, Jr., the Committee has requested that
this Office provide the Committee with reports of interviews of Henry O'Neill and Margaret
Williams that were conducted by this Office and by Mr. Fiske's Office. In addition, the
Committee has requested a copy of a particular polygraph report, or at least of questions asked
during a particular polygraph examination. Finally, the Committee has requested permission to
ask an individual employed by the FBI Laboratory questions about the work he has performed
for the Independent Counsel.
We respectfully decline these requests. As we have informed the Committee on this and
previous occasions, we will not disclose to the Congress any investigative work product from this
active and ongoing investigation. As you know, we must abide by the strictures of grand jury
secrecy contained in Federal Rule of Criminal Procedure 6(e). In addition, our position that we
will not disclose to the Congress any investigative work product from an open investigation
represents sound policy that is deeply rooted in the history and tradition of this Nation. See
generally Memorandum for Oliver B. Revell Re: Congressional Requests for Information from
Inspectors General Concerning Open Criminal Investigations, Op. Off. Legal Counsel, at 5
(March 24, 1989) ("the policy and practice of the executive branch throughout our Nation's
history has been to decline, except in extraordinary circumstances, to provide committees of
Congress with access to, or copies of, open law enforcement files. No President, to our
knowledge, has departed from this position affirming the confidentiality and privileged nature of
open law enforcement files"). We will adhere to this deeply rooted tradition, and therefore we
are constrained, with respect, ·to decline each of the above requests.

AMFnlCAN

VERSIGH

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 60

.

.

18-1621-000258

 C

C

We note, moreover, that our policy on these issues is not based on whether the requested
information is exculpatory or incriminating, but rather is made in accordance with long-standing
Department of Justice policy to protect the internal work of this Office with respect to an active
and ongoing investigation and to protect the privacy of individuals.
Separately, through Mr. Chertoff and Mr. Ben-Veniste, the Committee had also requested
the use of Mr. Foster's briefcase. As an accommodation to the Committee's investigative needs,
we provided the briefcase to the Committee. Such pre-existing material, which was neither
created nor modified by this Office or Mr. Fiske's office, is in our view readily distinguished
from investigative work product. Moreover, in circumstances where such material cannot be
obtained from any other source and where disclosure of it would not hinder or impede our
ongoing investigation, we believe it appropriate to disclose such material to the Committee upon
its joint request.
In sum, the question whether and under what conditions a law enforcement agency such
as this Office can and should provide information to Congress relating to an open criminal
investigation entails a delicate balancing of numerous competing concerns. With -respect to the
Foster documents investigation, we have balanced the competing concerns and formulated the
above policy. In so doing, we have been advised by Ethics Counsel Samuel Dash. We have
adhered to this policy thus far, and we intend to continue to do so. We do not believe, moreover,
that there has been any inconsistency in our responses to the Committee's joint requests.
Thank you for your cooperation. Please do not hesitate to contact me if you have any
questions.
Respectfully yours,

k,,.,_,,.,-¼,w. ~~ !...
.r

Kenneth W. Starr
Independent Counsel

AMl HICAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 61

VERSIGHT

18-1621-000259

 r

\; ,,

Office of the Independent Counsel

•

TWQ Finandlll Qnrre
lfNl25 Fintuu:uu CentrePari:M•ay, SuiU 134

Little Rock, Albur..\"4S'
72211
(501) 221·8700
Fax (SOI) 221-8707

July . is,

1995

FOR IMMEDIATERELEASE

The following

w. Starr

statement
from his

today

The statamant

House is wrong.

The Office

not

anyone.

In response

di ;sclose

Chairman

well

of the

Mamber of the

agreed

·::o provide

and use

in the

c:::ourse of the

of the

matter

occurrin~r

product

created

entire

by this

such pre-nxisting

other

source

impede

the

or Mr. Fiske's

ancl where disclosure

of it

tc, the

Collllilittee

grand

Banking

is not

upon its

inspection
The
acting

neither

on

a
work

In circumstances

be obtained

from any

would not hinder

joint,

both

Conunittee

nor investigative

inappropriate

to

Independent
for

is

jury
for

investigation.

office.

cannot

it

the

has not

to a representative

jury

White

Counsel

of the

The briefcase

grand

of the

made by counsel
Senate

Kenneth

Arkansas:

briefcase

material

our invee:tigation.

such material

night

before

Office

Committee's

Committee.

before

where

the

Mr. Foster's

was p1:-ovided last

behalf

Independent

request

of the hearing,

Rock,

~ounsel

on behalf

occurring

to a joint

counsel

brief case

in Little

matters

and Ranking

in advance

office

. by Independent

of Mark D. Fabiani

and will

tha

was issued

or

to disclose
bipartisan

request.

AMERICAN

pVERSIGH

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 67

18-1621-000260

 Office of the Independent Counsel
1001 Pennsylvania Avenue, N . W.
Suite 490-North
Washington, D. C. 20004
(202) 514-8688
Fax (202) 514-8802

February 8, 1996

The Honorable Alfonse M. D' Amato, Chairman
The Honorable Paul S. Sarbanes, Ranking Member
United States Senate
Special Committee on Whitewater and Related Matters
Washington, DC 20510

Dear Chairman D' Amato and Senator Sarbanes:
We write to respond to questions raised at this morning's hearing during discussion
of the handling of Rose Law Firm billing records on January 4 and 5, 1996, before production
of those records. That discussion raised questions about the policy of this Office with respect to
documents that have been produced to this Office or the grand jury.
As we stated in our letter to you of July 19, 1995, there is a considerable
difference between (a) investigative work product of this Office (for example, notes of attorneys
of this Office, interview reports prepared by investigators assigned to this Office, or forensic
reports prepared by persons retained by this Office) and (b) documents produced to this Office
or the grand jury voluntarily or pursuant to grand jury subpoena by an outside individual or
entity. As you know , consistent with long-standing history and tradition, we have declined to
disclose to the Committee investigative work product of this Office related to an ongoing
investigation.
As explained in our July 19 letter, however, the issue is quite different with respect
to documents produced to this Office or the grand jury by an outside individual or entity.
Consistent with Justice Department practice, this Office allows an individual or entity to obtain
copies of any documents they have produced to this Office or the grand jury. See, ~' U.S.
Department of Justice, Federal Grand Jw:y Practice 124 (January 1993). (In cases of voluminous
documents, there of course may be issues of cost and burden associated with the actual copying.)
The individual or entity is then free to use the copies of the documents for any purpose, including
production to the Congress or to other investigative bodies. Disclosure of copies of such
documents by the individual or entity is not prohibited either by policy of this Office or by Rule
6(e) of the Federal Rules of Criminal Procedure. See Senate of Puerto Rico v. U.S. Department
of Justice, 823 F.2d 574, 582 (D.C. Cir. 1987) (internal quotation and citation omitted) ("Rule
6(e)' s purpose is not to foreclose from all future revelation to proper authorities the same

AMFnlCAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 63

VERSIGHT

18-1621-000261

 information or documents which were presented to the grand jury"); S.E.C. v. Dresser Industries,
Inc., 628 F.2d 1368, 1383 (D.C. Cir. 1981) ("The fact that a grand jury has subpoenaed
documents concerning a particular matter does not insulate that matter from investigation in
another forum.").
Please do not hesitate to contact us if you have any questions.
Respectfully yours,

Kenneth W. Starr
Independent Counsel

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 64

P VERSIGHT

18-1621-000262

 TELECOPY COVER SHEET

OFFICE OF THE INDEPENDENf

COUNSEL

1001 Pennsylvania Avenue, N.W., Suite 490N
Washington, D.C. 20004
telephone {202) 514-8688
facsimile {202) 514-8802

Michael
Richard

TO:

Chertoff,
Special Counsel
Ben-Veniste,
Democratic Special

Date:
Counsel

Senate Special Committee on Whitewater and Related Matters
202-224-5137 (Chertoff)
202-224-7391 (Chertoff)
202-228-0017 (Ben-Venist~elephone
Number: 202-224-8077 (Ben-Veniste)

Company Name:
Fax Number:
FROM:

3

Number of Pages:

(including this cover sheet)

Message:

CONFIDENTIAUTY NOTE
This facsimile is intended only for the person or entity to which it is addressed and may cont:2in
information that is privileged, confidential, or otherwise protected from disclosure. Dissemination,
distribution, or copying of this facsimile or the information herein by anyone other tlwi the intended
recipient, or an employee or agent responsible for delivering the mess2ge to the intended. recipient, is
prohibited. If you have received this facsimile in error, please notify us immediately by telephone and
return the facsimile by mail.

A

c:\faxfonn rdb

FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 65

VERSIGHT

·

18-1621-000263

 02/08/!Hi

;.rn; bl

THU

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~UU.J.

*********************
*** TX REPORT ***
*********************
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ST. TIME
USAGET
PGS.
RESULT

0766
92245137

CHERTOFF
02/08
01'09

20:51

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OK

TELECOPY COVER SHEET

OFFICE OF THE INDEPENDENT COUNSEL
1001 Pennsylvania Avenue, N.W., Suite 490N
'Washington, D.C. 20004
facsimile (202) 514-8802
telephone (202) 514-8688

Michael .-Che1;toff, Special Counsel.
Richard Ren-Venisce, Democratic Special

Date:

Counsel

TO:
Company Na~e:

Senate Special

Fax Number:

202-228-0017

202-224-51:37

Commi'ttee on Whitewater and Related Matters
202-224-7 391 (Chertof £)
(Chertoff).
(Beµ-Veniste)
202-224-8077
r;
Numbe
(Ben-:Venist~lcphone

FROM:
Number of Pages:

3

(including this cover sheet)

Message:

AWL r

1

RE>56806 (Utt~
PVERSIGH f OIA

tll3tl2) DociCI: 70104902 Page 66

18-1621-000264

 IE&JUU..1.
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*********************
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*********************
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TELECOPY COVER SHEET

OFFICE OF THE INDEPENDENT COUNSEL
1001 Pennsylvania Avenue, N.W., Suite 490N
Washington, D.C. 20004
facsimile (202) 514-8802
telephone (202) 514-8688

TO:
Company Naine:

Fax Number:

Special Counsel.
Michael·Che~~off,
Richard B-en-Venisce, Democratic Special
Senate

Special

202-224-5137
202-228-0017

Commi·ttee on Whitewater

(Chercoff)

(Ben-Venist~lcphone

Date:
Counsel
and R.ela~ed Maccers

202-224-7391

Number: 202-224-8077

{Chertoff)
(Bep-Veniste)

FR.OM:
Number of Pages:

3

(including this cover sheet)

Message:

P'JERSIGH

FOIA RD 56806 (URTS1630Zj Dodd. 70104'!0~ Page57

18-1621-000265

  

 

 

Wow
bar/2224? Jig/7 Aura/L57; 
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FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 68
18-1621-000266

To:

John
Brett

From:

Craig

Re:

2

Date:

July

Bates
Kavanaugh
Lerner

u.s.c.
31,

§ 192

1997

Congress
has an inherent
power to punish
individuals
for
contempt
committed
against
it . .s.e.e_McGrain v. Daugherty. 273
U.S. 135 (1927)
( "penetrating
and far-reaching"
investigatory
powers
implied
from its
legislative
function
under Article
I).
The direct
adjudication
of contempt
by Congress
proved
to be a
cumbersome
process,
and in 1857 Congress
enacted
legislation
that
instructed
the executive
branch
to prosecute
contumacious
congressional
witnesses
in the courts.
The Act of 1857 has since
been codified
as 2 U.S.C.
§ 192; 1 and the prosecution
of
individuals
for this
offense,
like
all
federal
crimes,
falls
within
the responsibility
of the Department
of Justice.
Section

192 provides:

Every person
who having
been summoned as a witness
by the
authority
of either
House of Congress
to give testimony
or
to produce
papers
...
or who, having
appeared,
refuses
to
answer
any question
pertinent
to the question
under
inquiry,
shall
be deemed guilty
of a misdemeanor
....
2 U.S.C.
provision

§ 192.
The procedural
mechanism
is codified
at 2 U.S.C.
§ 194,

for enforcement
which provides

of
that:

this

[w]henever
a witness
summoned as mentioned
in section
192 of
this
title
fails
to appear
to testify
or fails
to produce
any [documents]
...
and the fact
of such failure
or
failures
is reported
to either
House ...
, a statement
of
fact
constituting
such failure
is reported
to and filed
with
the President
of the Senate
or the Speaker
of the House,
it
shall
be the duty of the said President
of the Senate
or
Speaker
of the House,
as the case may be, to certify,
and he
shall
so certify,
the statement
of facts
aforesaid
under
the
seal
of the Senate
or House,
as the case may be, to the
appropriate
United
States
attorney,
whose duty it shall
be
to bring
the matter
before
the grand
jury
for its
action.
1

That statute
"does not speak of contempt
but its
tenor
and proscription
render
it closely
analogous
to a contempt
statute."
United states v, Johnson, 736 F.2d 358, 364 n.8 (6th
Cir.
1984).
1

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FOIA RD 56806 (URTS 16302) Docld: 70104902 Page 69

18-1621-000267

 The Burford

crisis

In 1982 the Administrator
of the EPA, Anne Burford,
refused
to produce
certain
documents
covered
by a House subpoena.
The
House passed
a resolution
citing
the Administrator
for contempt,
and the Speaker
of the House,
pursuant
to Section
194, certified
the contempt,
whereupon
a copy of the certification
was delivered
to the U.S. Attorney
in the District
of Columbia . Immediately
after
the House vote,
but prior
to the delivery
of the contempt
citation,
the Justice
Department
filed
a complaint
in the name of
the United
States
seeking
declaratory
and injunctive
relief
against
several
House defendants.
The House defendants
moved to
dismiss
the complaint,
citing
jurisdictional
and constitutional
defects
in the Justice
Department
complaint.
The District
Court
granted
the motion
to dismiss,
stating
that
" constitutional
claims
and other
objections
to congressional
investigatory
procedures
may be raised
as defenses
in a criminal
prosecution."
United
states
v, House of Representatives,
556 F.Supp.
150, 152
(D.D.C.
1983).
It added that
resolution
of an executive
privilege
claim would only become necessary
if the Administrator
of the EPA became a defendant
in a criminal
contempt
or other
proceeding.
The Justice
Department
did not appeal,
and the
disputed
documents
were eventually
turned
over pursuant
to an
agreement
between
the two branches.
During the pendency
of the lawsuit
and the subsequent
settlement
negotiations,
the U.S. Attorney
for the District
of
Columbia
refrained
from referring
the contempt
citation
to the
grand jury.
He took the position
that
Section
194 left
him with
the discretion
to withhold
a referral.
Legislative

Reaction

to

the

Burford

Crisis

Representative
Frank and others
introduced
98th Congress
that
would have amended the Ethics
Act to require
that
the Attorney
General

a bill
in the
in Government

apply to the division
of the court
for appointment
of an
independent
counsel
within
five days after
the Speaker
of
the House of Representatives,
acting
pursuant
to section
194
of title
2 of the United
States
Code, has certified
to the
appropriate
United
States
attorney
that
any [high-ranking
executive
branch
official]
has been found in contempt
of
Congress.
H.R. 2684, § 2, 98th Cong.,
1st Sess.
(1983).
A similar
bill
was
introduced
in the 99th Congress . H.R. 3836, 99th Cong.,
1st
Sess.
(1985).
A separate
bill
was introduced
in the 98th
Congress
that
would have amended the congressional
contempt
statute
to clarify
that
"[t]he
duty of the United
States
attorney
2

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pVERSIGHT

18-1621-000268

 [under
s U.S.C.
98th Cong.,
1st
Executive

Branch

§ 192)
is nondiscretionary
Sess.
(1983).

Reaction

to

the

Burford

...

"

H.R.

3456,

crisis

In an OLC opinion
Ted Olson argued
that
(1) Section
194 left
a U.S. Attorney
with the discretion
not to prosecute
referrals
of
contempt
from Congress,
and (2) the contempt
of Congress
statute
does not apply
to executive
branch
officials
who assert
Executive
privilege.
Prosecution
for Contempt
of Congress
of An Executive
Branch Official
Who Has Asserted
a claim of Executive
Privilege,
8 Op. Off. Legal Counsel
101 (1984).
This view was repeated
in
1986 by Charles
cooper.
Response
to Congressional
Requests
for
Information
Made Under the Independent
counsel
Act,
10 Op. Off.
Legal Counsel
68, 68 (1986)
("Congress
may not,
as a matter
of
statutory
or constitutional
law, invoke
the criminal
contempt
of
Congress
procedure
against
the head of an Executive
agency.").
William
Barr may have retreated
from this
position
in 1989.
Congressional
Requests
for confidential
Executive
Branch
Information,
13 Op. Off. Legal Counsel,
153, 162 (1989).

3

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70104906

•

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 UNITED STAT::...:: ATTORNEYS' MANUAL
DETAILED
TABLE OF CONTENTS
FOR CHAPTER 11
9-11.

000

9-11.

001

9-11.010

Additional

9-11.100
9-11.101
9-11.110

Materials

120

Power

of a Grand

9-11.121

Venue

9-11.122

Limitations

9-11.123

Limitations
Attorney

9-11.124
9-11.130
9-11.

140

9-11.

141

9-11.150
9-11.151
9-11.152
9-11.153
9-11.

154

9-11.155
9-11.160
9-11.200
9-11.210
9-11.220
9-11.221
9-11.222
9-11.223

.. ......

_
Page
.... .... .... .. . . . ..... . .. ... . .. ... ...... ... 1
.. .... . .. ...... . ... . . .... .. .. ... . . . . .. . ...... . .. ... 1

Jury

Limitations

Limited

pVERSIGHT

by Its

. .... . . . .. . .......

Set

by the

District

Function

........

. .......

.. . 2

.. .. .. . .... .. . . .... . ... .. . . ... . . . . . .. 5
Court ..........
.. ...... . ........
.5

Arising
From the Role of the Government
. .. .... .. . ..... . . . . ...... . ...............
.. . . . . .. . ...... . .. . ...... 6
Testimonial
Privilege
as Limiting
Power of Grand
Jury ........ . .... . . ... .........
. ...............
. . . ....... . ..... ... .........
.6
Limitation
on Naming Persons
Unindicted
Co-Conspirators ...... .... .. . .... . . . ....... . .. . ..... ... .... .. ...... ..... ..... . . .... ... .. . . 7
Limitation
on Grand Jury Subpoenas
.... . ... . ..... . .. . ................
7
Fair Credit
Reporting
Act and Grand Jury SubpoenasSpecial
Handling
Necessary
..... . ..... .... ..... ..... ... .. . . .........
8
Advice of ''Rights''
of Grand Jury Witnesses
... . . ... . .. . .. . . .... 9
Subpoenaing
Targets
of the Investigation
. .. .... . ... . . .. .. . .. . 11
Requests
by Subjects
and Targets
to Testify
Before
the Grand Jury . . . . .. . ..............
. .........
.. .. . ... . .... .... ...... ..
Notification
of Targets
. ..................
.. . . . . . .. ........
... ... ...
Advance
Assertions
of an Intention
to Claim
the
Fifth
Amendment Privilege
Against
Compulsory
SelfIncrimination
.. .... . ... . ... . . ... . . . .. . ... . .. . .. . ..... . . . .. . .. .. . . .. ...
Notification
to Targets
when Target
Status
Ends .. .. ........
Limitation
on Resubpoenaing
Contumacious
Witnesses
Before
Successive
Grand Juries
.. .. . .. .. . .. .... ...... .. . ..... .. .. .
THE PROVISIONS OF FEDERAL RULES OF CRIMINAL PROCEDURE 6 . ......
Summoning Grand Juries
(Fed.R.Crim.P.
6(a)) .. . .. .. .. .. ... ... ..
ob ·ections
to Grand Jur
and to Grand Jurors
(Fed.R.
Crim. P. 6 ( b
............
.... ...... .. ........
. . ....... . ........
. ........
Challenges
... . .. .. .... .. .. .. ...... .. .. . .. ..... ....... .. . . .... . . ... . ... . . .
Motions
to Dismiss,
in General
.. ...... . . .. .... ... .........
.. .....
Motions

to Dismiss

Based

October

AMLHICAN

......

Grand Jury Indictment
Required
by the Fifth
Amendment ..... .. ....... ... . . .... .. . . . ..... . . ... .... .... ...... . . . ...... .... .... .. . 1
The Role of the Prosecutor
.. ... . ... ...... . .. . .. . . ... .. . . ... . .. . . . . .. . l
POWERS AND LIMITATIONS OF GRAND JURIES . : . ....... . .........
.. .... ... . l
The Functions
of a Grand Jury .. ... .. . .. .. . . .. . . .... . .. .. . . ....... .. . l
The Investigative
Powers of a Grand Jury . ..... ... .. . . .. ....... .. . . 2

9-11.020

9-11.

GRAND JURY .... .... ......

on Objections

to the

Array .. .....

1, 1990
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18-1621-000271

11
12

12
13
14
14
14
15
15
15
15

 TITLE 9-CRIMINAL DIVISION
9-11.224
9-11. 230
9-11. 231
9-11. 232
9-11.233
9-11. 240
9-11.241
9-11.242
9-11. 243
9-11.244
9-11. 245
9-11. 250
9-11.251
9-11.252
9-11.253
9-11.260
9-11.300
9-11.310
9-11.311

9-11.312
9-11.320
9-11.

330

9-11.331

Giving the Cou~t Information
Peitinent
to Jury Selection
. . .... . ..........
.. . ....... ; .. . . . . . ... .. ...... .... ... . . . ...... ... 16
Objections
to Grand Jury Proceedinqs
.. . . ... ... .... ....... ... . . ... 16
Motions to Dismiss Due to Illegally
Obtained
Evidence
Before a Grand Jury .....................
. ..................
. ..........
16
Use of Hearsay
i:. a Grand Jury Proceeding
. .. .........
.. ........
17
Presentation
of Exculpatory
Evidence. .. ..... .... ... . ... .
18
Who May be Present
at Grand Jury
Sessions
· Fed.R.
Crim . P . 6 ( d ) ... ... . ...............................
,-....... ........... -. . . . . 18
DOJ Attorneys
Authorized
to Conduct Grand Jury Proceedings
... ..... .... .. .... ........ .. ................
. ....... .... .. . ..... 18
Non-Department
of Justice
Government
Attorneys
... .. .......
19
Presence
of Stenographer-Recording
Required
................
20
Presence
of an Interpreter
.... .. .........................
.. ... . .... 20
No Exceptions
...........................................................
21
Disclosure
Under Fed.R.Crim.P.
6(e):
To Attorne
s for
the Government,
Inc u inq
or Civi
Use ....... .. .... .. .. . ..... 21
Disclosure
Under
Fed.R.Crirn.P.
6(e):
To Other
Government
Personnel
.... . ..................
.... ..........
..... .... . 22
Disclosure
Under Fed.R.Crirn.P.
6(e):
Preliminarily
to or in Connection
With a Judicial
Proceeding
.. . .. ... ... 22
Who is Not Covered by Fed.R.Crirn.P.
6(e):
Only Witnesses ...................................................................
23
Amendment to Rule 6 ( e) Federal
Rules of Criminal
Procedure
Permitting
Certain
Disclosure
to State
and
Local Law Enforcement
Officials
..................................
24
THE SPECIAL GRANDJURY-18 U.S.C. § 3331 ...........................
27
Impaneling
Special
Grand Juries
...............
...... ...............
27
Request
for Certification
..........................................
28
Additional
Special
Grand Juries
....................
. .............
28
Special
Duties Imposed Upon Attorneys
for the Government ..... . ................................
. ............
.. .. .. ..............
. 28
Reports
of Special
Grand Juries
....................................
28
Consultation
With the Criminal
Division
About Reports .................................................................
. . . 30

October

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 UNITED STAT::::. .~ ...:'':'ORNEYS' i•lANUAL

CHAP. ll
9-11.000

GRAND JURY

9-11.001

Additional

9-11.101

Materials

Additional
materials
that may be helpful
include
treatises,
especially
Beale and Bryson,
Grand Jury Law and Practice.
In addition,
the Narcotic
and Dangerous
Drug Section
has prepared
a monograph
entitled
''Federal
Grand Jury Practice
( Volumes I and II).
Copies
may be obtained
from that
Section.
9-11.010

Grand

Jury

Indictment

The Fifth
Amendment to
in part,
that
' 'no person
wise infamous
crime,
unless
except
in cases arising
in
in actual
service
in time

Required

by the

Fifth

Amendment

the Constitution
of the United
States
provides,
shall
be held to answer
for a capital,
or otheron a presentment
or indictment
of a grand jury,
the land or naval forces,
or in the Militia,
when
of War or public
danger.''

While it is a very effective
instrument
of law enforcement,
the grand
jury is regarded
primarily
as a protection
for the individual.
It has been
said that the grand jury stands
between
the accuser
and the accused
as '' a
primary
security
to the innocent
against
hasty,
malicious,
and oppressive
persecution.''
See Wood v. Georgia,
370 U.S. 375, 390 (1962).
The grand
jury functions
to determine
whether
there
is probable
cause to believe
that
a certain
person
committed
a certain
offense
and, thus,
to protect
individuals against
the lodging
of unfounded
er iminal
charges.
See United
States
v. Calandra,
414 U.S. 338 (1974);
Branzburg
v. Hayes,
408 U.S. 665 (1972);
United
States
v. Cox, 342 F.2d 167 (5th Cir.),
cert.
denied,
391 U.S. 935
(1965).
9-11.020

The Role

of the

Prosecutor

In his/her
dealings
with the grand
jury,
the prosecutor
must always
conduct
himself/herself
as an officer
of the court
whose function
is to
insure
that
justice
is done and that guilt
shall
not escape
nor innocence
suffer.
He/she must recognize
that the grand jury is an independent
body,
whose functions
include
not only the investigation
of crime and the initiation of criminal
prosecution
but also the protection
of the citizenry
from
unfounded
criminal
charges.
The prosecutor's
responsibility
is to advise
the grand jury on t:he law and to present
evidence
for its consideration.
In
discharging
these
respon&ibilities,
he / she must be scrupulously
fair
to
all
witnesses
and must do nothing
to inflame
or otherwise
improperly
influence
the grand jurors.
9-11.100

POWERS AND LIMITATIONS OF GRAND JURIES

9-11.101

The Functions

While grand
investigatory

juries
are
functions,

of a Grand

Jury

sometimes
described
it is particularly
October

as performing
accusatory
and
useful
to say that
a grand

1, 1990
l

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18-1621-000273

 9 -L

.101

,:·_.TL I

- CRIMIN21.L. ·IV~SF)N

CH~P. ll

~~ry=~ function
is t ~ d2t?rm. ~s wh2ther
e r n et ~her~ is probable
c ause to
::, :::l i cve that a certain
f.:t:. rso . . C!T>Jaitted
a. ce.::·t ::.L; federal
of::ense
w.:..thi:-:
t !-le ·.1enue of the district
c at · ·t.
':.'hus, L: has been said that
a grand jury
'.:as but two functions-tc
ind . :t c:::-, in the d l ternative,
to ret:irn
c. ' ' no:Ji ll,'
' see Wright,
Federal
• ::-actice ana Procedure,
Criminal
§ 110.
It is
11seful to look upon the £·.1:ric.. ;_ens cf a grand jury in this
way because,
ir ,
general,
a grand j 1_;_rymay ,10t _,erfcrm any different
function.
The .:.nvesti1ative
grand jury works t ~wa~d 6Uch an end, although
some i nvestigations
are never brought
to fruition.
0

At common law, a grand
jury enjoyed
a certain
power to issue
reports
alleging
non-criminal
misconduct.
A special
grand jury impaneled
under 18
U.S. C. § 3331 is authorized,
on the basis
of a criminal
investigation
( but
not otherwise),
to fashion
a report,
potentially
for public
release,
concerning
either
organized
crime conditions
in the district
or the non-criminal misconduct
in office
of appointed
public
officers
or employees.
This
is discussed
fully
at USAM 9-11. 330, infra.
It would seem that a grand jury
impaneled
under Rule 6 of the Federal
Rules of Criminal
Procedure
also has a
power to issue reports
on non-criminal
matters.
See Jenkins
v. McKei then,
395 U.S. 411 (1969);
Hannah v. Larche,
363 U.S. 420 (1960).
Whether and in
what form a grand jury report
should be issued
is in all events
a difficult
and complex question.
Consultation
should
be had with the Criminal
Division before
any grand
jury report
is initiated,
whether
by a regular
or
special
grand jury.
See USAM 9-11.331,
infra.
9-11.110

The Investigative

Powers

of a Grand

Jury

The grand jury has always
been accorded
the broadest
latitude
in conducting
its
investigations.
The proceedings
are conducted
ex parte,
in
secret,
and without
any judicial
officer
in attendance
to monitor
them, and
there
is no exclusionary
rule or standard
of relevancy
or materiality
to
inhibit
grand jury inquiry.
A grand
juror's
own information,
newspaper
reports,
rumors,
or whatever,
may properly
be used to trigger
an investigation.
The grand
jury may act upon mere suspicion
that
the law has been
violated,
or with the objective
of seeking
assurance
that
it has not.
The
grand jury may investigate
a field
of fact with no defendant
or cri..,inal
charge specifically
in mind and with no duty to measure
its steps
accc. -c ~ "lg
to predictions
about
the outcome.
Thus the grand
jury
may conduct
the
broadest
kind of investigation
hefore
stopping
to cetermine
whether
an
indictment
should be found.
Se£ Calandra,
supra;
Branzburg,
£'1prc:.; ' 7r.ited States
v. Morton
Salt
Co., 338 U.S. 632 (1950);
Blair
v. United
Sr:ates,
250 U.S. 273 (1919);
Hale v. Henkel,
201 U.S. 43 (1906);
United
Star:.es v.
Smyth,
104 F.Supp.
283 (N.D.Cal.1952).
9-11.120

Power

of a Grand

Jury

Limited

by Its

Function

The grand jury's
power,
although
expansive,
is
toward possible
return
of an indictment.
Costello
October

limited
v.

by its
United

function
350

State.i:.·,

1, 1990
2

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CHAP. 11

9-11.120

U.S. 359, 362 (1956).
Accordingly,
the grand jury cannot
be used solely
to
obtain
additional
evidence
against
a defendant
who has already
been indicted.
United
States
v. Woods, 544 F.2d 242, 250 (6th Cir.1976),
cert.
4 29 U.S. 1062 ( 1977) ; nor can it be
denied
sub nom., Hurt v. United States,
used solely
for pre-trial
discovery
or trial
preparation.
United States
v.
Star,
470 F.2d 1214 (9th Cir.1972).
After
indictment,
the grand jury may be
used if its investigation
is related
to a superseding
indictment
of additional
defendants
or additional
crimes
by an indicted
defendant.
In re
Grand Jury Proceedings,
586 F.2d 724 (9th Cir.1978).
A.

Approval

Required

Prior

to Resubmission

of Same Matter

to Grand

Jury

Once a grand jury returns
a no-bill
or otherwise
acts
on the merits
in
declining
to return
an indictment,
the same matter
(i.e.,
the same transaction or event and the same putative
defendant)
should
not be presented
to
another
grand jury or presented
again to the same grand jury without
first
securing
the approval
of the responsible
Assistant
Attorney
General.
B.

Use of Grand

Jury

to

Locate

Fugitives

It is improper
to utilize
the grand jury solely
as an investigative
in the search
for a fugitive
in whose testimony
the grand
jury
interest.
In re Pedro Archuleta,
432 F.Supp.
583 (S.D.N.Y.1977);
Wood, 430 F.Supp.
41 (S.D.N.Y.1977),
aff'd,
In re Cueto,
554 F.2d
Cir.1977).

aid
has no
In re
14 (2d

If, however,
the grand jury has a legitimate
interest
in the testimony
of a fugitive,
it may subpoena
other
witnesses
and records
in an effort
to
locate
the fugitive.
Wood, supra,
citing
Hoffman
v. United
States,
341
U.S. 479 (1951).
Similarly,
it is the Criminal
Division's
view that if the
present
whereabouts
of a fugitive
is related
to a legitimate
grand
jury
§§ 1071,
1072, 1381,
investigation
of offenses
such as harboring,
18 U.S.C.
§ 4, accessory
after
the fact,
18 U.S.C.
misprision
of felony,
18 u.s.c.
§ 3, escape
from custody,
18 U.S.C.
§§ 751,
752, or failure
to appear,
18
U.S.C.
§ 3146,
~he grand
jury properly
may inquire
as to the fugitive's
whereabouts.
See In re Grusse,
402 F.Supp.
1232 (D.Conn.1975).
Unless
such collateral
interests
are present,
the grand jury should
generally
not
be employed
in locating
and escape
cases
since,
fugitives
in bail-jumping
as a rule,
the gist
of those
offenses
is the circumstances
of defendant's
disappearance
rather
than his or her current
whereabouts.
Generally,
grand jury subpoenas
should
not be used to locate
fugitives
in investigations
of unlawful
flight
to avoid
prosecution,
18 U.S.C.
§ 1073.
Normally
an unlawful
flight
complaint
will
be dismissed
when a
fugitive
is apprehended
and turned
over
to state
authorities
to await
extradition.
Prosecutions
fo~ unlawful
flight
are rare
and the statute
requires
prior
written
approval
of the Attorney
General
or Assistant
Attorney
General.
Since indict:1ents
for unlawful
flight
are rarely
sought,
October

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18-1621-000275

 9-11.120

'l'!TLE 9-CRIMINAL

it would be improper
tor
unlawful
flight
fugitive
C.

utinely
3.

use the

DIVISION
grand

Obtaining
Records
.o Aid in Location
tives
to Use of Gr a nd Jury Subpoenas

CHAP. 11

jury

in an effort

of Federal

to locate

Fucri tives-Al

terna-

The Criminal
Division
: ecognizes
the importance
of providing
to federal
investigative
agencies
a means of cbtaining
records
which would aid in the
search of federal
fugitives.
Usually the records
sought are telephone
toll
records
of relatives
and close associates
of the fugitive,
al though other
kinds of records
might also be valuable
in ascertaining
the fugitive's
whereabouts.
With the enactment
of the Electronic
Public
Law No. 99-508,
law enforcement
will now be covered
by federal
statute.

communications
Privacy
access
to telephone

Act of 1986,
toll
records

Pursuant
to 18 u.s.c. §§ 2703(c) (1) (B) and 2703(c) (2) the government
may
1 1
obtain a
record or other information
pertaining
to a subscriber'
' ( telephone toll
records)
without
notice
to the subscriber
by obtaining:
( 1) an
administrative
or grand jury subpoena;
(2) a search
warrant
pursuant
to
state
or federal
law; or (3) a court order pursuant
to 18 u.s.c. § 2703(d)
based on a finding
that the information
is relevant
to a legitimate
law
enforcement
inquiry.
For an analysis
USAM 9-7.2000.

of the Electronic

Communications

Privacy

Act of 1986 see

Occasionally,
there may be records,
other than telephone
toll
records,
which might be useful
in a fugitive
investigation
but which cannot
be
obtained
by grand jury subpoena,
administrative
subpoena,
or search
warrant.
In such situations,
it may be appropriate
to seek a court order for
production
of the records
pursuant
to the All Writs Act, 28 u.s.c. § 1651.
The All Writs Act provides:
The Supreme Court and all
Congress may issue all writs
their
respective
jurisdictions
principles
of law.

courts
established
by the Act of
necessary
or appropriate
in aid of
and agreeable
to the usages and

The Supreme Court has recognized
the power of a federal
court
to issue
orders
under the All Writs Act ''as
may be necessary
or appropriate
to
effectuate
and prevent
the frustration
of orders
it has previously
issued
in the exercise
of its
jurisdiction.''
See United States
v. New York
Telephone Co., 434 U.S. 159, 172 (1977).
Because
the purpose
of the All Writs Act is to aid the court
in the
exercise
of its jurisdiction,
an application
for an order under the act
must be sought
only from the United
States
District
Court in which the
complaint
or indictment
is pending.
October

AMERICAN

pVERSIGHT

l,

1990

FOIA RD 56806 (URTS 16!o2) Docld: 70104906 Page 7

18-1621-000276

 UNITED STATES ATTORNEYS' MANUAL

CHAP. 11

· 9-11.122

The use of the All Writs Act to obtain
records
in a fugitive
investigation is not a procedure
to be used in every
fugitive
case.
The willingness
of courts
to issue
such orders
will
depend
in the selectivity
with which
such applications
are made, and the courts
will not condone
a wholesale
use
of the act for this
purpose.
Thus,
the procedure
should
be used only in
important
cases
where a strong
showing
can be made that
the records
are
likely
to lead to the whereabouts
of the fugitive.
9-11.121

Venue

Limitations

A case should not be presented
to a grand jury in a district
unless
venue
for the offense
lies
in that
district.
Nevertheless,
it is common for a
grand jury to investigate
matters
occurring
at least
partly
outside
its own
district,
because
federal
offenses
are often
prosecutable
in more than one
district,
and a grand jury is under no obligation
to determine
venue early
in its investigation.
A witness
should
not be heard to challenge
the right
of a grand jury to inquire
into events
that happened
in other
districts.
As
a general
matter,
a witness
has a duty to testify
if the grand jury has a de
facto existence
and cannot
resist
questions
on the grounds
of relevancy
or
materiality.
9-11.122

Limitations

Set

by the

District

Court

It is often
said that the grand jury is an arm or appendage
of the court.
This has a certain
significance
but is also misleading.
The grand
jury is
dependent
on the court
in certain
respects
and independent
in other
respects.
Lacking
powers
of its own, the grand
jury must rely
upon the district
court's
subpoena
and contempt
powers
if witnesses
are to be compelled
to
attend
and to testify
in grand jury sessions.
See Brown v. United States,
359 U.S. 41 (1959).
This presents
no problems
in the ordinary
course.
But
a court
may properly
deny a grand
jury
the use of subpoenas
to engage
in
''the
indiscriminate
summoning
of witnesses
with
~o definite
object
in
mind and in a ~pirit
of meddlesome
inquiry.''
The court
may curb a grand
jury
when it c.Learly
exceeds
'' its
historic
authority.''
See Hale v.
Henkel,
supra.
:n any event,
the district
court
has broad
authority
to
discharge
a grand
jury
impaneled
under
Rule 6 of the Federal
Rules
of
Criminal
Procedure,
and rather
than
monitor
the issuance
of grand
jury
subpoenas
in situations
involving
a flagrant
abuse,
the court
might more
likely
put an end to the grand
jury by discharging
it.
See Fed.R.Crim.P.
6 ( g) •
There
is a counterbalancing
principie.
Constitutional
status,
the district
court
fere with the grand
jury
in'
'the
~x~r~ise

See United States
of West Virginia,

,r. united
238

F.2d

States
7 13

District
( 4th

October

AMl HICAN

Since
the grand
jury
enjoys
must neither
control
nor interof its essential
functions.''

Court

Cir.1956
1,

for the Southern
District
) , cert.
denied,
.sub nom.,

1990

FOIA RD 56806 (URTS 16302} CYocld:70104906 Page 8

VERSIGHT

·

18-1621-000277

 ; -CRIMIN;..:.

;.; IVISION

·..'.HAP. ::.1

',"dlc=:yBe.:.1

Dai.::-:;'Co. v . :~nit
.: .JC:ic:es, 3':2 U .S. :1Bi. , _: 957),
:n tha-:
~he district
court was h~ld
c have i~~erfered
impro~erly
wi~h the
::ury by denying government
cc rnsel the use of the granc jury transcript
jy instructing
the juror s to vote without
the benef~t
of government
s el's
summarization
of the e-;ridence.

case,
gran~
and
coun-

The government
attorn~y
a_sc enjoys
a constitutionall~-based
independence.
Court,
prosecutor,
ar..1 :1rand jury-each
has its own author.:;.ty;
and
a court :nay not exercise
its s c1pervisory
power over the grand jury in such a
~ay as to encroach
upon the jurors'
or the prosecutor's
prerogatives,
unless
there
is a clear
basis
in law and fact
for doing so.
See United
States
v. Chanen,
549 F.2d 1306 (9th Cir.1977).
1

9-11.123

Limitations

Arising

From

the

Role

of

the

Government

Attorney

No federal
grand jury can indict
without
the concurrence
of the attorney
for the government.
He/she must sign the indictment
under Rule 7 ( c) of the
Fed. R. Cr. P. for the indictment
to be valid,
and the judiciary
cannot compel
the attorney
for the government
to sign any indictment.
In signing
an
indictment,
the attorney
for the government
is not just complying
with Rule
7; the attorney
is exercising
a power belonging
to the executive
branch of
the government.
See Cox, supra;
Smith v. United
States,
375 F. 2d 24 3 ( 5th
Cir.),
cert.
denied,
391 U.S. 841 (1967).
9-11.124

Testimonial

Privilege

as Limiting

Power

of Grand

Jury

A witness
before
a grand jury enjoys
the same testimonial
privilege
he/she would have at any stage of a criminal
proceeding.
The single
rule in
the Fed.R.Evid.
that is made applicable
to grand jury proceedings
is Rule
501 on testimonial
privileges;
see Fed.R.Evid.
101 and ll0l(c)
and (d).
Fed.R.Evid.
501 provides
that,
except
as otherwise
required
by the Constitution,
statute,
or rules,
the testimonial
privileges
of witnesses
' 'shall
be governed
by principles
of the common law as they may be interrreted
by
the courts
of the United
States
in the light
of reason
and exper ...ance.''
The subject
is thus left
for case law development.
But Rule 501 is clear:
federal
law (not state
law) is controlling
on the matter
of testimonial
privilege
before
grand juries.
See United
States
v. Woodall,
4 38 F. 2d 1317
(5th Cir.1970),
cert.
denied,
403 U.S.
933 (1971).
It is emphasized,
however,
that Rule 501 is only a rule
for the witness
and does not set a
standard
for what may be heard and used as a basis
for indictment.
See the
Advisory
Committee's
Note to Rule 1101 of the Fed.R.Evid.
In short,
a grand
jury may consider
and indict
on the basis
of testimony
that
will
not
necessarily
be admissible
at trial;
and the indictment
will not c2 vitiated because
evidence
was obtained
in violation
of a testimonial
pr · vile.ge.
See, e.g.,
United
States
v. Fultz,
602 F.2d 830 (8th Cir.1979);
United
States
v. Colasurdo,
453 F.2d 585 (2d ·.:ir.1971),
cert.
denied,
406 U.S. 917
October

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6

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18-1621-000278

 CHAP. 11
(1972);

UNITED STATES ATTORNEYS' MANUAL
cf.

United

444 U.S.

denied

States

v.

Franklin,

598

F.2d

954

9-11.140
(5th

Cir.),

cert.

870 (1970.)

, When a grand jury witness
invokes
a testimonial
privilege,
the attorney
for the government
will want to examine the claim very carefully
to ascertain whether
the privilege,
although
perhaps
available
in that
state,
is
properly
invoked
in a federal
proceeding.
Each witness
is under a broad
duty to answer questions;
the witness
has no privilege
to protect
others.
See United
States
v. Mandujano,
425 U.S. 564 (1976).
To compel a witness
to
give testimony,
resort
may be had to the civil
contempt
remedy under
18
u.s.c. § 401, and Rule 42 of the Federal Rules of Criminal
Procedure
is
utilized
for punitive
purposes.
If the privilege
against
self-incrimination
is invoked
in appropriate
circumstances,
it may be necessary
to
consider
whether
to seek authority
for obtaining
an order to compel testimony under
18 U.S.C.
§ 6003,
which may be enforced
by use of the civil
testimony
under 18 U.S.C. § 6003, which may be enforced
by use of the civil
contempt
remedy.
One exceptional
situation
is to be noted.
A grand
jury
witness
is
entitled,
by reason
of 18 U.S.C. § 2515, to refuse
to respond
to questions
based on illegal
interception
of oral or wire communications.
Gelbard
v.
United
States,
408 U.S. 41 (1972).
The decision
is based on the statute
and
not any broader
principle.
9-11.130

Limitation

on Naming

Persons

Unindicted

Co-Conspirators

The practice
of naming individuals
as unindicted
co-conspirators
in an
indictment
charging
a criminal
conspiracy
has been severely
criticized
in
United
States
v. Briggs,
514 F.2d 794 (5th Cir.1974),
and other
cases.
As the court in Briggs
pointed
out, there
is no need ordinarily
to name a
person as an unindicted
co-conspirator
in an indictment
in order to fulfill
any legitimate
prosecutorial
interest
or duty.
For purposes
of indictment
itself,
it is sufficient,
for example,
to allege
that
the defendant
conspired
with
''another
person
or persons
known.''
The identity
of the
person
can be supplied,
upon request,
in a bill
of particulars.
With
respect
to the trial,
the person's
identity
and status
as a co-conspirator
can be established,
for evidentiary
purposes,
th= ::ugh ":he introduction
of
proof
sufficient
to invoke
the co-conspirator
hearsay
exception
without
subjecting
the person to the burden of a formal accusation
by a grand jury.
Accordingly,
of the person's
knowledge),
it
co-conspirators
9-11.140

in the absence
conspiratorial
is not desirable
in conspiracy

Limitation

on Grand

of some sound reason
(e.g.,
where the fact
involvement
is a matter
of public
record
or
for U.S. Attorneys
to identify
unindicted
indictments.
Jury

Subpoenas

Subpoenas
in federal
proceec!ings,
including
governed
by Rule 17 of the Fed.R.Cr.P.
October

grand

j•.1ry proceedings,

1, 1990
7

AMLHICAN

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 10

pVERSIGHT

18-1621-000279

are

 ~
•

-~

..
•

/f

• . • ·-:

"

IT:,

1,,.1

-~-A.I?. :.._:_

....... ·_f:1i..;ec
~ -

. t.a to:~:2. -~.-.der
;;_'..12..e ~-~· ; g ; c:. ·->..·3 ?edera:.
I-:·...!::..23 ,J f (.~:..
...imir:a..L I-!:C':.:e•it.:i"e,
(~~
-=-'!i.l u~ c.. :.J~
" ,:! ~ersor£ ·~,Tl ~:r.~·Jt
:•.::quc~t.e e :~::.::,~se t.2 _jbe~:.l a .3U1:p8ena ~·se1.-\"::::i.
~~;,on

:-:i:u / ~:-2::.· may be deemed

a c ont -mpt

of the

-::ourt.

Grand jury
subpoenas
raa y e issued,
~o be served
abr~ad,
~o ::::::::mpel thP
_,_;:,pear.~::.::::ebefc::::-e the g:~and : ·_:::.·yof a national
or resident
of ~r: c-- 'nitec
:::tates
anc the prcduct i -~·,n ,-,: '' a speci:ied
document
or ether
r ;·. '_:1g cy
:-..irr,. · ' Tf:e d.ec is ic-~ t.J the c;. ntra!.'"2' in :J n;_
ted States
-✓• Thomps.on , .: :. -; E'". 2-:'i
66 5 (2
6. ,_::..r.:.963),

was

o·,.rerc~rn .c !:~, an

a mP.ndment - of

'.~rigr:t , Federal
Pract .~ce anc :-::ocedure,
issuing
a subpoena
to a wit~ess
abr o ad,
•_::1der 2 8 U.S.C. § 1783(a)
to make certain
=~r subpoenaing
the witness.
The issuance
7,J-n
erican
citizen
i:i a foreig:i
c:ountry may
i:1g the person's
statement
to the grand

28 U.S.C.

§

l7S...:; ..

See

Criminal
§ 277.
However,
.i:.,efc,r~
the district
court
is required
findings
regarding
the necessit:'i·
cf a granc
jury subpoena
to an
a.t times be obviated
by presentjury
in the
form of hearsay.

There can t:e enormous diffic-..il
ties
i.:wolved
:n .investigating
any matter
ab road and in seeking
to obtain
the testimony
of persons
located
in other
countries,
even if they are citizens
of the United
States.
See
Jor.:s,
International
Judicial
.ri.ssistance:
Procedural
Chaos And A Program Por
Reform.
62 Yale L. J. 515.
Subpoenas
cannot
be issued
and served
a.broad
upon foreign
nationals;
even to request
a foreign
national
to appear
in
this
country
may involve
sensitive
problems.
Accordingly,
before
making
any effcrt
or initiating
any process
to obtain
testimony
or evidence
from
abroad,
prior
consultation
with the Criminal
Division
is required.
Inquiries
should
be directed
to the Office
of International
Affairs.
All grand jury witnesses
should be accorded
reasonable
advance
notice
of
their
appearance
before
the grand jury.
''Forthwith''
or ''eo instanter''
subpoenas
should be used only when swift
action
is important
and then only
with the prior
approval
of the U.S. Attorney.
Consideraticns,
among others,
which bear upon the desirability
of using such subpoe~~s
include
the
following:
( 1) the risk of flight;
( 2) the risk of destructi
n
or
fabrica
tion of evidence;
(3) the need for the orderly
presentation
of evidence;
and (4) the degree
of inconvenience
of the witness.
Policies
regarding
the issuance
of subpoenas
to members
oft~:
n~wmedia and subpoenas
for telephone
toll
records
of members of the new; media
are discussed
elsewhere
in the ·, JAM.
9-11.

141

Fair

dling

Credit
Reporting
Necessary

Act and Grand

Jury

Subpoenas-Specie

•. ~.n-

The Fair Credit
Reporting
Act (15 U.S.C. § 1681 et seq.)
pr.__,hibits
.:edit
reporting
agencies
from furnishing
consumer
reports
?Xcept,
inter
~a,
'' in response
to the order of a court''
of competent
ju.:. i;;;dic:::ion.
;:..L'.-• . __:ities
are divided
on =he question
whether
grand jury subpoenas
are
v urt
October

1, 1990
8

AMLHICAN

pVERSIGHT

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 11

18-1621-000280

 CHAP. 11

UNITED STATES ATTORNEYS' MANUAL

9-11.150

orders
within
the
meaning
of the
quoted
language
(at
15 U.S.C.
1681 ( b) ( 1).
The cases are collected
in Matter of Application
to Quash
Grand Jury Subpoena, 526 F.Supp. 1253 (D.Md.1981).
The only circuit
court
to rule on the issue held that a subpoena is not a court order within the
meaning of the act.
See In re Gren, 633 F.2d 825 (9th Cir.1980);
accord,
Doe v. DiGenova, 779 F.2d 74 (D.C.Cir.1985).
§

Because of the division
of opinion on the legal issue and the resulting
differences
in practices
in the various
districts,
credit
reporting
agencies are often constrained
to resist
grand jury subpoenas which they would
promptly
obey if the subpoenas
were specially
issued
by the district
courts.
The trouble,
expense and delay involved
for the agencies
and the
government seem particularly
unwarranted
when no definitive
resolution
of
the legal issue is foreseeable
at an early date.
Heretofore,
in order to
try to minimize these problems,
and the need for litigation,
U.S. Attorneys
were given discretion
to seek court approval of a grand jury subpoena.
This
policy,
however, has not been completely
successful
in resolving
the issue.
Accordingly,
to provide
consistency
and uniformity
in the various
districts,
the Department of Justice
has determined
that henceforth
attorneys for the government
in seeking
to obtain
credit
reporting
agency
records,
should seek court
orders
or the endorsement
or other
special
handling
of subpoenas
by the district
court
so as to obviate
the legal
difficulties.
See, e.g.,
In re Gren, supra, at n. 3.
It should be sufficient
simply to make an in camera, ex parte showing
that the information
sought from the credit
reporting
agency is or may be
relevant
to an ongoing investigation,
that it is properly
within the grand
jury's
jurisdiction
and that
it is not sought primarily
for any other
purpose.
Cf. In re Grand Jury Proceedings
( Larry Smith) , 5 7 9 F. 2d 8 3 6 ( 3d
Cir.1978).
9-11.150

Advice

of'

'Rights''

of Grand Jury

Witnesses

It is the Department's
policy
to advise
a grand jury witness
of the
rights
described
below only if such witness
is a ' 'target'
' or ' 'subject'
'
(as hereinafter
defined)
of a grand jury investigation.
The Supreme Court declined
to decide whether a grand jury witness
must
be warned of his/her
Fifth Amendment privilege
against
compulsory
self-incrimination
before his/her
grand jury testimony
can be used against
the
witness.
See United States
v. Washington,
431 U.S. 181, 186 and 190-191
(1977);
United States
v. Wong, 431 U.S. 174 (1977);
Mandujano,
supra, at
582 n. 7. It is important
to note, however,
that in Mandujano the Court
took cognizance
of the fact that
federal
prosecutors
customarily
warn
' 'targets'
' of their
Fifth Amendment rights
before grand jury questioning
begins.
Similarly,
in Washington the Court pointed
to the fact that Fifth
Amendment warnings
were administered
as negating
''any
possible
compulOctober

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FOIA RD 56806 (URTS 16302) Dt>cld: 70104906 Page 12

18-1621-000281

 S-11.150

TITLE

-~.:er_ 4cc se2.t-inc;
:-imi:"1atio:1
.set-:i:-1g.
See Washington,

9-CRIMINAL

·wf _:_,=r
.. ;ni -gl-"t. =--·ther ..wise

sur:a,

CHAP. 11

DIVISION

exist

ir: the

1

granj

j-:.1r:{

2.t l88.

Not·.;:. t !.standin

-g the .:.a::k c.: 5. :::.iea;: ::::mstitutional
imperative,
.:..'.:. is i:::r
.e
-:~.1.eLie::,dr-:.:-:.er1t tha-:. a11 ; 'Advice
of Rights''
=~=m, as set
:~rth
below_ oe appen~e ~ __ ~l grand
~ury subpoenas
~o be served
en any
' ::.ar ge--:.'' ::.r
~, iereinafte~
defined)
_:-...=.
. e::-na:.. po2..~.:::{ cf

Advice

cf

Rignts

'!'-.. T:ie grand
jur~· i.::; conducting
a~ i::vestigation
of possible
violations
-- federal
criminal
:aws .:..nvolving:
( State here the general
subject
matter
o f inquiry,
e.g. , the conduct.ing
of an illegal
gambling
business
in viola1:ion of 18 U.S.C.
§ 1955).

B. You may refuse
to answer
any question
question
would tend to incriminate
you.
C. Anything
in a subsequent

that you do say may be used
legal
proceeding.

D. If you have retained
counsel,
reasonable
opportunity
to step outside
counsel
if you do so desire.

the
the

if

against

grand
grand

a truthful

you by the

answer

to

grand

jury

jury
will
permit
jury room to consult

the

or

you a
with

In addition,
these
''warnings''
should be given by the prosecutor
on the
record
before
the grand jury and the witness
should be asked to affirm
that
the witness
understands
them.
A ' 'target'
' is a person
as to whom the prosecutor
or the grand jury has
substantial
evidence
linking
him/her
to the commission
of a crime and who,
in the judgment
of the prosecutor,
is a putative
defendant.
An officer
or
employee
of an organization
which is a target
is not automatically
to be
considered
as a target
even if such officer's
or employee's
conduct
contributed
to the commission
of the crime by the target
organization,
and the
same lack of automatic
target
status
holds ·true
for organizations
which
employ,
or employed,
an officer
or employee
who is a target.
Although
the
Court
in Washington,
supra,
held
that
''targets''
of the grand
jury's
investigation
are entitled
to no c:,pecial warnings
relative
to their
status
as'
'potential
defendant[s]'
', the Department
continues
its longstanding
internal
practice
to advise
witnesses
who are known ''targets''
of the
investigation
that their
conduct
is being investigated
for possible
violation of federal
criminal
law.
This supplemental
' 'warning'
' will be administered
on the record
when the target
•,-!itness
is advised
of the matters
discussed
in the preceding
paragraphs.
the

A' 'subject''
scope of the

of an investigation
is a person
grand jury's
investigation.
October

AMl HICAN

whose

conduct

is

1, 1990

FOIA RD 56806 (URTS1%302) Docld: 70104906 Page 13

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within

18-1621-000282

 UNITED STATES ATTORNEYS' MANUAL

CHAP. 11

Where a local district
court insists
that the notice
appended to a grand jury subpoena,
the advice of rights
separate
letter
and mailed to or handed to the witness
served.
9-11.151

Subpoenaing

Targets

of the

9-11.152

of rights
may not be
may be set forth in a
when the subpoena is

Investigation

A grand jury may properly
subpoena a subject
or a target
of the investigation and question
him/her about his/her
involvement
in the crime under
investigation.
See Wong, supra,
at 179 n. 8; Washington,
supra,
at 190 n.
6; Mandujano, supra, at 573-75 and 584 n. 9; United States
v. Dionisio,
410
U.S. 1, 10 n. 8 (1973).
However, in the context
of particular
cases such a
subpoena may carry the appearance
of unfairness.
Because the potential
for
misunderstanding
is great,
before a known' 'target''
(as defined
in USAM
supra)
is subpoenaed
to testify
before
the grand jury about
9-11.150,
his/her
involvement
in the crime under investigation,
an effort
should be
made to secure his/her
voluntary
appearance.
If a voluntary
appearance
cannot be obtained,
he/she should be subpoenaed
only after
the grand jury
and U.S. Attorney
or the responsible
Assistant
Attorney
General have approved the subpoena.
In determining
whether to approve a subpoena for a
''target,''
careful
attention
will be paid to the following
considerations:
A. The importance
to the successful
conduct
tigation
of the testimony
or other information
B. Whether the substance
of the testimony
could be provided
by other witnesses;
and
C. Whether the questions
ask or the other information
privilege.
9-11.152

Requests

by Subjects

of the grand
sought;
or other

jury

information

I

s invessought

the prosecutor
and the grand jurors
intend
sought would be protected
by a valid claim

and Targets

to Testify

Before

to
of

the Grand Jury

uncorrmon for subjects
It is not altogether
or targets
of the grand
jury's
investigation,
particularly
in white-collar
cases,
to request
or
demand the opportunity
to tell
the grand jury their
side of the story.
While the prosecutor
has no legal obligation
to permit such witnesses
to
testify
United States
v. Leverage
Funding System,
Inc.,
637 F.2d 645 (9th
Cir.1980),
cert.
denied,
452 U.S. 961 (19811;
United States
v. Gardner,
516F.2d334
(?thCir.1975),
cert.
denied,
423U.S. 861 (1976)) a refusal
to
do so can create
the appearance
of unfairness.
Accordingly,
under normal
circumstances,
where no burden upon the grand jury or delay of its proceed1 1
ings is involved,
reasonable
requests
by a 1 'subject
or ''target''
of an
investigation
( as defined
in USM! 9-11.150,
supra) personally
to testify
before the grand jury ordinarily
should be given favorable
consideration,
provided
that such witness
explicitly
waives his/her
privilege
against
October

AMERICAN

1, 1990

FOIA RD 56806 (URTS 16302) Db1cld: 70104906 Page 14

P VERSIGHT

18-1621-000283

 ::.- :...... :. 52

-

·- -..L- ~·.- .:··-·~

...,...

L'..:..

, I

._.
•

~

.....

~

....

.:::i,·.: -

-

..I.\. ... ..;,.. J..

-~ /.:..-: .:: ,: .:.--:..:,: :-. --

~-r-. ; .

~~

ad v ersary
~roceeding
Calandra,
~upra,
at 343.

5ee,

Notification

:-11.153

c=

cf Targets

::he:::2 a targe-:: i.3 :1·::t ca:.::.20. to t:2:stify
pursuan i: ::o ~,SJ.l·! 0 -::.::.. ::_5:_,
;,_;_:::ra.,°'nd do ~s :-:c:
·t :::2quest tc : test.if::•
:::n his/her
cwn :notion
'.see 7: SA.1'1
s -11. 1 :::2, sup.::a ) , t.l:e p:::-osecu tc r, ~n appropriate
cases,
is enc ou ra ge d :::.o
:-:ctif:
3uch pers on a reasonablE.
ti:ne before
seeking
ar. i::dic-:men-:: in .)rder
::.:::afford
him/her an opportuni
t::· to testify
( subject
to the condi t.ions .:et
: :::,rth i n USAM9-:.:;_ .152, su pra ) before
the grand jury.
'";,f course,
notification would not be appropriate
in routine
clear cases nor where such a.ction
might jeopardize
the investigation
or prosecution
because
cf the likelihood of flight,
destruction
or fabrication
of evidence,
endangerment
of
other witnesses,
undue delay or otherwise
would be inconsistent
with the
ends of justice.
0

9-11.154

1

Advance Assertions
Privilege
Against

of an Intention
to Claim
Compulsory
Self-Incrimination

the

Fifth

Amendment

A question
frequently
faced by federal
prosecutors
is how to respond
to
an assertion
by a prospective
grand jury witness
that if called
to testify
he/she will refuse
to testify
en Fifth Amendment grounds.
S0me argue that
unless
the prosecutor
is prepared
to seek an order pursuant
to 18 u.s.c.
§ 6003,
the witness
should be excused
from testifying.
However,
such a
broad rule would be improper
and make it too convenient
for witness~s
to
avoid testifying
truthfully
to their
knowledge
of relevant
facts.
.•.io:ceover,
once compelled
to appear,
the witness
may be willing
and able to
answer some or all of the grand jury's
questions
without
incriminating
himself/herself.
However, if & ''target''
of the investigation
(-s
defined
in USAM 9-11.150,
supra)
and his/her
attorney
state
in a writing,
signed by both, that the ' 'target'
' will refuse
to testify
on Fifth
Amendment grounds,
the witness
ordinarily
should
be excused
from testifying
u nless the grand jury and the U.S. Attorney
agree to insist
en the a;pear3nce.
In determining
the desirability
of insisting
on the ~ppeara~ c e of
:ouc:h a person,
ccnsideration
s hould b2 given to the facto:::-s which ~0.:.s~:..::.:..2d
the subpoena
in the first
p:ace,
~ .e.,
:he importance
of tte testi~ c ~y or
~t her information
s ought,
its unavai:a0ility
f:::-om other
sources,
and ~he
October

AM HICAN

pVERSIGHT

1,

1990

12

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 15

18-1621-000284

 CHAP. 11

UNITED STATES ATTORNEYS' MANUAL

applicability
inquiry.
9-11.155

of

Notification

the

Fifth

Amendment

to Targets

privilege

when Target

to

9-11.155

the

Status

likely

areas

of

Ends

The United States
Attorney
shall
have discretion
to notify
an individual, who has been the target
of a grand jury investigation,
that the individual is no longer
considered
to be a target
by the United
States
Attorney's
Office.
Such a notification
should
be provided
only by the United
States
Attorney
having
cognizance
over the grand
jury investigation.
It
will

is suggested
most generally

that the discontinuation
be obtainable
when:

a. The target
previously
or she was a target
of the

of target

has been notified
by the
investigation;
and,

b. The criminal
investigation
involving
tinued
without
an indictment
being returned
government
receives
evidence
in a continuing
sively
establishes
that target
status
has

status

notification

government

that

he

the target
has been disconcharging
the target,
or the
investigation
that concluended as to this
individual.

There may be other circumstances
in which the United States
Attorney
may
exercise
discretion
to provide
the detargeting
notification
such as when
government
action
has resulted
in public
knowledge
of the investigation.
The United States
Attorney
may decline
to issue
notification
would adversely
affect
the integrity
the grand jury process,
or for other
appropriate
need be provided
for declining
such a request.

such notification
if the
of the investigation
or
reasons.
No explanation

If the United
States
Attorney
concludes
that the detargeting
notification
is appropriate,
the language
of the notification
may be tailored
to
the particular
case.
In any particular
case,
for e::-:ample, the language
of
the notification
may be drafted
to preclude
the target
from using
the
notification
as a' 'clean
bill
of health''
or testimonial.
The delivering
of s 1]ch a notification
to a target
or the attorney
for the
target
shall
not ~:reclude
the United Stat:es
Attorney
' s Office
or the grand
jury having
cognizance
over the investigation
(or any other
grand
jury)
from reinstituting
such an investigation
without
notification
to the target, or the attorney
for the target,
if, in the opinion
of that or any other
grand jury,
or any United States
Attorney'
3 Office,
circumstances
warrant
such a reinstitution.
The foregoing
provisions
are
relied
upon to create
any rights,
at law by any party
in any matter
tions
hereby
placed
on otherwise
Department
of Justice.

not intended
to, do not,
and may not be
substantive
or procedural,
enforceable
civi_l or criminal.
Nor are any limitalawL,l
li tigative
prerogatives
of the

October

AMLHICAN

1, 19 9 0

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18-1621-000285

 : · ':.l.

,. ::0
c essive

Grand

J~rie

~

:•J}'-i.J.C:! .he Supreme
Cour+: i.:: .Shi-2;..J..t.::..L_:~
·v .
L~t1i=ed Stc.tes ·, -384 C . .3. ~64,
·.. 3 ( l?65 ) , ::t.ppears
to
~~
-:;rc -.t'7: ::~:e re.in 1p =sit i o:-~- :)f · .:i-r✓--• i l .:c :1-:2 :11p7..

c:a..:ctions

.:..::-:successi
·✓e •:rran : j u ri-:::s,
it is tr.e ge::1eral
poli ,::y cf -:.r,e
~ 2 i:;ar t men.: "'.ot to subpoei-:a a :::i see k ::o nt c,mpt c i tations
i n a .successor
•;:car. :i
•:ry ;::c,~ir,!::t ,: witne.:.,s who re .· ~sec: t:: testify
befo:::-e the prior
gra.n ci. j 1r y
~r. i w- 'S c c ns.:::quently
incarcer
:: : ed f::n.· such refusal.
The rE:subpoenai!1g
cf 3.
• ~;rti: .~:e:~ .1ous •.-:.:.tness
:nay, howeve:::- , be j;.:stified
in certain
lirni ted .:=.;i
t'.la'. i o ns such as wher: the questio:.1.s
to :Oe as,~ed the ·,;itness
relate
to mat-cers
·· ct ::over ,~d in the pre v im.::.s p:::-cceedir:gs
e r ·..,,hen tr.ere
is an i ndica.tio.:1
:;::::-om
'.:J-:c witness
or his / her legal
counsel
t .ha 1: the witness
will
in fact testify
if called
before
the new grand jury.
:f the witness
is believed
to possess
~nformaticn
essential
to the investigation,
resubpoenaing
may also
be
~u stified
~ hen the ~ itness
himself / herself
i s i~vol v ed to a signifi
c ant
degree
in the criminality
about which he/she
can testify.
In such cases,
p r:or
authorization
must be obtained
from the Assistant
Attorney
General,
r~riminal
Division,
to subpoena
the witness
before
the successive
g£and
jury as well as to seek ci v il contempt
sanctions
if the witness
continues
to
persist
in his/her
refusal
to testify.
Since the coercive
effect
of a civil
contempt
adjudication
is substantially
diluted
when the grand jury's
term is about to expire,
it is recommended that
a subpoena
ordinarily
not .be issued
to a witness
who it is
anticipated
will
refuse
to testify
before
such grand
jury.
This,
of
course,
is a matter
of judgment
for the U.S. Attorney
and there
may well be
situations
when it is necessary
to subpoena
a witness
and institute
contempt proceedings
for recalcitrance
in such circumstances.
In most situations,
however,
it would seem preferable
to subpoena
the witness
before
a
new grand jury.
9-11.200

THE PROVISIONS OF FEDERAL RULES OF CRIMINAL PROCEDURE 6

9-11,210

Summoning

Grand

Juries

(Fed.R.Crim.P.

6(a))

Rule 6(a) of the Federal
Rules of Criminal
Procedure
authorizes
courts
to impanel
as many grand juries
' '3.S the public
interest
requires.
' ' Each
grand jury must consist
of not less than 16 nor more than 23 members.
The
jury selection
process
is discussed
at USAM 9-11.223,
infra.
Either
the
clerk
of the court
or a jury commission
(depending
upon the type
f plan
adopted
for the random selection
of jurors)
manages
the jury
se~ection
process
under the Jury Selection
and Service
Act.
Rule

6 of the

Federal

; tl· / wha t ::onstitc1tes

Rules of Cr i minaJ. Procedure
does not s t2.-:.e :-~
pl:..::a quoru:-:i to ,::,nabl e 3. grand jc1ry tc o:;;:-era-::.
e. Hewe ·, :;::.-,

· i.n ce :·~ c: ::-.=:..
r..d ~ ·_;.=-·_: c c::~"":::o t !:)8 :..:-:i.r
:2.n el2 -5.

· -------------

- ------

r::i
c~ o ber

AMERICAN

pVERSIGH

~ :.h

- ---

:..es ~J t!"". ~1.n .-:::. ~-~-ee :: :----'.;;
ml:-2r ..- ,

- - ---

----

--

--·-

::..

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 17

18-1621-000286

 CHAP. 11

UNITED STATES ATTORNEYS' MANUAL

considered
that 16 jurors
constitute
a quorum.
function
with less than 16 members in attendance.
9-11.220

Objection

to Grand Jury

A grand

and to Grand Jurors

9-11.223
jury

should

(Fed.R.Crim.P.

not

6(b))

The U.S. Attorney's
primary concern with the grand jury selection
process arises
under Rule 6(b) of the Fed.R.Cr.P.
That rule allows for the
making of two basic types of objections.
The first
are objections
to the
array (that the jurors were not selected,
drawn, or summoned in accordance
with law).
The second are objections
to individual
jurors
(that they are
not legally
qualified
to serve).
The rule provides
two methods for making
these objections.
9-11. 221 Challenges
Rule 6(b) (1) of the Fed.R.Cr.P.
permits
the attorney
for the government
or a defendant
held to answer in the district
court to make challenges
before the administration
of the oath to the grand jurors.
The rule was
recognized,
when framed, as being of limited
practical
value and was not
meant to prevent
objections
being made instead
by means of motions
to
dismiss.
See the original
note to subdivision
(b) of Fed.R.Cr.P.
6.
9-11.222

Motions

to Dismiss,

in General

If not previously
determined
upon challenge,
objections
to the array or
to individual
jurors may be made under Rule 6(b)(2)
of the Fed.R.Cr.P.
by
means of motions to dismiss
the indictment.
Objections
will usually
be
raised
by this method.
It is expressly
provided
in the rule that such
motions to dismiss
should be made and granted
as provided
in 28 U.S.C.
§1867(e) . .
9-11.223

Motions

to Dismiss

Based on Objections

to the Array

It is declared
federal
policy under the Jury Selection
and Service Act
(specifically
28 U.S.C. §§ 1861 and 1862) that grand and petit
jurors
shall
be' 'selected
at r~ndom from a fair cross section
of the community in the
district
or division
wherein the court convenes,''
and no citizen
shall be
excluded
from serving
en account of race,
color,
religion,
sex, national
origin,
or economic status.
Pursuant
to 28 u.s.c.
§ 1363,
each U.S. District
Court has placed into operation
a written
plan for random selection
of jurors.
This jury selection
plan generates,
in accordance
with 28
U.S.C. §§ 1864 to 1866, first
a ''master
:ury wheel''
of names selected
at
random from particular
sources
(generally
voter
registration
lists
and
certain
supplemental
sources ) ; and ~hen ( on t~e basis of juror qualification forms executed
by ~he persons
on the master
jury w~eel, and' 'other
competent evidence'')
a '' qu-::tl 1 fied j .,;ry wheel''
of names of legally
qualified and nonexempt persons.
Fcom time to time, r2ndom (and usually
public) drawings
are ccnduct°-d aud subpoe~as
issued
to a certain
number of
1

October

AMl HICAN

1, 199 0

FOIA RD 56806 (URTS 16302) Efucld: 70104906 Page 18

VERSIGHT

18-1621-000287

 :- • · mr
...__

;:

.'..l

... J...I .....

- ~::.Q('

_.p.·ar.u. a:1.0. p eti

c: :::•J.:: :.e.::' :.;re

_ ;;,p ,1ne.:C1=::.
f- r•

::·. c=:i::::-.:-.unt.err:
:-art.s

•ta

·;;; ,··ft:
ic ~0 :::-rnanAntly excused.

·:: }--._:_-. -= ~J.3.
~"'t::c.r:1e ~/S :._
;_:_
"'.,e ~-.o ·:...-e'3pc-qs1.~-i.lit.::ir --·-- a.U!nini~teri.ng
t:-.e Jury
~0 : 0c ~ion ~nd Service
~ct , ttey hsve an obv i ous s~ake in the ~ct'3
~~ing
:·-;,;;e:::-1~' :i.dministered
. .::-:e r2q1..:irement in Z8 ::.
:.s.c. § 1363(b ) (,;) that. the
;·,.~.3t-::.- ~•.:ry wheel l::;ee11pti~d an d .::efillec
perioc.ical2.y
: at l east. eve ry f:::iur

--.-~.:,.~~ :, ,::.ffords
an cpportu~1ity
-:.-:--:
::: a nd the possibl
,~ 2ffsct

-:-::e, e.q.

fe r r•~flect
.)f changed

:.nq u~,~n the
c:~.rcumstar~ces

jury
in

f..~lection
sys;:8ITJnunity.

t.:l e

, UnitedStatesv.

Goodine;, 473F.2d425
(S thC:ir. ) , cert.
denied,
Uni tedStates
v . Guzman, 463 F.2dl245
(2dCir.1972),
c art.
denied,
410 U.S. J3 7 ( 1973).
~hile
it i s contemplated
that ?oter
~~s ts will be the primary
sources
of jurors,
it is also contemplated
that
su pplemental
sources
will be used at times as a corrective
in the system.
See United States
v. Ross, 468 F.2d 1213 (9th Cir.1972),
cert.
denied,
410
U.S. 989 (1973);
United St ates v. Lewis,
472 F.2d 252 (3d Ci.::-.1973);
1968
U.S.Code Congressional
and Administrative
News, 1974.
-L :: U .. 3. 328 (1973);

9-11.224

Giving

the

Court

Information

Pertinent

to Jury

Selection

!tis
important
for a U.S. Attorney
to inform the district
court of all
facts
that may be pertinent
to the matter
of excluding
jurors
under 28
U.S.C. § 1866(c),
especially
when a grand jury is to be selected
to conduct
a highly
sensitive
in vestigation.
Particular
care should
be taken
to
prevent the impaneling
of a juror who might ' 'be unable to render i:·npartial
jury service.''
If provided
for in the jury selection
plan,
in accordance
with 28 U.S.C. § 1863(b) (8) , the court may vary from its cust , -:iary practice
and keep the names drawn from the qualified
jury wheel conf~dential
''in
any case where the interests
of justice
so require.''
9-11.230

Objections

to Grand Jury

Proceedings

There are few principles
of more
criminal
justice
than the pri:.ciple
States,
350 U.S. 359, 363 (1956);
constituted
and unbiased
grand jury,
call for trial
of the charges
on the
9-11.231

Motions to Dismiss
Grand Jury

The fact that illegally
evi dence was presented

to

Due to Illegally

obtained,
privileged,
the grant
jury is
October

AMFnlCAN

importance
in the administration
of
announced
in Costello
v. r,rc1ited
an indictment
returned
by a l~gally
if valid on its face, is sufficient
to
merits.
Obtained

Evidence

or otherwise
~o cause
for

B~f ore

incompetent
abating
t~e

1, 1990

FOIA RD 56806 (URf~16302) Docld: 70104906 Page 19

VERSIGHT

·

a

18-1621-000288

 CHAP. 11

UNITED STATES ATTORNEYS' MANUAL

9-11.232

prosecution
under the indictment,
or for inquiring
into the sufficiency
of
the competent
evidence
before
the grand jury,
even if the defendant
may be
expected
to have the illegally
obtained
evidence
suppressed
or incompetent
evidence
excluded
at trial.
See Dionisio,
supra.
Despite
some argument
that the Costello
rule has been eroded by cases
calling
for a more limited
use of hearsay
in grand
jury
proceedings,
it appears
that
the rule
is
entitled
to its full
force today in light
of the broad bases
for decision
in
Calandra,
supra.
In Calandra,
the Supreme
Court held that
a grand
jury witness
cannot
properly
refuse
to answer questions
based upon evidence
obtained
from an
unlawful
search
and seizure.
The court reasoned
that a contrary
rule would
deter
police
misconduct
in only a speculative
and minimal
way while
it
would exact
a prohibitive
price
by impeding
the grand
jury's
investigation.
The Court cited
Dionisio,
allow
litigious
interference
also recognized
the existence
will hardly
seek indictments
dra, supra,
at 349-351.

supra,
as reaffirming
'' our disinclination
to
with grand
jury
proceedings.''
The Court
of an internal
control
in that
prosecutors
where convictions
cannot
be obtained.
Calan-

It is in recognition
of this principle
that the Department
has formulated the following
internal
policy
of self-restraint
regarding
presentation
to the grand
jury of unconstitutionally
obtained
evidence:
A prosecutor
should not present
to the grand jury for use against
a person
whose constitutional
rights
clearly
have been violated
evidence
which the prosecutor
personally
knows was obtained
as a direct
result
of the constitutional
violation.
9-11.232

Use of Hearsay

in a Grand

Jury

Proceeding

There has been considerable
criticism
voiced
that
hearsay
evidence
is
relied
upon too much in grand
jury proceedings.
From the perspective,
however,
that
a grand
jury
is a layman's
inquiry,
conducted
ex parte
to
determine
probable
cause
rather
than
guilt
or innocence,
and that
in
certain
forms hearsay
is highly
creditable
evidence,
there
is a justification
for using
hearsay
in grand
jury
proceedings.
Each U.S.
Attorney
should
be accountable
to himself/herself
in this
regard
and to the grand
jurors.
Worthy of consideration
are guidelines
on the use of hearsay
in
grand jury proceedings
set out in A.B.A.
Standards
For Criminal
Justice,
Standards
Relating
To The Prosecution
Function
3.6(a)
(Approved
Draft,
1971).
Hearsay
evidence
should
be presented
on its
merits
so that
the
jurors
are not misled
into believing
that the witness
is giving
his/her
own
personal
account.
See United
States
v. Leibowitz,
420 F.2d 39 (2d Cir.
1969);
but see United
States
v. Trass,
644 F.2d 791 (9th Cir.1981).
The
question
should not be so much whether
to use hearsay
evidence,
but whether,
at the end,
the presentation
was in keeping
with
the professional
October

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TITLE

~-CRIMINAL

CHAP. 11

DIVISION

obligat.ions
of attorneys
for i__ ie government,
and afforded
the grand jurors
a substantial
basis for votir;
upon an indictment.
Government
attorneys
are charged with a high duty .i -, presenting
matters
to grand juries
but are
See United States
also entitled
to a cons ti tu tic ~ally based independence.
v. Chanen, 549 F.2d 1306 (9th C:ir.1977).
9-11.233

Presentation

of Exculpatory

Evidence

Although
neither
statutory
nor case law imposes upon the prosecutor
a
legal obligation
to present
e:-~culpatory
evidence
to the grand jury (Leverage Funding System,
Inc.,
supra;
United States
v. Y. Hata Co., 535 F.2d
508, 512 (9th Cir.),
cert. denied,
429 U.S. 828 (1976);
Loraine v. United
States,
396 F.2d 335,339
(9th Cir.),
cert. denied,
393 U.S. 933 (1968),
it
is the Department's
internal
policy to do so under many circumstances.
For
example,
when a prosecutor
conducting
a grand jury inquiry
is personally
aware of substantial
evidence
which directly
negates
the guilt
of a subject
of the investigation,
the prosecutor
must present
or otherwise
disclose
such evidence
to the grand jury before
seeking
an indictment
against
such a
person.
9-11.240

Who May be Present

at

Grand

Jury

Sessions

(Fed.R.Crim.P.

6(d))

Under Rule 6(d) of the Federal
Rules of Criminal
Procedure,
no person
may be present
while a grand jury is in session
other than attorneys
for the
government,
the witness
under examination,
interpreters
when needed,
and
stenographers
or operators
of recording
devices
who are making a record
of
the evidence.
No one at all other than the jurors
may be present
while the
grand jury is deliberating
or voting.
See United States
v. Mechanik,
475
U.S. 66 (1986).
Eavesdropping
upon the deliberations
or voting
of a grand
jury is punishable
as an obstruction
of justice
under 18 u.s.c.
§ 1508.
9-11,241

DOJ Attorneys

Authorized

to Conduct

Grand

Jury

Proceedings

Federal
Rule of Criminal
Procedure
6(d) authorizes
attorneys
for the
government
to appear before
the grand jury,
For purposes
of that
rule,
''attorney
for the government''
is defined
in Fed.R.Cr.P.
54(c)
as the
Attorney
General,
an authorized
assistant
of the Attorney
General,
a u. S.
Attorney,
an authorized
assistant
of a U.S. Attorney,
and certain
other
persons
in cases arising
under the laws of Guam.
The authority
for a U.S. Attorney
to conduct
grand jury proceedings
is
set forth
in the statute
establishing
U.S. Attorney
duties,
28 u.s.c.
§ 54 7.
U.S. Attorneys
are directed
in that statute
to ' 'prosecute
for all
offenses
against
the United States,
' ' Assistant
U.S. Attorneys
similarly
derive their
authority
to conduct grand jury proceedings
in the district
of
their
appointment
from their
appointment
statute,
28 u.s.c. § 542.
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UNITED STATES ATTORNEYS' MANUAL

9-11.

242

When a U.S. Attorney
or Assistant
U.S. Attorney
needs to appear
before
a
grand jury in a district
other than the district
in which he/she
is appointed, the U.S. Attorney
for either
the district
of appointment
or the district
of the grand jury should
submit a request
to the Executive
Office
for
U.S. Attorneys
for an appointment
as a Special
Assistant
U.S. Attorney.
The request
should
identify
the attorney,
and the reasons
therefor.
The
Executive
Office
will
send the notice
of appointment
to the U.S. Attorney
in the district
in which the grand
jury is sitting.
Departmental
attorneys,
other
than U.S. Attorneys
and
Attorneys,
may conduct
grand jury proceedings
when authorized
the Attorney
General
or a delegee
pursuant
to 28 u.s.c.
Attorney
General
has delegated
this
authority
to direct
Justice
Attorneys
to conduct
grand
jury proceedings
to all
torneys
General
and Deputy Assistant
Attorneys
General
in
vised
by them.
(Order No. 725-77.)
9-11.242

Non-Department

of Justice

Government

Assistant
U.S.
to do so by
§ 515(a}.
The
Department
of
Assistant
Atmatters
super-

Attorneys

Federal
Rule of Criminal
Procedure
6 ( d) provides
that the only prosecutional
personnel
who may be present
while the grand jury is in session
are
''attorneys
for the government.''
Rule 54(c)
defines
attorney
for the
government
for Federal
Rules of Criminal
Procedure
purposes
as'
'the Attorney
General,
an authorized
assistant
of the Attorney
General,
a United
States
Attorney,
(and) an authorized
assistant
of a United
States
Attorney.''
An agency attorney
or other
non-Department
of Justice
attorney
must be
appointed
as a Special
Assistant
or a Special
Assistant
to the Attorney
General,
pursuant
to 28 u.s.c.
§ 515,
or a Special
Assistant
to a U.S.
Attorney,
pursuant
to 28 U.S.C.
§ 543,
in order
to appear
before
a grand
jury in the district
of appointment.
Normally
the Special
Assistant
to a
U.S.
Attorney
appointment
is employed.
Where the less
common Special
Assistant
or Special
Assistant
to the Attorney
General
appointment
is to be
used in cases O!'.' matters
within
the jurisdiction
of the Criminal
Division,
the Office
of Enforcement
Operations
should
be contacted
for information.
Appointments
as Special
Assistants
to U.S. Attorneys
are made by the
Associate
Attorney
General.
A letter
of appointment
is executed
and the
oath of office
as a Special
Assistant
to a U.S. Attorney
must be taken
( see
28 u.s.c.
§§ 543, 544).
Requests
for such appointments
must be made in
writing
through
the Director
of the Executive
Office
for U.S. Attorneys
and
must include
the following
information:
A.

The facts

B.

The reasons

C.

The duration

and circumstances
supporting
and

any

of

pVERSIGHT

case;

the

appointment;

special

conditions

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the

of the

appointment;

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 9-11.242

TITLE 9-CRIMINAL DIVISION

D. Whether the appointee
jury.
If such a possib
make the appointment;
E.

How the attorney
ments in Federal

CHAP. 11

~ay be called
as a witness
exists,
it o.r-dinarily

.:.ity

has be -~n informed
Rule ~ f Criminal

of the grand

Procedure

jury
6(e).

before
the gracd
would be unwise to
secrecy

require-

F.

If the appointee
is an agency attorney,
whether the agency from which
the attorney
c omes is conducting
or may conduct
contemporaneous
administrative
or othEr ~ivil proceedings.
If so, a full description of the substance
and status
of such proceedings
should
be
included;
and

G.

If the appointee
is an agency attorney,
a full description
of the
arrangements
that have been made to prevent
the attorney's
agency
from obtaining
access through the attorney
to grand jury materials
in the case.

The request must also state that the agency attorney
will be accompanied
at all times while before the grand jury by an experienced
Department
of
Justice
attorney,
the u. s. Attorney,
or an Assistant
U.S. Attorney.
Finally, the request must contain the following
statement,
signed by the agency
attorney:
I understand
the restrictions
on the grand jury secrecy
obligations of this appointment
as a Special Assistant
to the United States Attorney and do hereby certify
that I will adhere to
the requirements
contained
in t~is letter.
The use of agency attorneys
as Special Assistants
before the grand jury
has been upheld by the courts.
See United States
v. Wencke, 604 F.2d 607
(9th Cir.1979);
United States v. Birdman, 602 F.2d 547 (3rd Cir.1979);
In
re Perlin,
589 F.2d 260 (7th Cir.1978).
The U.S. Attorney
or Departmental
attorney
with responsibility
for the case retains
such full responsibility.
Cf. D.C.Cir.1979
Judicial
Conference
Proceedings,
85 F.R.D. 180-181.
9-11. 24 3 Presence

of Stenographer-Recording

Required

Federal Rule of Criminal Procedure
6 ( e) ( 1) requires
that all grand jury
proceedings
be recorded
except
when the grand jury is deliberating
~r
voting.
Government attorneys
should not have any conversations,
even of a
casual
nature,
with grand jurors
unless
they are being recorded.
The
recording,
however,
is not required
to be transcribed
and trans :~ ipts
should not be prepared unless there is a specific
need for them. Reporters
and stenographers
are bound by the secrecy requirements
of Rule 6(e)(2).
It is important
that they be made aware of that rule.
9-11. 244 Presence
Federal
interpreter

of an Interpreter

Rule of Criminal
Procedure
6(d) permits
t he presen c ~ of an
when needed in grand jury proceedings.
Interpreters
should be
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 9-11.250

UNITED STATES ATTORNEYS' MANUAL

CHAP. 11

obtained
in accordance
with 28 U.S.C. § 1827 and Rule 28. An interpreter
is
bound not to disclose
matters
occurring
before
the grand
jury
without
judicial
authority.
Attorneys
for the government
should make sure that any
interpreter
used in a grand
jury proceeding
is aware of his/her
secrecy
obligation.
9-11.

24 5 No Exceptions

Federal
Rule of Criminal
Procedure
6(d) does not admit any exception
under which persons
not usually
authorized
to be present
are allowed
to
attend
a grand
jury session
under extraordinary
circumstances.
Indeed,
the presence
of any unauthorized
person
during
a grand jury session
may be
grounds
for dismissal
of the indictment.
Thus, a parent
may not accompany
a
child
who is to testify,
nor may a marshal
be present
to control
a potenUnited States
v. Borys,
169 F.Supp.
366 (D.Alaska
tially
unruly
witness.
see United States
v. Carper,
116 F.Supp.
817 (D.D.C.1953).
1959);
9-11.250

Disclosure
Government,

Under
Fed.R.Crim.P.
Including
for Civil

6(e):
Use

To

Attorneys

for

the

Disclosure
of materials
covered
by Federal
Rule of Criminal
Procedure
6 ( e) may be made ' 'to an attorney
for the government
for use in the performSee Fed.R.Cr.P.
6(e)(3)(A)(i).
"Attorance of such attorney's
duty."
ney for the government''
is defined
in Fed.R.Cr.P.
54(c).
Disclosure
to
government
attorneys
and their
assistants
for use in a civil
suit
is
United
permissible
only with a court
order
under
Rule 6(e)(3)(C)(i).
463 U.S. 418 (1983).
See Guide on Rule
States
v. Sells Engineering,
Inc.,
1984).
6(e) after
Sells and Baggot 6-8, 18-32 (January
From the Federal
Rule of Criminal
Procedure
54 (c) definition
it is clear
that Rule 6 ( e) does not authorize
disclosure
to attorneys
for other
federal
See United States
v. Bates,
627 F.2d 349, 351 (D.C.
government
agencies.
Cir .1980).
Nor is disclosure
permitted
under this section
to attorneys
for
In re Holovachka,
317 F.2d 834 (7th Cir.1963);
state
or local
governments.
Corona Construction
Co. v. Ampress Brick Co., Inc.,
376 F.Supp.
598 (N.D.
Ill.1974).
When disclosure
is authorized
by court
order
under Rule 6 ( e) ( 3) ( C) ( i),
of the Federal
Rules of Criminal
Procedure,
for use in civil
proceedings,
there
is a danger
of misuse,
or the appearance
thereof,
when such disclosure is made during
the pendency
of the grand jury investigation.
There is
no rule of law that would require
a civil
disclosure
within
the Department
to be deferred
until
the relevant
criminal
investigation
has been completed; but unless
there
is a genuine
need for disclosure
during
the pendency
of the grand jury investigation,
it is the better
practice
to forestall
the
disclosure
until
the criminal
investigation
is completed.

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 TITLE 9-CRIMINAL

9-11.251

?-11.'.:51

Disclosure
sonnel

Una.er F. d.R.C.;:im.F.

CHAP. 11

DIVISION

6(e):

~::, Other

Government

Per-

Disclosure
of materials
c 0vered by Federal Rule of Criminal
Procedure
G( e) may be made to ' 'governmt ~nt personnel
.. . to assist
a;1 attorney
for the
; overnment .. . to enforce f ede :-:-al criminal
law. ' ' ' 'Government personnel'
'
i ncludes not only federal
:::ri .-~inal investigators
such as the FBI, but also
employees of any federa:
ag ~ncy who are assisting
the prosecutor.
See
S.Rep. No. 354, 95th Cong., 1-st Sess.,
reprinted
in 1977 U.S.Code Cong. &
;,.d.News 53 0 . The decision
to use government personnel
to assist
the grand
j ury investigation
is within the discretion
' of the prosecutor
and need not
be justified.
Perlin,
supra at 268. Such personnel
may use the material
disclosed
in conducting
interviews.
Cf United States v. Stanford,
5 8 9 F. 2d
285 (7th Cir.1978),
cert.
denied,
440 U.S. 983 (1979).
Strict
precautions
should be taken when employing personnel
from agencies which have a civil
function,
such as the Securities
and Exchange
Commission, the Environmental
Protection
Agency, or the Internal
Revenue
Service,
to ensure
that knowledge of the grand jury investigation
or
documents subpoenaed by the grand jury are not used improperly
for civil
purposes
by the agency.
Grand jury documents should be segregated
and
personnel
assisting
the grand jury investigation
should not work on a civil
matter involving
the same subjects
unless a court order has been obtained
authorizing
such use.
It may be valuable
to issue written
precautionary
instructions
which can be used in any hearing
challenging
the grand jury
procedures.
See Robert Hawthorne,
Inc. v. Director
of Internal
Revenue,
406 F.Supp. 1098, 1126 (E.D.Pa.1975).
9-11. 252 Disclosure
Connection

Under Fed.R.Crim.P.
6 (e):
With a Judicial
Proceeding

Preliminarily

to

or

in

Under subsection
(3)(C)(i)
of Fed.R.Cr.P.
6(e),
grand jury materials
may be disclosed
by order of a court preliminarily
to or in c ·:,nnection with
a judi(;ial
proceeding.
A court must make two determinations
before enter ·ing such an order.
The first
is whether the requested
disclosure
is indeed prelimina _·:• to
or in connection
with a judicial
proceeding.
The leading
definition
of
judicial
proceeding
is that provided by Judge Learned Hand:
The term 'judicial
proceeding'
includes
any proceeding
deter
minable by a court, having for its object the compliance
of any
person,
subject
to judicial
control
with standards
imposed
upon his conduct in the public interest,
even though such c c npliance
is enforced
without
the procedure
applicablG
to the
punishment of crime.
An interpretation
that should not go at
least
so far, would not only be in the teeth
of the l angu 1e
employed, but would defeat
any rational
purpose
that can be
October

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18-1621-000294

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UNITED STA':I'ESATTORNEYS' :1ANUAL

CHAP. ll
imputed to the
Cir.1958).

Rule.

Poe v.

Rosenberg,

255 F.2d

118,

120 (2d

B.ecause IRS has unique powers to assess and collect
taxes without resort
to litigation,
its tax audits
and other proceedings
may not qualify
for
United
States
v.
disclosure
under Rule 6(e)(3)(C)(i)
of the Fed.R.Cr.P.
Baggot,
4 6 3 U.S. 4 7 6 ( 19 8 3) •
The second determination
the courts make before authorizing
disclosure
of grand jury materials
to private
parties
is to weigh the particularized
need of the party seeking disclosure
against
the public
interest
in grand
jury secrecy.
See Douglas
Oil Co. v. Petrol
Stops Northwest,
441 U.S. 211,
216-219 (1979);
Guide on Rule 6(e) after
Sells
and Baggot
at 22-27 (January
1984).
A failure
to demonstrate
sufficient
need can result
in the denial of
a request
for otherwise
permissible
disclosure.
See In re Grand
Jury
483 F.Supp.
422 (E.D.Pa 1979) (state
prosecutor).
The DeProceedings,
partment
takes the position
that the particularized
need requirement
is
inapplicable
when grand jury materials
are sought for federal
law enforceSee In re Grand Jury Subpoenas,
April
1978,
581 F.2d 1103,
ment purposes.
1110 (4th Cir.1978),
cert.
denied,
440 U.S. 971 (1979);
In re Grand Jury
(LTV), 583 F.2d 128, 130-131 (5th Cir.1978).
As with disclosure
to Department
of Justice
attorneys
for use in civil
supra,
it is preferable
to await the completion
of a
proceedings,
discussed
grand jury investigation
before seeking disclosure
to another
government
Capitol
Indemnity
Corp.
v. First
Minnesota
agency for civil
purposes.
Construction
Co., 405 F.Supp.
929 (D.Mass.1975).
9-11.253

Who is Not Covered

by Fed.R.Crim.P.

6(e):

Only Witnesses

One of the purposes of grand jury secrecy is to foster
the cooperation
of
witnesses.
Only by making witnesses
aware of the protection
afforded
them
can the full value of grand jury secrecy be realized.
It is suggested
that
in an appropriate
situation
the witness
be told that the proceeding
will
remain secret
until
such time as disclosure
is required
in court,
and,
therefore,
that the witness'
cooperation
with or appearance
before
the
grand jury will not be known publicly
unless the witness
chooses to make it
known.
In communicating
with a witness
regarding
grand jury secrecy,
it is
important
to make clear
that
Federal
Rule of Criminal
Procedure
6 ( e)
specifically
prohibits
any obligation
of secrecy
from being imposed '' upon
any person except in accordance
with this rule.''
Witnesses,
therefore,
See Application
of Eisencannot be put under any obligation
of secrecy.
berg,
654 F.2d 1107, 1113 n. 9 (5th Cir.1981).
However, a suggestion
or request
that a witness
not disclose
matters
occurring
before the grand jury may be made where necessary
to protect
the
integrity
of the grand jury's
investigation
or the safety
of witnesses
and
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 - r: ")
~-

--

-

....

..J

CilAP

.... ;

ll

~astimony.
~etter~
er stacements
to witmentioned
s ,-; •=-a.·,.11:.ioning them r;=,gar i ':g d.isclGst:.:::e
3hc:-ul2 r:,ake _;_;~cle2.r
that
no
~li,_;ation
of secrecy
can be _, ,,posed.
In additicn,
it should
be mad2 cl<:?a.r
--.:.'1cttthe wi t~ess has an absol
-:e right
to consult
with his eir her att.orne:/.

~~her

~ndividuals

• .::: 0

~-::..1.260

Amendment to R,,le E ·,,,; Federal
Rules
riii tting
Certain
JL,closure
to State
Officials

of Criminal
and Local

Proced,;re
PerLaw Enforcement

Tr;e S;;preme Court added a r:ew subdivision,
6(e)(3)(C)(iv),
J.n an amend~ent 2ffective
in the Advisory
August l, 1965.
:ts purpose,
as stated
Committee
(on Criminal
Rules of the Judicial
Conference)
notes,
was to
eliminate
''an unreasonable
barrier
to the effective
enforcement
of our
two-tiered
system of criminal
laws ... [by allowing]
a court
to permit
disclosure
to a state
or local official
for the purpose
of enforcing
state
law when an attorney
for the government
so requests
and makes the requisite
showing.''

The new subdivision
reads as follows:
hibited
by this rule of matters
occurring
made

''(C)
before

Disclosure
the grand

otherwise
projury may also be

( iv) when permitted
by a court at the request
of an attorney
for the
government,
upon a showing that such matters
may disclose
a violation
of
state criminal
law, to an appropriate
official
of a state
or subdivision
of a state
for the purpose
of enforcing
such law.
If the court orders
disclosure
of matters
occurring
before
the disclosure
shall
be made in such manner,
at such time,
conditions
as the court may direct.''

the grand jury,
and under such

It is both the intent
of the amended rule,
and the policy
of the Department of Justice,
to share
such grand
jury
information
wherever
it is
appropriate
to do so. Thus, the phrase
' 'appropriate
official
of a state
or
subdivision
of a state''
shall
be interpreted
to mean any official
whose
law whose violaofficial
duties
include
enforcement
of the state
criminal
tion is indicated
in the matters
for which permission
to disclose
is to be
sought.
This policy
is, however,
subject
to the caution
in the Adv~sory
Committee
notes that
gra,d
''[t]here
is no intention
... to have Federal
juries
act as an arm of the state.''
It

is thus clear
that the decision
to release
or withhold
such in:Formation may have significant
effects
upon relations
between fE!deral p:tusecutors and their
state
and local counterparts,
and that disclosure
may raise
issues
which go to the heart
of the federal
grand jury process.
In this
respect,
the Assistant
Attorney
General
in charge of the Criminal
Division
(who is a member of the Advisory Committee)
promised
the Advisory
Committee
that prior
to any request
to a court for permission
to disclose
sc-::h grand
jury information,
authorization
would be required
from the Assis~ant
AtOctober

1, 1990
24

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 27

P VERSIGHT

18-1621-000296

 UNITED STATES ATTORNEYS' MANUAL

CHAP. 11

9-11.260

torney
General
in charge of the Division
having
jurisdiction
over the
matters
that were presented
to the grand jury.
In the case of a multiplejurisdiction
investigation
(e.g.,
tax, non-tax)
requests
should be made to
the Assistant
Attorney
General of the Division
having supervisory
responsibility
for the principal
offense ( s) being investigated.
It is the policy
in
of the Department that such prior authorization
be requested
in writing
all cases.
A copy of such requests
shall
be sent to all investigating
agencies
involved
in the grand jury investigation.
To insure that grand jury secrecy
submitting
of such requests,
place
bottom of each page of the request:

requirements
the following

are not violated
legend
at the

in the
top and

GRANDJURY INFORMATION:
Disclosure

restricted

Rule

Federal

6(e),

of Criminal

by
Rules

Procedure

In addition,
the entire
packet shall
be covered with a plain white sheet
having the word' 'SENSITIVE''
stamped or typed at the top left
and bottom
right
corners.
United States
Attorneys
seeking
permission
to apply for a disclosure
order shall request
that permission
from the Assistant
Attorney
General of
the Division
havi_ng jurisdiction
over the matter that was before the grand
jury by submitting
a written
request
in which they shall address
expressly
all elements necessary
for these officials
to comply with the standards
set
forth below in making their
decision.
Requests
submitted
to the Criminal
Division
shall be sent to the Head, Legal Support Unit, Office of Enforcement Operations.
Ones submitted
to other Divisions
shall
be sent to the
appropriate
contact
person listed
at the conclusion
of this memorandum.
There is no requirement
that a ' 'particularized
need' ' be established
for
the disclosure,
but there should be a substantial
one.
The need to prosecute or to investigate
ongoing or completed
state
or local
felony offenses
will generally
be deemed substantial.
Persons
information:

making requests

1.

Title

of grand

2.

Origin

of grand

3.

General

nature

4.

Status

5. State(s)
sought;

jury

investigation

should

provide

and involved

target(s);

to

grand

the

following

investigation;

of investigation;

of grand
for

jury

for authorization

jury

which

investigation;
authorization

October

disclose

jury

matters

1, 1990
25

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 28

P VERSIGHT

18-1621-000297

is

 CHAP. 11

TITLE ':-CRIMINAL DIVISION

9-11.260
6.

Nat•~:!:'eand summary of inL rmation

7.

General

to be disclosed;

offenses;

state

of potenti~l

nature

sought

grand jury ir.vesti-

to st ite ( s) on ongoing federal
3. Impact of disclosure
or prosecutions;
sative efforts

10. Extent,
investigation;

if any, of state

regard-

or efforts

if any, of ongoing state investigations
11. Existence,
and
ing grand jury matters sought to be disclosed;

pro-

grand jury

of federal

or awareness

knowledge

jury

grand

in federal

if any,

9, Extent of prior state inv ~lvement,
ceedings under Rule 6(e)(3)(A)(ii);

Attorney
to enable the Assistant
necessary
material
12. Any additional
reparagraph
which the following
fully the factors
General to evaluate
quires them to consider in making a decision.
the seeking
on whether to authorize
In making a determination
Attorney Generd.l shall consider
each Assistant
sion to disclose
whether:
including
vant factors
1.

The state

2. The grand
purpose;

need for the information;

has a substantial
jury

was convened

would impair

an ongoing

4. Disclosure
regulation,

would violate

a federal

Disclosure

would violate

a specific

5.

8.

Disclosure

would compromise
would improperly

(e.g.,

government's
trade

reveal

ability

secrets;

means exist for obtaining
9. Reasonable alternative
to be disclosed.
tained in the grand jury materials

26

u.s.c.

to persons

information

the

or investigation;
6103) or

policy;

Departmental

would reveal classified
6. Disclosure
clearance,
security
appropriate
7. Disclosure
informant,

trial

federal
statute

investigative

federal

a legitimate

for

Disclosure

3.

of permisall rele-

without

to protect

an
an

and
the information

con-

the government attorney who seeks permisIf the request is authorized,
~hat
in the proposed order a provision
shall include
sion to disclose
involved shall be li ~ite6 to
by the state officials
disclosures
further
laws.
of state criminal
in the enforcement
those required
October

AMFfllCAN

1, 1990
26

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 29

VERSIGHT

18-1621-000298

 UNITED STATES ATTORNEYS' MANUAL

CHAP. 11

9-11.310

It is requested
that a copy of any order denying
a request
for permission
to disclose
be sent to the Assistant
Attorney
General who authorized
the
filing
of the request.
The following
divisions
of the Department
have designated
individuals
to answer questions
regarding
Rule 6(e)(3)(C)(iv).
Antitrust
Division
Civil
Rights
Division

Criminal
Lands

Division
Division

Tax Division

9-11. 300

Director
of Operations
Deputy Chief
Criminal
Section
Deputy Chief
Criminal
Section
Head,
Legal
Support
Unit
Office
of Enforcement
Operations
Director,
Environmental
Crimes
Unit
Environmental
Enforcement Section
Senior
Assistant
Chief
Office
of Policy
and Tax
Enforcement
Analysis
Criminal
Section

THE SPECIAL GRANDJURY-18 U.S. C.

§

the

listed

Joe Widmar .... . ... . ... . ... 514-3543
Dan Bell ...................
514-4071
Barry

Kowalski

... . ......

514-4067

David

Simonson

... . ......

724-6672

Judson

Starr

Ed Vellines

.. . ... . ......

514-24

90

.... . ... . .. . ... 514-3011

3331

It was once common for investigative
grand juries
and for grand juries
other than the first
of two or more impaneled
in a district
to be called
' 'special'
' grand juries.
The term is now ambiguous.
Legislation
enacted
in 1970 created'
'special''
grand juries
primarily
to meet the special
needs of organized
crime investigations.
These statutory
grand juries
differ
in several
significant
respects
from grand juries
impaneled
under
Federal
Rule of Criminal
Procedure
6. Care should be taken in using the
term special
grand jury to avoid any misunderstanding.
The term may be
used, for example, with a parenthetical
reference
to the statute
or the
rule,
if the meaning is not otherwise
clear
from the context.
The distinctive
features
of special
grand juries
are discussed
below.
To the extent these distinctive
features
permit,
the special
grand juries
are governed
by the same statutes,
rules,
and case law applicable
to
See 18 U.S.C.
§ 3334.
In a very large
measure,
regular
grand juries.
special
grand juries
and regular
grand juries
are alike.
9-11.310

Impaneling

Special

Grand Juries

As provided
in 18 u. S. C. § 3334 (a), the district
court in every judicial
district
having more than four million
inhabitants
must impanel a special
grand jury at least once every eighteen
months ( unless a special
grand jury
is then sitting);
and the district
court must also impanel a special
grand
jury when the Attorney
General,
Deputy Attorney
General,
or a designated
Assistant
Attorney
General certifies
in writing
to the chief judge of the
district
that
in his/her
judgment,
a special
grand jury is necessary
''because
of criminal
activity
in the district.''
(See 28 C.F.R.
§ 0.59
October

AMERICAN

1, 1990
27

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 30

P VERSIGHT

18-1621-000299

 9-11.

TITLF ?-CRIMINAL

310

DIVISION

·.,nder which the Assistant
.'-'':.":crney General
Division
is designated
to m~~e certificati6ns
9-11.311

Request

for Certif

in

r :HAP.

charge
of the
under :8 u.s.c.

11

Criminal
§ 3331.)

~cation

Attorneys
who want cFrtification
made to cause the i~paneling
of
special
grand j1.1ries should direct
their requests
for certification
to the
Chief of the Organized
Crim~ and Racketeering
Section
of the Criminal
Di vision,
o2xplaining briefly
the reasons :or the request
and the natt, _re. and
scope of the criminal
activities
to be investigated.
U.S.

9-11.312

Additional

Special

Grand Juries

District
courts
are authorized
under 18 U.S.C. § 3332(b)
to impanel
additional
special
grand juries
when the special
grand juries
already
impaneled have more business
than they can properly
handle.
When impaneling additional
special
grand juries,
a court should make a finding
as to
the need; and a court should always make it clear that the special
grand
jury is being impaneled under 18 U.S.C. § 3331 (and is therefore
not subject
to the limitations
of a regular
grand jury).
See Wax v. Motley,
510 F.2d
318 (2d Cir.1975).
9-11.320

Special

Duties

Imposed

Upon Attorneys

for

the

Government

The special
grand jury has a duty under 18 u.s.c. § 3332(a)
''to
inquire
into offenses
against
the criminal
laws of the United States
alleged
to
have been committed within the district.''
Such alleged
offenses
may be
brought to the jury's
attention
by the court or by any attorney
appearing
for the United States to present
evidence
to the jury.
It is incumbent upon
any such government attorney
to whom it is reported
that a federal
offense
was committed within
the district,
if the source of information
so requests,
to refer
the information
to the special
grand jury,
naming the
source and apprising
the jury of the attorney's
action
or recommendation
regarding
the information.
9-11. 330 Reports

of Special

Grand Juries

At the conclusion
of its service,
a special
grand jury is authorized
under 18 U.S.C. § 3333, by a majC":..-ity vote of its members, to submit to the
district
court, potentially
for public release,
a grand jury report,
,;hich
must concern either:
(1) noncriminal
misconduct,
malfeasance,
or misfeasance in office
involving
organized
crime activity
by an appointed
public
officer
or employee,
as the basis
for a recommendation
for removal
or
disciplinary
action;
or (2) organized
crime conditions
in the district,
without however being critical
of any identified
person.
( ' 'Publ .:..c officer or employee''
is defined
broadly
in 18 U.S.C. § 3333 ' f) tc include
federal,
state and local officials.)

-----------------------------

----

October

AMFnlCAN

1, 1990
28

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 31

VERSIGHT

18-1621-000300

 CHAP. 11

UNITED STATES ATTORNEYS' MANUAL

9-11.330

Upon receiving
a report
from a special
grand jury,
the district
court
must examine it, together
with the minutes of the special
grand jury, and
accept it, for eventual
filing
as a public record,
if the report
is: (1) one
of the two types authorized
by 18 U.S.C. § 3333(a);
(2) based upon facts
discovered
in the course of an authorized
criminal
investigation;
(3)
supported
by a preponderance
of the evidence;
and (4) if each public
officer
or employee named in the report was afforded
a reasonable
opportunity to testify
and present
witnesses
on his/her
own behalf
before
the
special
grand jury, prior to its filing
the report.
( It would seem that 18
u.s.c. § 3333(a) necessitates
a recording
of the proceedings
if a special
grand jury may issue a grand jury report.)
The wording and the legislative
history
of 18 u.s.c. §§ 3332(a)
and
3333(b)(l)
indicate
that a special
grand jury should not investigate
for
the sole purpose of writing
a report;
the report
must emanate from the
criminal
investigation.
At bottom, then, a special
grand jury functions
essentially
like a regular
grand jury.
It is only after the ' 'completion'
'
of the criminal
investigation,
when the time is near for discharging
the
jury, that a report may be submitted
to the court under 18 U.S.C. § 3333(a).
The grand jury will by that time have exhausted
all investigative
leads and
have found all appropriate
indictments.
The ' 'misconduct,
' ' ' 'malfeasance,
' ' or ' 'misfeasance'
' that may be the
subject of a report
(provided it is related
to organized
criminal
activity)
must, to some degree,
involve
willful
wrongdoing
as distinguished
from
mere inaction
or lack of diligence
on the part of the public
official.
Nonfeasance
in office,
however, if it is of such serious
dimensions
as to be
equitable
with misconduct,
may be a basis for a special
grand jury report.
See S.Rep.
No. 617, 91st Cong., 1st Sess.
(1969);
1970 U.S.Code Cong. &
Ad.News 4007.

Reports involving
public officials
must connect
''misconduct,''
''malfeasance,''
or ''misfeasance''
with
''organized
criminal
activity.''
''Organized
criminal
activity''
should be interpreted
as being much broader than'
'organized
crime;''
it includes'
'any criminal
activity
collectively
undertaken.'
' This statement
is based upon the legislative
history
of 18 U.S.C. § 3503(a),
not of 18 U.S.C. § 3333, but both sections
were part
of the Organized
Crime Control Act of 1970, making it logical
to construe
the term the same way for both sections.
See 116 Cong.Rec.
35293 (October
7, 1970).
Before the district
court may enter as a public record a special
grand
jury report
concerning
appointed
public
officers
or employees,
a complex
procedure
must be followed as set down in 18 u.s.c. § 3333(c).
If a court decides that
regarding
a public officer
court may seal the report

a report submitted
to it by a special
grand jury
or employee does not comply with the law, the
and keep it secret
or, for remedial
purposes,
October

1 , 19 9 0
29

AMERICAN

pVERSIGH

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 32

18-1621-000301

 9-11.330

TITLE

9--CRIMINAL

CHAP. 11

DIVISION

order the same grand jury to =.aka additional
For purposes
of
testimony.
taking additional
testimo:1y,
, special grand jury may be extended to serve
to the
£or longer than thirty-six
mc:~ths (but this is the only exception
thirty-six
months limitation
.
If the district
court feels that the filing
of a special
grand jury
=eport as public record would ;irejudice
the fair consideration
of a pending
criminal matter,
the court is authorized
under 18 U.S.C. § 3333(d) to keep
the =eport sealed during the pendency of that matter.
Sealed for such a
reason,
the report would not je subject
to subpoena.
When appropriate,
U.S. Attorneys
will deliver
copies
of grand jury
reports,
together
with the appendices,
to the governmental
bodies having
jurisdiction
to discipline
the appointed
officers
and employees whose
involvement
in' 'organized
criminal
activity''
is the subject
of the report.
See 18 u.s.c. § 3333(c)(3).
(The prospect
of such disciplinary
action does not prevent
the officer's
or employee's
being compelled
to
testify
under a grant of immunity; see In re Reno, 331 F.Supp. 507 (E.D.
Mich.1971)).
9-11.331

Consultation

With the Criminal

Division

About Reports

If a special
grand jury will be considering
the issuance
of a report at
the culmination
of its service,
U.S. Attorneys
are requested
to notify the
Chief of the Organized Crime and Racketeering
Section promptly of the fact
and explain why an indictment
cannot be found to obviate the issuance
of a
grand jury report.
It should also be explained
how the facts developed
during a criminal
investigation
support one of the authorized
types of
reports.
Before any draft report is furnished
to the grand jury, it must be
submitted to the Chief of the Organized Crime and Racketeering
Section for
approval.
It is not clear what remedy the government would have if a court was
wrong in sealing a special grand jury report and refusing
to make it public.
The Chief of the Organized Crime and Racketeering
Section should be notified promptly if a court finally
determines
for any reason that a grand jury
so that consideration
report is deficient
or not properly
to be released,
may be given to the possibility
of taking
the matter
to the court of
appeals.

October

l,

1990

30

AMERICAN

FOIA RD 56806 (URTS 16302) Docld: 70104906 Page 33

P VERSIGHT

18-1621-000302

 Screened by NARA (RD-F) 07-25-2018
FOIA RD 56806} (URTS 16302) DOCID:
70104912

FOIA RD 56806 (URTS 16302) Docld: 70104912 Page 1

18-1621-000303

 FDIC

Federal Deposit Insurance Corporation

Washington , D .C. 20429

Office of Inspector

July

28,

General

1995

Honorable
Kenneth
W. Starr
Office
of the Independent
Counsel
Suite
134
10825 Financial
Centre
Parkway
Little
Rock, Arkansas
72211
Dear

Mr.

Starr:

The Office
of Inspector
General
of the Federal
Deposit
Insurance
Corporation
has completed
its investigation
into
alleged
conflicts
of interest
of the Rose Law Firm and the review
conducted
by the FDIC Legal Division.
Enclosed
is a copy of the
Report
of Investigation
and accompanying
Exhibits;
together
the
Report
and Exhibits
comprise
a four-volume
set.
We will
be
making copies
of the Report's
Executive
Summary section
available
for public
release
at noon on Monday, July 31, 1995, and are
providing
you with a separate
advance
copy.
Also enclosed
are
copies
of relevant
transmittal
letters
from me to other
recipients
of the Report.
If you or your staff
have any questions
about this
Report,
please
feel
free
to contact
me at (202) 942-3615,
or Thomas D.
Coogan, Assistant
Counsel,
at (202) 942-3622.
Sincerely,

ames A. Renick
Inspector
General
Enclosures:

1 Report
Executive

(Acting)

set
Summary

AMFRICAN

pVERSIGH

FOIA RD 56806 (URTS 16302) Dodd : 70104912 Page 2 18-1621-000304

 REPORT OF INVESTIGATION
Sensitive Investigative Information
-- For Official Use Only -ALLEGED CONFLICTS OF INTEREST
BY THE ROSE LAW FIRM
Case Number 10-94-096
VOLUME 1 of4
Report

Federal Deposit Insurance Corporation
Office of Inspector General
This report remains the property of the Office of Inspector General and is for OFFICIAL USE ONLY. THE
REPORT AND ITS CONTENTS MAY NOT BE REPRODUCED without the express written permission of
the Office of Inspector General, and its disclosure to unauthorized persons is prohibited.

AMERICAN

PVERSIGH

FOIA RD 56806 {URTS 16302} Docld : 70104912 Page 3

18-1621-000305

 TABLE OF CONTENTS

VOLUME 1: REPORT OF INVESTIGATION
LIST OF EXHIBITS:
~GATIONS

VOLUMES 2-4

• . . . . • . . . . • • . . . . • . . • • . • • • •• •

i-vii

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

EXECUTIVE SUMMARY

2

.....................................

DETAIL.5 OF INVESTIGATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

GOVERNING FEDERAL STATUTES . . . . . . . . . . . . . . . . . . . . . . . . .

10

BASIS FOR INVESTIGATION

CONFLICT OF INTEREST CRITERIA

FDIC CONFLICT OF INTEREST POLICIES . . . . . . . . • . . . . . .
CONFLICT RULES FOR ARKANSAS LA WYERS . • . . • . . . . . •
ROSE LAW FIRM PROCEDURES TO IDENTIFY
AND DISCLOSE CONFLICTS . • . . . • . . . . . . . • . . . • . . . .
MADISON GUARANTY SAVINGS AND WAN
BACKGROUND

10
11
13

ASSOCIATION

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

HIRING OF TIIE ROSE LAW FIRM FOR FROST LAWSUIT • . • •
CONFLICT OF INTEREST ISSUE RAISED WITII FDIC . • • • . • • •
FAILURE TO INFORM FDIC OF CONFLICTING
REPRESENTATION - UNIVERSAL SAVIN GS . . • . . • . • . . . •
WARD LAWSUITS AGAINST MADISON . . . . . . . . . . • . • . • . . .
WEBSTER HUBBELL RELATIONSHIP WITII
AND REPRESENTATION OF POM, INC. . . . . . . . . . • • . . • •
ROSE AND HUBBELL REPRESENTATION OF WARDS •••..••
OTIIER RELATIONSHIPS BETWEEN HUBBELL AND WARD • • •
ROSE REPRESENTATION OF MADISON BEFORE
ARKANSAS SECURITIES DEPARTMENT • • • . • . . • . • . . • • •
FAILURE TO INFORM FDIC OF CONFLICTING
REPRESENTATION - PACE INDUSTRIES • • . • . . . . • • • . • . •
FORMER MADISON EMPLOYEE HIRED BY
ROSE DURING FROST LAWSUIT . . . . . . . . . . . . . . . • . . . .

18
23

FIRST AMERICAN SAVINGS AND WAN
BACKGROUND

27
29
34
35
36
37
40
43

ASSOCIATION

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46

FIRST AMERICAN v. LASATER AND COMPANY .....••..•.
47
HILLARY CLINTON REPRESENTATION OF
FIRST AMERICAN AND RELATIONSHIP TO LASATER . . . . • 48
LEGAL DIVISION REVIEW OF
ROSE RETENTION FOR MADISON

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
BASIS FOR LEGAL DIVISION REVIEW . . . . . . . . . . . . . . . . . . 55

AMERICAN

PVERSIGH

FOIA RD 56806 {URTS 16302} Docld : 70104912 Page 4

18-1621-000306

 TABLE OF CONTENTS

LEGAL DIVISION REVIEW OF
ROSE RETENTION FOR MADISON (continued)

PROCESS, PROCEDURES AND CRITERIA
USED BY LEGAL DIVISION . . . . . . . . . . . . . . . . . . . . . . . . 55
LEGAL DIVISION RESULTS AND
HOW THEY WERE REPORTED . . . . . . . . . . . . . . . . . . . . . 56
RESULTS OF OIG INVESTIGATION OF
LEGAL DIVISION REVIEW . . . . . . . . . . . . . . . . . . . . . . . . 58
HOME FEDERAL SAVINGS AND WAN ASSOCIATION
BACKGROUND

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64

ROSE ATTORNEY SHEMIN RELATIONSHIP TO LASATER . • . . 64
LASATER REGAINED CONTROL OF UCC • . . • . . . . . • • . • . . . 65
CONFLICT OF INTEREST ISSUES INVOLVING
ROSE LAW FIRM AND FSLIC
F'IR.STS
OtrrH, F. A. • • • . • • • • • • • • • . . • • • . • • . . • • • • • • • • • • 68
~OHEMIAN SAVIN GS AND LOAN ASSOCIATION •.....•....
68
KNOX FEDERAL SAVIN GS AND LOAN ASSOCIATION .•••..•
69

REVIEW OF LEGAL PAYMENTS TO ROSE LAW FIRM

.•........•

70

TIMELINE: ROSE LAW FIRM PERIODS OF LEGAL SERVICE ..
TABLE 1: SUMMARY OF PAYMENTS REVIEWED .......•..
TABLE 2: SUMMARY OF QUESTIONED COSTS ••••.••••.••

72
75
76

UNSUPPORTED FEES ...•................•......•..
UNSUPPORTED FEE ADJUSTMENTS ................•.•.
UNAUTHORIZED BILLING RATES •..•.•...........•...
MISCALCULATED FEES .......•....•........•......
FEES FOR DEPOSITIONS NOT ATTENDED .....•....••...
EXCESSIVE TIME FOR DEPOSITIONS .................
MULTIPLE REPRESENTATION AT DEPOSITIONS .........
DUPLICATE PAYMENTS ..................•..•••...•
UNSUPPORTED EXPENSES .....••.•..............•..
EXPENSE DISCREPANCIES .........................
INCREASED EXPENSES ............................
NON-BILLABLE EXPENSES .........................

.
.
.

77
78
79
81
81
82
82
83
84
85
86·
87

.

88

REDACTED

.....................................

STATUS OF INVESTIGATION

................................

GWSSARY OF 'fERMS ..•..........•......••.....•....••••••

.
.

. 88
90

APPENDIX A: GOVERNING FEDERAL STATUTES
APPENDIX B: CHRONOWGY

OF EVENTS

APPENDIX C: BIOGRAPillES OF WrfNESSES

AMl HICAN

VERSIGH

OIA RD 56806 (URTS 16302) Docld: 70104912 Page 5 18-1621-000307

•

c..C
.c.--~·,a:...:

 LIST OF EXHIBITS
VOLUME 2

Exhibit
Number

Description

1

December 21, 1987, letter from the FDIC to Mr. Hubbell, Rose Law Firm,
concerning the firm's representation of the FDIC for Director and Officer liability
at Coming Bank, enclosing the Legal Services Agreement for the bank and a copy
of the FDIC Guide for Legal Representation

2

June 1989 FDIC Guide for Legal Representation

3

Model Rules of Professional Conduct developed by the American Bar Association

4

Court case of First American Carriers, Inc., v. The Kroger Company

5

Court case of Norman L. Burnette d/b/a Burnette Flying Service v. Billy Morgan

6

Rose Law Firm background

7

Sworn statements (3), dated March 29, 1994,
Director/Shareholder, Gerrish & McCreary, P.C.

8

Sworn statements, dated June 8, 1994, February 23, 1995, and July 18, 1995, of
April A. Breslaw, Counsel, RTC, Division of Legal Services

9

FDIC Legal Division Guidelines for Selection and Termination of Outside Counsel,
dated August 27, 1987

10

Sworn testimony of Webster L. Hubbell, former Rose Law Firm attorney, on
March 16, 1995, and RTC interview of Mr. Hubbell on April 20, 1995

11

Memorandum from Mr. Hubbell to all Rose Law Firm attorneys concerning a
conflicts check relative to the finn's representation of the FDIC as conservator for
Madison Guaranty Savings and Loan

12

Interview of Richard T. Donovan, Attorney, Rose Law Finn, on October 4, 1994

13

Interview of Hillary Rodham Clinton, former Rose Law Firm attorney, on
November 10, 1994

14

December 1987 Legal Services Agreement relative to the liquidation of Coming
Bank, signed by Mr. Hubbell

of Jeffrey

C. Gerrish,

AMERICAN

PVERSIGH

FOIA RD 56806 {URTS 16302} Docld : 70104912 Page 6

18-1621-000308

 VOLUME 2 (continued)
Exhibit
Number

Description

15

Sworn statement, dated March 15, 1994, of Paul A. Jeddeloh, Senior Program
Attorney, FDIC Office of the Executive Secretary

16

June 8, 1989, letter from Mr. Jeddeloh to Ms. Breslaw, concerning a possible
conflict of interest due to the relationship between Mr. Hubbell and Seth Ward, his
father-in-law

17

Sworn statement, dated April 7, 1994, of Sue Strayhorn, former secretary to James
McDougal, President of Madison Financial

18

Sworn statement, dated May 6, 1994, of David Paulson, former FDIC Managing
Agent of Madison Guaranty Savings an~ Loan

19

June 28, 1989, letter from Mr. Hubbell to Mr. Paulson informing him that
Mr. Hubbell has not represented Mr. Ward in the latter's disputes with Madison
Guaranty Savings and Loan

20

June 23, 1989, letter from Ms. Breslaw to Mr. Paulson informing him of-her
hesitancy to replace the Rose Law Firm in its representation of the Madison
Conservatorship for the FDIC

21

Sworn statement, dated March 21, 1994, of Pamela A. Shea, Regional Counsel,
FDIC Legal Division, Chicago

22

August IO, 1989, letter from Kenneth K. Schneck, Supervisory Liquidation
Specialist, FDIC Division of Depositor and Asset Services, Chicago, to John A.
O'Donnell, concerning a possible conflict of interest for the Rose Law Firm
because of the Hubbell/Ward relationship

23

Sworn statement, dated March 21, 1994, of Kenneth K. Schneck

24

Sworn statement, dated April 5, 1994, of John A. O'Donnell

25

November 3, 1988, memorandum from Vincent Foster, Jr., of the Rose Law Firm
to all firm attorneys concerning the Firm's representation of an S&L in receivership
by the FSLIC

26

November 21, 1988, letter from Thomas L. Hindes, Senior Trial Attorney,
FHLBB, to Mr. Foster

27

Sworn statement, October 5, 1994, of Seth Ward, Mr. Hubbell's father-in-law

28

January 18, 1990, letter from David M. Powell, an attorney with the law firm of
Wright, Lindsey & Jennings, to Mr. Hubbell, enclosing a draft of a suggested letter
concerning a proposed indemnification agreement in favor of the RTC

AMERICAN

PVERSIGH

ll

FOIA RD 56806 {URTS 16302} Docld : 70104912 Page 7 18-1621-000309

 VOLUME 2 (continued)
Exhibit
Number

Description

29

Sworn statement, dated March 29, 1995, of David M . Powell, Partner, Wright,
Lindsey & Jennings

30

January 18, 1990, letter from Mr. Ward to Alston Jennings, Sr., of Wright,
Lindsey & Jennings concerning a proposed indemnification agreement in favor of
the RTC

31

Sworn statement, dated March 29, 1995, of Alston Jennings, Sr.

32

Sworn statement, dated April 29, 1994, of Thomas Ray, Partner, Shutts, Ray &
Kurrus, and interview of Mr. Ray on March 29, 1995

33

Interview of Seth Ward Il, Mr. Hubbell's brother-in-law, on December 7, 1994

34

September 24, 1985, letter from Mr. Ward to James B. McDougal, President,
Madison Financial Corporation, setting forth the agreement between the two
concerning Mr. Ward's purchase of the Industrial Development Company of Little
Rock property

AMFnlCAN

VERSIGH

111

FOIA RD 56806 (URTS 16302} Docld: 70104912 Page 8 18-1621-000310

 LIST OF EXHIBITS
VOLUME3
Exhibit
Number

Description

35

December 11, 1986, draft letter from Mr. Hubbell to H. Don Denton, Senior Vice
President of Madison Guaranty S&L, enclosing a deed in lieu of foreclosure to
property securing two nonrecourse Madison notes in the names of Seth and
Yvonne D. Ward

36

Interviews of Martha Patton, Mr. Hubbell's former secretary, on December 8,
1994, and March 21, 1995

37

April 30, 1985, letter from the Rose Law Firm to Charles Hanley of the Arkansas
Securities Department

38

May 14, 1985, letter from Beverly Bassett, a savings and loan supervisor at the
Arkansas Securities Department, to Hillary Rodham Clinton of the Rose Law Firm

39

May 23, 1985, letter from Hillary Rodham Clinton, Rose Law Firm, to Jim
McDougal, Madison Guaranty S&L

40

Follow-up submission, dated July 25, 1985, from Richard N. Massey, Rose Law
Firm, to the Arkansas Securities Department concerning an application by Madison
Guaranty S&L to engage in brokerage activities

41

October 17, 1985, letter from Ms. Bassett, Arkansas Securities Department, to
Mr. Massey, Rose Law Firm

42

Handwritten note of Ms. Bassett, Arkansas Securities Department, indicating that
Madison's application (to engage in brokerage activities) was never approved
because Madison never completed its capitalization

43

Affidavit, dated September 16, 1994, of Hillary Rodham Clinton, a former Rose
Law Firm partner

44

Interview of Richard N. Massey, Partner, Rose Law Firm, on October 4, 1994

45

Interview of Michael D. Robinson, Director, Tax Division, Frost & Company, on
July 11, 1995

46

Interview of Gary N. Speed, Partner, Rose Law Firm, on October 5, 1994

47

July 14, 1986, letter from Hillary Rodham Clinton of the Rose Law Firm to
Messrs. Jim McDougal and John Lathan of Madison Guaranty S&L

48

Sworn statements, dated September 7, 1994, and June 27, 1995, of Jimmy D.
Alford, a former partner of Frost & Company

AMl HICAN

VERSIGH

IV

OIA RD 56806 (URTS 16302) Docld: 70104912 Page 9 18-1621-000311

 VOLUME 3 (continued)
Exhibit
Number

Description

49

Sworn statements, dated April 29, 1994, and May 18, 1995, of Peter G. Kumpe,
Partner, Williams & Anderson

SO

Borod & Huggins Report, dated December 9, 1986, and February 6, 1987,
interviews of Patricia Heritage, a former executive assistant at Madison,

51

Affidavit, dated September 16, 1994, of David E. Kendall, Attorney for Hillary
Rodham Clinton

52

Sworn statement, dated April 26, I 994, of Antony S. Burt, Partner, Hopkins &
Sutter

53

Summary of hours billed by Rose Law Firm personnel to represent the FSLIC in
the court case of First American v. Lasater and Company

54

Rose Law Firm fee bill invoice, number 17530, dated June 2, 1987, to Hopkins &
Sutter for services rendered on behalf of First American Savings and Loan
Association relative to litigation with Lasater and Company

55

Motion to Amend Complaint, filed May 8, 1987, by the Rose Law Firm in the case
of First American v. Lasater and Company

56

Motion for Continuance and Extension, filed May 8, 1987, by the Rose Law Firm
in the case of First American v. Lasater and Company

57

Plaintiff's Motion to Compel Discovery, filed May 8, 1987, by the Rose Law Firm
in the case of First American v. Lasater and Company

58

Brief in Support of Motion to Compel, filed May 8, 1987, by the Rose Law Firm
in the case of First American v. Lasater and Company

59

May 20, 1987, First American v. Lasater and Company - Amended Complaint filed
May 20, 1987, by the Rose Law Firm and Verified (original) Complaint filed
October 2, 1985, by Hardin and Grace on October 2, 1985.

60

Sworn statement, dated March 31, 1994, of B. Michael Bennett, a former associate
of the Rose Law Firm

61

Affidavit, dated July 15, 1994, of Patrick J. Goss, Partner, Wright, Lindsey &
Jennings

62

Unsigned and undated statement of Dan R. Lasater, former President and Owner
of Lasater and Company

63

Interview of Dan Moudy, former In-house Counsel
Company/United Capital Corporation, on June 22, 1994.

AMFnlCAN

VERSIGH

for

Lasater

and

V

OIA RD 56806 (URTS 16302) Docld: 70104912 Page 10 18-1621-000312

-.,.:;;.,.-,

 VOLUME 3 (continued)
Exhibit
Number

Description

64

June 29, 1984, and April 26, 1984, flight logs for Dan Lasater' s airplane

65

February 17, 1994, FDIC Legal Division report on the retention of the Rose Law
Finn for the Madison Guaranty Savings and Loan Conservatorship

66

March 2, 1994, letter from Congressman James A. Leach, to FDIC Inspector
General James A. Renick, concerning a review by the FDIC Office of Inspector
General of possible conflicts of interest surrounding the Rose Law Finn's
representation of the U.S. government

67

Sworn statement, dated May 25, 1994, of Jack D. Smith, Jr., Deputy General
Counsel, FDIC Legal Division

68

Copies of the various interviews conducted by the FDIC Legal Division during its
review of the retention of the Rose Law Finn

69

Sworn statements, dated May 6, 1994, and March 1, 1995, of John T. Downing,
Senior Attorney

70

Memorandum from Thomas A. Schultz, Assistant General Counsel, FDIC Legal
Division to FDIC/RTC Conflicts Committee transmitting a draft report of the Legal
Division's inquiry of the circumstances under which the Rose Law Finn was
retained to represent the FDIC in the Madison Guaranty S&L litigation, including
the existence of any conflicts

71

Sworn statements, dated April 18, 1994, and May 4, 1994, of James T. Lantelme,
Assistant General Counsel, FDIC Legal Division

72

Sworn statements, dated June 7, 1994, and March 20, 1995, of Douglas H. Jones,
Senior Deputy General Counsel, FDIC Legal Division

73

Memorandum, dated February 2, 1987, from Thomas A. Rose, Deputy General
Counsel, to Deputy General and Assistant General Counsels concerning FDIC
Legal Division Procedures for Employing Outside Counsel

74

Memorandum, dated May 3, 1990, from Douglas H. Jones, Acting General
Counsel, FDIC Legal Division, to all FDIC and RTC in-house and outside counsel,
attaching Guidelines of the FDIC/RTC with Respect to Conflicts of Interest and
Confidentiality and General Policies of Waiver Favored by the Outside Counsel
Conflicts Committee

75

Sworn statements, dated May 31, 1994, and May 4, 1995, of Thomas A. Schultz,
Assistant General Counsel, FDIC Legal Division

AMERICAN

PVERSIGH

VI

ltOIA RD 56806 (URTS 16302) Docld: 70104912 Page 11

18-1621-000313

 LIST OF EXIDBITS
VOLUME4
Exhibit
Number

Description

76

Interview of Kenneth R. Shemin, Partner, Rose Law Finn, on December 8,
1994

77

Sworn testimony, dated December 12, 1994, of Patsy L. Thomasson, a former
officer of Lasater, Inc.

78

Memorandum, dated March 18, 1987, from John B. Beaty, Trial Attorney, to
Dorothy L. Nichols, Associate General Counsel, concerning retention of the
Rose Law Finn as counsel for the FSLIC

79

FDIC Guide for Outside Counsel, dated December 1991

80

Declaration, dated July 12, 1995, of Gary N. Speed, Partner, Rose Law Finn

81

Rose Law Finn fee bill, invoice number 35331, dated March 7, 1990, to the
FDIC for legal services rendered in connection with the Madison Guaranty S&L
litigation against Frost & Company

82

Various statements and interviews related to Madison Guaranty Savings and
Loan Association

83

Various statements and interviews related to First American Savings and Loan
Association

84

Various statements and interviews related to the FDIC Legal Division review of
the Rose retention for Madison

85

Interview of King Betz, the former president and chief executive officer of
Home Federal Savings and Loan Association of Centralia, on October 5, 1994,
and of Tom Mars, a former Rose Law Finn attorney, on October 3, 1994, both
related to Home Federal Savings and Loan Association

AMFnlCAN

VERSIGH

VII

ltOIA RD 56806 (URTS 16302) Docld: 70104912 Page 12 18-1621-000314

 Office of Investigations
Office of Inspector General
Federal Deposit Insurance Corporation

REPORT OF INVESTIGATION
Title
ALLEGED CONFLICTS OF INTEREST BY THE ROSE LAW FIRM

Case Number
1094-096

I

Date
July 28, 1995

The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General (OIG) has
completed an investigation into alleged conflicts of interest related to the retention of the
Rose Law Firm, Little Rock, Arkansas (Rose or Firm), to represent failed insured
depository institutions. These allegations related to the Finn's FDIC and Federal Savings
and Loan Insurance Corporation (FSLIC) contract work on behalf of the Madison Guaranty
Savings and Loan Association Conservatorship, McCrory, Arkansas (Madison); and the
First American Savings and Loan Association Conservatorship, Oak Brook, Illinois (First
American).
Specifically, allegations of conflicts of interest were based on media reports in late 1993 and
early 1994 that Rose did not inform FDIC when the Firm was hired by FDIC in 1989 to
represent Madison that:
•

In 1985 the Firm had represented Madison before the Arkansas Securities
Department;

•

A former Rose partner, Webster L. Hubbell, who was the Associate Attorney
General, U.S. Department of Justice, when the allegations were made, was
the son-in-law of a Madison borrower and consultant who was in litigation
adverse to the Madison Conservatorship; and

•

Another fonner Rose partner, Hillary Rodham Clinton, had assisted in
Rose's representation of First American against a corporation owned by a
personal friend of Mrs. Clinton's family who was a contributor to her
husband's political campaign for Governor of Arkansas.

We also investigated a review conducted by the FDIC Legal Division into the circumstances
surrounding the retention of Rose to perfom1 legal work for the Madison Conservatorship.
In addition, we completed a review of all legal fee payments made to Rose by FDIC since
July 1, 1987. The highlights of our investigation are included in the following Executive
Summary.

AM HIC

This report is FOR OFFICIAL USE ONLY and its disclosure to unauthorized
person s is prohibited. The report remains the property of the Office of Inspector
General and may not be reproduced wholly or in part without the express written
penni ssion of the OIG .

pvERSIGH

OIA RD 56806 (URTS 16302) Docld: 70104912 Page 13 18-1621-000315

 -2 -

EXECUTIVE SUMMARY

In February 1989, Madison Guaranty Savings and Loan Association was designated as a
conservatorship and pursuant to an agreement with FSLIC , the FDIC Legal Division was
responsible for managing Madison litigation, including a lawsuit pending against Madison's
fonner auditors, Frost and Company, P.A. (Frost). According to the Resolution Trust
Corporation's (RTC) 1989 annual report, 175 institutions were designated as conservatorships
in February and March 1989, one of which was Madison. In March 1989, April A. Breslaw,
who was then an attorney with FDIC Legal Division's Professional Liability Section (PLS),
was designated as the responsible attorney for PLS matters related to Madison. On or about
March 24, 1989, Ms. Breslaw hired Rose to take over the pending Frost lawsuit from another
finn that was conflicted. Rose continued to represent the Madison Conservatorship until this
lawsuit was settled in April 1991.

CONFLICTING RELATIONSHIPS AND REPRESENTATIONS'

The results of our investigation evidenced conflicting relationships among the Rose Law
Finn, Rose partner Webster L. Hubbell, and Mr. Hubbell's father-in-law since 1971, Seth
Ward. During the time that Mr. Hubbell represented the Madison Conservatorship on behalf
of FDIC, Mr. Hubbell's father-in-law was engaged in litigation adverse to the Madison
Conservatorship. We found that neither the Finn nor Mr. Hubbell had infonned FDIC of
these relationships when the Finn was hired in March 1989 to handle the lawsuit against
Frost or while the Finn was acting as litigator for the Madison Conservatorship.

'For purposes of this investigation, evidence of relationships or representations by the Rose
Law Finn, or its attorneys, in matters affecting the interests of FSLIC and FDIC that could be
viewed as relevant to the agency in making an infonned detennination with respect to the
retention of the Finn as agency counsel, has been included as conflicting relationships and
representations.

AMl HICAN

VERSIGH

BOIA RD 56806 (URTS 16302) Docld: 70104912 Page 14 18-1621-000316

 -3-

Executive Summary (contd.)

Further, we found during the time from 1989 to 1991 while the Rose Law Firm was litigating
the Frost lawsuit for FDIC and RTC, Mr. Hubbell was:
• Involved in his father-in-law's $300,000 lawsuit against the Madison
Conservatorship;
• Providing legal advice for one of Mr. Ward's companies, POM, Inc.
(POM); and
• A part-owner of POM.
With respect to POM, we found that Mr. Hubbell served as c01porate counsel for POM from
1981 through 1992, in addition to providing legal services for several of Mr. Ward's other
companies during the 1980s.
The Rose Law Finn's responsibility to identify and disclose conflicts to its clients was set
forth not only in federal banking agency agreements, guides and letters, but also in rules
adopted by the Arkansas Supreme Court governing conflicts. However, our investigation
evidenced that neither Mr. Hubbell nor the Rose Law Finn disclosed to FDIC information
pertaining to these conflicting relationships. Ms. Breslaw stated to OIG special agents that
she did not learn that Mr. Hubbell was Mr. Ward's son-in-law until months after hiring Rose
when, in June 1989, FDIC employees working at the Madison Conservatorship raised
concerns about the relationship. Ms. Breslaw further stated that when she asked Mr. Hubbell
about his relationship with Mr. Ward, Mr. Hubbell did not inform her about Mr. Hubbell's
business relationship with the Wards, or his legal role and ownership interest in his father-inlaw's company, POM.
At the time the Rose Law Firm accepted the engagement to represent FDIC for the Madison
Conservatorship in the Frost lawsuit, Mr. Hubbell was:
• The Rose partner responsible for billing FDIC, in addition to being the lead
Rose attorney for litigating the Frost lawsuit;

AMl HICAN

VERSIGH

ltOIA RD 56806 (URTS 16302) Docld: 70104912 Page 15 18-1621-000317

 - 4 -

Executive Summary (contd.)

•

One of three attorneys comprising the Rose Law Firm's
Committee; and

Conflicts

• The Rose partner who, on behalf of the Finn, had negotiated and signed a
1988 settlement agreement with FSLIC related to a conflict of interest
between the former Rose managing partner and FSLIC.
The results of our investigation also evidenced conflicting representations on the part of the
Rose Law Firm with respect to its representation of FDIC regarding the Madison
Conservatorship. Specifically, we found that the Finn had represented Madison and its
wholly owned subsidiary, Madison Financial Corporation, in 1985 and 1986 on various legal
matters, including representation of Madison in 1985 before the Arkansas Securities
Department (ASD). During its 1985 representation of Madison the Firm submitted materials
to the ASD which were prepared by Frost, the finn that was later sued by Rose on behalf of
FDIC for the Madison Conservatorship. We further found that for many years the Rose Law
Firm represented Mr. Hubbell's father-in-law, Seth Ward, or Mr. Ward's companies
regarding various legal matters. However, there was no evidence to show that Mr. Hubbell
or the Rose Law Firm disclosed these representations to FDIC when the Firm was hired or
during its representation of the Madison Conservatorship in the Frost lawsuit.
When interviewed, Mr. Hubbell admitted to FDIC special agents that he had not disclosed
to FDIC at the time he was retained to represent the Madison Conservatorship that the Rose
Law Finn was still representing a client who was adverse to the FSLIC Receivership for
Universal Savings Association, F.A., Chickasha, Oklahoma. Moreover, Mr. Hubbell
admitted that at the time FDIC retained Rose to represent the Madison Conservatorship
against Frost and during the time he was litigating the Frost lawsuit, the Firm failed to inform
FDIC of another conflicting representation. The Finn was representing a company partially
owned by its president who was the fonner Frost partner in charge of the Madison audits
which formed the basis for Madison's lawsuit against Frost. The former Frost partner also
was a named defendant in the Madison litigation.
Regarding the conflicts allegations relating to the First American Conservatorship, the results
of our investigation evidenced that a relationship did exist, as alleged, between Hillary
Rodham Clinton's in-laws and Danny Ray Lasater, owner of Lasater and Company, the

AMl HICAN

VERSIGH

ltOIA RD 56806 (URTS 16302) Docld: 70104912 Page 16 18-1621-000318

 -5 -

Executive Summary

(contd.)

defendant corporation in a lawsuit being handled in 1986 and 1987 by the Rose Law Finn for
FSLIC and the First American Conservatorship. When interviewed, Mrs. Clinton stated to
OIG special agents that she had met Mr. Lasater twice, did not consider him a personal or
social friend, and did not do any legal work for him or Lasater and Company.
Mrs. Clinton's attorney, David Kendall, from the law firm of Williams & Connolly, in an
affidavit to the OIG indicated that between 1982 and 1985, Mr. Lasater, his companies or his
family, contributed a total of $16,000 to President Clinton's political campaigns for Governor
of Arkansas, or referendum initiatives. When interviewed, Mr. Lasater informed OIG special
agents that he was friends with the Clintons, but has not spoken with them since 1986. He
further explained that he was close friends with President Clinton's brother, Roger Clinton,
and his mother, the late Virginia Kelley.
Our investigation also evidenced that in 1987 Mrs. Clinton, while a Rose partner, performed
work on the First American litigation against Lasater and Company. The late Vincent Foster,
Jr., not Mrs. Clinton, was the Rose partner who was in charge of the First American
litigation. We determined from billing records that Mrs. Clinton, on one occasion in May
1987, billed two hours to review, sign and file three motions and one brief in Mr. Foster's
absence. One of the motions :Mrs. Clinton filed was a motion to amend the complaint. The
amended complaint was subsequently signed and filed with the court by Mr. Foster . We
interviewed witnesses involved in the First American litigation, all of whom stated they could
recall no involvement by Mrs. Clinton related to this lawsuit. The Rose Law Firm billed a
total of 467 hours related to the Lasater and Company lawsuit, and total fees and expenses
paid to the Firm amounted to $59,471. The actual loss to First American had been estimated
at $361,000.
The lawsuit was settled in November 1987, and the First American
Conservatorship recovered $200,000 from the defendant. Mrs. Clinton stated to OIG special
agents that she did not participate in the settlement negotiations.

FDIC LEGAL DIVISION REVIEW OF ROSE LAVVFIRM
The FDIC Legal Division conducted a review of FDIC's retention of the Rose Law Finn for
the Madison litigation.
The Legal Division's review concluded that neither Rose's
representation of Madison before the ASD nor the Hubbell-Ward family relationship
constituted a conflict of interest. The Legal Division's opinion that Rose did not have a

AMERICAN

pvERSIGH

ltOIA RD 56806 (URTS 16302) Docld: 70104912 Page 17 18-1621-000319

 -6 -

Executive Summary (contd.)

conflict of interest was based on the relevant information available to the Legal Division at
that time, and from the Legal Division's decision to rely on Model Rule l. 7 to determine
whether the Firm had a conflict of interest. The Legal Division, however, did not include
in its evaluation of Rose other conflict criteria, including the "appearance of impropriety"
standard or FDIC guidelines and policies. The Legal Division's review also did not address
whether FDIC procedures were followed when Rose was retained in 1989. In addition, the
Legal Division did not criticize itself for Ms. Breslaw's lack of documentation regarding her
discussions with Mr. Hubbell, or how she arrived at the conclusion there was no conflict of
interest in view of concerns raised by other FDIC employees at the Madison Conservatorship.
The OIG investigation went beyond the Legal Division's review; therefore, additional
evidence and information was obtained that was not considered by the Legal Division during
its review.
Our investigation disclosed evidence of conflicting relationships and
representations. Even though the Legal Division pointed out in its report that law finns are
expected to disclose prior representation and family relationships similar to Mr. Hubbell's,
the Legal Division did not criticize Rose for its failure to inform FDIC of matters that had
a direct relationship to the work Rose was hired to do for FDIC. During our investigation,
we found no evidence that FDIC Legal Division attorneys were compromised or
inappropriately influenced during their review of the retention of the Rose Law Firm.

LEGAL FEE PAYMENTS TO ROSE LAW FIRM
In conjunction with our investigation, we conducted a fee bill review of all FDIC payments
to the Rose Law Firm for legal services subsequent to July l, 1987, and FSUC payments
subsequent to January 1, 1989. The review covered $1,049,930 in payments to Rose and
included those payments related to the failure of the Madison Guaranty Savings and Loan
Association and three other failed financial institutions . Webster L. Hubbell, Rose partner,·
was the Rose billing attorney on the Madison lawsuit against Frost, for which Rose received

AM HICAN

pvERSIGH

OIA RD 56806 (URTS 16302) Docld: 70104912 Page 18 18-1621-000320

 - 7 -

Executive Summary (contd.)

$375,380. The RTC approved settlement of the Madison lawsuit against Frost for $1.025
million on or about February 26, 1991. Our review identified questioned costs 2 totaling
$156,286 related to payments for work on the four institutions, of which $78,391 related to
Madison. Of the $156,286 in questioned costs, Mr. Hubbell pleaded guilty to defrauding
FDIC and RTC by falsifying expenses and inflating fees totaling $41,995 . Mr. Hubbell's
fraudulent claims to FDIC primarily involved misrepresenting and billing his personal
expenses as legitimate business expenses on behalf of FDIC. Mr. Hubbell pleaded guilty to
one count of mail fraud and one count of tax evasion related to fraudulent billings sent to
FDIC and RTC. On June 28, 1995, Mr. Hubbell was sentenced to 21 months in prison and
ordered to make restitution in the amount of $135,000 to the Rose Law Finn.
Our review of the Rose Law Finn's billing system disclosed that the Finn did not have the
internal controls necessary to safeguard the integrity of the billing process. Therefore,
Mr. Hubbell was able to misrepresent the expenses billed to FDIC. Mr. Hubbell was allowed
to sign Finn checks for expenses that would later be billed to clients without submitting
receipts or invoices verifying that the checks were actually written for the expenses and
clients identified by him. As a result, Mr . Hubbell was able to write Finn checks to pay for
his personal expenses and have the expenses billed to Rose clients without verification that
these expenses were legitimate business expenses. The Finn is ultimately responsible for the
actions of its billing partners.
Other questioned costs from our review related primarily to instances in which the Rose Law
Finn did not comply with the tenns of applicable guidelines and agreements. Rose billed fees
such as those which were 1) unsupported or did not agree with original timesheets; 2) in
excess of authorized hourly rates; 3) duplicated or miscalculated; and 4) excessive related to
depositions. Also, expenses billed were questioned because they were 1) unsupported by
vendor invoices; 2) in excess of the Finn's cost; and 3) non-billable per the FDIC contract.
2

For purposes of this investigation , questioned costs are those that have been questioned by
the OIG with respect to a finding that :
1) the cost was not authorized by the contract;
2) at the time of the review, the cost was not supported by adequate
documentation; or
3) the expenditure of funds for the intended purpose was unnecessary or
unreason able .

AMERICAN

pvERSIGH

OIA RD 56806 (URTS 16302) Docld: 70104912 Page 19 18-1621-000321

 -8-

Executive Summary (contd.)

REFERRAL TO THE FDIC VICE CHAIRMAN AND GENERAL COUNSEL

This investigative report is being forwarded to the Office of the Vice Chairman for
consideration and appropriate administrative action. The report is also being forwarded to
the newly appointed FDIC General Counsel for final determination with respect to the Rose
Law Finn's failure to comply with FDIC policies regarding the reporting of conflicts of
interest, including appropriate sanctions; the referral of professional misconduct to appropriate
authorities; overbillings by the Rose Law Finn; and FDIC Legal Division assessment of
current policies and procedures.

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DETAILS OF INVESTIGATION
BASIS FOR INVESTIGATION
On February 24, 1994, the United States Senate Committee on Banking, Housing, and Urban
Affairs conducted a hearing on the semiannual report of the RTC Thrift Depositor Protection
Oversight Board. Former FDIC Acting Chairman Andrew C. Hove, Jr., who is currently
FDIC Vice Chairman, was present at the hearing since at that time he was a member of the
RTC Oversight Board. During the proceedings, Senator Alfonse D' Amato, Ranking Minority
Member (now Chairman), questioned FDIC Legal Division's February 17, 1994, report
regarding FDIC retention of the Rose Law Finn as legal counsel for the Madison
Conservatorship. Senator D' Amato expressed his view that FDIC's Inspector General should
review this matter.
Mr . Hove agreed to ask the Inspector General to conduct an
investigation.
On February 25, 1994, Mr. Hove requested that the FDIC Office of Inspector General (OIG)
initiate an investigation into 1) the 1989 retention by FDIC of the Rose Law Firm for the
representation of the Madison Conservatorship and 2) the handling by Rose of a lawsuit
captioned First American Savings and Loan Association v. Lasater and Company on behalf
of the First American Conservatorship.
Additionally, on March 2, 1994, the OIG received a letter from James A. Leach, Ranking
Minority Member, Committee on Banking, Finance and Urban Affairs, United States House
of Representatives (now Chairman, Committee on Banking and Financial Services).
Congressman Leach stated that he was pleased that Mr. Hove had agreed to request an OIG ·
investigation into Rose's role in representing FDIC. Congressman Leach requested that the
OIG also examine FDIC Legal Division's recent determination that no conflict of interest
existed related to Rose's representation of the Madison Conservatorship. Subsequently, we
met with staff from the Senate and House Banking Committees to obtain any relevant
documentation they had and to inform them that our investigation had begun.
As part of our investigation, the OIG's Office of Legal Audits performed a fee bill review
of all FDIC legal payments since July 1, 1987, and FSLIC since January 1, 1989, to the Rose
Law Firm. The results of this review are presented in a separate section of this report.
During our investigation, we worked with the RTC OIG in areas of joint authority.

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GOVERNING FEDERAL STATUTES
The federal criminal and civil statutes that may relate to this investigation are contained in
Appendix A.

CONFLICT OF INTEREST CRITERIA
FDIC CONFLICT OF INTEREST POLICIES
Because of the numerous allegations that the Rose Law Finn failed to disclose conflicts of
interest to FDIC, we expanded our traditional law enforcement criteria to include various
contractual provisions requiring law firms to disclose conflicts , and criteria used to evaluate
conflicts. When Rose was retained by FDIC and FSLIC as agency outside legal counsel, the
Finn was contractually responsible for identifying and disclosing conflicts of interest in its
representation on behalf of the agencies. The Firm's responsibility to identify and disclose
conflicts was set forth in federal banking agency agreements, guides, and letters and also in
rules adopted by the Arkansas Supreme Court governing conflicts.
In addition to having knowledge of previous FSLIC policies regarding conflicts, the Rose
Law Finn had knowledge of FDIC conflicts policies no later than 1987. A letter to Webster
L. Hubbell, former Rose partner, in late 1987, from Ronald R. Glancz, FDIC Acting Deputy
General Counsel, enclosed a Legal Services Agreement and Guide for Legal Representation
(Guide). (See Exhibit l . ) The Guide was prepared by the FDIC Legal Division for use by
outside attorneys engaged i.n representing FDIC in connection with its liquidation and
receivership activities. Mr. Hubbell, as the billing attorney, signed the FDIC Legal Services
Agreement (LSA) related to work performed for the Corning Bank Receivership, Coming,
Arkansas, in December 1987. The following are relevant sections of the Guide and the LSA.
Section Bl. of the Guide, Conflicts of Interest, provides in part:
We expect the highest ethical standards in your representation of the FDIC. Your
firm must be free of conflicting interests. At the time you are retained, you will
be asked to provide the FDIC with a list of potentially conflicting representations.
Thereafter, any potential conflict must be discussed with us as soon as you
recognize its existence .

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We reserve the right to decide whether an actual or potential conflict exists. If, in
our opinion, an actual or potential conflict does exist, you will not be permitted to
go forward with your representation until the situation has been resolved.
In addition to actual or potential conflicts covered by the Code of Professional
Responsibility or applicable federal or state provisions , there are other actual or
potential conflict situations peculiar to your representation of the FDIC of which
we should be promptly informed. These include such matters as: participation of
any member of the firm as a director or officer of any insured bank that has failed
or that is the subject of any ongoing supervisory action, representation of an
officer, director, debtor, creditor or stockholder of any failed or assisted bank in
a matter relating to the FDIC; representation of a creditor whose claim competes
with that of the FDIC; and representation of a client in a matter adverse to the
FDIC. Upon notification, we will inform you promptly whether we believe a
conflict exists.
The Legal Services Agreement signed by Mr. Hubbell in December 1987 provides in part:
The Undersigned state and represent that they do not and did not formerly
represent the Bank as general attorney(s), do not have a managerial or ownership
interest therein, are not directors or shareholders thereof, have no professional or
personal interests adverse to or in potential conflict with the FDIC, (whether in its
Corporate or Receivership capacity), and are not otherwise ethically disqualified
to represent the FDIC.
The Guide was updated by FDIC in June 1989. The conflicts of interest section remained
virtually unchanged. The Rose Law Firm was sent a copy of the June 1989 Guide
(Exhibit 2}, and in October 1990 Mr. Hubbell, as the billing attorney, signed the Madison
LSA which incorporated the Guide for the Finn.

CONFLICT RULES FOR ARKANSAS LAWYERS
The Rose Law Finn's representation of FDIC and FSLIC was also subject to the rules of
professional conduct adopted and interpreted by the Arkansas Supreme Court. The rules of
professional conduct for Arkansas lawyers were adopted from model rules developed by the
American Bar Association (ABA). From July 1976 to the end of 1985, the Rose Law Finn's
conduct was governed by the Model Code of Professional Responsibility. Beginning on
January l, 1986, and during the period of this inquiry, the Finn· s conduct was governed by
the Model Rules of Professional Conduct. (See Exhibit 3.) The Preamble to the Model
Rules provides in part:

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Many of a lawyer's professional responsibilities are prescribed in the Rules of
Professional Conduct, as well as substantive and procedural law. However, a
lawyer is also guided by personal conscience and the approbation of professional
peers. A lawyer should strive to attain the highest level of skill, to improve the
law and the legal profession and to exemplify the legal profession's ideals of public
service.

***
In the nature of law practice, however, conflicting responsibilities are encountered.
Virtually all difficult ethical problems arise from conflict between a lawyer's
responsibilities to clients, to the legal system and to the lawyer's own interest in
remaining an upright person while earning a satisfactory living. The Rules of
Professional Conduct prescribe terms for resolving such conflicts. Within the
framework of these Rules many difficult issues of professional discretion can arise.
Such issues must be resolved through the exercise of sensitive professional and
moral judgment guided by the basic principles underlying the Rules.
Model Rule of Professional Conduct 1.7, which is the general rule for conflicts of interest,
provides in part:
(a)

A lawyer shall not represent a client if the representation of that
client will be directly adverse to another client, unless:
(1) the lawyer reasonably believes the representation will not
adversely affect the relationship with the other client; and
(2) each client consents after consultation.

(b) A lawyer shall not represent a client if the representation of that client

may be materially limited by the lawyer's responsibilities to another
client or to a third person, or by the lawyer's own interests, unless:
(1) · the lawyer reasonably believes the representation will not
be adversely affected; and
(2)

the client consents after consultation.

The official Comment following Model Rule I .7 relating to loyalty to a client provides in
pan:
Loyalty is an essential element in the lawyer's relationship to a client. An
impermissible conflict of interest may exist before representation is undertaken, in
which event the representation should be declined. The lawyer should adopt
reasonable procedures appropriate for the size and type of firm and practice, to
determine in both litigation and nonlitigation matters the parties and issues involved
and to determine whether there are actual or potential conflicts of interest.

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Model Rule 1. 10, which is the general rule for imputed disqualification , provides in part:
(a) While lawyers are associated in a firm, none of them shall knowingly
represent a client when any one of them practicing alone would be
prohibited from doing so by Rules 1.7, 1. 8(c), 1.9, 2. 2 or 3. 7.

Canon 9 of the former Model Code of Professional Responsibility provided that "a lawyer
should avoid even the appearance of professional impropriety." The Model Rules do not
include an "appearance of professional impropriety" standard. However, the Arkansas
Supreme Court has ruled in at least two cases that the appearance of impropriety standard
remains in effect in Arkansas.
First American Carriers, Inc. v. The Kroger Company,
302 Ark. 86, 787 S.W.2d 669 {1990)
Canon 9 was a part of the ABA Code of Professional Responsibility and the exact
language is not in the Model Rules of Professional Conduct adopted by this court.
Canon 9 provided that "a lawyer should avoid even the appearance of impropriety. "
The fact that Canon 9 is not in the Model Rules does not mean that lawyers no
longer have to avoid the appearance of impropriety. (See Exhibit 4.)
Norman L. Burnette, d/b/a Burnette Flying Service v. Billy Morgan,
303 Ark. 150, 794 S.W.2d 145 {1990)
The "appearance of impropriety" prohibition of Canon 9 of the American Bar
Association Code of Professional Responsibility [is] not a part of the Model Rules
of Professional Responsibility which we have adopted. Nevertheless, the principle
is yet alive and, though not controlling, is a rock in the foundation upon which is
built the rules guiding lawyers in their moral and ethical conduct. (See Exhibit 5.)

ROSE LAW FIRM PROCEDURES TO IDENTIFY AND DISCLOSE CONFLICTS

According to the Rose Law Finn in a letter dated September 27, 1994, each Rose attorney
is charged with the responsibility of determining whether a proposed client engagement in a
particular matter might create a conflict of interest. Associate attorneys with less than three
years of service are not permitted to accept an engagement without the prior consent of a
Firm partner. The Rose Law Finn asks clients with a new engagement to provide a list of
parties that will be involved in the proposed engagements under consideration. The

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responsible Rose attorneys compare parties so identified with a list of clients and other parties
in prior engagements to determine if the two lists overlap . If there are such overlaps,
responsible attorneys must compare the proposed engagement with the existing or prior
engagement so as to evaluate whether the proposed engagements could raise a conflict issue.
During the 1970s and early 1980s, the process stated above was achieved by oral and written
communications among attorneys. Thus, attorneys considering new engagements circulated
memorandums identifying the interested parties and describing the nature of proposed
engagements. They asked the other Firm attorneys to notify them of any potential conflicts.
Often, but not always, copies of the memorandums were kept with client files. In 1987 the
Firm obtained a software system to supplement the conflicts checking procedures.
If there is an overlap between new client information involved in a proposed engagement and
existing client information identified through the conflicts checking procedures, the attorneys
involved are obligated to determine if a conflict exists under the Model Rules or other
applicable rules. In addition, overlaps may reveal situations that do not involve legal conflict
issues under the Model Rules, but may present business issues that may have an impact on
an existing client relationship.
The Rose Law Firm established a Conflicts Committee in August 1988 consisting of three
elected members. The original members were Webster L. Hubbell and two other Rose
partners, each to serve until a successor was nominated and elected. In 1994 another Rose
partner was elected to fill the position vacated by Mr. Hubbell. The Conflicts Committee
generally meets informally as issues arise and typically does not keep any minutes. A
decision of the Conflicts Committee ·may be appealed to the partners of the Firm .

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MADISON GUARANTY SAVINGS AND LOAN ASSOCIATION
BACKGROUND
In February

1989 the Federal Home Loan Bank Board (FHLBB) placed Madison into
conservatorship and, pursuant to an agreement with FSLIC, the FDIC Legal Division was
responsible for managing Madison litigation, including a lawsuit pending against Madison's
former auditors, Frost & Company, P.A. In January .1982 James B. McDougal and his wife,
Susan, had purchased a majority interest in Madison. Madison Financial Corporation (MFC)
was established on February 3, 1982, as a wholly owned subsidiary service corporation for
Madison to engage in real estate investment, development and management. The following
are some of the more significant events related to Madison:
•

On January 20, 1984, a report of a limited examination of Madison by the
Office of Examinations and Supervision, PHI.BB, identified questionable
investment and lending practices in real estate development projects. Other
deficiencies included poor underwriting practices, inadequate recordkeeping,
and little or no savings and loan experience by either the Chief Executive
Officer or the Board of Directors. Based on declining capital and regulatory
violations, the FHLBB executed a Supervisory Agreement on July 19, 1984,
stipulating a number of requirements for Madison and its Board of Directors.

•

In March 1985 Frost & Company, P.A., Madison's outside auditors, issued
an unqualified opinion on Madison's 1984 Financial Statements.
In
February 1986 Frost issued an unqualified opinion on Madison's 1985
Financial Statements, concluding that Madison was solvent.

•

In March 1986 the FHLBB again identified unsafe and unsound practices at
Madison and identified insider abuse by Mr. McDougal, Madison's major
shareholder.

A Cease and Desist Order signed in August 1986 imposed
severe operating restrictions on Madison's operations and required Madison
to obtain a new audit for 1985. At the FHLBB Supervisory Agent's request,
Madison retained the law finn of Borod & Huggins in September 1986 to
investigate internal abuses.

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•

In August 1987 a FHLBB examination concluded that Madison had been

insolvent since December 1985. A second audit of Madison for 1985,
completed by Peat Marwick Main & Company after Frost had already
performed the 1985 audit, determined severe capital deficiencies, including
inadequate reserves for loan losses.
• Jeffrey C. Gerrish, then of the law finn of Borod & Huggins, completed the
investigation, issued a report and prepared the Frost lawsuit. Mr. Gerrish
had been the Regional Counsel for FDIC's Memphis Regional Office in the
early 1980s before he left FDIC to begin a private law practice. In February
1988 Madison filed suit against Frost seeking $10 million for defective
audits and negligent preparation of financial statements. Guthrie Castle and
the law firm of Borod & Huggins were retained by Madison for the Frost
lawsuit.
• On March 1, 1988, Borod & Huggins separated into three new law firms,
one of which was Gerrish & McCreary. The Frost lawsuit was transferred
to the Gerrish & McCreary law firm.
On February 7, 1989, FDIC entered into an agreement with FSLIC and the FHLBB to act
as agent for FSLIC in any conservatorship or receivership appointed for an insured savings
and loan association after January 1, 1989. Consequently, on March 2, 1989, FDIC was
appointed managing agent for the Madison Conservatorship. As managing agent, FDIC was
required to pursue all claims by, and defend those against, Madison. The FDIC Legal
Division separates issues concerning general litigation involving liquidation matters from
those issues involving possible impropriety by former officers and directors or outside
professionals who were hired to perform work for an institution. Any professional liability
lawsuits are handled by FDIC Legal Division's Professional Liability Section (PLS). The
formal role of FDIC related to thrifts ended on August 9, 1989, when the Financial
Institutions Reform, Recovery, and Enforcement Act (FIRREA) was enacted and the·
Resolution Trust Corporation (RTC) was created. However, FDIC Legal Division continued
to provide legal support to the RTC until September 1991, when FDIC attorneys working on
RTC matters transferred to the RTC to form its Legal Division.

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When Madison was placed into conservatorship in February 1989, Madison's lawsuit against
its former outside audit firm, Frost, had been in process for about one year in Arkansas state
court. Madison had filed suit against Frost alleging that Frost had breached its contract by
failing to fairly present Madison's financial condition in the I 984 and 1985 audits. After
Madison was placed into conservatorship, the PLS of FDIC Legal Division was responsible
for managing the Frost lawsuit. In 1989 all PLS matters were directly managed from FDIC
Washington, D.C., headquarters, unlike other legal matters, such as general collection or
foreclosure work, which were managed by the regional offices.
In February 1989 Paul A. Jeddeloh of the FDIC Burnsville Consolidated Field Office in
Burnsville, Minnesota, was named Managing Attorney for the Madison Conservatorship. One
of Mr. Jeddeloh's duties was to hire local counsel to represent the conservatorship regarding
general litigation matters. Soon after Madison was placed into conservatorship, Mr. Jeddeloh
hi.red the law finn of Friday, Eldredge & Clark, Little Rock, Arkansas (Friday), to represent
the Madison Conservatorship on all general litigation matters. Mr. Jeddeloh stated that he
based his selection on the fact that Friday was on the FDIC List of Counsel Available (LCA),
formerly known as the List of Counsel Utilized. The LCA is a formal list of law firms from
which FDIC attorneys may select firms to handle general litigation matters on behalf of
FDIC. Mr. Jeddeloh also stated that the firm had been recommended by other FDIC
attorneys who had been assigned to other failed institutions in Little Rock, Arkansas.
Friday, however, was not given the responsibility for the Frost lawsuit because this was a
PLS matter. In March 1989 April A. Breslaw, an attorney for PLS, FDIC Legal Division,
was named as the responsible attorney for PLS matters related to Madison. Ms. Breslaw
transferred into the RTC Legal Division when it was created in September 1991, and she -cc,•.:,2..
remained Madison's PLS attorney until all of the professional liability matters were resolved.
Former RTC Special Counsel Gerald Jacobs and former RTC Deputy Executive Director
William Roelle approved settlement of the Frost lawsuit for $1.025 million on or about
February 26, 1991. The RTC concluded the damages were actually $6 million, although the
only meaningful recovery source was Frost's $3 million insurance policy. The $3 million,
however, was self-liquidating; therefore, the policy was being reduced to pay Frost's attorney
and expert fees. The settlement agreement was executed on April 8, 1991. See Appendix B
for a chronology of events related to Madison and the Frost lawsuit.

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HIRING OF THE ROSE LAW FIRM FOR FROST LAWSUIT

The Rose Law Finn is a Professional Association located at 120 East Fourth Street in Little
Rock, Arkansas. The number of Finn attorneys grew from 24 in 1980, to more than 50 in
1991. The Finn handled many areas of legal practice including litigation and banking. From
1987 the Finn listed FSLIC as a representative client and listed FDIC from 1990. Prior to
1989 the Rose Law Finn represented FSLIC regarding failed savings and loan institutions,
including Guaranty Savings and Loan Association, Harrison, Arkansas. Also prior to 1989
the Rose Law Firm represented FDIC regarding failed banks, including Coming Bank,
Coming, Arkansas. (See Exhibit 6 for additional background on the Rose Law Finn.)
In March 1989 Ms. Breslaw determined that Madison's law firm for PLS matters, Gerrish
& McCreary, had a conflict of interest. In a March 1989 letter to Mr. Jeddeloh, Mr. Gerrish
listed two lawsuits and an enforcement proceeding that his finn was currently involved in that
were adverse to FDIC. They were defending one of the directors in the Coming Bank PLS
lawsuit brought by FDIC. Mr. Gerrish provided a sworn statement to OIG special agents
(Exhibit 7) in which he said he did not believe then and he does not believe now that his firm
had a conflict of interest which would have prevented the firm from continuing with the Frost

lawsuit. Mr. Gerrish did state that his finn was representing a director who was a defendant
in the Coming Bank lawsuit and that the lawsuit was set for trial about the same time
Madison was placed into conservatorship. He further stated that, apparently, FDIC used the
Coming Bank litigation as its reason for removing the Frost lawsuit from Gerrish &
McCreary .
Ms. Breslaw subsequently was sent a copy of Mr. Gerrish's March 1989 letter. In a sworn - ----=
statement provided to the OIG (Exhibit 8), she said the letter also stated that Mr. Gerrish did
not consider these representations to be conflicts because they were opposed to FDIC in bank
matters, and the Madison litigation involved a savings and loan. Ms . Breslaw said she did
not find this argument persuasive because she believed FDIC was a single entity that
performed different functions . She said that regardless of the context, she believed thaf
opposing FDIC in litigation created a conflict of interest for a finn that sought to represent
FDIC at the same time. Ms. Breslaw stated she was concerned that, if Gerrish & McCreary
was allowed to continue the Frost lawsuit, the firm could become aware of confidential
infonnation about FDIC practices, procedures, and policies and be tempted to use it against
FDIC in one of the matters adverse to FDIC .
0

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Ms. Breslaw stated that she knew of Gerrish & McCreary's involvement in the Corning
lawsuit because she was also the FDIC attorney responsible for the Corning PLS lawsuit.
She stated that this litigation involved claims against approximately 17 former Corning
directors and officers and that this case had been transferred to her from another FDIC
attorney after the lawsuit had already been filed. The former FDIC attorney had retained
Rose for the Corning lawsuit, and Webster L. Hubbell was the responsible Rose attorney with
whom Ms. Breslaw worked. Ms. Breslaw further stated that the only requirement that she
was aware of for hiring a law finn was that the law finn had to be included in the List of
Counsel Available or had to go through the application process to be added to the List. Each
time a law finn was selected for a new representation, the law firm would have to check for
conflicts of interest.
Ms. Breslaw said she only considered two firms to replace Gerrish & McCreary. She first
considered Wright, Lindsey & Jennings because of her previous experience working with that
finn on FDIC matters. However, she learned that Wright, Lindsey & Jennings had a conflict
of interest because they were representing someone who was adverse to Madison. She next
considered the Rose Law Finn because of the good work they were doing on the Corning
lawsuit. She considered only these two firms because they were the only Little Rock law
firms she believed capable of handling a complex accounting malpractice case. She
considered only local finns because of the associated travel costs and expense of using a more
distant firm.
Ms. Breslaw could not specifically recall, but it was her belief that in March 1989 she first
contacted Mr. Hubbell regarding Madison to have him conduct a Rose internal conflicts check
and evaluate whether the Finn could assume the litigation. She further stated that she
believes she would have explained the Gerrish .& McCreary conflicts to Mr. Hubbell and that
it was likely he would have known about Gerrish & McCreary's work on the Corning matter
due to his own involvement on the FDIC side. She did not know what action was taken by
Rose to conduct an internal conflicts check after her request. Ms. Breslaw informed us that
it was her practice to ask for a written response to the conflicts check, but she did not recall
receiving one from Rose. She added that she believes Mr. Hubbell told her that there was
no conflict and that she was too busy to note that she had not received a written confirmation.
Ms. Breslaw further said that there was no FDIC requirement at that time that she receive
a written confinnation.

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Agent's Note: Our investigation evidenced that in 1987 FDIC issued internal
policies and procedures for its managing attorneys relating to the retention of
outside counsel. One of these procedures was set forth in a memorandum from
FDIC Deputy General Counsel to the Regional Counsels , Liquidation Branch,
FDIC Legal Division, dated August 27, 1987. (See Exhibit 9.) This memorandum
transmitted internal procedures for the selection and termination of outside counsel.
Section g. of the memorandum states that FDIC attorneys should ask outside
counsel to perform a thorough conflicts check and to submit a written response.
This memorandum was not addressed to other branches of the Legal Division,
including the branch responsible for professional liability matters. In January 1988
Ms. Breslaw transferred to Washington, D.C., to work in the Professional Liability
Section (PLS) of FDIC Legal Division. Before transferring to PLS, Ms. Breslaw
was an attorney in the Liquidation Branch in the Dallas Region of FDIC Legal
Division when these internal procedures were issued.
Ms . Breslaw informed the OIG that she was not familiar with the internal procedures and did
not recall having received them in 1987. Ms. Breslaw also stated that in 1989, when FDIC
was given responsibility to manage savings and loan matters for FSLIC, all FDIC attorneys
already had full caseloads comprised of banking matters. She said the sheer volume of work
created a chaotic situation. According to RTC 's 1989 annual report, 175 institutions were
placed into conservatorship in February and March 1989, one of which was Madison.
Mr. Hubbell stated under oath to the OIG that he could not specifically recall conducting a
conflicts check related to Madison, but believes that he did. (See Exhibit 10.) During our
review of the Rose Law Finn's litigation files , we found a Rose memorandum dated
March 21, 1989, from Mr . Hubbell to all Rose attorneys in which he asked the Firm
members to conduct a conflicts check related to the Frost lawsuit. (See Exhibit 11.)
Mr . Hubbell also said that a Finn meeting was held to discuss whether or not to accept this
case. Some of the tax partners did not want to sue Frost because they did not want to be
adverse to Frost. They decided to accept the case because they wanted to form a relationship
with FDIC. Mr. Hubbell also informed the OIG that , due to the compensation arrangement
at the Finn , it was necessary that he actually perform the work in order to be compensated.

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Richard T. Donovan, Rose Law Firm partner, was interviewed by OIG special agents during
our investigation. (See Exhibit 12.) Mr. Donovan declined to be placed under oath during
the interview. Mr. Donovan stated that he recalls a Firm meeting that was held in March
1989 to discuss whether to accept the Frost lawsuit. Mr. Donovan said that the Firm
members agreed to accept the case. Hillary Rodham Clinton, a former Rose partner, was
also interviewed by OIG special agents during our investigation. (See Exhibit 13.)
Mrs. Clinton declined to be placed under oath during the interview. Mrs. Clinton said she
does not recall Mr. Hubbell conducting a conflicts check regarding the Madison litigation
although that was the normal practice.
Mr. Hubbell recalls that, after the conflicts check was completed, he telephoned Ms. Breslaw
to tell her that Rose had no conflicts and could accept the case. According to Mr. Hubbell,
this was a 15-second conversation wherein he told Ms. Breslaw that there were three issues
that were discussed, but that none of them amounted to a conflict of interest. The issues
discussed with Ms. Breslaw were that 1) some of the partners did not want to sue Frost
because some Rose clients were also Frost clients; 2) some Rose attorneys had done some
minor work for Madison; and 3) Mr. Hubbell's father-in-law was a Madison borrower and
had a lawsuit against Madison. He also believed that he did not tell Ms. Breslaw his fatherin-law's name during the conversation. Mr. Hubbell said that he did not discuss any of these
issues in detail during the telephone call.
Mr. Hubbell stated under oath to OIG special agents that he did not inform Ms. Breslaw that
the prior work Rose had done for Madison was before the Arkansas Securities Department
because, at the time of the telephone call, he was not aware of the ASD representation. (See
page 37 of this report for details on Rose's representation of Madison before the ASD.)
Mr. Hubbell said he knew that Richard Massey, a Rose attorney, had done work for
Madison, but he thought this had been lending and collection work. Mr. Hubbell stated that
he did not have a lengthy discussion regarding these issues because he did not think any of
them were significant. He further said that he did not document anything in writing
concerning his conflicts check because Ms. Breslaw did not ask him to do so.
Ms. Breslaw stated to the OIG that she does not specifically recall Mr. Hubbell's calling her
back and telling her that Rose could accept the case. She also said that she does not believe
that Mr. Hubbell told her anything about Mr. Ward when he agreed to litigate the Frost
lawsuit because she believes she would have had Mr. Hubbell write her a letter explaining
the situation, which is what she did when the issue was raised in June 1989. Ms. Breslaw

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further said that she does not believe that Mr. Hubbell told her in March 1989 that Rose had
done any prior work for Madison, and she is fairly certain that he did not mention any work
Rose did for Madison before the ASD. We found no documentation in the Madison
Conservatorship litigation files or from Ms. Breslaw to substantiate this telephone call.
Mr . Hubbell explained that he believed Ms. Breslaw was replacing the Gerrish & McCreary
firrn because it had a conflict of interest. He said it was his understanding that Gerrish &
McCreary was being replaced because the firm was representing a client who was suing FDIC
in its corporate capacity . He did not think that Gerrish & McCreary was being replaced
because the firm was adverse to the Coming Bank Receivership. Mr. Hubbell did not inform
Ms. Breslaw about any Rose clients that he knew were adverse to a receivership or
conservatorship . He thought that FDIC treated each failed institution as a separate entity so
that the Firm could be adverse to FDIC regarding one failed institution but could also
represent another failed institution for FDIC. However, during the investigation we obtained
a copy of a Legal Services Agreement (LSA) related to the Coming Bank Receivership and
signed by Mr. Hubbell for the Rose Law Firm in December 1987. The LSA contained a
statement indicating that FDIC did not differentiate between its Corporate or Receivership
capacity with respect to conflicts. The LSA signed by Mr. Hubbell for the Rose Law Firm
states: "The Undersigned state and represent that they .. . have no professional or personal
interests adverse to or in potential conflict with the FDIC, (whether in its Corporate or
Receivership capacity), and are not otherwise ethically disqualified to represent the FDIC."
(See Exhibit 14.)
On or about March 24, 1989, Rose was retained and immediately began to represent FDIC
in the Madison litigation concerning the Frost lawsuit. An already existing LSA signed by
Mr. Hubbell on December 28, 1987, for the Coming Bank Receivership prevailed until an
LSA which was effective on October 3, 1990, was signed by Rose and FDIC for the Madison
Conservatorship. Rose continued to represent the Madison Conservatorship until this lawsuit
was settled in April 1991. The Frost lawsuit was the only matter Rose handled for the
Madison Conservatorship.

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CONFLICT OF INTEREST ISSUE RAISED WITH FDIC
Paul A. Jeddeloh, former FDIC Managing Attorney for the Madison Conservatorship,
provided a sworn statement to OIG special agents. (See Exhibit 15.) According to
Mr. Jeddeloh, soon after the March 1989 transfer of the Frost lawsuit to the Rose law Finn,
Sue Strayhorn, a former employee of both Madison and MFC who was working for the
Madison Conservatorship, raised concerns to him about a conflict of interest because of Mr.
Hubbell's family relationship with Mr. Ward. She informed Mr. Jeddeloh that she saw
Mr. Hubbell at Mr. Ward's trial against Madison, which took place in August 1988. He
further said that Ms. Strayhorn was noticeably agitated over Mr. Hubbell's involvement in
the Frost lawsuit and expressed concern over the possibility that information garnered from
the Frost lawsuit could be used against Madison in the Ward lawsuit. Mr. Jeddeloh stated
that he also discussed the Hubbell-Ward relationship with David Paulson, FDIC Managing
Agent for the Madison Conservatorship, and that Mr. Paulson had the same concerns as
Ms. Strayhorn. Mr. Jeddeloh said that he then telephoned Ms. Breslaw to relay the concerns
expressed by both Ms. Strayhorn and Mr. Paulson. He said that during the telephone
conversation Ms. Breslaw advised him that 1) she wanted Rose for the litigation because they
were influential; 2) that it was not his case; and 3) he should mind his own business.
Mr. Jeddeloh was left with the impression that Ms. Breslaw did not think the Ward lawsuit
against Madison was a significant matter. Mr. Jeddeloh stated that he considered the conflict
of interest issue significant enough to write to Ms. Breslaw and believed that, by putting his
concerns in writing, she would deal with the situation appropriately. Mr. Jeddeloh forwarded
Ms. Strayhorn's information to Ms. Breslaw in a June 8, 19_89,letter for her resolution. (See
Exhibit 16.)
Ms. Strayhorn was interviewed and provided a sworn statement to OIG special agents. (See
Exhibit 17.) She said that during the time she was employed at Madison Financial
Corporation (MFC) Seth Ward was also employed at MFC, but she was not aware if he was
being paid by MFC or Madison. She further stated she was aware that Webster L. Hubbell
was Mr. Ward's son-in-law and that he was associated with the Rose law Finn·.
Ms. Strayhorn said that, soon after Madison was placed into conservatorship in March 1989,
the Frost lawsuit was transferred to Rose. When she learned that the litigation files had been
transferred to Mr. Hubbell, she became concerned that the FDIC personnel responsible for
the transfer were not aware of the relationship between Messrs . Hubbell and Ward and that
Mr. Ward's lawsuit against Madison was still pending. She stated that she informed Billy
Carroll, who was FDIC Managing Agent for Madison at that time, about the Hubbell-Ward

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relationship. Ms. Strayhorn remembers that Mr. Carroll called either Mr. Jeddeloh or Ms.
Breslaw to check on the situation. She could not recall being present during this telephone
call. However, she does recall being told that Mr. Hubbell would be acting as lead attorney,
but would not be arguing the case and that Rose attorneys Richard Donovan or Gary Speed
would be responsible for all aspects of the case.
Mr. Paulson was inteiviewed and provided a sworn statement to OIG special agents. (See
Exhibit 18.) He stated that he replaced Billy Carroll as Madison's Managing Agent in May
1989. He explained that a professional liability case that was ongoing when he arrived at the
Madison Conseivatorship involved Frost. The first information he received concerning a
possible conflict of interest with Rose came from Ms. Strayhorn. Mr. Paulson stated that
Ms. Strayhorn told him that Mr. Hubbell was related by marriage to either Seth Ward or Seth
Ward IT, both of whom were involved in litigation against Madison , and that Ms. Strayhorn
felt it was a conflict of interest for Rose. Mr. Paulson asked Kenneth K. Schneck, FDIC
Credit Specialist assigned to Madison, to look into the situation for him. He said that Mr.
Schneck was adamant that the Hubbell-Ward relationship was a conflict of interest. Mr.
Paulson believes that Mr . Schneck discussed the issue with Ms. Breslaw by telephone, but
that Ms. Breslaw did not agree there was a conflict. Mr. Paulson also recalls discussing the
issue with Mr. Jeddeloh . He further said he recalls correspondence from Ms. Breslaw and
Mr . Hubbell on the matter. Mr. Paulson explained that, after he and Mr. Schneck did not
get anywhere with Ms. Breslaw on this issue, they decided to write a letter to John
.O'Donnell , FDIC Savings and Loan Project Area Coordinator, and inform him of their
concerns. Mr. Paulson stated that once the letter was sent to Mr. O'Donnell, he had no
further involvement in this issue.
Ms. Breslaw infonned OIG special agents that her first recollection of being told about a
potential conflict for Rose with Madison was a letter she received from Mr. Jeddeloh after
Rose had begun work on the Frost lawsuit. She also stated she believes she received either
a letter or telephone call at about the same time from Mr. Paulson, who was Madison ' s
Managing Agent at the time. OIG special agents showed Ms. Breslaw the June 8, 1989,'
letter to her from Mr. Jeddeloh. After reviewing the letter, Ms. Breslaw questioned whether
the letter raised true conflict issues. Nevertheless , she stated that, after having received Mr.
Jeddeloh 's letter originally, she contacted Mr. Hubbell and discussed with him over the
telephone his relationship with his father-in -law. Mr. Hubbell explained to her that he did
not have a close relationship with his father-in-law. She specifically recalls that Mr. Hubbell
told her that he and Mr. Ward had different political affiliations and that he was not

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representing Mr. Ward. Mr. Hubbell did not inform her of any of his other relationships
with Mr. Ward. From this information, Ms. Breslaw concluded that there was no conflict
of interest. However, she requested that Mr. Hubbell write to Mr. Paulson to inform him
that he was not representing Mr. Ward. Mr. Hubbell wrote a letter (Exhibit 19) to
Mr. Paulson on June 28, 1989, stating that he had not represented Mr. Ward in his dispute
with Madison and had no intention of representing Mr. Ward in the future concerning any
matter relating to Madison. As a result of Mr. Jeddeloh's letter to her, Ms. Breslaw also
wrote a letter (Exhibit 20) to Mr. Paulson on June 23, 1989, stating that she was not inclined
to take the Frost lawsuit away from Rose because of Mr. Hubbell's relationship to Mr. Ward.
However, according to Ms. Breslaw, in his telephone conversation with her Mr. Hubbell
omitted addressing his business relationship with Mr. Ward. Mr. Hubbell also did not
disclose his business relationship with Mr. Ward in his June 28, 1989, letter to Mr. Paulson.
The Regional Counsel for the Chicago Regional Office in 1989 was Pamela A. Shea. During
our investigation, Ms. Shea provided OIG special agents with a sworn statement (Exhibit 21)
in which she recalled that Mr. Jeddeloh was the Managing Attorney for the Madison
Conservatorship. OIG special agents showed Ms. Shea the June 8, 1989, letter from
Mr. Jeddeloh to Ms. Breslaw, which indicates a copy was sent to Ms. Shea. After reviewing
the letter, Ms. Shea stated that she had no recollection of having received a copy of the letter
in 1989. Ms. Shea said that she had no supervisory responsibility for PLS matters and very
little interaction or communication with the Washington, D.C., Professional Liability Section.
Ms. Shea believes that Mr. Jeddeloh took the appropriate action by informing Ms. Breslaw
of the situation, and that no further action was required by her or Mr. Jeddeloh.
Concerns regarding the Hubbell-Ward relationship were raised again in an August 10, 1989, letter from Mr. Schneck to Mr. O'Donnell. (See Exhibit 22.) In a sworn statement provided
to the OIG by Mr. Schneck (Exhibit 23), he stated that he was assigned as Credit Specialist
at Madison in late June or early July 1989. Mr. Schneck said that his main duties were to
collect the loans and handle the credit side of the institution and that he had no responsibility
over the professional liability issues at Madison. Someone at the Madison Conservatorship,
whom he could not recall, informed him that Mr. Hubbell's father-in-law was Seth Ward and
that Mr. Ward had been a Madison borrower and was involved in litigation adverse to the
Madison Conservatorship.
Mr. Schneck also was concerned whether a conflict of interest existed because of Mr.
Hubbell' s relationship to Mr. Ward. In late July or early August 1989 Mr. Schneck attended

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a strategy meeting at the Rose Law Finn to discuss settling the Frost lawsuit. He stated that
during a break in the meeting he pulled Ms. Breslaw aside and informed her he felt the
Hubbell-Ward relationship was a conflict of interest and that, from a credit standpoint, it
would be best to replace the Firm. Mr. Schneck said that Ms. Breslaw responded by telling
him that it was no concern of his because it was a Professional Liability Section issue. He
further said that it was his impression that talking with Ms. Breslaw about this issue was not
going to do any good and, therefore, decided to put something in writing. Mr. Schneck
believed that Ms. Breslaw's opinion that there was no conflict was incorrect and that he
wanted to bring this issue to someone else's attention in the hope that she would be overruled.
Therefore, sometime after the meeting he wrote the letter to Mr. O'Donnell. He said he
wrote
. to him because Mr.. O'Donnell was next in the chain of command after Mr. Paulson.
Mr. Schneck does not know what action Mr. O'Donnell took after he received the letter, but
he later heard from Mr. Paulson that the Rose Law Firm was not going to be replaced. He
said that after hearing that, he decided not to waste any more of his time dealing with this
issue.
Mr. O'Donnell provided a sworn statement (Exhibit 24) to OIG special agents in which he
stated that his main duties as FDIC Savings and Loan Project Area Coordinator were to
review credit cases and handle the administrative responsibilities associated with the
. managing agents and credit specialists who were assigned to Arkansas savings and loan
institutions that were in conservatorship. He stated that he did not recall that Rose had been
hired to represent the Madison Conservatorship or the lawsuit that had been filed against
Frost. Mr. O'Donnell said that he did remember that Messrs. Paulson and Schneck were
assigned to the Madison Conservatorship. He further stated that he remembers discussing ·
with someone a conflict of interest situation involving Seth Ward, but he does not recall the
specifics of the conflict. After Mr. O'Donnell reviewed the August 10, 1989, letter, he stated
to OIG special agents that he does not recall receiving this letter. However, he said that,
since the issue involved the Legal Division, his normal procedure in 1989 would have been
to have made sure that someone in the Legal Division at the Chicago Regional Office was
made aware of the issue. Mr. O'Donnell stated that the legal aspects of the conservatorships
were handled by the Legal Division, and he had no responsibility in this area. He believes
he would have told Mr. Schneck to make sure that someone at the Chicago Regional Office
was aware of the issue. He said that he does not recall speaking with anyone about this
matter. Ms. Breslaw also was shown a copy of Mr. Schneck's August 10, 1989, letter, and
she stated that she does not believe the letter was sent to her when it was written. She further
said that she does not recall discussing this issue with Mr. Schneck.

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In addition to substantiating the personal relationship between Messrs. Hubbell and Ward, our
investigation evidenced that Mr. Hubbell also had been for several years a part owner and
corporate official of POM, Mr. Ward's company . (See page 34 of this report for details of
Mr. Hubbell's involvement with POM.) The Rose Law Finn and Mr. Hubbell had regularly
represented Mr. Ward and his company in legal matters. Neither the Rose Law Firm nor
Mr. Hubbell provided the OIG evidence that this information was communicated to FDIC or
the RTC.
Further, during interviews by OIG special agents, both Ms. Breslaw and various individuals
at Rose stated that the Finn set up a "firewall" to ensure that Mr. Hubbell did not learn about
issues from the Frost lawsuit that could affect his father-in-law. However, we found no
documents that confirmed the firewall existed or that Mr. Hubbell was prevented from
learning of developments regarding his father-in-law's case. Further, we found that
Mr. Hubbell billed the Madison Conservatorship on two separate occasions for reviewing the
Borod & Huggins report, which included information on loans Mr. Ward received from
Madison, which were the same loans that were later charged off by Madison, and his
employment with MFC. Ms. Breslaw informed the OIG that she knew of the firewall, but
that it was not imposed at her direction. Mr. Hubbell stated to the OIG that the firewall was
formed because of the concerns raised by the Madison Conservatorship staff. Mr. Hubbell
said there was nothing in writing relative to the firewall. He said that the firewall eventually
broke down because he needed to review documents that related to Mr. Ward in order to be
prepared for the Frost trial. Mr. Hubbell stated that initially he did not review the Borod &
Huggins report because it contained material on Mr. Ward. However, once he learned that
the defense attorneys had a copy of it he read the report. Mr. Ward's lawsuit against the
Madison Conservatorship was still ongoing when Mr. Hubbell read the Borod & Huggins
report.

FAILURE TO INFORM FDIC OF CONFLICTING REPRESENTATION UNIVERSAL SAVINGS
Universal Savings Association, F.A., Chickasha, Oklahoma (Universal), was placed into
Receivership by the Federal Home Loan Bank Board (FHLBB) on February 13, 1987. Prior
to being placed into Receivership, Universal filed suit in 1985 against First Investment
Securities Corporation (FIS) , which was being defended in the lawsuit by the Rose Law Firm.
The lawsuit alleged securities fraud against FIS and others . After Universal was placed into

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receivership FSLIC, as receiver for Universal, was substituted as the plaintiff in this action
in February 1987. During 1987 all of the parties agreed on a settlement; however, FSLIC
ultimately rejected the settlement due to unacceptable indemnification provisions. In January
1988 FSLIC filed a motion to return the cause of action to the docket for a trial date. In
February 1988, FIS, still being defended by Rose, filed a motion to enforce the settlement
agreement against FSLIC. These motions were never ruled on by the court, and the case
became essentially dormant in 1989. The FDIC Legal Division currently lists this as an open
matter and is attempting to reactivate the lawsuit.
Our investigation evidenced that Rose was informed as early as November 1986 by FSLIC
which wanted to know if the Firm was representing any client in litigation against or
otherwise known to have interests in conflict with FSLIC, either in its corporate capacity or
as receiver or conservator. We also obtained a November 3, 1988, Rose memorandum from
Vincent Foster to all Rose attorneys. (See Exhibit 25.) The memorandum states that the
Firm represents defendants in an action by a savings and loan that was put into receivership
by FSLIC. Further, Mr. Foster's memorandum states that under FSLIC policy, Rose
therefore was disqualified from receiving any new business while the Firm was representing
defendants adverse to a FSLIC receivership. Mr. Foster wrote to the FHIBB which was
responsible for FSLIC matters, and asked that the Firm not be disqualified from receiving
new business because of the conflict with FSLIC. By a November 21, 1988, letter, the
FHLBB informed Mr. Foster that Rose would be allowed to bid on new legal matters related
to savings and loan associations. (See Exhibit 26.) On February 28, 1989, Mr. Foster wrote
a letter to both FSLIC and FDIC requesting that Rose be considered for legal services arising
out of failed savings and loans in Arkansas. The FSLIC letter disclosed that Rose was
currently representing FIS against the FSLIC Universal Receivership; the FDIC letter did not.
In addition to being informed of FSLIC policies regarding conflicts of interest, in December
1987 Mr. Hubbell was sent the FDIC's Guide for Legal Representation. The Guide
containing a section regarding conflicts of interest was sent to the Firm in connection with
its representation of the Corning Receivership. (See Exhibit 1.) This section provides that
FDIC be promptly informed of a representation of a client adverse to FDIC. Also, the
Coming Bank LSA signed in December 1987 prohibited the Firm from having any
professional or personal interests adverse to or in potential conflict with FDIC, whether in
its Corporate or Receivership capacity. In May 1990 FDIC and RTC issued joint guidelines,
which were sent to Rose concerning conflicts of interest. The guidelines do not differentiate
between FDIC' s various capacities, including its conservator, receiver and corporate capacity.

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Our investigation evidenced that Mr. Hubbell did not inform FDIC of Rose's representation
of FIS in 1989 when he agreed to represent FDIC in the Madison litigation. Mr. Hubbell
admitted during his sworn testimony to the OIG that he did not inform Ms. Breslaw that Rose
was representing FIS against the Universal Receivership. He stated that it was his belief that
FSI.lC and FDIC treated each receivership or conservatorship as a separate entity. Mr.
Hubbell further said that Rose would have a conflict of interest if the Finn was representing
someone against FSI.lC or FDIC in their corporate capacities.
In sworn testimony to the OIG (Exhibit 8), Ms. Breslaw said that Mr. Hubbell did not inform
her of the FIS representation. She further said that she believed that Rose's representation
of FIS against the Universal Receivership was a conflict of interest for Rose and that, had she
been informed of this matter, she would have brought it to the attention of her supervisor .
Ms. Breslaw stated that, in order for the Finn to represent the Madison Conservatorship, a
waiver for Rose related to the Universal Receivership would have been necessary.

WARD LAWSUITS AGAINST MADISON
Mr. Hubbell's father-in-law, Seth Ward, was hired in 1985 by James McDougal, President
of Madison's wholly owned subsidiary, Madison Financial Corporation (MFC), to represent
l¼FC in real estate transactions. Mr. Ward provided a sworn statement (Exhibit 27) to the
OIG in which he said that he received a salary of $25,000 per year from MFC and was to
receive a 10 percent commission on sales he arranged. In one such transaction, known as
the Castle Grande Development, Mr. Ward negotiated and signed for the purchase of $1.75
million of real estate for MFC from the Industrial Development Company (IDC). According
to information contained in the Borod & Huggins report, at that ti.me MFC had an investment
limitation of $600,000. Consequently, Madison loaned $1. 15 million to Mr. Ward, who
purchased part of the property, and MFC purchased the remainder of the property for
$600,000. The loan to Mr. Ward was made on a nonrecourse basis and, therefore,
Mr. Ward was not personally obligated to repay the loan, and Madison's sole security was
the property. Through an agreement with MFC, Mr. Ward was able to pay down the $1.15
million debt with proceeds from Castle Grande sales.
Mr. Hubbell stated to the OIG that he recalls Rose had represented both Mr. Ward and
Madison concerning the purchase of property from the IDC. He stated that at least one Rose
attorney attended the closing for this property on behalf of Mr. Ward and Madison .

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Mr. Hubbell said that he did not work on this matter and that he did not perform any legal
work for Madison while it was an open institution.
During the period October 1985 through July 1986, Mr. Ward and his son, Seth Ward II,
received several separate loans from Madison totaling approximately $1.9 million. The $1.9
mjllion figure includes the $1.15 million that Mr. Ward borrowed for the purchase of the
!DC property. At least two of the loans to Mr. Ward - one for $400,000.on March 31, 1986,
and another on June 6, 1986, for $70,000 - were charged off by Madison on October 31,
1988. Madison also charged off a third loan for $93,000 on September 30, 1987. During
its litigation of the Frost lawsuit, Rose obtained information concerning Mr. Ward's loans .
Mr. Ward filed suit in Circuit Court of Pulaski County, Little Rock, Arkansas on
September 2, 1987, against Madison and MFC, claiming . Madison failed to pay him
commissions of $300,000 plus interest on land he sold. Madison countersued Mr. Ward
claiming he owed .Madison $93,000. The jury entered a verdict for Mr. Ward, and a
judgment for $353,502 was entered against Madison on September 6, 1988. Madison and
MFC appealed the decision to the Arkansas Court of Appeals on October 6, 1988.
Mr . Alston Jennings, Sr., an attorney with the law firm of Wright, Lindsey & Jennings,
Little Rock, Arkansas, originally represented Mr. Ward in this case against Madison.
Madison was represented by the Mitchell, Williams, Jackson, Selig & Tucker law firin.
However, in March 1989, after Madison had been placed into conservatorship, Mr. Jennings'
law finn developed a conflict of interest regarding FDIC work and withdrew as counsel for
Mr. Ward. Thomas Ray, an attorney with Shults, Ray and Kurrus then became Mr. Ward's
attorney during the appeal. While the case was pending, the RTC and Mr. Ward entered into
a settlement agreement in April 1993 and, as part of the agreement, Mr. Ward paid the RTC
$325,000. This matter was concluded on May 10, 1993, when the United States District
Court, Little Rock, Arkansas, ordered all claims and counterclaims dismissed with prejudice
as a result of the settlement.

.

While Mr. Hubbell was handling the Frost lawsuit for the Madison Conservatorship and
during the appeal of Mr. Ward's lawsuit against Madison, Mr. Hubbell had several telephone
conversations with Mr. Ward's attorney , Mr. Ray, and received copies of significant briefs
and filings in this matter. Further, Mr. Hubbell also called Mr. Ward's former attorney,
Mr. Jennings, on or about October 26, 1989, and informed him of the dismissal of the
Madison appeal. After Mr. Hubbell called him, Mr. Jennings removed the funds from the

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Madison escrow account that had been established to cover Mr. Ward's judgment.
Mr. Hubbell confirmed during his testimony to the OIG that he received copies of documents
from Mr. Ray that related to the lawsuit, but did not give Mr. Ray any advice on this matter.
During our investigation we obtained the file and documents from Rose regarding Seth
Ward's lawsuit against Madison. One of these documents was a letter sent by David M.
Powell, Attorney, Wright, Lindsey & Jennings, to Mr. Hubbell on January 18, 1990,
regarding an indemnification agreement between Mr. Ward and the Wright, Lindsey &
Jennings law finn. (See Exhibit 28.) Mr. Powell's letter was sent to Mr. Hubbell during
the time Mr. Hubbell was handling the Frost lawsuit for the Madison Conservatorship.
Further, this letter enclosed a draft agreement slightly revising the proposed agreement
Mr. Hubbell had recently submitted to Alston Jennings, also with the Wright, Lindsey &
Jennings firm. The proposed letter agreement that was enclosed was also dated January 18,
1990, and it was from Seth Ward to Alston Jennings, Sr. According to the proposed letter,
RTC wanted the agreement as assurance that Mr. Ward would pay any final judgment entered
against him in favor of the RTC related to their ongoing litigation.
In a sworn statement (Exhibit 29) provided to the OIG by Mr. Powell, he said that in 1990,
he was a member of Wright, Lindsey & Jennings' Executive Committee and ·became involved
with an issue related to the removal of the escrow funds related to the Ward lawsuit. After ··
Mr. Jennings learned that the state court had dismissed Madison's appeal, Mr. Jennings
involved himself in releasing funds held in escrow at the Worthen Bank and delivering the
funds to Mr. Ward. According to Mr. Powell, RTC became extremely upset with Mr.
Jennings and his firm for what it perceived as his improper involvement in obtaining the
escrow funds. The proposed agreement resulted when RTC took the position that it was a - - ,.~
conflict of interest for Wright, Lindsey & Jennings to have anything to do with the Ward v.
Madison lawsuit and refused to give the firm any new work. Mr. Powell said that the firm
did not believe Mr. Jennings' actions constituted a conflict of interest, but wanted to resolve
the matter to RTC's satisfaction. The RTC wanted Mr. Ward to return the funds to an
escrow account, but Mr. Ward refused to do so . The RTC also requested that the finn pt.it
up collateral for the judgment amount in case the lawsuit was reversed on appeal. The
members of the finn decided not to put up collateral, but they agreed to enter into an
indemnification agreement with RTC stating the firm would be responsible for the judgment
if it was reversed and Mr. Ward refused to pay any judgment rendered against him.

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Mr. Powell said that he is not sure how Mr. Hubbell became involved in the matter, but
believes that Mr. Ward asked the firm to deal with his son-in-law on this issue. Mr. Powell
stated that he did not know whether Mr. Hubbell was just helping Mr. Ward because of his
family relationship with him or if Mr. Hubbell was actually advising Mr. Ward on how to
deal with this matter. Either Mr. Powell or Mr. Jennings contacted Mr. Hubbell concerning
the indemnity. Mr. Powell believes he drafted the original agreement and sent it to
Mr. Hubbell. He said that either Mr. Hubbell or Mr. Ward made changes to the agreement.
Mr. Powell recalls that a few drafts went back and forth before they agreed on a statement.
Mr. Powell provided the OIG with a copy of the signed January 18, 1990, agreement. (See
Exhibit 30.)
Mr. Jennings also provided a sworn statement to the OIG regarding this matter. (See
Exhibit 31.) He stated that he thought Mr. Ward needed to have Mr. Hubbell review the
draft indemnification agreement because Mr. Ward was in an adversarial position with
Wright, Lindsey & Jennings and needed representation. He did not recall whether he
suggested that Mr. Hubbell represent Mr. Ward on this issue or if Mr. Ward suggested that
Mr. Hubbell review the agreement. Mr. Jennings believed that another reason Mr. Hubbell
became involved was that Mr. Ward did not want to incur any additional legal fees.
Mr. Jennings further said that he did not want to place Mr. Ray in the middle of this issue
because it was a potentially awkward situation, since Mr. Jennings had recommended that
Mr. Ray handle Mr. Ward's appeal.
Office of Inspector General special agents interviewed Mr. Ray and showed him a copy of
the January 1990 indemnification agreement. During his interview, Mr. Ray stated that he
had not previously seen the agreement and did not know of its existence. (See Exhibit 32.)
He further said that Mr. Ward did not ask him to represent him regarding this matter even
though he was representing Mr. Ward on the appeal. He could only speculate that Wright,
Lindsey & Jennings thought it would be easier to get Mr. Ward to sign the agreement if they
went through Mr. Hubbell rather than approaching him.
Negotiation of the indemnification agreement took place while Mr. Hubbell was litigating the
Frost lawsuit on behalf of the Madison Conservatorship. Mr. Hubbell became involved with
this matter after stating to FDIC in a June 28, 1989, letter (Exhibit 19) to the Madison
Conservatorship that he would not become involved in Mr. Ward's dispute with Madison.
Mr. Hubbell stated to OIG special agents that in January 1990, at the request of attorneys
from the Wright, Lindsey & Jennings law firm, he agreed to become involved in negotiating

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the indemnification agreement between the firm and his father-in-law. Mr. Hubbell did not
believe his involvement in this agreement was contrary to his June 1989 letter to the Madison
Conservatorship because he did not think of this as being involved in the lawsuit, rather, he
saw this as a private agreement between Mr. Ward and Wright, Lindsey & Jennings. Mr.
Hubbell acknowledged to OIG special agents that he did not inform Ms. Breslaw of his
involvement in this matter.
Seth Ward II, Mr. Hubbell's brother-in-law, also had active litigation against Madison at the
time it was placed into conservatorship. The litigation began in December 1988 when Mr.
Ward II filed a lawsuit against Madison alleging that Madison was charging him a higher rate
of interest on his $260,000 mortgage loan than was agreed upon. Mr. Ward II was
represented in this lawsuit by Judd Kidd, an attorney with the Little Rock law firm of Dodds,
Kidd, Ryan & Moore. After Madison was placed into conservatorship, FDIC removed the
case to federal court in March 1989. A hearing was held in January 1990 in United States
District Court that granted Madison's motion for summary judgment and dismissed the case.
Had Mr. Ward II prevailed, the result would have been a loss of interest earned to Madison
in the amount of $28,654 over the life of the mortgage.
Seth Ward II stated to OIG special agents that Mr. Hubbell was not involved in his lawsuit
against Madison. He further stated that a personal friend, Judd Kidd, represented him, and
Mr. Hubbell did not advise him or Mr. Kidd regarding this lawsuit. (See Exhibit 33 for a
copy of Mr. Ward II's interview.)

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- 34 -

WEBSTER HUBBELL RELATIONSIDP WITH
AND REPRESENTATION OF POM, INC.
Mr. Hubbell had a longstanding business relationship with Seth Ward that was not disclosed
to FDIC. We contacted the Office of Secretary of State, State of Arkansas, and con.finned
that Seth Ward, as President, filed Articles of Incorporation for the Deta Corporation in
Arkansas on August 12, 1981. The application was signed by "Webb"Hubbell" acting as
incorporator, and using the address of the Rose Law Finn. On August 16, 1984, the name
of Deta Corporation was changed to POM, Incorporated, with the application for amendment
signed by Seth Ward as President and Webb Hubbell as Secretary. The stated business
purpose of POM was described as the manufacture of parking meters.
Mr. Hubbell and his wife owned five percent of POM's stock and the remaining shares were
held by Mr. and Mrs. Ward and Seth Ward II. Mr. and Mrs. Hubbell continued to hold
POM stock at the time Rose was hired by FDIC to handle the Madison litigation against
Frost. Mr. and Mrs. Hubbell subsequently deeded their shares to Seth Ward II in October
1989. Mr. and Mrs. Ward also deeded their shares to Seth Ward II during 1989. In
addition, we learned that Mr. Hubbell was Acting Secretary for the company from 1981 to
January 1987. POM records evidenced that Mr. Hubbell was the corporate counsel for the
company from 1981 through 1992, around the time Mr. Hubbell left Rose to become the
Associate Attorney General of the U.S. Department of Justice. Mr, Hubbell acknowledged
to the OIG that he incorporated Deta Corporation. He further stated that he was elected
secretary, and served in that capacity for many years until Mr. Ward II asked him to resign
because having to send him documents to sign was cumbersome. Mr. Hubbell also
acknowledged that he acted as POM's general counsel and performed legal services for POM
without charge. He said that he received no salary or dividends from POM and that he
received no money from Mr. Ward II when he deeded his POM stock to him in 1989. Mr.
Hubbell stated that, during the time he was litigating the Frost lawsuit, he did not inform
Ms. Breslaw that he was representing POM or that he had owned stock in the company.
While Rose was still litigating the Frost lawsuit, POM filed suit against Duncan Industries
Parking Control Systems Corporation of Delaware (Duncan Industries). The May 4, 1990,
complaint alleged a variety of issues, including patent infringement, false advertisement, and
monopoly or attempts to monopolize. Mr. Hubbell and the Rose Law Firm filed the
complaint and represented POM. This representation by Rose was also principally handled
by Mr. Hubbell. A trial began on November 6, 1991, and a verdict was rendered in favor

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of the defendant on December 3, 1991. In addition to representing POM in the 1990 lawsuit
against Duncan Industries, Mr. Hubbell and Rose represented POM as defendant and counterclaimant with respect to a patent infringement lawsuit filed June 26, 1992, by Duncan
Industries. Our investigation also evidenced that several Rose attorneys routinely represented
POM regarding legal matters. Mr. Hubbell, Richard Donovan, Richard Massey and Gary
Speed all performed legal services for POM in the 1980s. Messrs. Hubbell, Donovan and
Speed handled the Frost lawsuit for the Madison Conservatorship.

ROSE AND HUBBELL REPRESENTATION OF WARDS
Our investigation evidenced several instances in which Rose and its predecessor law firm,
Rose, Nash, Williamson, Carroll, Clay & Giroir, had represented Mr. Ward as early as
1975. For example, during December 1975, Mr. Hubbell represented Mr. Ward regarding
property tax payments. Other Rose attorneys represented Mr. Ward in 1976 regarding the
creation of a life insurance trust and litigation of a tax matter. Mr. Ward had a longstanding
relationship with the Rose Law Finn that spanned a period of time before, during and after
Rose litigated the Frost lawsuit for FDIC and RTC from March 1989 through April 1991.
We also found instances where Mr. Hubbell was involved with Mr. Ward regarding Madison
issues. We obtained from Rose a September 24, 1985, letter from Mr. Ward to James
McDougal, President, MFC. (See Exhibit 34.) This letter sets forth the terms of an
agreement between Mr. Ward and Madison concerning the purchase and resale of the
Industrial Development Company property. Mr. Hubbell was shown this letter during his
interview with the OIG. He stated that he did not draft this letter for Mr. Ward although he
may have seen it. He said that his father-in-law would visit his office and would occasionally
give his secretary, Martha Patton, handwritten notes to type. We also obtained from Rose
a December 11, 1986, draft letter, from Mr. Hubbell to H. Don Denton, Senior Vice
President, Madison. (See Exhibit 35.) The subject of the letter was two loans that Madison
had made to Mr. Ward. The text of the letter stated that Mr. Ward did not intend to pay off
these loans and, instead, offered a deed in lieu of foreclosure on the property that secured the
loans. These loans were later charged off by Madison and figured into the damage
assessment calculated for the Frost lawsuit. Mr. Hubbell was shown this letter and stated to
the OIG that his name at the bottom of the letter below the signature line was a typographical
error and that the letter should have been signed by Mr. Ward. He further said that his
secretary probably typed this letter for Mr. Ward from his handwritten notes and accidentally

AMl HICAN

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 - 36 -

typed his (Hubbell's) name at the bottom. Mr. Hubbell said that he did not represent Mr.
Ward regarding his dealings with Madison while it was an open institution.
We interviewed (Exhibit 36) Martha Patton who was Mr. Hubbell's secretary at Rose until
December 31, 1986. After reviewing the September 24, 1985, letter from Mr. Ward to
Mr. McDougal, Ms. Patton stated she believes she typed it because the type is similar to the
IBM typewriter she used at Rose and the second page is formatted in the style she used while
a Rose secretary. Ms. Patton also reviewed a copy of the December 11, 1986, letter and
stated that she believes she typed it because her initials are at the bottom and the type
resembles the IBM typewriter she used while at Rose. She further said that both letters
appear to be in her style of typing. She said she cannot recall Mr. Ward's handing her
handwritten notes to type for him, and she does. not think she ever saw Mr. Ward's
handwriting. Ms. Patton said she is sure that Mr. Ward never directly asked her to type
anything for him. She recalled that Mr. Ward was one of Mr. Hubbell's clients and that,
over the years, he had many businesses for which Mr. Hubbell did legal work. She also
recalled that Mr. Hubbell represented Mr. Ward on matters related to Madison, although she
could not recall any of the specific issues.

OTHER RELATIONSHIPS BETWEEN HUBBELL AND WARD
At the time Mr. Hubbell accepted the engagement for the Madison Conservatorship, he was
indebted to his father-in-law regarding real estate he had purchased from him. Seth Ward
and his wife, Yvonne, sold property located in Little Rock, Arkansas, to Webster and
Suzanna Hubbell on June 1, 1981. The Hubbells purchased the property for $200,718.81 and · - '~"
agreed to make monthly payments to the Wards over 14.5 years. The Wards granted the
Hubbells a warranty deed related to the property on January 31, 199 I. Mr. Hubbell stated
to the OIG that Mr. Ward had a mortgage on this property that he paid in full in the late
1980s or early 1990s. Once Mr. Ward paid the mortgage he deeded the property to the
Hubbells. However, Mr. Hubbell stated that he continued to pay on the note after Mr. Ward
deeded the property to him. He further stated that he currently owes the Wards
approximately $100,000 regarding this property. Mr. Hubbell said that he did not inform
Ms. Breslaw that he was indebted to the Wards at the time FDIC retained Rose to handle the
Frost lawsuit for Madison.

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18-1621-000350

 J{

- 37 -

ROSE REPRESENTATION OF MADISON BEFORE ARKANSAS
SECURITIES DEPARTMENT
We investigated whether Rose informed FDIC in March 1989 that the Finn was retained in
1985 to represent Madison before a state agency, the Arkansas Securities Department (ASD).
Our investigation evidenced that in April 1985 Rose was retained to represent Madison before
the ASD in order to get approval of a proposed capitalization plan to allow Madison, an
Arkansas chartered savings and loan association, to issue preferred stock and engage in
brokerage activities. An April 30, 1985, letter from Rose to the ASD stated Rose's opinion
that it is permissible for an Arkansas savings and loan association to authorize and issue
preferred stock. (See Exhibit 37.) The letter was signed "Rose Law Finn" and identified
Hillary Rodham Clinton or Richard Massey as the responsible Rose attorneys for this matter.
On May 14, 1985, Beverly Bassett, Savings and Loan Supervisor; ASD, wrote Mrs. Clinton
concurring with Rose's opinion that Madison's proposed capitalization plan was not
inconsistent with Arkansas law, but did not authorize Madison to proceed with the issuance
of the stock. (See Exhibit 38.) This information was forwarded.to Madison by Mrs. Clinton
in a May 23, 1985, letter addressed to Mr. McDougal at Madison. (See Exhibit 39.)
On July 25, 1985, Rose responded to concerns raised by the ASD regarding Madison's
proposed brokerage activities by submitting additional information to the ASD.

(See

Exhibit 40.) This submission contained a letter from John Latham, Chairman and Chief
Executive Officer, Madison, in which he stated that the independent auditor's adjusting
entries for the year ended December 31, 1984, were included as Attachment 2. Madison's
independent auditor at the time was Frost & Company. Mr. Massey's submission also
included a letter dated July 24, 1985, from Michael D. Robinson, a Frost partner, to the
ASD, explaining the difference in the calculation of net worth under Generally Accepted
Accounting Principles versus Regulatory Accounting Principles (RAP).
Ms. Bassett
subsequently wrote to Mr. Massey on October 17, 1985, and informed him that Madison's
request to engage in brokerage activities was approved by the ASD on September 20, 1985,
conditioned upon Madison's meeting the Federal Home Loan Bank Board's minimum net
worth requirements by December 31, 1985. (See Exhibit 41.) Our investigation evidenced
an unda_ted handwritten memorandum to the file written by Ms. Bassett that stated that
Madison never completed the additional capitalization of the association.
application was never approved. (See Exhibit 42.)

Therefore, the

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During our investigation, Mrs. Clinton provided the OIG with an affidavit. (See Exhibit 43.)
She was subsequently interviewed by OIG special agents. (See Exhibit 13.) Mrs. Clinton
declined to be placed under oath for our interview. She stated that she was the billing partner
on this matter; however, the great bulk of the work was done by Richard Massey, who was
then an associate at Rose. She further said that Mr. Massey's specialty was securities law,
and that she was not involved in the day-to-day work on the project.
We also interviewed Mr. Massey who declined to provide us with a sworn statement. (See
Exhibit 44.) He stated that he was given the assignment to represent Madison before the
ASD in 1985. He stated that he worked on two issues: I) obtaining the authority from the
ASD for Madison to issue preferred stock, and 2) obtaining authority from the ASD for
Madison to operate a broker-dealer securities business they had purchased. Mr. Massey said
he used Mrs. Clinton's name in correspondence to the ASD because, at the time, he was an
associate, and it was a procedure at the Firm to name a partner as a contact. Mr. Massey
also stated to the OIG that, while working on the preferred stock issue, he relied on audit
information provided by Frost. He further stated that he neither endorsed the Frost
information nor reviewed the audit work Frost performed for Madison. Mr. Massey said that
in 1985 he had no reason to believe there was anything wrong with the Frost audits of
Madison.
Mr. Robinson was interviewed by OIG special agents (Exhibit 45) and stated that he is
currently the Director of Frost's Tax Division. Mr. Robinson said that Frost first was hired
by Madison as a result of a telephone call from John Selig, an attorney with the Little Rock
law firm of Mitchell, Williams, Selig, Jackson & Tucker. Mr. Selig requested Mr.
Robinson's assistance as a consultant regarding recapitalization issues for Madison.
Mr. Robinson further said that he could not recall the exact services Frost performed for
Madison. However, he did recall meeting with Messrs. Selig and Latham and Madison's
Chief Financial Officer, Greg Young, to discuss various recapitalization ideas. Mr. Robinson
stated that his primary contact for the recapitalization issues was Mr. Selig and that he did
not have any contact with any Rose attorneys regarding this issue. Mr. Robinson also said
that Frost prepared tax returns for Madison. He further stated that Jimmy Alford, a former
Frost Audit Director, was involved in performing audits for Madison and that the audit work
evolved from Frost's consulting work on the recapitalization. OIG special agents showed
Mr. Robinson the July 25, 1985, submission by Rose to the ASD, which included a July 24,
1985, letter that Mr. Robinson wrote to the ASD. After reviewing the letter, Mr. Robinson
acknowledged that he, or his staff, wrote the letter that he subsequently signed.

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 - 39 -

Mr. Robinson also reviewed Attachment 2 to the July 25, 1985, submission which contained
the adjusting journal entries. He stated that the adjusting journal entries could have been
prepared by Frost. He added that one of the journal entries included the statement "Client
will not book entry in accordance w/RAP" which lead Mr. Robinson to believe that the
adjusting journal entries could very well have been prepared by Frost.
Mr. Hubbell, in his sworn testimony to the OIG, stated that he did not.inform Ms. Breslaw
of the prior representation of Madison before the ASD because he did not know about it in
March 1989. He said he informed Ms. Breslaw that Rose did not have a conflict, although
they had done a small amount .of work for Madison. Mr. Hubbell stated that this was a 15second conversation with Ms. Breslaw and that he did not elaborate on what the earlier
Madison work had entailed. He stated that he became aware of the ASD representation only
after Rose had begun the Frost lawsuit. Once Mr. Hubbell became aware of the
representation before the ASD, he recalled discussing it with the other Rose attorneys who
were assisting him with the Frost lawsuit. He does not recall discussing this matter with Ms.
Breslaw, although he said that he could have. Mr. Hubbell stated that he did not see the
prior ASD representation as a significant issue because Rose was representing Madison in
both matters.
Mr. Hubbell was assisted in the Frost lawsuit by another Rose partner, Gary N. Speed.
During the FDIC OIG interview of Mr. Speed (Exhibit 46), he declined to be placed under
oath. Mr. Speed stated that he discussed Rose's 1985 representation of Madison before the
ASD with Mr. Hubbell when he began working on the Frost lawsuit. According to Mr.
Speed, Mr. Hubbell told him that he, Mr. Hubbell, had discussed the matter with Ms.
Breslaw and that there was no conflict of interest. Mr. Speed did not directly speak to Ms. - C,
Breslaw about the prior ASD representation.
In addition, Mr. Speed informed the OIG that Julie Baldridge, his wife at the time he was
working on the Frost lawsuit, and her former husband, Steve Smith, along with James and
Susan McDougal and others had purchased Madison in 1982. Ms. Baldridge reportedly sold
her interest in Madison less than one year later. Mr. Speed indicated he reported this
information to Mr. Hubbell. According to Mr. Speed, Mr. Hubbell told him that he
discussed this issue with Ms. Breslaw and it was determined that there was no conflict of
interest. Mr. Speed stated that he did not personally discuss this issue with Ms. Breslaw
because he believed the matter had been resolved. Mr. Hubbell stated that once Mr. Speed
started working on the Frost lawsuit Mr. Speed told him that his wife was a former Madison

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stockholder. Mr. Hubbell said he did not know why Mr. Speed did not mention this issue
in response to the conflicts check that was done prior to accepting the case. He stated that
since Ms. Baldridge's stock ownership did not overlap with the Frost audits, they determined
it was not a conflict of interest. He does not recall discussing this issue with Ms. Breslaw
but he said either he, Mr. Donovan or Mr. Speed could have done so. Ms. Breslaw informed
the OIG that she does not recall previously learning of the information regarding Mr. Speed's
wife, and does not recall ever discussing this issue with him. She further said that she could
not recall ever discussing any personal conflict of interest issue with Mr. Speed.
Our investigation also evidenced that Mrs. Clinton advised Madison in April 1985 that Rose
would credit legal fees against a monthly retainer and then bill Madison for whatever fees
might be in excess of the retainer at the end of each month. Madison records indicate that
at least eleven $2,000 payments to Rose were made in 1985 and 1986. By letter dated
July 14, 1986, from Mrs. Clinton to Mr. McDougal (Exhibit 47), she said that Madison was
relying on other law finns to provide ongoing representation and that Rose's representation
had been for isolated matters and had not been continuous or significant. Mrs. Clinton
further stated in the letter that Rose did not believe it appropriate to take a prepayment of fees
from Madison when Rose was only representing them on one matter and she returned the
$4,622.53 balance of fees in Madison's account.

FAILURE TO INFORM FDIC OF CONFLICTING REPRESENTATION PACE INDUSTRIES
Our investigation evidenced Rose was representing Pace Industries, Inc. (Pace), at the
direction of a former Frost partner during the time Rose was representing the Madison
Conservatorship against the same former Frost partner. Jimmy D. Alford, a vice president
and stockholder of Pace, hired Rose to represent the company regarding a labor dispute. Mr .
Alford was the former Frost partner who was responsible for the oversight of the Madison
audits that were the subject of the Madison Conservatorship ' s lawsuit against Frost and was
a named defendant in the Frost lawsuit. Mr. Alford informed the OIG in sworn statements
(Exhibit 48) that he left Frost and joined Pace in September 1988. Pace had been one of
Mr. Alford's audit clients since 1979. Also in September 1988 Mr. Alford and others at Pace
formed Precision Industries, Inc. (Precision) , to acquire the assets of Universal Die Casting,
Inc. (UDC) , which owned aluminum die casting plants in Little Rock and Malvern, Arkansas.
According to Mr. Alford , Rose had previously performed labor relations work for UDC .
Precision became a division of Pace in August 1990.

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Mr. Alford stated that in approximately July or August 1988 he and his business partners had
a discussion with Tim Boe, Rose partner, about hiring criteria to be used after Precision
acquired the UDC assets. Mr. Alford felt it would be a good idea to hire Rose to guide
Precision through the administration of rehiring the plant workers and renegotiating the
contract. Mr. Alford recommended hiring Rose to the Pace Board of Directors and the Board
approved the recommendation. In October 1988 Pace, through Precision, acquired the UDC
Little Rock and Malvern plants. In addition to his position with Pace,. Mr. Alford was the
president and chief operating officer of Precision and he owned five percent of the stock.
According to Mr. Alford, in approximately December 1988, several Precision employees filed
complaints with the U.S. Equal Opportunity Commission (EEOC) and Rose handled the
matter for Precision. He said the Rose attorneys who worked on this matter were Mr. Boe
and Jim Birch, another Rose partner. The EEOC matter laster approximately two and a half
to three years.
According to Mr. Alford, the next matter Rose was involved in was a National Labor
Relations Board (NLRB) complaint filed by the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW) in approximately April
1989. Mr. Boe originally estimated that the representation would cost between $25,000 and
$50,000. However, the case became much more complicated, and Precision ultimately paid
Rose $400,000 to $500,000 in legal fees.
On June 8, 1989, Rose, on behalf of Precision, filed an answer to the complaint with the
NLRB. Records further evidence that the hearing began on November 13, 1989, and that
Messrs. Boe and Birch appeared at the hearing on behalf of Precision. The hearing took
place over several sessions, and a final decision was reached in the UAW's favor on May 4,
1993. According to Mr. Alford, this case is currently on appeal.
Mr. Alford stated to OIG special agents that he has a vague recollection of discussing with
Mr. Boe the fact that Rose was representing him on one matter and suing him on another as
he was individually named as a defendant in the Frost lawsuit. He stated that Mr. Boe
replied that he had nothing to do with the Frost lawsuit. Mr. Alford also said that he
discussed the Precision matter with Peter Kumpe, the attorney representing Frost in the
Madison litigation. Mr. Alford did not recall Mr. Kumpe's reaction, but he believes that
Mr. Kumpe may have discussed this issue with the Rose Law Firm. Mr. Alford never had
any indication that hiring Rose for the Precision matter had any influence on the Frost
settlement. Mr. Kumpe said in a sworn statement (Exhibit 49) to the OIG that he did not see

AMFnlCAN

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 I - 2 - ·1· , 11

u.--- .

dm

- 42 -

how the defense could have used the Precision issue to help their case. He further stated that
he did not discuss the Precision matter with anyone at Rose, and he believes the Precision
representation had no impact on the settlement that was reached in the Frost lawsuit.
Mr. Hubbell initially stated to the OIG that he was very concerned about the Precision matter
when he became aware of it late in the Frost lawsuit. He said that he discussed the situation
with Messrs. Donovan and Speed. He also said that they did not discuss this with Ms.
Breslaw. Mr. Hubbell stated that, before they could decide what to do, the Frost lawsuit was
settled.
The OIG obtained Mr . Speed's handwritten notes regarding an April 1990 conference he had
with other Rose attorneys, including Jim Birch, who was working on the Precision matter.
On the bottom of page three of the notes Mr. Speed wrote , "Pat has worked a little bit on
Precision case, but Jim will cut her out of it." This indicates that Rose was aware of the
Precision case as early as April 1990, a full year prior to the settlement of the Frost lawsuit.
The FDIC's Guide for Legal Representation requires law firms to inform FDIC of conflicts
of interest as soon as the firm becomes aware of the conflict.
In a subsequent interview of Mr. Hubbell by RTC special agents, he was again questioned
about the possible conflict of interest regarding Rose's representation of Precision. (See
Exhibit 10.) Mr. Hubbell stated during the second interview · that he discussed the possible
conflict with Mr. Boe. Mr. Hubbell stated that Mr. Boe refused to withdraw from his
representation of Precision and he (Hubbell) refused to withdraw from his representation of
the Madison Conservatorship. He further said that Rose did not obtain consent from Mr.
Alford to represent him in the Precision matter while simultaneously representing the Madison
Conservators hip against him. Mr. Hubbell again admitted that Rose did not inform
Ms. Breslaw about this situation.
The Rose Law Firm refused to allow OIG special agents to interview Mr. Boe and Mr. Birch
regarding the Firm's representation of Precision.
Ms. Breslaw stated to the OIG (Exhibit 8) that she was not informed of Rose's representation
of Precision during the time they were litigating the Frost lawsuit. She believes that the
Precision representation was a conflict of interest for the Firm and that Rose was required
to inforn1 her of this matter. She further said that, if any of the Rose attorneys had informed
her of the Precision representation, she was required to request a waiver to allow the Firm

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- 'J

Ii! - '7!

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to litigate the Frost lawsuit. Ms. Breslaw stated that she would not have been inclined to
seek a waiver for Rose on this matter.

FORMER MADISON EMPLOYEE IIlRED BY ROSE
DURING FROST LAWSUIT
The Rose Law Finn did not inform FDIC that in October 1989 Rose hired Patricia J.
Heritage, who was a former Madison employee. Ms. Heritage began her Rose employment
prior to graduating from the University of Arkansas School of Law in December 1989. She
left Rose in June 1994. She joined Madison in June 1985 as an administrative assistant to
John Latham, the chief executive officer, and later became a collection officer. Ms. Heritage
left Madison in June 1987.
An attorney for Borod & Huggins interviewed Ms. Heritage, while she was employed at
Madison, twice during their investigation of Madison. The Borod & Huggins Investigative
Report includes memorandums of those interviews. (See Exhibit 50.) The report states that

Ms. Heritage created minutes of MFC board of directors meetings even though no such
meetings took place. The report also indicates that Ms. Heritage created the minutes at
Mr. Latham's direction. The report further indicates that Mr. Latham told her what to write
in the minutes and that he reviewed and made changes to her first drafts of the minutes.
Further, the report states that Ms. Heritage included approvals in the minutes for bonuses that
were previously paid. Mrs. Heritage stated that she began creating the minutes in February
1986 because Mr. Latham had received notice that the Federal Home Loan Bank Board
examiners would arrive on March 1, 1986, to examine Madison. Ms. Heritage said she
created the minutes for January 1985 forward. She said the minutes were presented to the - "' --·~
examiners as though they had been written shortly after each meeting, and the examiners
never knew the minutes were written after the fact.
During his sworn testimony to the OIG, Mr. Hubbell stated that he was not involved in
Rose's hiring of Ms. Heritage. He further said that Mr. Speed came to him after reviewing
the Borod & Huggins report and said that it contained allegations against Ms. Heritage and
she needed to be fired. Mr. Hubbell said that he then reviewed the Borod & Huggins report
to determine if any action was warranted. He stated that he discussed the information in the
report with Messrs. Speed and Donovan. He further said that after they looked into the
matter they determined that some of the allegations had no merit, and they decided not to fire
Ms. Heritage. Mr. Hubbell stated they did not discuss this matter with Ms. Breslaw.

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The OIG obtained Mr. Speed's handwritten notes regarding an April 1990 conference he had
with Ms. Heritage. Also present during the conference were Rose attorneys Richard
Donovan and Jim Birch. The notes indicated that they questioned Ms. Heritage about her
duties while she was employed at Madison. According to the notes, Ms. Heritage admitted
that she created the minutes for MFC. She further admitted that she knew the minutes were
created to satisfy the FHLBB examiners. The notes also state that Ms. Heritage admitted to
changing the cover sheet of a property appraisal from $82,000 to $182,000 at Mr. I..a.tham's
request. Ms. Heritage confirmed to the OIG that this interview took place.
As part of the Madison litigation, Ms. Heritage, who was a Rose attorney, was deposed on
February 27, 1991, by Steven Quattlebaum, an attorney who was defending Frost. In her
deposition, Ms. Heritage again stated that she wrote the minutes for MFC board meetings that
had not taken place. She also stated that, while she was a collection officer she was
instructed by Mr. I..a.thamnot to send past due letters to certain Madison borrowers. She said
there was a list of Mr. McDougal' s relatives and friends whom she was not supposed to
contact, and Seth Ward was one of the persons on the list.
Ms. Heritage was interviewed by OIG special agents during our investigation; She stated that
she did draft MFC minutes for several meetings at Mr. Latham ' s request. She further said
that, although she knew of no formal :MFC board meetings, Messrs. Latham and McDougal
frequently discussed MFC business. Ms. Heritage stated Mr. Latham told her to write the
minutes in order to reflect purchases of property by MFC and bonuses that were paid by
MFC. She said that Mr. I..a.thamasked her to write the minutes when he learned that the
FHLBB examiners were coming .to examine Madison. Ms. Heritage stated that she obtained
dates of property purchases and bonus payments and made sure that they were properly . -.•-•·~·
reflected in MFC minutes as having been authorized . She stated that in addition to creating
new minutes, she reviewed the existing MFC minutes and added authorizations if needed.
Ms. Heritage could not recall ever changing the value of an appraisal.
Ms. Heritage also informed the OIG that, during her first two years as a Rose attorney, she
specialized in labor law. Ms. Heritage said that Precision was a Rose client arid that she
handled equal employment opportunity lawsuits for Precision while a Rose attorney. She
further said that she knew of the NLRB case Rose was handling for Precision, but she did
not assist with this case. She was aware that Mr. Alford, a former Frost partner and a named
defendant in the Frost lawsuit, was employed by Precision, but said that she had no contact
with Mr. Alford regarding her representation of Precision. Ms. Heritage confirmed that she

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was interviewed in April 1990 by Messrs. Speed, Donovan and Birch, and she stated that she
learned that Rose was litigating the Frost lawsuit during this interview . She believed the
Rose attorneys interviewed her in anticipation that the Frost attorneys would depose her
related to her former Madison employment.
Ms . Breslaw stated to the OIG that she did not have any contact with Ms. Heritage until 1992
or 1993. She said she did not realize at that time that the Ms. Heritage -working at Rose was
the same Ms. Heritage who was a former Madison employee. Ms. Breslaw indicated that
she read the Borod & Huggins report in March or April 1989, and did not connect the Ms.
Heritage in the report with the Rose attorney three years later. Ms. Breslaw said that she did
not believe she was told that Ms. Heritage was deposed in connection with the Frost matter
at the time it happened. She was troubled to discover that a Rose attorney was deposed in
a Madison matter concerning actions she took while employed at Madison. Ms. Breslaw
further said that opposing counsel might have tried to use the situation to RTC's detriment
if the Frost lawsuit had not been settled. She stated that Rose should have specifically
advised her of Ms. Heritage's involvement with Madison and that opposing counsel sought
to depose her.
During our investigation, we interviewed several witnesses that provided us with additional
information related to Rose's legal services for the Madison Conservatorship or the HubbellWard relationship. See Exhibit 82 for copies of those additional sworn statements and
memorandums of interview.

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FIRST AMERICAN SAVINGS AND LOAN ASSOCIATION

BACKGROUND
The First American Savings and Loan Association, Oak Brook, Illinois, was placed into
conservatorship on April 14, 1986, by the Federal Home Loan Bank Board, and the Federal
Savings and Loan Insurance Corporation (FSUC) was appointed conservator. The law firm
of Hopkins & Sutter, Chicago, Illinois, was retained by FSUC to handle all of the legal
matters related to the First American Conservatorship. The FDIC was not involved in this
matter. Before being placed into conservatorship, First American filed suit on October 9,
1985, in federal court in Arkansas against Lasater and Company, a Little Rock securities
brokerage firm under contract with First American. The complaint stated that Lasater and
Company had made unauthorized trades for U.S. Treasury Bond futures contracts, which
caused First American to lose approximately $361,000.
Our investigation evidenced that Lasater and Company was owned by Danny Ray Lasater,
who allegedly had a relationship to the family of Hillary Rodham Clinton, a former Rose
partner. Mr. Lasater is an Arkansas businessman who has been involved over the years in
several ventures including the securities brokerage business. In 1982 he became the sole
shareholder of Lasater and Company, Inc., a securities brokerage firm he co-founded in 1980
with two partners. All of the stock of Lasater and Company was actually held by Mr.
Lasater's holding company, Lasater, Inc. On October 6, 1986, he sold all of the stock of
Lasater and Company to a corporation formed by two purchasers who pledged all of Lasater
and Company's stock as collateral for the note held by Lasater, Inc., and renamed the · - ''
company United Capital Corporation (UCC). One of these purchasers was president of
Lasater and Company. By September 1988 UCC had defaulted on its note to Lasater, Inc.,
and Mr. Lasater repossessed the UCC stock and took control of the brokerage. Mr. Lasater's
relationship to Mrs. Clinton and the Rose Law Firm was included in the scope of our
investigation. However , Mr. Lasater's other business ventures were not included in the scope
of our investigation.

0

On October 30, 1986, shortly after selling the stock of Lasater and Company, Mr. Lasater
pleaded guilty to a federal drug offense in Arkansas . He was convicted on December 18,
1986, of knowingly and intentionally conspiring to possess and to distribute cocaine and was
sentenced to 30 months' imprisonment. Mr. Lasater was paroled in November 1987, and in

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September 1988 he regained control of UCC . He received a conditional pardon from then
Governor Clinton in November 1990. Mr. Lasater requested the pardon to restore his right
to own and possess firearms for hunting puiposes.
In July 1986 Hopkins & Sutter hired Rose to handle the ongoing Lasater and Company
lawsuit on behalf of the First American Conservatorship, and the late Vincent Foster, Jr.,
former Rose partner, was the Rose partner who was in charge of the case. Hopkins & Sutter
hired Rose because both Rose and Lasater and Company were located in Little Rock,
Arkansas, and the lawsuit had been filed in court in Little Rock. Rose began litigating this
lawsuit in July 1986 and negotiated a settlement with UCC in the amount of $200,000. The
settlement was executed on November 19, 1987. This was the only matter Rose handled
related to the First American Conservatorship. Rose received fees and expenses totaling
$59,471. The FDIC had no involvement in the retention of the Rose finn in this matter.
However, FDIC is the successor in interest to FSLIC due to the enactment of FIRREA. See
Appendix B for a chronology of events concerning the First American litigation and Mr.
Lasater.

FIRST AMERICAN v. LASATER AND COMPANY
Antony Burt was the Hopkins & Sutter partner who was in charge of the First American
Conservatorship legal matters. In a sworn statement (Exhibit 52), Mr. Burt stated to OIG
special agents that he attended FSLIC's closing of First American, reviewed pending First
American litigation, and determined that the Little Rock law firm of Hardin & Grace was at
the time of closing representing First American in a lawsuit against Lasater and Company. · .,,:.
:..,:,
He further determined that Hardin & Grace was also representing J.R. Hodges, a large
borrower of First American and close associate of former Governor Dan Walker, the
controlling shareholder and a director of First American. Mr. Burt told the OIG he
concluded that Hardin & Grace should be replaced as outside counsel on the Lasater and
Company lawsuit. At that point, according to Mr. Burt, the FSLIC attorney assigned to the
First American Conservatorship either recommended or directed Mr . Burt to contact Rose
about representing First American against Lasater and Company. Mr . Burt stated that Rose
was FSLIC's primary law firm in Little Rock , Arkansas, at that time , and had a standard
contract with FSLIC.

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Our review of the records provided by Hopkins & Sutter regarding the Lasater and Compan
y
lawsuit disclosed no formal contract between Hopkins & Sutter and Rose . Mr. Burt
also
confim1ed that no fonnal contract existed. However, Hopkins & Sutter did provide
to the
OIG an unsigned July 11, I 986, engagement letter, addressed to Mr. Foster regardin
g the
Lasater and Company lawsuit. The engagement letter requested that Mr. Foster
act as
Counsel for FSLIC as Conservator in this action. Mr. Burt stated that Rose agreed to charge
FSLIC approved rates regarding the Lasater and Company lawsuit.
The documents provided to the OIG by Hopkins & Sutter and Rose containe
d no
documentation showing that a conflicts check had been conducted by Rose concerning
the
Lasater and Company lawsuit. Mr. Burt stated that he contacted Mr. Foster by telephon
e to
determine if Rose could handle the case. He discussed with Mr. Foster the Lasater
and
Company lawsuit and the parties involved. Mr. Burt could not recall specifically discussi
ng
any conflict of interest issues with Mr. Foster. However, he was under the impression
that,
if there was a conflict of interest or any reason why Rose could not handle the Lasater
and
Company lawsuit, he believed Mr. Foster would have informed him.
First American's original law firm, Hardin & Grace, and then the Rose Law Finn each
filed
multicount complaints on behalf of First American seeking actual and punitive damages
from
Lasater and Company. Our investigation evidenced that the actual loss to First America
n had
been estimated at approximately $361,000, and the final settlement in November 1987
was
$200,000. Allegations that the complaints sought up to $3.5 million apparently were obtained
by adding together separate counts and including punitive damages. We were advised
by the
First American Conservatorship ' s attorney, Mr. Burt, that he believes the Lasater
and
Company settlement was fair, based on the information that was available to him. He
also
stated that he believed that Mr. Foster and Rose were competent and professional
in the
representation of First American in the Lasater and Company lawsuit.

HILLARY CLINTON REPRESENTATION OF FIRST
AMERICAN AND RELATIONSIDP TO LASATER
In order to determine Mrs. Clinton's involvement in the Lasater and Company lawsuit,
we
obtained from Hopkins & Sutter and Rose the fee bills submitted by Rose related to
this
litigation. Rose submitted its fee bills directly to Hopkins & Sutter, which in tum submitte
d
the bills to FSLIC . A review of the fee bills showed that Rose personnel billed a total
of

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$59,471 for 467 hours for time spent on the Lasater and Company lawsuit. The following
is a breakdown of the Rose attorneys who worked on the Lasater and Company lawsuit, the
hours they worked, and the amounts billed for those hours:
• Vincent Foster, Jr., billing partner, 261 hours, $31,042.64
• B. Michael Bennett, associate attorney, 123 hours, $10,489.00
• Hillary Rodham Clinton, partner, 2 hours, $238.00
• Jerry Jones, partner, 0.25 hours, $25.50
See Exhibit 53 for a complete breakdown of the Rose personnel who worked on this case and
the hours that they billed. A review of the litigation records evidenced that Mr. Foster was
in Chicago, Illinois, on May 8, 1987; therefore, he was not available to sign and file the
documents with the court in Little Rock. A travel agency itinerary indicates that on May 6,
1987, Mr. Foster traveled to Chicago where he worked on several aspects of the litigation
on May 6, 7, and 8. We also located other documentation that supports that Mr. Foster was
in Chicago on these days. Further, we located documentation to support that on May 9,
Mr. Foster traveled from Chicago to Itasca, Illinois, which is just west of Chicago O'Hare
Airport, deposed a witness, and then flew back to Little Rock on the evening of May 9,
. 1987.
The fee bills showed that, during Mr. Foster's absence, Mrs. Clinton billed a total of two
hours on the Lasater and Company lawsuit. (See Exhibit 54.) According to the litigation
records, on May 8, 1987, Mrs. Clinton reviewed and signed three motions and one brief
already prepared related to the lawsuit. The documents signed by Mrs. Clinton were the
following:
• Motion to Amend Complaint with attached Amended Complaint (Exhibit 55)
• Motion for Continuance and Extension (Exhibit 56)
• Plaintiff's Motion to Compel Discovery (Exhibit 57)
• Brief in Support of Motion to Compel (Exhibit 58)

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All of these signed documents were filed with the court on May 8, 1987. The amended
complaint was signed and filed with the court by Mr. Foster on May 20, 1987. (See
Exhibit 59 for a copy of the amended complaint and a copy of the original complaint which
was filed by Hardin & Grace .) We compared the amended complaint that was submitted with
the Motion to Amend Complaint signed by Mrs. Clinton with the amended complaint signed
and filed with the court by Mr. Foster . We found the two amended complaints to be virtually
identical. Our review of the litigation files for the Lasater and Company lawsuit did not
disclose other court documents or correspondence signed by Mrs . Clinton.
Mrs. Clinton provided the OIG with an affidavit (Exhibit 43) and she was subsequently
interviewed by OIG special agents. (See Exhibit 13.) She declined to be placed under oath
during the interview. Mrs. Clinton stated to OIG special agents that she has no independent
recollection of the work she did on this lawsuit. It is her belief that, during part of the two
hours, she would have talked with Mr. Foster about the documents she reviewed and about
the case, but she has no recollection of such discussions. Mrs. Clinton further said that she
did not speak with Mr. Lasater concerning this lawsuit, and she was not involved in the
settlement negotiations. She stated that it was a Rose policy that motions and pleadings filed
with the court be signed by a partner rather than an associate. Therefore, she believes that
is why Mr. Foster asked her to file the documents on May 8, 1987, instead of asking
Mr. Bennett, the associate who was assisting him.
In order to determine Mrs. Clinton's involvement in the Lasater and Company lawsuit, we
interviewed the following:
• B. Michael Bennett, Former Associate, Rose Law Firm (Exhibit 60)
• Antony Burt, Partner, Hopkins & Sutter (Exhibit 52)
• Patrick Goss, Partner, Wright , Lindsey & Jennings (Exhibit 61)
• Danny Ray Lasater, Former Owner, Lasater and Company (Exhibit 62)
• Dan Moudy, Former In-house Counsel , Lasater and Company (Exhibit 63)

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The witnesses we interviewed who were involved in the First American litigation stated that
they could recall no involvement by Mrs . Clinton related to the Lasater and Company
lawsuit.
Mr. Bennett, a former Rose associate, was interviewed and provided the OIG with a sworn
statement. He stated that he joined Rose in July 1987 and began working on the Lasater and
Company lawsuit under the direction of Mr. Foster. Mr. Bennett does not recall working
with Mrs. Clinton regarding the lawsuit, and he does not know if she performed any work
on the litigation. It is his belief that Mrs. Clinton was aware of the Lasater and Company
lawsuit and may have discussed it with Mr. Foster. According to Mr. Bennett, both
Mr. Foster and Mrs. Clinton worked together as partners in Rose's litigation section.
However, Mr. Bennett said that he was not aware of any conflict of interest related to the
First American litigation.
Mr. Burt stated to OIG special agents that his primary contact at Rose was Mr. Foster. Mr.
Burt also recalls one telephone conversation with Mr. Bennett. Mr. Burt further stated that
he had no contact with Mrs. Clinton regarding the Lasater and Company lawsuit, and he
believes that Mr. Foster was the primary author of the documents signed by Mrs. Clinton.
Lasater and Company was represented throughout this litigation by the Wright, Lindsey &
Jennings law firm. The partner who handled the case was Patrick Goss. Mr. Goss informed
the OIG that Mr. Foster was the Rose attorney who handled the lawsuit and he could not
recall having any contact with any Rose attorney other than Mr. Foster. He further stated
that he did not speak with Mrs. Clinton regarding this lawsuit. Mr. Goss stated that, based
on his records, he was in Chicago on May 8, 1987, taking depositions with Mr. Foster; - :, i 0; 2
therefore, Mr. Foster was not available to sign the documents that were filed that day.
Mr. Goss said that Mr. Foster was the only Rose attorney who attended the taking of the
depositions. He further said that all of the settlement negotiations were between Mr. Foster
and himself.
Mr. Lasater was interviewed by OIG special agents in the presence of his counsel, Michael
Lax, of the law firm Lax, Vaughn, Pender & Evans . A statement was prepared, based on
the interview, and Mr. Lasater reviewed and made changes to the statement. However, on
the advice of his counsel, Mr. Lasater declined to sign and swear to the statement.
Mr. Lasater's counsel infonned the OIG that he had advised his client not to sign the
statement, due to the investigation currently being conducted by the Office of the Independent
Counsel.

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Mr. Lasater stated that Lasater and Company employed Dan Moudy as its in-house counsel,
and it was Mr. Moudy's responsibility to hire outside counsel to represent the company
.
Mr. Lasater said that Mr. Moudy hired Wright , Lindsey & Jennings to represent the company
regarding the First American litigation. He further stated that he was not aware of
the fact
that Rose replaced Hardin & Grace as counsel for First American. Mr. Lasater informed
the
OIG that he did not speak with any of the Rose attorneys regarding the First America
n
litigation. Further, he had no contact with Mrs. Clinton regarding this case and does
not
recall discussing this lawsuit with any Wright, Lindsey & Jennings attorneys. He said
that
Mr. Moudy was the Lasater and Company point of contact for all attorneys regardin
g this
lawsuit. Mr. Lasater stated that he was not named personally as a defendant in this lawsuit,
nor was he deposed. According to Mr. Lasater, this case was ongoing when he sold his
stock
in Lasater and Company in September 1986, and he had no input in the settlement process.
Mr. Moudy was interviewed and confirmed to the OIG that he was the in-house counsel
at
Lasater and Company and that he regularly received updates on the First American litigation
from Mr. Goss. Mr. Moudy also stated that he had no dealings with Mrs.
Clinton
concerning First American. He further said that he did not participate directly
in the
settlement negotiations, but was involved in approving the final $200,000 settleme
nt.
Mr. Moudy stated that he was aware of the friendship between the Clintons and Mr. Lasater.
We investigated Mr. Lasater's relationship with Mrs. Clinton and her family. Mr.
Lasater
stated that he was friends with the President and Mrs. Clinton, but has not spoken with
them
since 1986. Mr. Lasater said that he was close friends with Mrs. Clinton's brotherin-law,
Roger Clinton, and her mother-in-law, the late Virginia Kelley. Mr. Lasater also said
that
he made a contribution to President Clinton's 1984 campaign for Governor of Arkansa
s.
However, he has only been in President Clinton ' s presence a total of six times
(when
President Clinton was Governor of Arkansas) and he has had even fewer contacts
with
Mrs. Clinton.
Mrs. Clinton informed us that she met Mr. Lasater twice, did not consider him a personal
or social friend, and did not do any legal work for him or Lasater and Company. She
asked
her attorney , David Kendall, of the law finn Williams & Connolly , to research contribu
tions
made by Mr. Lasater, his companies or his family , to her husband ' s political campaig
ns.
Mr. Kendall indicated in an affidavit (Exhibit 51) that between 1982 and 1985 Mr. Lasater,
his companies or his family, contributed a total of $16,000 to President Clinton's political
campaigns for Governor of Arkansas, or referendum initiatives.

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We obtained from Mr. Lasater's attorney a copy of the flight logs for airplanes owned by
Mr. La.sater. The logs covered December 1980 through February 1986, when the last
airplane was sold. Our review of the flight logs indicated that then - Governor Bill Clinton
used a Lasater airplane on two occasions in 1984. (See Exhibit 64.) Governor Clinton's
name did not again appear in the log. However, the other entries in the passenger names
section of the log only list one name and the number of accompanying passengers.
Therefore, every passenger on the plane is not identified in the flight log-by name. We found
no entries naming Mrs. Clinton as a passenger, and she stated to OIG special agents that she
never flew on Mr. La.sater's plane.
During our investigation, we interviewed several witnesses that provided us with additional
information related to Rose's legal services for the First American Conservatorship. See
Exhibit 83 for copies of those additional sworn statements and memorandums of interview.

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LEGAL DIVISION REVIEW OF ROSE
RETENTION FOR MADISON
BACKGROUND
The FDIC Legal Division conducted a review of the retention by FDIC of the
Rose Law Finn
for the Madison Conservatorship lawsuit against Frost & Company. The
Legal Division
began its review in October 1993 in response to inquiries by the media
regarding Rose
conflicts of interest. The Legal Division's stated objective was determining
whether: 1)
Rose's prior representation of Madison before the Arkansas Securities Depart
ment (ASD)
constituted a conflict of interest; 2) the litigation against the Madison Conservatorsh
ip by Seth
Ward, the father-in-law of Webster Hubbell, the Rose partner in charge of the
Frost lawsuit,
was a conflict of interest; and 3) any action against Rose was warranted.
In late January 1994 Legal Division representatives met with staff of the
Senate Banking
Committee (Committee) and briefed them on their review. Subsequent! y,
during former
Acting Chairman (now Vice Chairman) Hove's confirmation hearings on Februa
ry 1, 1994,
regarding his reappointment to the FDIC Board of Directors, he told the Comm
ittee that the
Legal Division would soon complete its review. On February 17, 1994, the
Legal Division
released its report related to Rose, concluding that neither Rose's representation
of Madison
before the ASD nor Mr. Ward's lawsuit against Madison constituted a conflict
of interest and,
consequently, that no action against Rose was warranted. (See Exhibit 65 for
a copy of the
Legal Division report.)
The FDIC OIG conducted an examination of the Legal Division's review at
the request of
Congressman James A. Leach, Ran.king Minority Member (currently Chairm
an), Committee
on Banking and Financial Services. Congressman Leach expressed concern
that the Legal
Division had investigated itself and had implicitly determined that the Legal
Division and
Rose had done nothing wrong. Therefore, he requested that the OIG conduct
an independent.
review of the conflict of interest allegations against Rose and examine the Legal
Division's
determination that no conflict of interest existed. (See Exhibit 66 for a copy of
Congressman
Leach's request letter.)

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BASIS FOR LEGAL DIVISION .REVIEW
Jack D. Smith, Jr., Deputy General Counsel, Litigation Branch, FDIC Legal Division,
informed the OIG in a sworn statement (Exhibit 67) that , after he had received several
telephone calls in October 1993 from r~porters concerning the retention of Rose for the
Madison Conservatorship, he initiated a review of Rose's retention . Mr. Smith stated that
media inquiries were alleging two possible conflict of interest situations related to Rose.
Specifically, the reporters were questioning whether Rose informed FDIC of its prior
representation of Madison and of the Hubbell-Ward relationship, and wanted to know if either
of these situations constituted a conflict of interest for Rose. Mr. Smith asked Thomas A.
Schulz, Assistant General Counsel, Corporate and Special Litigation Section, FDIC Legal
Division, to conduct a review to determine the facts surrounding Rose's retention and what
information .Rose had provided to FDIC. John T. Downing, Senior Attorney, Corporate and
Special Litigation Section, FDIC Legal Division, assisted Mr. Schulz in this review.

PROCESS, PROCEDURES AND CRITERIA USED BY LEGAL DIVISION
During its review, the Legal Division reviewed the FDIC litigation file related to the Madison
lawsuit against Frost, other relevant FDIC and RTC documents, and documents the Legal
Division obtained from Rose. Representatives of the Legal Division interviewed current and · ·
former FDIC and RTC personnel who were involved in the Madison Conservatorship, and
current and former Rose attorneys who worked on the litigation. (See Exhibit 68, containing
write-ups prepared by the Legal Division of these witness interviews.) All persons were
interviewed by telephone except Mr. Hubbell, then Associate Attorney General, who was ·
interviewed in person by Messrs. Smith and Downing at his office in the U.S. Department
of Justice. The documents reviewed from outside FDIC were obtained voluntarily, and the
interviews were not conducted under oath.
The criteria used by the Legal Division for determining whether a conflict existed are
contained in the American Bar Association's Model Rules of Professional Conduct (Model
Rules) that the State of Arkansas adopted effective 1986.

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LEGAL DIVISION RESULTS AND HOW THEY WERE REPORTED
Mr. Downing, in a sworn statement (Exhibit 69) to the OIG, said that he prepared the initial
draft report regarding the review. The draft report was edited by several Legal Division
officials, including Messrs. Schulz, Smith and Douglas H. Jones, Senior Deputy General
Counsel, FDIC Legal Division. The draft report (Exhibit 70) was also discussed at the
February 9, 1994, meeting of the Outside Counsel Conflicts Committee (OCCC). The OCCC
is a joint FDIC-RTC committee that reviews requests for waivers of conflicts concerning
outside counsel who wish to represent FDIC or RTC. The OCCC is comprised of FDIC and
RTC attorneys. James Lantelme, Assistant General Counsel, Special Projects Section, FDIC
Legal Division, is one of its nine members. In a sworn statement (Exhibit 71) provided to
OIG special agents, Mr. Lantelme said that the OCCC was asked to review and discuss the
draft report. Messrs. Schulz and Downing attended the OCCC February 9, 1994, meeting
to answer questions when the draft report was discussed. According to Mr. Lantelme, the
members of the OCCC agreed with the conclusions reached by the Legal Division in its draft
report that there were no conflicts of interest.
The Legal Division found no documentation to show that any information was provided to
FDIC by Rose when it was retained in March 1989. Current and former Rose attorneys and
April A. Breslaw, the FDIC staff attorney who retained Rose, gave the Legal Division
conflicting accounts about what was disclosed. Richard Donovan, a Rose partner who
worked on the Frost lawsuit, told the Legal Division that Mr. Hubbell had advised
Ms. Breslaw of Rose's prior representation of Madison before the Arkansas Securities
Department. However, Mr. Hubbell told the Legal Division that at the time Rose was
retained, he was not aware of the ASD representation so he did not discuss it with
Ms. Breslaw. Mr. Hubbell also said that he believed he told Ms. Breslaw that Rose had done
a small amount of lending and collection work for Madison years earlier. Ms. Breslaw
informed the Legal Division that she had no recollection of the ASD representation being
raised by any Rose attorney.
The Legal Division concluded that it was unclear whether Rose may have orally disclosed the
prior Madison representation to FDIC. The Legal Division went on to state that the more
important question was whether a conflict of interest existed that should have been disclosed
by Rose before the Finn agreed to represent the Madison Conservatorship. The Legal
Division relied on the Model Rules of Professional Conduct as its criteria but did not include
FDIC Legal Division or FSLIC policies. The Legal Division concluded that Rose's

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representation of Madison before the ASD was not directly adverse to its 1989 representation
of the Conservatorship. Further, the Legal Division found no indication that Rose had done
any work on the Frost audit of Madison and no indication that Rose edited or participated in
the preparation of Frost material that was presented to the ASD by Rose. Therefore, the
Legal Division further concluded that the prior Rose representation of Madison did not
represent a conflict.
As to the involvement of Webster L. Hubbell, the Rose partner for Madison, in his father-inlaw's litigation against Madison, the Legal Division reported that:

• It was uncertain whether the Hubbell-Ward relationship was disclosed at the
time of retention, but that it was clearly discussed within three months after
the retention;
• The staff attorney (Ms. Breslaw) concluded that this relationship was not a
conflict of interest, and the Legal Division agreed with that assessment;
• Mr. Hubbell did not represent Mr. Ward in his lawsuit against Madison so
there was no conflict of representation [sic] directly adverse to the
Conservatorship, and Mr. Hubbell's representation of the FDIC did not
appear to have any effect on Mr. Ward; and
• Although there was no requirement that Mr. Hubbell's relationship with Mr.
Ward be disclosed, they wanted to emphasize that the better course would
have been for the attorney (Mr. Hubbell) to make full disclosure in writing
to the FDIC.
Representatives of the Legal Division also spoke by telephone to four outside experts in the
conflicts field and discussed the review results with them without divulging the identity of the
law fmn. All four experts agreed with the Legal Division's conclusion that neither situation
was a conflict of interest.

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RESULTS OF OIG INVESTIGATION OF LEGAL DIVISION REVIEW
The results of the OIG's investigation evidenced that in March 1989 Rose did not infonn
FDIC of either its prior representation of Madison before the ASD or Mr. Hubbell's business
relationship with his father-in-law, Seth Ward - a frequent borrower and consultant of
Madison Financial Corporation. Mr. Hubbell stated to the Legal Division during its review
that he attended the closing arguments in his father-in-law's trial against Madison, but had
no other involvement in the lawsuit. We found that although Mr. Hubbell was not his fatherin-law's attorney of record in Mr. Ward's lawsuit against Madison, the evidence is that
Mr. Hubbell:
• Involved himself in his father-in-law's
Conservatorship;

lawsuit against the Madison

• Was a part owner of POM, Incorporated, with Seth Ward and Seth Ward II
at the time he accepted the Madison Conservatorship engagement and until
October 1989 when Mr. Hubbell transferred his shares of stock to Seth
Ward II;
• Served as corporate counsel for POM from 1981 through 1992;
• Represented POM in an antitrust lawsuit in 1990 while Rose was still
representing the Madison Conservatorship in the Frost lawsuit; and
• Was indebted to his in-laws, the Wards, regarding property that he had
purchased from them in 1981.
With regard to Seth Ward, the evidence is that he had:
• Worked for the Madison subsidiary, Madison Financial Corporation;
• Won a $353,502 judgment against Madison that was being appealed by
Madison when it was placed into conservatorship; and

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• Received loans from Madison on which he defaulted and which were
included in the damage calculation being used in its lawsuit against Frost &
Company.
At the time the Legal Division conducted its review, they did not learn the information
concerning Mr. Hubbell, but they did learn the information concerning Mr. Ward. The Legal
Division's review concluded that neither Rose's representation of Madison before the ASD
nor the Hubbell-Ward relationship constituted a conflict of interest.
The Legal Division's opinion that Rose did not have a conflict of interest resulted from the
relevant information available to the Legal Division, and the Legal Division's decision to
limit its analysis to determine whether the Finn violated Model Rule 1.7. Our investigation
did not disclose that the Legal Division in reaching its decision failed to consider relevant
information that had been gathered. The Legal Division, however, did not include in its
evaluation of Rose other relevant conflict criteria, including the "appearance of impropriety"
standard or FDIC guidelines and policies. Douglas H. Jones, Senior Deputy General
Counsel, FDIC Legal Division, provided two sworn statements (Exhibit 72) to the OIG
during our investigation. Mr. Jones was the Acting General Counsel for FDIC Legal
Division from November 12, 1993, to January 3, 1995. Mr. Jones explained in his
statements that in 1989, the Legal Division was still developing the more global conflict of
interest guidelines that were ultimately adopted in 1990 as the "Guidelines of the FDIC/RTC
With Respect To Conflicts Of Interest." Therefore, the Legal Division used the conflict of
interest provisions in the Model Rules as its criteria and did not rely on other criteria from
FDIC contracts and policies. The Arkansas Supreme Court in 1990 recognized the continued
validity of the appearance of impropriety standard that had been codified before 1986 in the -:· •cz::.
Model Code adopted in Arkansas. The Legal Division review footnoted, but declined to
adopt this standard. Mr. Jones stated that the Legal Division did not want to hold Rose
responsible for something that occurred in 1989 based on a 1990 court decision. He further
said it was not clear that the facts in this instance arose to the level of an "appearance of
impropriety" under existing court precedent. The Legal Division also chose not to include
in its criteria the Guide for Legal Representation, which was in effect in 1989 and had been
provided to Rose as early as 1987. Among other things, the Guide (Exhibit 1) informed Rose
that FDIC:
• Expected the highest ethical standards in the finn 's representation;
• Required the fim1 to be free of conflicting interests:

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• Required any potential conflict to be discussed with the FDIC as soon as the
finn recognized its existence;
• Reserved the FDIC's right to decide whether an actual or potential conflict
exists; and
• Required the firm to list conflict of interest situations peculiar to the finn ' s
representation of the FDIC, in addition to actual or potential conflicts
covered by the Code of Professional Responsibility or applicable federal or
state provisions.
Our investigation evidenced that in 1987 FDIC issued internal policies and procedures for its
managing attorneys relating to the retention of outside counsel ; (See Exhibits 73 and 9.) One
of these procedures was set forth in an August 27, 1987, memorandum from FDIC Deputy
General Counsel to the Regional Counsels, Liquidation Branch, FDIC Legal Division. This
memorandum transmitted internal procedures for the selection and termination of outside
counsel. Section g. of the memorandum states that FDIC attorneys should ask outside
counsel to perform a thorough conflicts check and submit a written response. This
memorandum was not addressed to other branches of the Legal Division, including the branch
responsible for professional liability matters. In January 1988 Ms. Breslaw transferred to
Washington, D.C ., to work in the Professional Liability Section (PLS) of FDIC Legal
Division. Before transferring to PLS, Ms. Breslaw was an attorney in the Liquidation Branch
in the Dallas Region of FDIC Legal Division when these internal procedures were issued.
Ms. Breslaw informed the OIG in a sworn statement (Exhibit 8) that she was not familiar
with the internal procedures and did not recall having received them in 1987. She further
said that she was not aware of any written FDIC or RTC internal conflicts procedures prior
to May 1990; however, she was aware of the Guide when she hired Rose to represent the
Madison Conservatorship in March 1989. Other than the two 1987 policies and the Guide
discussed above, the Legal Division did not have extensive policies regarding conflicts of
interest in 1989. Further, the Legal Division's review did not address whether FDIC
procedures were followed when Rose was retained in 1989.
The conflicts of interest section is in Section B 1. of the Guide for Legal Representation, and
this section of the Guide did not specifically mention family relationships or prior
representation of financial institutions. However , Ms. Breslaw pointed out that this section
did state that at the time a law firm is retained it will be asked to provide a list of potentially

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conflicting representations and that FDIC reserves the right to decide whether an actual or
potential conflict exists. Ms. Breslaw believes that the Guide makes it clear that the law firm
should disclose anything that could be a potential conflict. She further stated that the Seth
Ward matter and the prior representation of Madison before the ASD might have been
considered potential conflicts or might have raised appearance questions. Given the overall
tone of the Guide, Ms . Breslaw expected a finn, including the Rose Law Firm , to err on the
side of broad disclosure.
Douglas A. Jones, FDIC Deputy General Counsel, informed the OIG in sworn statements
that, while some procedures for the retention of outside counsel had been established prior
to 1989, it became clear during the Legal Division's review that these procedures were not
consistently provided to Legal Division staff. Mr . Jones said that the Legal Division did not
locate the 1987 internal policies during its review. However, after reviewing the policies and
the Guide that was in effect in 1989, Messrs. Jones, Schulz and Downing, the attorneys who
conducted the review, stated to the OIG that the policies and Guide would not have required
law firms to disclose prior representation, such as the ASD matter, or relationships such as
the Hubbell-Ward family relationship. They further said that, had these policies been located
during the review, the report would not have been affected. Mr. Jones also stated, that even
though FDIC had a Conflicts Committee in 1989 and only the Conflicts Committee could .
issue a waiver, the Legal Division did not have a clear-cut policy defining conflicts of
interest. Mr. Jones said that each Legal Division branch was allowed to issue its own
policies until 1990. Mr. Schulz advised that there was no requirement that policiesissued
by one branch, be followed by other branches. Therefore, the Professional Liability Section
was not bound by the policies and procedures issued by the Liquidation Branch when the
Rose Law Firm was hired to represent the Madison Conservatorship. However, in 1990 the
Legal Division issued formal written procedures on the retention of outside counsel and
conflict of interest matters, and these procedures were applicable to all branches within the
Legal Division.
We found in Rose's records a copy of FDIC ' s Guide for Legal Representation which was sent
to Rose in December 1987 when it was hired by FDIC in connection with the Coming Bank
failure. This Guide was still in effect in 1989 when Rose was hired to represent the Madison
Conservatorship. Our review of Rose records also disclosed that, in addition to receiving the
Guide , Rose received in September 1988 a draft copy of the Outside Counsel Handbook
prepared by FSLICs Office of General Counsel which included conflicts policies. Further,
we found in Rose records a copy of a May 3, 1990, letter from Mr. Jones addressed to all

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FDIC and RTC outside counsel, stating that the Outside Counsel Conflicts Committee had
adopted guidelines regarding conflicts of interest and waiver of conflicts, and enclosing the
guidelines. (See Exhibit 74.)
The Legal Division stated in its report that when law firms are aware of prior representation
of institutions or family relationships they expect the firms to make full disclosure to FDIC.
However, the Legal Division did not criticize Rose for its failure to inform FDIC of
relationships and representations that could be viewed as relevant to FDIC in making a final
determination with respect to the retention of the Finn. Further, the Legal Division did not
criticize itself for Ms. Breslaw's lack of documentation regarding her discussions with Mr.
Hubbell or how she arrived at the conclusion there was no conflict of interest in the face of
concerns raised by other FDIC employees at the Madison Conservatorship. Mr. Jones stated ·
that the Legal Division was not more critical of Rose because it could not be certain that Rose
had not orally disclosed the ASD representation. He further said that the Legal Division did
not criticize Rose for not informing Ms. Breslaw that Mr. Hubbell's father-in-law was
involved in litigation with the Madison Conservatorship because, when she was informed, she
determined that it was not a conflict of interest. Therefore, the Legal Division concentrated
on determining if a conflict of interest existed that should have been disclosed.
Even though the Legal Division spoke to four outside experts concerning its review,
Mr. Smith explained to the OIG during our investigation that the experts were given no
written materials to review, were not paid, and were not asked to give FDIC a written
opinion. Mr. Smith added that the Legal Division report did not mention the consultations
because they did not believe it would be fair to the experts for the foregoing reasons. During
our investigation, we interviewed the four outside experts and they confinned that, they were
contacted by telephone, not given any written materials to review, and received no
compensation for their opinion. The experts also confirmed that based on the information
they were provided, they agreed with the Legal Division's conclusion that there was no
conflict of interest violation.
During our investigation, we informed the Legal Division attorneys who had conducted the
review of the business relationship Mr. Hubbell had with the Wards and of apparent instances
when Mr. Hubbell represented Mr. Ward concerning Mr. Ward's loans from Madison. The
attorneys who conducted the Legal Division review stated that they did not uncover these
facts during the Legal Division review. They were particularly concerned when they learned
that Mr. Hubbell involved himself in Mr. Ward's lawsuit against the Madison

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Conservatorship in January 1990. Mr. Schulz stated (Exhibit 75) that Mr. Hubbell should
have informed Ms. Breslaw about his involvement with Mr. Ward when she asked him to
represent the Madison Conservatorship. He also said that the January 1990 correspondence
regarding Mr. Ward's agreement with Wright, Lindsey & Jennings leads him to believe that
Mr. Hubbell was much more involved with Mr. Ward than the Legal Division discovered
during its review. He further said that he does not believe Mr. Hubbell should have
represented Mr. Ward regarding the indemnification agreement. Mr. Schulz stated that, had
he been the responsible FDIC attorney for the Frost lawsuit and learned of Mr. Hubbell's
involvement with Mr. Ward's lawsuit, he would have terminated the services of the Rose
Law Finn. He also stated that, had the Legal Division learned of Mr. Hubbell's relationship
with POM and his involvement with Mr. Ward's dealings with Madison, their report probably
would have stated that Mr. Hubbell should not have been involved in the Frost lawsuit.
All of the Legal Division attorneys involved in the Rose review provided the OIG with sworn
statements asserting that no influence was exerted on their review of Rose by any FDIC
official or anyone outside of FDIC. Messrs. Schulz and Downing stated that no restrictions
were placed on their review by anyone in the Legal Division or at FDIC. Mr. Downing in
his sworn statement to the OIG added that he was never prevented from speaking with anyone
or reviewing any documents that he believed were necessary to review. Messrs. Schulz and
Downing also said that they had no prior dealings with Rose and had never met any of the
Rose attorneys prior to their review. All of the Legal Division officials we interviewed who
were involved with conducting the review stated that they were not contacted by anyone from
the White House regarding the review. They further stated that they did not contact the
White House to discuss the review. In addition, they stated that they agreed, when the report
was issued in February 1994, with the determination in the Legal Division's report that no
conflict of interest existed.
During our investigation, we interviewed several witnesses that provided us with additional
information related to the Legal Divisions review of the Rose retention for the Madison
Conservatorship. See Exhibit 84 for copies of those additional sworn statements and
memorandums of interview.

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HOME FEDERAL SAVINGS AND LOAN ASSOCIATION
BACKGROUND
Home Federal Savings and Loan Association of Centralia, Illinois (Home Federal), filed a
lawsuit against United Capital Corporation (UCC) on March 14, 1988. Home Federal was
represented by Vincent Foster and Michael Bennett of the Rose Law· Firm. The lawsuit
alleged that UCC defrauded Home Federal by making unauthorized trades of U.S. Treasury
futures contracts using Home Federal's account. On March 16, 1989, while the litigation was
still ongoing, Home Federal was placed into conservatorship and FDIC became the
Conservator.

ROSE ATTORNEY SHEMIN RELATIONSHIP TO LASATER
During our investigation, we obtained draft letters prepared in August 1988 by a Rose
attorney, Kenneth Shemin, regarding possible representation of Dan Lasater. OIG special
agents interviewed Mr. Shemin (Exhibit 76) about this possible representation. On advice
from his counsel, Mr. Shemin refused to be placed under oath for our interview.
Mr. Shemin stated that he was approached in the summer of 1988 by Gerald Hannahs, a
mutual friend of his and Mr. Lasater's. According to Mr. Shemin, Mr. Hannahs explained
that Mr. Lasater was concerned about the viability of UCC since Mr. Lasater was UCC's
primary creditor. At that time, Mr. Lasater was acting as a consultant to UCC, and Mr.
Shemin gave him some advice. Mr. Shemin stated that he did not charge Mr. Lasater for his
advice and did not obtain a client billing number for Mr. Lasater related to this issue.
Mr. Shemin also informed the OIG that Mr. Lasater requested that he represent Mr. Lasater
in the sale of UCC's assets. Mr. Shemin further stated that he discussed possibly
representing a new entity that might be formed by the buyers and Mr. Lasater regarding
UCC's assets. Mr. Lasater was anticipating regaining control of UCC because UCC was no
longer making payments to Mr. Lasater regarding the 1987 sale of Lasater and Company to
UCC. Mr. Shemin stated that in July 1988 he attended a meeting held at Mr. Lasater's
residence to discuss the possible sale of UCC assets. After this meeting, Mr. Shemin
discussed the possible representation with Rose's Executive Committee and with Mr. Foster,
who was litigating the Home Federal lawsuit. In connection with this possible representation,

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Mr. Shemin drafted letters of waiver to the parties involved. He stated that he believed Mr.
Foster discussed the possible representation with King Betz, the president of Home Federal,
and that it was his understanding that Mr. Betz did not have a problem with Mr. Shemin's
possible representation.
Mr. Shemin stated that he ultimately decided he would not become involved in the sale of
UCC's assets because one of Rose's partners, William Bishop, objected to Rose having any
involvement with the potential buyers. Mr. Shemin said that Mr. Bishop had some
unpleasant experiences with the buyers in the past and did not want Rose to be involved with
them. According to Mr. Shemin, the decision not to become involved in the sale of UCC's
assets was made between August 20 and August 25, 1988. Since the decision was made not
to become involved in the sale of UCC's assets, Mr. Shemin did not know if Mr. Foster
drafted a waiver letter to Mr. Betz or Home Federal regarding this issue.

LASATER REGAINED CONTROL OF UCC
Mr. Lasater informed the OIG that the investors who purchased Lasater and Company and
renamed it UCC defaulted on their note. Therefore, in 1988 he began to take steps to
repossess the company.
He asked Kenneth Shemin to represent him regarding the
repossession of UCC; however, Mr. Shemin informed him that Rose had a conflict of interest
so he could not accept the case. Mr. Lasater could not recall what the conflict was, but Rose
was representing Home Federal in its lawsuit against UCC at that time. Mr. Lasater stated
that he then hired John Calhoun, an attorney with Hilburn, Calhoon, Harper, Pruniski &
Calhoun to represent him. Records provided by Mr. Lasater confirm that he reacquired
UCC's stock on September 14, 1988. According to Mr. Lasater, at that time UCC was
inactive, but there were approximately five or six lawsuits that were ongoing. Mr. Lasater
recalls that one of the litigation matters was a lawsuit filed against UCC by Home Federal.
Wright, Lindsey & Jennings was the law firm handling this case for UCC when he regained
control, but Mr. Lasater replaced them with Mr. Mars of Stanley, Harrington & Mars."
Mr. Mars was UCC's attorney when the Home Federal case was settled in 1989.

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Mr. Lasater stated that he signed the Home Federal settlement in his capacity as president of
UCC. He further stated that he was not personally involved in the settlement negotiations,
as those were handled by Messrs. Mars and Foster. According to Mr. Lasater, he had no
contact with any Rose attorney, including Mrs. Clinton, regarding the Home Federal lawsuit.
According to Mr. Bennett, during the settlement process between Home Federal and UCC
he was instructed by Mr. Mars to send drafts of the settlement agreement directly to Patsy
L. Thomasson, who Mr. Bennett believed was an officer of UCC. At that time, Mr. Bennett
did not know of any connection between Ms. Thomasson and the Clintons. He has since
learned that Ms. Thomasson is the Director, Office of Administration, at the White House.
We interviewed Ms. Thomasson under oath (Exhibit 77) regarding her involvement with
Lasater and Company. She stated that she met Dan Lasater through a mutual friend in 1975,
and began working for one of his companies in 1983. After approximately six months, Ms.
Thomasson began working as Mr. Lasater's assistant at his holding company, Lasater Farms,
Inc. This company was subsequently renamed Lasater, Inc., and was the holding company
for Mr. Lasater's business interests. Ms. Thomasson stated Mr. Lasater gave her his power
of attorney to run his businesses while he was serving his prison term in 1988. She said she
ended her affiliation with Mr. Lasater in August 1992 when she began working for the
Democratic Party of Arkansas .
Ms. Thomasson recalled that when Mr. Lasater reacquired control of UCC in 1988 there
were six or seven ongoing lawsuits, but she could not recall if the Home Federal case was
one of the open litigation matters. She could not recall reviewing the draft settlement
agreements related to Home Federal, but she stated it was possible that she did. Ms.
Thomasson stated that she did not speak with any Rose attorney, including Mrs. Clinton,
about the Home Federal lawsuit.
Ms. Thomasson said she first met President Clinton in 1968 during the Fulbright campaign
in Arkansas. She believes she did not meet Mrs. Clinton until she became the First Lady of
Arkansas. According to Ms. Thomasson, Mr. Lasater did not have a close relationship with
the Clintons. She described Mr. Lasater as being an associate of the Clintons and said that
he occasionally saw them at Arkansas events. She added that Mr. Lasater was close friends
with Roger Clinton and President Clinton's mother, the late Virginia Kelley. Our review of
the litigation files we obtained from Rose related to the Home Federal/DCC lawsuit did not
evidence that Mrs. Clinton was involved in this lawsuit. We found no pleadings signed by

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her, no correspondence authored by her, and the fee bill we reviewed did not list
Mrs. Clinton as having charged time to this case. We also obtained and reviewed a copy of
the court file related to this lawsuit. None of the pleadings or motions were signed by
Mrs. Clinton.
Our investigation evidenced that the settlement agreement between the Home Federal
Conservatorship and UCC was signed by Mr. Lasater, who used the .title, "President" of
UCC. The settlement agreement was also signed by a representative of the Home Federal
Conservatorship and was approved by FDIC in its capacity as conservator. The UCC paid
$250,000 to the Home Federal Conservatorship in 1989 to settle the lawsuit. Home Federal
had claimed damages in the amount of $1,264,336.
During our investigation, we interviewed two witnesses that provided us with additional
information related to Rose's legal services for the Home Federal C~mservatorship. See
Exhibit 85 for copies of those additional memorandums of interview.

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CONFLICT OF INTEREST ISSUES INVOLVING
ROSE LAW FIRM AND FSLIC
Our investigation evidenced the following instances when the Rose Law Finn and the Federal
Savings and Loan Insurance Corporation (FSLIC) were involved in resolving conflict of
interest issues regarding Rose while the Finn was representing FSLIC concerning a failed
savings and loan association. The Rose Law Finn was hired by FSLIC in November 1985
to handle all of the litigation matters arising out of the Guaranty Savings and Loan
Association Receivership, Harrison, Arkansas (Guaranty). The Rose Law Finn represented
the Guaranty Receivership until March 1993. During this period, FSLIC raised several ·
concerns over conflicts of interest at the Rose Law Firm .

FIRSTSOUTH,

F .A.

On January 28, 1988, FSLIC in its corporate capacity and in its capacity as Receiver for
FirstSouth, P.A., Pine Bluff, Arkansas (FirstSouth), alleged that the Rose Law Finn had a
conflict of interest regarding a partner of the finn and FirstSouth. The conflict concerned
transactions involving letters of credit and financing involving a company owned by Rose's
former managing partner, C. Joseph Giroir; FirstSouth; and other financial institutions. The
transactions, which took place in 1984, 1985, and 1986, allegedly resulted in a financial loss
to FirstSouth. Webster Hubbell was the Rose Law Finn partner who participated in the
negotiations with FSLIC . The FSLIC regarded Rose's involvement in the transactions as a
conflict of interest, and in order to avoid being sued by FSLIC, Rose entered into a
settlement agreement the terms of which are subject to a confidentiality provision between
FSLIC and Rose.

BOHEMIAN SAVINGS AND LOAN ASSOCIATION
Bohemian Savings and Loan Association, St. Louis, Missouri (Bohemian), was placed into
conservatorship by the FHLBB on January 30, 1986. As a result of the passage of the
Financial Institutions Reform, Recovery, and Enforcement Act in August 1989, responsibility
for this conservatorship was transferred to FDIC. Bohemian, while an open institution, was
party to a participation loan in which the Worthen Bank and Trust Company, Little Rock,

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Arkansas (Worthen), a longstanding Rose client , was the lead lender. The participation loan
was for a development project in Arizona , and Worthen retained local counsel in Arizona to
represent them on the project in addition to retaining Rose. Documentation obtained by the
OIG evidenced that a Rose attorney assisted the Arizona counsel with drafting loan
documents. The borrowers defaulted on the project, and Worthen, as lead lender, foreclosed.
The other participants, unsatisfied with the manner in which Worthen was managing the
project during the foreclosure, filed a lawsuit against Worthen in July 1987. The FSUC
Bohemian Receivership was a named plaintiff in the lawsuit. Worthen added Rose as a thirdparty defendant in December 1987. The lawsuit was settled in March 1989, and Rose paid
$200,000 as part of the settlement. Therefore, Rose was a third-party defendant in a FSUC
lawsuit while the Firm was representing FDIC regarding the Guaranty Receivership.

KNOX FEDERAL SAVINGS AND LOAN ASSOCIATION
Knox Federal Savings and Loan Association, Knox, Tennessee (Knox), was placed into
receivership by the Federal Home Loan Bank Board in November 1984. In December 1986,
FSLIC learned that Rose was a defendant in a pending lawsuit and that the Knox Receivership
might need to join. According to a FSLIC memorandum dated March 18, 1987, the lawsuit
alleged that Rose had represented Worthen, while knowing that Worthen had been accused
of securities fraud. The lawsuit also alleged that Rose attorneys engaged in malpractice and
fraud . The memorandum recommended that due to conflicts of interest, Rose be released
from representing the Guaranty Receivership due to the Knox and FirstSouth matters. (See
Exhibit 78.)

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REVIEW OF LEGAL PAYMENTS TO ROSE LAW FIRM

In support of our investigation, Office of Inspector General auditors reviewed all payments,
which totaled $1,049,930, to the Rose Law Firm (Rose or Firm) for legal services provided
to FDIC since July 1, 1987 and the Federal Savings and Loan Insurance Corporation (FSLIC)
since January 1, 1989. This includes all payments made for legal services related to the
failure of the Madison Guaranty Savings and Loan Association, McCrory, Arkansas, for
which FDIC hired the Rose Law Firm prior to the creation of RTC which in August 1989
assumed responsibility for the Madison litigation. In addition to Madison, the review covered
work performed by Rose related to the failed financial institutions of Coming Bank, Corning,
Arkansas; Guaranty Savings and Loan Association, Harrison, Arkansas; and Bohemian
Savings and Loan Association, St. Louis, Missouri. A limited review was also performed
of Rose billings related to its representation of the First American Savings and Loan
Association, Oak Brook, Illinois, Conservatorship for FSLIC from July 1986 through
November 1987. Rose was a subcontractor for the Hopkins & Sutter law firm of Chicago,
Illinois, during the First American litigation and received ten payments totaling $59,471.
Webster L. Hubbell, Rose partner, was designated by Rose as the FDIC billing attorney for
the Rose Law Firm on the Coming, Madison, and Bohemian representations, and Vincent
Foster, Jr., was the designated billing attorney for the Guaranty and First American
representations. According to the Rose Law Firm, the billing attorney is responsible for
understanding and complying with the provisions in the governing agreements and rate
schedules and to ensure the accuracy of all fees and expenses billed. The Firm is ultimately
responsible for the actions of its billing partners.
FDIC hired Rose in July 1987 to provide legal services arising from the failure of Coming
Bank. A Legal Services Agreement (LSA) signed by Mr. Hubbell on December 28, 1987,
established the authorized hourly rates and incorporated FDIC's Guide for Legal
Representation that provided the rules to be followed during the Firm's representation of
FDIC. The LSA provided that these terms would extend to any other employment or service
by the Firm to FDIC, or its representatives, as receiver or other fiduciary.
A new LSA signed by Mr. Hubbell was executed between the Rose Law Firm and FDIC
effective as of October 3, 1990. This LSA required the Firm to maintain all billing records
for at least three years from the billing date. This criteria was later amended by FDIC Guide

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for Outside Counsel dated December 1991, which was received by the Rose Law Finn on
January 27, 1992. (See Exhibit 79.) The Guide for Outside Counsel required that the Finn
retain copies of all bills and underlying documentation, including original timesheets and
other time and expense records for four years after payment. The October 3, 1990, LSA
incorporated these amendments by stating that FDIC periodically changes the Guide, and the
finn hereby expressly agrees to be bound by any such changes, modifications, clarifications,
and supplemental instructions. While the Finn was not required to have maintained billing
information prior to October 3, 1990, a substantial portion was made available for our
review.
As shown by the chart on the next page, the Rose Law Finn provided legal services related
to Corning Bank from July 1987 through October 1990. Rose received 14 payments totaling
$279,204 for legal services related to Corning Banl<. In March 1989 FDIC contracted with
the Rose Law Finn to provide counsel with respect to the Madison Conservatorship lawsuit
against Frost & Company, P.A. The FDIC Legal Division supervised the Madison litigation
on behalf of the RTC until the creation of the RTC Legal Division in September 1991. The
Rose Law Finn received 19 payments related to the Madison litigation totaling $375,380 with
the last payment being made by the RTC in April 1993. Legal services were also provided
by the Rose Law Finn related to Bohemian Savings from April 1992 through November
1992. The October 3, 1990, LSA was amended to include legal services related to
Bohemian. The hourly rates for professional services related to Bohemian were also amended
specifically for this litigation. Mr. Hubbell signed this amended Legal Services Agreement
in May 1992. Rose received six payments totaling $3,443 for work related to Bohemian
Savings.

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Rose Law Firm Periods of Legal Service
1986

1987
7/87

10/90

Corning
Madison
4/92

11/92

m:m

Bohemian
8/89

11/85

3/93

Guaranty
Legend: ~~~ Service Provided to FDIC/RTC
-

Service Provided to FSLIC

The Federal Savings and Loan Insurance Corporation (FSLIC) contracted with the Rose Law
Finn to provide counsel to FSLIC with respect to Guaranty Savings and Loan Association,
Harrison, Arkansas (Guaranty). The FSLIC contract with Rose was effective December 4,
1985, with several amendments extending the contract through September 30, 1990. When
FSLIC was abolished under the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA), the Rose Law Firm contract was transferred to FDIC. The FDIC
Legal Division informed the Firm that the legal services provided to FDIC would continue
to be governed by the existing FSLIC contract. Our review of Guaranty related invoices
began with those paid after January 1, 1989. We identified 191 separate legal cases for
Guaranty. The review covered total payments of $391,903 on 904 invoices submitted by the
Rose Law Firm.
Hopkins and Sutter hired the Rose Law Firm as a subcontractor to provide legal services on
behalf of the First American Conservatorship for FSLIC in July 1986. The Rose Law Finn
did not have a written agreement with Hopkins and Sutter stating billing rates or expense
terms related to their work as subcontractor on the First American litigation. The Finn also
advised that, due to the age of the litigation, they did not have timesheets related to work on

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First American. As such, our review of fees billed was limited to comparing the billing rates
to those agreed to between Hopkins and Sutter and FSLIC. Rose was able to locate vendor
receipts for $10,940 of $16,137 in expenses billed on First American. We compared vendor
information to the invoices submitted to Hopkins and Sutter to determine the accuracy of
expenses billed.
For payments authorized by FDIC, the Rose Law Firm submitted invoices for payment to the
FDIC managing attorney. The FDIC did not require outside counsel to provide supporting
. expense documentation with their billings. Therefore, the review of these billings by FDIC
managing attorney was limited to the information shown on the face of the bill. Due to the
workload of the FDIC Legal Division during the time these invoices were submitted , a
detailed review of the information on the face of the invoices was not generally performed.
Of the $156,286 in questioned costs3 from our review, $29,219 related to the rates billed,
miscalculated fees, and non-billable expenses that should have been questioned by FDIC
managing attorney when the invoices were submitted for payment.
The review .identified questioned costs totaling $156,286 related to payments for work on the
four institutions of which $78,391 related to Madison . Of the $156 ,286 in questioned costs,
Mr. Hubbell pleaded guilty to defrauding FDIC and RTC by falsifying expenses and inflating
fees totaling $41,995.
Mr. Hubbell's fraudulent claims to FDIC primarily involved
misrepresenting and .billing his personal expenses as legitimate business expenses on behalf
of FDIC. Mr. Hubbell pleaded guilty to one count of mail fraud and one count of tax
evasion related to fraudulent billings sent to FDIC and RTC. On June 28, 1995, Mr. Hubbell
was sentenced to 21 months in prison and ordered to make restitution in the amount of
$135,000 to the Rose Law Firm.
Our review of the Rose Law Finn's billing system disclosed that the Firm did not have the
internal controls necessary to safeguard the integrity of the billing process. Therefore,
Mr. Hubbell was able to misrepresent the expenses billed to FDIC. Mr. Hubbell was allowed
3

For purposes of this investigation , questioned costs are those that have been questioned by
the OIG with respect to a finding that:
l) the cost was not authorized by the contract;
2) at the time of the review, the cost was not supported by adequate
documentation ; or
3) the expenditure of funds for the intended purpose was unnecessary or unreasonable.

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•

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to sign Finn checks for expenses that would later be billed to clients without submitting
receipts or invoices verifying that the checks were actually written for the expenses and
clients identified by him. As a result, Mr. Hubbell was able to write Firm checks to pay for
his personal expenses and have the expenses billed to Rose clients without verification that
these expenses were legitimate business expenses.
Other questioned costs from our review related primarily to instances in which the Rose Law
Finn did not comply with the terms of applicable guidelines and agreements. Rose billed fees
such as those which were 1) unsupported or did not agree with original timesheets; 2) in
excess of authorized hourly rates; 3) duplicated or miscalculated; and 4) excessive related to
depositions. Also, expenses billed were questioned because they were 1) unsupported by
vendor invoices; 2) in excess of the Finn's cost; and 3) non-billable per the FDIC contract.
Tables 1 and 2 below summarize total payments and questioned costs from our review of
legal payments to the Rose Law Finn. The RTC Office of Inspector General has conducted
a separate audit of legal fees paid to the Rose Law Finn which included payments on the
Madison litigation. Questioned costs related to payments on the Madison litigation from our
review will be reported to the RTC Office of Inspector General for further action. Other
questioned costs related to Corning, Guaranty, and Bohemian will be reported to FDIC Legal
Division for collection. No questioned costs were noted from our review of billings on the
Rose Law Finn's representation of First American.

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Table 1

SUMMARY OF PAYMENTS REVIEWED

I
I DESCRWITON I MADISON ICORNrnG IGUARANTY I BOHEMIAN
FEES

I
I

TOTAL

I

$ 329,627

$ 197,636

$ 328,844

$ 2,984

$ 859,091

EXPENSES

$ 45,753

$ 81,568

$ 63,059

$

459

$ 190,839

TOTAL

$ 375,380

$ 279,204

$ 391,903

$ 3,443

$1,049,930

QUESTIONED
COSTS

$ 78,391

$ 57,762

$ 19,752

$

381

$ 156,286

21 %

21 %

5%

\

QUESTIONED
COSTS AS A
PERCENTAGE
OF PAYMENTS
REVIEWED

11%

15%

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~

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Table 2

SUMMARY OF QUESTIONED COSTS

I

I
CONDITION

MADISON

CORNING

l

Unsupported Fees

2

Unsupported
Fee Adjustments

9,823

14,601

3

Unauthorized
Billing Rates

6,808

4

Miscalculated Fees

5

Fees for
Depositions Not
Attended

$ 23,823

$

2,124

GUARAr~TY
$ 5,817

BOHE..'l\1IAN TOTAL
$

10

$31,774

375

156

24,955

11,452

2,440

0

20,700

6,556

0

0

0

6,556

4,982

0

0

0

4,982

Excessive Time
for Depositions

3,227

NIA

NIA

NIA

3,227

Multiple
Representation at
Depositions

1,533

0

NIA

NIA

1,533

8

Duplicate
Payments

4,571

1,539

7,864

0

11;91.4

9

unsupported
Expenses

12,911

13,850

1,730

44

28,535

10

Expense
Discrepancies

2.484

12,220

0

0

14,704

11

Increased Expenses

1.511

321

1.440

111

3,383

12

Non-Billable
Expenses

162

1,655

86

60

1,963

$ 78,391

$ 57,762

$ 19,752

$ 381

$ 156,286

6
7

TOTAL

NI A - Depositions were not reviewed for these conditions related to Coming, Guaranty and Bohemian

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UNSUPPORTED FEES (Table 2, Condition 1)
The Rose Law Finn received legal fees totaling $859,091 (Table 1) for time billed by
attorneys and other legal staff. However, the Finn could not provide original timesheets to
support $177,764 of the $859,091 in legal fees. Of the $177,764 which was not supported,
$145,990 was paid prior to the October 3, 1990, LSA. The remaining unsupported fees of
$31,774 (Table 2) related to work that was paid after October 3, 1990. Rose was required
to maintain this documentation for three years from the billing date based on the October
1990 LSA. The FDIC Guide for Outside Counsel then amended this contract to require
outside counsel to retain copies of all FDIC bills and underlying supporting material,
including original timesheets for at least four years after final payment.
Rose provided printouts of time billed from the Finn's billing database as support .for fees
billed to FDIC. We did not accept these as adequate support for fees billed. because
information entered to the Finn's database from original timesheets is subject to error and
modification by others without review by the employee who originally provided the service
and recorded their time. Therefore, we consider hours charged to FDIC that cannot be
verified by an original timesheet as unsupported.
The lack of timesheets during our review limited the extent to which we could verify the
validity and accuracy of FDIC legal fee payments to the Rose Law Finn. For example,
during trial preparation on the Madison litigation in August 1990, Mr. Hubbell billed a total
of 173 hours during a 22 consecutive day period at a cost to FDIC of $21,625. Timesheets
were not provided by Mr. Hubbell or the Finn for these billings. Therefore, we could not
determine whether fee adjustments were made to hours billed by comparing the original
timesheet to the invoice submitted for payment. Where timesheets were provided for our
review, numerous adjustments were found to have been made to Mr. Hubbell' s billings, as
shown in Condition 2, Unsupported Fee Adjustments.
The Firm responded that they agreed to keep "billing records" for three years from the billing
date based on the October 1990 LSA. The Finn maintained billing memos, automated billing
records, and copies of final bills to comply with this criteria. The Firm did not consider
timesheets as part of a client's billing records because they contain confidential and privileged
information about work being done for many clients. Rose further responded that, once they
received the FDIC Guide for Outside Counsel on January 27, 1992, they began maintaining
timesheets as part of their billing records, and none of the missing timesheets from the OIG
review relate to those required after January 27 , I 992.

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We do not accept the Finn's contention that the 1990 LSA requirement to maintain billing
records did not include original timesheets. The original timesheet of an employee
performing the work is the best record of the time for which FDIC should be charged for the
related service. It is the basis for the hours billed to FDIC and, as such, is considered a
billing record.

UNSUPPORTED FEE ADJUSTMENTS (Table 2, Condition 2)

The Rose Law Firm was paid $24,955 (Table 2) more in legal fees than was supported by
timesheets prepared by the employee providing the service. Further, Mr. Hubbell has
admitted that $4,650 of these adjustments were falsely made by him to cover personal
expenses he charged to the Rose Law Firm. For fees paid, we compared the hours shown
on the invoice submitted for payment to an original timesheet prepared by the attorney or
legal staff performing the service. By comparing the timesheets to the invoice submitted for
payment, we noted that 246 more hours were billed to FDIC than were shown on the
employees timesheets. According to the Firm, these adjustments were made by the billing
attorney during the billing process.
During the period of our review, Rose employees typically recorded the time that they billed
to FDIC and other Firm clients on timesheets; The time was then entered into the Firm's
automated billing databases. From these systems, Rose's accounting personnel generated
draft bills that identified all of the fees and charges that individual attorneys and
paraprofessionals allocated to Firm clients. Rose officials explained that the draft bills were
distributed to the partner who had been designated as the FDIC's billing attorney. The billing
attorney would then review the bills for accuracy and make adjustments based on their
understanding of the billing agreement with FDIC. For example, certain expenses were
written off or hours billed were adjusted because the billing partner believed the associate or
other employee may have underestimated or overestimated their time.
Most of the time adjustments between the original timesheets and final invoice identified
during our review occurred on the Madison and Coming litigation in which Mr. Hubbell was
the billing partner. On the Madison litigation, 47 adjustments increased hours billed and five
adjustments decreased hours billed, resulting in a net increase of 97 hours. On the Coming
litigation, 108 adjustments increased hours billed and eight decreased hours billed, resulting
in a net increase of 146 hours billed. However, on the Guaranty cases in which Mr. Foster

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was the billing attorney, no adjustments were noted. Differences found between timesheets
and final invoices related to Guaranty totaling three hours were determined to be the result
of a transcription error by a secretary when entering timesheet data into the billing system.
Where description changes were noted between the original timesheet and the final bill, we
attempted to verify the reasonableness of the time adjustments.
In some instances,
. adjustments were noted where additional description that did not appear on the timesheet was
added to the final invoice. For example, one Rose attorney ~ay have omitted a conference
with another Rose attorney from his timesheet which was added to the final invoice. When
we could verify that the second Rose attorney had recorded the conference on their timesheet,
we did not take exception to the adjusted hours.
The Rose Law Firm responded that FDIC's Guide for Outside Counsel recognizes that time
and expense records may be "adjusted" to ensure accuracy. Out of the thousands of time
records reviewed, the questioned adjustments are an infinitesimal percentage, approximately
1 percent of the hours originally recorded, and less than 2 percent of the dollars billed. As
with timesheets, the adjustments cover times for which the Firm was not obligated to retain
records. The Firm advised that they do not possess the necessary information to further
address this issue at this time.
We understand that time adjustments may occasionally be necessary to ensure accuracy as the
Firm contends. As noted above, we did not question time adjustments where additional
description of work performed was included on the final bill. We question the unexplained
adjustments because of the lack of evidence that additional work was performed to justify the
increased hours. Further, Mr. Hubbell's admission that he made false adjustments leads us
to question all unsupported adjustments related to the Madison and Coming invoices.

UNAUTIIORIZED BILLING RA TES (Table 2, Condition 3)
Our review identified that the Rose Law Firm billed hourly rates that were unauthorized and,
as a result, was overpaid $20,700 (Table 2) in legal fees. The hourly rates authorized by
FDIC were provided in the December 1987 and October 1990 Legal Services Agreements that
Rose executed with FDIC. The December 1987 LSA provided that any increase in rates must
be requested and approved in writing.
However, the Firm could not provide any
correspondence authorizing increased rates .

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Most of the unauthorized rates were related to hours billed on the Corning and Madison
litigation prior to the signing of the October 1990 Legal Services Agreement (LSA). We
compared rates billed to those authorized in the December 1987 LSA and noted numerous
instances where Rose billed hourly rates exceeding those authorized in the LSA. While the
December 1987 LSA was executed in connection with the Coming Bank litigation, it provided
that: "The representations made herein and the terms hereto shall also extend to every
employment or service by the Undersigned whether in connection with the Bank named
herein, or any other matter, and to any co-partner, associate or employee engaged by the
Undersigned to assist in any such matter." Therefore, we applied the rates authorized in the
December 1987 LSA for both the Corning and Madison litigation until execution of the
October 1990 LSA.
The Finn responded that the hourly rates stated in the December 1987 LSA should not apply
to the Madison litigation. The Finn contends that no written Legal Services Agreement
covered the Madison litigation, and the best evidence of the fee schedule is the invoices
received, reviewed, approved, and paid by FDIC - not recollections colored by time or other
factors. By cover letter Mr. Hubbell always submitted statements to the supervising attorney
for "review and comment" and regularly invited the reviewer to call if the statements were
inaccurate. Rose also contends that the Corning Bank LSA was with FDIC - not the RTC,
which was the Finn's client.
The Finn's contention that the rates stated in the Corning LSA should not apply to the
Madison litigation differs with statements Mr. Hubbell made to the FDIC OIG. Mr. Hubbell
stated that the terms and rates in the Corning LSA applied to the Madison litigation until the
October 1990 LSA was signed. He also did not recall ever discussing a rate increase with
anyone at FDIC during his time as billing partner. Further , the contention that the Corning
LSA was with FDIC and not the RTC is not valid because FDIC hired the Rose Law Finn
for the Madison litigation prior to the creation of the RTC.

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MISCALCULATED

FEES (Table 2, Condition 4)

Rose incorrectly calculated the fees for professional services on two of its invoices resulting
in overcharges of $6,556 (Table 2). During our review, we noted discrepancies between the
hours shown on the time summary and the fee detail infonnation reported on the same
invoice. The time summary shows the total hours each attorney and paraprofessional charged
during the entire billing period. The fee detail describes the services and hours billed by the
attorney on a daily basis. The time summary infonnation should equal a total of the fee
detail on the invoice. However, for two of the invoices submitted for the Madison litigation,
the time summary included 75 .5 hours over those included in the fee detail. The FDIC made
payments based on the totals included in the summary infonnation on these invoices and
therefore overpaid Rose for legal services provided during this billing period.
The Finn responded that they were not obligated to maintain billing records for the period
of time covered by the two invoices in question. They believe that. the error resulted from
an overlap in the billing periods when the time summary infonnation was generated. Unlike.
fee detail, summary information was created by hand. Since draft fee statements often
covered different billing periods than final invoices did, it is likely that the time summary was
not changed when the final bill was prepared.

FEES FOR DEPOSITIONS NOT ATTENDED (Table 2, Condition 5)
The Rose Law Finn charged $4,982 (Table 2) for Mr. Hubbell to attend eight depositions
related to the Madison litigation for which the official deposition transcripts produced by a . ., -'•"
court reporter did not indicate that he was present at any of those depositions. Mr. Hubbell
has admitted that he falsely billed fees totaling $3,648 related to these depositions.
The Rose Law Finn also charged $875 for Mr. Speed' s services in connection with two
depositions held on the same day. According to Firm billing information, Mr. Speed billed.
seven hours for "Depositions of Bill Blackwell and Lee Sorenson,11indicating to us that Mr.
Speed attended the two depositions. The deposition transcripts, however, did not indicate that
Mr. Speed was present at either of these depositions. Mr. Speed provided the OIG with a
sworn statement regarding his activities on the day in question. (See Exhibit 80.) In his
statement, Mr. Speed explained that he did not attend the depositions, but, instead, was
working on matters related to the ongoing depositions. We found Mr. Speed's explanation
plausible and have, therefore, decided not to question the related costs.

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EXCESSIVE TIME FOR DEPOSITIONS (Table 2, Condition 6)
We evaluated the reasonableness of the Finn's time charges to attend depositions. Rose
billed 522 hours for legal services provided on days Finn attorneys attended depositions. If
the Finn's bills did not specify the time spent attending depositions, we estimated such time.
We estimated that the Finn billed 368 hours to attend the 50 depositions for the Madison
litigation.
We then computed the length of the deposition from the beginning and ending times shown
on the deposition transcript, and added one hour for preliminary or closing matters not
recorded on the transcript. We then compared the length of the deposition to the actual or
estimated hours charged by Rose for attending the depositions. For 25 of the 50 depositions,
we determined that Rose attorneys charged 47.6 hours of excessive time to attend those
depositions. We did not include charges by Mr. Hubbell to attend depositions that he did not,
in fact, attend; these charges are already questioned in Condition 5. We included inthe47 .6
hours of excessive time 19. 6 hours for lunch breaks that appear to have been taken by Rose
attorneys during the course of various depositions. The Finn explained that lunch breaks
. were used for reviewing the morning session of a deposition and preparing for the afternoon
session. Our exceptions related to the 4 7. 6 hours of excessive time charged for attending
depositions total $3,227 (Table 2).

MULTIPLE REPRESENTATION AT DEPOSITIONS (Table 2, Condition 7)
Rose billed FDIC $1,533 for more than one Rose Law Finn attorney or paraprofessional to . .. ---,~
attend certain depositions at which only one attorney actively participated. The FDIC Legal
Division's Guide for Legal Representation (Guide) provided to the Rose Law Finn in 1987
states that outside counsel should avoid multiple representation at meetings or depositions.
The Guide further states that multiple representation at meetings should be discussed in
advance with the FDIC managing attorney. Of the 50 Madison depositions, more than one
attorney or paraprofessional billed for attending 17 depositions, not including the eight
depositions charged for but not attended by Mr. Hubbell. We determined that in eight of the
17 depositions, the Finn ' s multiple representation was unnecessary because either Mr.
Hubbell did not actively participate in the deposition, or the deposition primarily consisted
of questions by the opposing counsel.

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Mr. Hubbell , the Rose billing partner for the Madison litigation, stated to the OIG that he
does not recall obtaining approval or discussing the issue of multiple representation ·with
FDIC managing attorney, Ms . Breslaw . Ms. Breslaw stated that she did not recall discussing
deposition attendance with any Rose attorneys; however , she would disallow time charged by
Mr. Hubbell if he did not actively participate in depositions taken by Rose attorneys who, at
the time, were not experienced in conducting depositions. Ms . Breslaw further stated that
she would question multiple representation by Rose attorneys at those depositions primarily
consisting of questions by opposing counsel. The Rose Law Firm stated that multiple
representations were reasonable because the Firm's three attorneys were assigned different
roles in the Madison litigation, and these assignments were known to the FDIC managing
attorney .

DUPLICATE PAYMENTS (Table 2, Condition 8)
Our review identified duplicate payments made to the ·Rose Law Firm totaling $13,974
(Table 2) that the Firm had not reimbursed. We found 48 duplicate payments totaling
$10,641 to Rose for work related to Guaranty Savings. These involved instances where the
Rose accounting department resubmitted charges for lack of payment, and both the original
charge and the resubmission were paid by FDIC. Rose had identified and reimbursed FDIC
$2,993 of this amount prior to our review. However, $7,648 has not been returned to FDIC
by the Firm. Two duplicate payments were also identified on invoices related to the Madison
litigation. Both of these involved photocopy expense charges and totaled $878. The FDIC's
Guide for Legal Representation dated June 1989 cautioned firms not to include past due
invoice amounts in their fee bills, as such practices could cause duplicate payments.
We also noted 17 instances resulting in overpayments of $5,448 in which FDIC was billed
twice for services pexformed on the same day . Of the total duplicate entries identified, 11
occurred in the Madison litigation , five in the Coming Bank litigation and I entry was
identified in the Guaranty litigation. Ten of the 17 duplicate entries were billed within the
same invoice . (See Exhibit 81.) The remaining seven duplicate entries were same-day
services, but were billed on separate invoices. It appears that many of these duplicate fee
charges resulted from overlaps in the cutoff period used by the Finn for billing services .
The Rose Law Finn responded that they did not maintain the necessary documentation to
research these payments and that the records related to these ·payments were outside the
record retention guidance of FDIC.

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pvERSIGH

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UNSUPPORTED EXPENSES (Table 2, Condition 9)

The FDIC reimbursed the Rose Law Firm a total of $190,839 (Table l) for expenses such
as long-distance telephone calls , computer research, travel expenses , deposition expenses,
postage, photocopying and other miscellaneous expenses. However, the Firm could not
provide evidence from outside vendors to support $85,382 of the $190,839 which showed that
the expenses were incurred by the Finn on behalf of FDIC. Of the $85,382 in unsupported
expenses, $75,271 was paid prior to the October 3, 1990, LSA that required the Firm to
maintain billing records . However, Mr. Hubbell has admitted to the OIG that $21,740 of
these unsupported expenses were for his personal expenses that were falsely billed to FDIC.
In addition to the personal expenses of Mr. Hubbell, we question as unsupported an additional
$6,795 of the $85,382 which was paid after the October 3, 1990, Legal Services Agreement
requiring Rose to maintain billing records. Therefore , we question unsupported expenses
totaling $28,535 (Table 2).
The lack of third-party documentation supporting expenses limited the extent to which we
could verify the validity and accuracy of FDIC legal expense payments to the Rose Law
Finn . For example, we noted discrepancies between expense descriptions on the Finn's
internal billing memoranda and final legal bills submitted to FDIC. Therefore, we could not
verify that the costs billed for these unsupported expenses were on behalf of FDIC.
The Finn advised that documentation to support expenses incurred by their attorneys on
behalf of clients is not maintained in a central location. E.ach Finn attorney was responsible
for maintaining their own expense receipts. When Rose attorneys incurred expenses they
were permitted to obtain Rose Law Finn checks from the accounting department and to
address and sign the checks for expenses incurred on behalf of clients. In these cases, the
attorney or the attorney's secretary was required to note on the check a brief description of
the expense for which the check was written and which client should be billed. Until 1993,
the Firm did not require its attorneys to submit any type of receipt to the accounting
department to verify that the checks were actually written for legitimate business expenses
on behalf of clients .
Rose provided canceled checks or carbons of checks to the OIG as support for many of these
expenses. However, the checks did not contain sufficient third party infonnation for us to
verify that the amounts paid were for legitimate business expenses incurred on behalf of
FDIC. In addition, most of the canceled checks were made payable to the billing attorney,

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his personal credit card company, or cash and were not supported by invoices, detailed cash
register receipts, etc.
The Rose Law Firm reimbursed $12,895 of the $28,535 (Table 2) in unsupported expenses
in February 1995 based on an in-house review that the Finn conducted indicating that the
charges were inappropriately billed to FDIC by Mr. Hubbell. Of the $12,895 reimbursement,
$6,884 related to payments for Madison litigation and $6,01 I related to payments for Coming
litigation.

EXPENSE DISCREPANCIES (Table 2, Condition 10)
We identified $14,704 (Table 2) in expense discrepancies where expense descriptions changed
during the Finn's billing process. We noted numerous instances in which the expense
descriptions noted on the invoice submitted for payment to FDIC conflicted with the
descriptions on the checks and/or underlying billing records of the Finn. For instance, 13
separate expenses described on the Finn's internal billing documents as travel expenses were
stated as expert witness fees, court reporter, photocopy expense, computer research expense,
or deposition expense on the final invoice submitted to FDIC. For example, a $600
deposition charge on the Firm's check register appears to have been carried forward as a
computer research charge on the final invoice to FDIC. We identified 14 of these expense
discrepancies related to billings on the Corning litigation and 6 related to the Madison
litigation. Many of the checks were written to the personal credit card companies of Mr.
Hubbell or to Mr. Hubbell himself. Mr. Hubbell has admitted to the OIG that $10,957 of
these expense discrepancies related to his personal expenses and should not have been charged
to FDIC.
In February 1995 the Finn reimbursed $10,591 of these expense discrepancies to FDIC based

on information that the Firm had at that time indicating that the charges were inappropriately
billed to FDIC by Mr. Hubbell. Of the $10,591 reimbursement, $1,237 related to payments
for Madison litigation and $9,354 related to payments for Corning litigation.

AMFnlCAN

VERSIGH

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INCREASED EXPENSES (Table 2, Condition 11)

Terms of FDIC's LSA specified that the Firm will be reimbursed for necessary expenses at
the Firm's cost, not including overhead. During our review of expense documentation, we
noted that expenses were increased without explanation on one invoice and on others Rose
billed various expenses above the Firm's cost. As a result, Rose was overpaid by FDIC a
total of $3,383 (Table 2) for expenses including computer research, photocopying, facsimile
and long-distance telephone charges.
Related to the Madison litigation, one invoice was found to have been increased by a total of
$1,000 prior to billing FDIC. The increase was related to expenses on an interim billing
document reponing total expenses of $3,027. However, these same expenses were carried
forward to the invoice to FDIC totaling $4,027. A credit memo for the $1,000 in expenses
appeared on the Firm's interim billing document the subsequent month; however, the credit
memo was marked off by Mr. Hubbell and not included in the final invoice to FDIC. Mr.
Hubbell has admitted to the OIG that the $1,000 credit memo was deleted to cover personal
expenses he charged to the Rose Law Firm.
We determined that computer research was billed to FDIC at cost for each minute of research
performed plus an additional $1.00 per minute. As a result, FDIC was overcharged $795 for
computer research. The FDIC considers any charges over those of the research service as
overhead.
We also noted that photocopy charges related to Madison, Guaranty, and Bohemian were in
excess of those permitted in the governing agreements. The October 3, 1990, LSA specified
that photocopy charges would be reimbursed at a cost not to exceed $.15 per copy. In
January 1992, Rose received FDIC's Guide for Outside Counsel which amended this to $.08
per copy. Our review noted that Rose billed for photocopying at rates up to $.20 per page,
resulting in an overcharge to FDIC of $960.
Facsimile charges were billed at a rate of $2. 00 for the first page and $1. 00 for each
additional page. The Firm contends that these charges include their direct cost for longdistance service, cost of facsimile equipment, paper and other supplies for facsimile service.
The FDIC policy is only to pay for the cost of the long distance telephone rates associated
with the production of facsimiles. As a result of the Firm's billing practices, we determined
that Rose was overpaid by FDIC $443 for facsimile charges.

AMl HICAN

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Long-distance telephone charges billed to FDIC by Rose were increased $185 above the
Finn's cost. Rose used a phone system to bill clients for long distance telephone that
automatically added a surcharge to the programmed long distance rate. The surcharge
included in the programmed rate table is used to recover overhead costs to the Finn. The
FDIC's guidance specifies that the Finn will not bill for overhead.
Rose has agreed to reimburse $1,000 related to the credit memo deleted by Mr. Hubbell.
The Finn responded that they considered the other charges billed to FDIC to be direct costs
incurred by the Finn for services provided. However, they agree that similar charges are
consistently denied during audits of other law firms by the OIG.

NON-BILLABLE EXPENSES (Table 2, Condition 12)
Rose billed FDIC for expenses totaling $1,963 (Table 2) that were not reimbursable according
to FDIC's guidanc::eto the Finn. The majority of these expenses related to secretarial
overtime charges on the Coming matter totaling $1,421. The FDIC only pays for secretarial
overtime if required by the nature and timing of our projects. We did not find any
authorization for Rose to bill for this secretarial overtime. The other non-billable expenses
included charges for supplies, business meals, and parking. These should not have been paid
by FDIC per the .Guide for Legal Representation. Rose responded that the Finn does not
have, nor is it suppose to have, records showing authority for these charges under FDIC
record retention guidance. Mr. Hubbell stated to the OIG that he does not recall obtaining
authorization for the non-billable expenses.

AMFnlCAN

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REDACTED

STATUS OF INVESTIGATION
This investigative report is being forwarded to the Office of the Vice Chairman for
consideration and appropriate administrative action. The report is also being forwarded to
the newly appointed FDIC General Counsel for final determination with respect to the Rose
Law Finn's failure to comply with FDIC policies regarding the reporting of conflicts of
interest, including appropriate sanctions; the referral of professional misconduct to appropriate
authorities; overbillings by the Rose Law Finn; and FDIC Legal Division assessment .of
current policies and procedures.

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39

-

Office of Investigations
Office of Inspector General
Feaeral Deposit Insurance Corporation

REPORT OF INVESTIGATION
Title

ALLEGED CONFLICTS OF lNTEREST BY THE ROSE I.AW FIRM
Case Number
1094-096

Date
July 28. 1995

Distribution:

Andrew C. Hove, Jr., Vice Chairman
William F. Kroener, III, General Counsel

/

(

This report is FOR OFFICIAL USE ONLY and its disclosure to
unauthorized persons is prohibited. The report remains the property
of the Office of Inspector General and may not be reproduced wholly
or in part without the express written permission of the OIG.

AM HICAN

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GLOSSARY OF TERMS

ABA - American Bar Association

ARH - Allison, Rosenblum and Hannahs, Incorporated

ASD - Arkansas Securities Department
Duncan Industries - Duncan Industries Parking Control Systems Corporation
FDIC - Federal Deposit Insurance Corporation
FHLBB - Federal Home Loan Bank Board

Firm - Rose Law Firm, Little Rock, Arkansas
FIRREA - Financial Institutions Reform, Recovery, and Enforcement Act

First American - First American Savings and Loan Association, Oak Brook, Illinois
FirstSouth - FirstSouth. F.A., Pine Bluff, Arkansas
FIS - First Investment Securities
Friday - Friday, Eldredge & Clark, Little Rock, Arkansas

Frost - Frost & Company , P.A.
FSLIC - Federal Savings and Loan Insurance Corporation

Guaranty - Guaranty Savings and Loan Association, Harrison , Arkansas
Guide - FDIC Guide for Legal Representation
Home Federal - Home Federal Savings and Loan Association, ·Centralia , Illinois
IDC - Industrial Development Company

LCA - FDIC List of Counsel Available
LSA - FDIC Legal Services Agreement

Madison - Madison Guaranty Savings and Loan Association , McCrory, Arkansas
MFC - Madison Financial Corporation

AMl n

vi

1

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GLOSSARY OF TERMS

Model Rules - American Bar Association Model Rules of Professional Conduct
NLRB - National Labor Relations Board
OCCC - FDIC/RTC Outside Counsel Conflicts Committee

OIG - Office of Inspector General
Pace - Pace Industries, Incorporated

PLS - Professional Liability Section
POM - Park O Meter, Incorporated, Russellville, Arkansas
Precision - Precision Industries, Incorporated

Rose - Rose Law Firm, Little Rock, Arkansas
RTC - Resolution Trust Corporation
UAW - United Automobile, Aerospace, and Agricultural Implement Workers of America

UCC - United Capital Corporation
UDC - Universal Die Casting, Incorporated

Universal - Universal Savings Association, F.A., Chickasha, Oklahoma

AMERICAN

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  u. (WIMEIHMC -.- - 

 

FOIA RD 56806 (URTS 16302) Docld: 70104912 Page 104184621-000406

GOVERNING FEDERAL STATUTES
The following federal criminal and civil statutes relate to this investigation:
Title 18 United States Code, Section 1001
Statements or entries 1:enerally
Whoever, in any matter within the jurisdiction of any department or agency
of the United States knowingly and willfully falsifies, conceals or covers up
by any trick. scheme, or device a material fact, or makes any false, fictitious
or fraudulent statements or representations, or makes or uses any false writing
or document knowing the same to contain any false, fictitious or fraudulent
statement or entry, shall be fined not more than $10,000 or imprisoned not
more than five years. or both.

Title 18 United States Code, Section 1007
Federal Deposit Insurance Corporation transactions
Whoever. for the purpose of influencing in any way the action of the Federal
Deposit Insurance Corporation. knowingly makes or invites reliance on a false,
forged. or counterfeit statement, document, or thing shall be fined not more
than S1,000.000 or imprisoned not more than 30 years, or both.

Title 18 United States Code, Section 287
False, fictitious or fraudulent claims
Whoever makes or presents to any person or officer in the civil, military, or
naval service of the United States. or to any department or agency thereof, any
claim UJXlnor against the United States. or any department or agency thereof.
knowing such claim to be false. fictitious. or fraudulent. shall be imprisoned
not more than five years and shall be subject to a fine in the amount provided
in this title .

Title

18 United States Code. Section 1341. Frauds and swindles

Whoever, having devised or intending to devise any scheme or artifice to
defraud, or for obtaining money or property by means of false or fraudulent
pretenses, representations. or promises, or to sell, disJX)seof, loan, exchange,
alter, give away, distribute. supply. or furnish or procure for unlawful use any

AMLHICAN

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 -2 -

counterfeit or spurious coin, obligation, security, or other article, or anything
represented to be or intimated or held out to be such counterfeit or spurious
article, for the purpose of executing such scheme or artifice or attempting so
to do, places in any post office or authorized depository for mail matter, any
matter or thing whatever to be sent or delivered by the Postal Service, or takes
or receives therefrom, any such matter or thing, or knowingly causes to be
delivered by mail according to the direction thereon, or at the place at which
it is directed to be delivered by the person to whom it is addressed, any such
matter or thing, shall be fined not more than $1,000 or imprisoned not more
than five years, or both. If the violation affects a financial institution, such
person shall be fined not more that $1,000,000 or imprisoned not more than
30 years, or both.

Title 18 United States Code, Section 1343
Fraud by wire, radio. or television
Whoever. having devised or intending to devise any scheme or artifice to
defraud. or for obtaining money or property by means of false or fraudulent
pretenses. representations, or promises, transmits or causes to be transmitted
hy means of wire. radio, or television communication in interstate or foreign
commerce, any writings, signs. signals, pictures, or sounds for the purpose of
executing such scheme or artifice, shall be fined under this title or imprisoned
not more than five years. or both. If the violation affects a financial
institution. such person shall be fined not more than $1,000,000 or imprisoned
not more than 30 years. or both.

Title 31 United States Code. Section 3729 False claims
(a)

Liability for certain acts. Any person who:
(I)
knowingly presents. or causes to be presented, to an
officer or employee of the United States Government
or a member of the Armed Forces of the United
States a false or fraudulent claim for payment or
approval;
(2)

·

knowingly makes. uses, or causes to be made or
used. a false record or statement to get a false or
fraudulent claim paid or approved
by the
Government;

AMERICAN

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 -3(3)

conspires to defraud the Government by getting a false or
fraudulent claim allowed or paid;
* * *

(7)

knowingly makes, uses or causes to be made or used,
a .false record or statement to conceal, avoid, or
decrease an obligation to pay or transmit money or
property to the Government, is liable to the United
States Government for a civil penalty of not less than
$5,000 and not more than $10,000, plus 3 times the
amount of damages which the Government sustains
because of the act of that person, . . . .

AMLHICAN

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H. 1 p? 1- .- 41FOIA RD 56806 (URTS 16302) Docld: 70104912 Page 103184621-000410

CHRONOLOGY OF EVENTS

DATE

EVENT

.REPORT

REFERENCE
Aug. 1981

Seth Ward files Articles of Incorporation for Deta Corporation.
Webster Hubbell signs as incorporator using Rose Law firm address

p.34

Jan . 1982

James McDougal purchases majority interest in Madison

p.15

Feb. 1982

MFC incorporated as wholly owned subsidiary of Madison

p.15

Jan. 1984

FHLBB examination finds questionable investment and lending
practices at Madison

p.15

Mar. 1984

Worthen enters into participation with Bohemian SLA. Rose
represents Worthen

p.68

Jul. 1984

FHLBB executes Supervisory Agreement with Madison

p.15

Aug. 1984

Name of Deta Corporation changed to POM, Incorporated. Seth
Ward signs as President and Webster Hubbell signs as Secretary

p.34

Nov. 1984

Knox Savings and Loan Association fails; FSLIC inherits lawsuit

p.69

Mar. 1985

Frost issues unqualified opinion regarding Madison 1984 financial
statements (concludes that Madison is solvent)

p.15

Apr . 1985

Rose retained to represent Madison before Arkansas Securities
Commissioner re: preferred stock and broker/ dealer subsidiary

p.37

May 1985

Arkansas Securities Commissioner issues opinion - thrifts are
permitted to issue stock to raise capital

p.37

Oct. 1985

First American sues Lasater & Co. - complaint filed by Hardin &
Grace

p.47

Nov. 1985

Universal Savings Association sues FIS; Rose represents FIS

p.27

Dec. 1985

Guaranty Savings and Loan Association fails; FSLIC appointed
Conservator

p.68

Dec. 1985

FSLIC contracts with the Rose Law Firm to provide counsel for
Guaranty Savings and Loan Association Conservatorship

p.68

Jan. 1986

Bohemian Savings and Loan Association fails and FSLIC appointed
Conservator

p.68

Feb. 1986

Frost issues unqualified opinion regarding Madison 1985 financial
statements

p.15

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 Mar. 1986

FHLBB examination discloses unsafe/unsound practices, and insider
abuse by McDougal

p.15

Apr. 1986

FSLIC appointed conservator of First American

p.46

Jul. 1986

First American's outside counsel, Hopkins & Sutter, subcontracts
Lasater & Co. litigation to Rose

p.47

Aug. 1986

Cease and Desist Order signed: imposes severeoperating
restrictions; requires Madison to obtain new audit for 1985

p.16

Sept. 1986

At Supervisory Agent's request, Madison retains Borod & Huggins
to investigate internal abuses

p.15

Oct. 1986

Lasater sold stock of Lasater & Company; renamed UCC

p.46

Dec. 1986

Lasater convicted of Possession with Intent to Distribute Cocaine &
sentenced to 30 months in prison

p.46

Feb. 1987

FHLBB places Universal Savings Association, FA., into
Receivership

p.27

May 1987

Rose attorney Hillary Clinton performs two hours of work on
Lasater lawsuit

p.49

Jul. 1987

FDIC hires Rose Law Firm for legal services related to the failure
of Corning Bank

p.18

Aug. 1987

FHLBB examination concludes that Madison has been insolvent
since December 1985

p.16

Sept. 1987

Seth Ward files suit against Madison and Madison Financial
Corporation, claiming Madison failed to pay him commissions for
land he sold

p.30

Nov. 1987

UCC settles with FSLIC/First American for $200,000

p.48

Dec. 1987

Mr. Hubbell signs FDIC Legal Services Agreement on behalf of
Rose Law Firm to provide legal services for the failure of Corning
Bank

p.10

Dec. 1987

FDIC Guide for Legal Representation sent to Mr. Hubbell at the
Rose Law Firm

p.10

Dec. 1987

Worthen files claim against Rose Law Firm concerning Bohemian
representation

p.69

Jan. 1988

Rose settles FirstSouth allegation with FSLIC

p.68

Feb. 1988

Madison files suit against Frost for defective audits; retains Gerrish
and McCreary. Lawsuit seeks $10 million in damages

p.16

Mar. 1988

Borod & Huggins separates into three new law firms, one of which
is Gerrish & McCreary. The Frost lawsuit is transferred to the
Gerrish & McCreary law firm

p.16

AMERICAN

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 Mar. 1988

Home Federal Savings and Loan Association files a lawsuit against
United Capital Corporation. Home Federal is represented by the
Rose Law Firm

p.64

Mar. 1988

Home Federal is placed in conservacorship with the FDIC as
conservator

p.64

Aug. 1988

Rose Law Firm establishes a Conflicts Committee. Original
members include Webster Hubbell and two other partners

p.14

Sept. 1988

Seth Ward obtains judgement against Madison for $353,000 in
commissions owed by Madison. Ward represented by Wright,
Lindsey & Jennings. Madison appeals the decision .

p.30

Sept. 1988

Dan Lasater reacquires UCC's stock

p.47

Dec. 1988

Seth Ward II, Mr. Hubbell's brother in law files a lawsuit against
Madison and MFC alleged interest overcharges

p.33

Feb. 1989

FDIC entered agreement with FSLIC to act as agent for FSLIC in
any conservatorship/receivership appointed for an insured Savings
and Loan association after January 1, 1989

p.16

Feb. 1989

Vincent Foster, of Rose, sends letter to FDIC that generally solicits
business in Arkansas

p.28

Feb. 1989

FSLIC appointed conservator of Madison

p.15

Feb. 1989

Paul Jeddeloh, FDIC, named Managing Attorney for the Madison
Conservatorship.

p.17

Mar. 1989

April Breslaw, Professional Liability Section, FDIC Legal Division,
designated as the responsible attorney for PLS matters related to
Madison.

p.17

Mar. 1989

Wright, Lindsey & Jennings develops conflict regarding Ward v.
Madison and withdraws as counsel. Thomas Ray becomes Ward's
attorney

p.30

Mar. 1989

FDIC accepts appointment as FSLIC's Managing Agent for Madison

p.16

Mar. 1989

Gerrish discloses that his firm is representing three sets of D&Os in
litigation against the FDIC; FDIC refuses to waive conflicts

p.18

Mar. 1989

Webster Hubbell and other members of Rose Firm retained to
represent government in Frost malpractice case

p.22

Mar. 1989

Home Federal placed into FSLIC conservatorship

p.64

Mar. 1989

Settlement between Rose Law Firm and Worthen for $200,000
concerning Bohemian representation

p.69

Jun. 1989

Letter from Paul Jeddeloh to April Breslaw expressing concern
about Hubbell-Ward relationship

p.23

Jun. 1989

Letter from Breslaw to David Paulson responding to Jeddeloh's
letter of 6-8-89; Breslaw refuses to replace Rose

p.25

AMFRICAN

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 •

Jun. 1989

Letter from Hubbell to Paulson stating Hubbell had not represented
Ward in dispute with Madison, and had no intention of doing so in
the future

p.25

Jul. .1989

Precision Industries Inc., retains Rose Law Firm for representation
in a labor dispute at it's Malvern plant

p.40

Aug. 1989

RTC created by FIRREA

p.16

Aug. 1989

Letter from Ken Schneck to John O'Donnell asking him to look into
possible conflict of interest concerning Hubbell-Ward relationship

p.26

Sept. 1989

Settlement of Home Federal lawsuit for $250,000

p.68

Oct. 1989

Webster Hubbell signs a new Legal Services Agreement on behalf of
Rose Law Firm with the FDIC

p.22

Oct. 1989

Rose Law Firm hires Patricia J. Heritage, a former Madison
employee

p.43

May 1990

POM files suit against Duncan Industries, Webb Hubbell and the
Rose Law firm file the complaint and represent POM

p.34

May 1990

FDIC and RTC issue joint guidelines concerning conflicts of interest.
A copy of the guidelines is sent to the Rose Law Firm

p.28

Oct. 1990

Webster H~bbell signs Madison Legal Service Agreement on behalf
of Rose

p.22

Nov. 1990

Lasater is granted a pardon by then Governor Bill Clinton

p.48

Fall 1991

RTC Professional Liability Section created; FDIC lawyers
responsible for RTC projects are transferred to RTC Legal Division

p.16

Feb. 1991

RTC approves $1,025,000 settlement of Frost lawsuit

p.17

Apr. 1991

Frost settlement documents executed

p.17

Apr. 1993

RTC settles Seth Ward claims

p.30

Oct. 1993

FDIC Legal Division begins a review of the retention of the Rose
Law Firm by the FDIC

p.54

Feb. 1994

FDIC Legal Division releases its report on the retention of Rose

p.54

Jun. 1995

Webster Hubbell sentenced to 21 months in prison and ordered to
make restitution of $135,000 to the Rose Law Firm

p.7

AMERICAN

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 Conflictof InterestChronology
of Events
FirstAmerican
- Lasater
1985
Oct.

1986
April

1st American sues
Lasater & Co. complaint
filed by Hardin & Grace

1986
July

FSLIC appointed
conseNator of
1st American

-

1st American's outside
counsel, Hopkins &
Sutter, Subcontracts
Lasater & Co. litigatigation
to Rose

1987

Lasater sold stock
of Lasater & Co :,
renamed UCC
Rose substituted
for Hardin & Grace
as counsel for 1st
American re: Lasater
& Co. lawsuit

Lasater convicted of
Lasater enters Federal
Possesion with Intent
prison in Ft. Worth, TX
to Distribute Cocaine &
sentenced to 30 months
in prison

1988

Rose attorney
Hillary Clinton
performs 2 hrs work
on Lasater Lawsuit

Lasater released from UCC Settles with
prison , confined to
FSLIC/1st American
halfway house
for $200 ,000
Lasater released from
halfway house, confined
to house arrest

1989

Home Federal S&L ,
Centralia . IL files
suit against UCC;
Home Federal
represented by Rose

Lasater
reacquires
UCC stock

FSLIC appointed
conseNator of
Home Federal

1990

UCC settles with
Home Federal for
$250,000

Lasater is granted
a pardon by then
Governor Bill Clinton

Legend
Madison
MFC
Frost
1st American

=
=
=
=

Madison Guaran_ty Savings & Loan Association of McCrory, AR
Madison Financial Corporation
Frost & Company
.
First American Savings & Loan ~ssociation of Oak Brook, IL
I

Rose
UCC
FHLBB
FSLIC

=
=
=
=

Rose Law Firm
United Capital Corporation
Federal Home Loan Bank Board
Federal Savings and Loan Insurance Corporation

FOIA RD 56809 (URTS 16302} Docld: 70104912 Page 113

18-1621-000415

 Conflictof InterestChronology
of Events
Madison
- Hubbell- Ward
1982

James McDougal
Purchases Majority
Interest in Madison

1984

MFC Incorporated
as Wholly Owned
Subsidiary of Madison

1985

Rose retained to
represent Madison
before Arkansas
Securities
Commissioner
re· preferred stock
and broker/dealer
subsidiary

FHLB Examination
Finds "Viability" of
Madison in Jeopardy

AM f{ICAN

Supervisory
Agreement
Executed

McDougal Resigns
as CEO of Madison
(remains majority
stockholder, and
CEO of MFC)

Frost issues
unqualified
opinion regarding
Madison 1984
Financial Statements

1986

Arkansas Securities
Commissioner issues
opinion - thrifts are
permitted to issue
preferred stock to
raise capital

Frost issues unqualified
opinion regarding Madison
1985 financial statements
(concludes that Madison
is solvent)

1987

Madison files
criminal referral
implicating
McDougal

1985

FHLBB
examination
discloses
unsafe/unsound
practices, and
insider abuse

Cease and Desist
Order signed:
imposes severe
operating
restrictions;
requires Madison
to obtain new
audit for 1985

At Supervisory
Agent's request.
Madison retains
Gerrish &
McCreary
to investigate
internal abuses

1988

FHLBB examination
concludes that
Madison has. been
insolvent since
December 1985

pVERSIGHT ·

Seth Ward
files suit against
Madison for
commissions. Ward
repmsented by
Wright. Lindsey
& Jennin9s
FOIA RD 56806, (URTS 16302)

Madison files suit
against Frost for
defective audits;
retains Gerrish &
McCreary. Lawsuit seeks
$10 million in damages

Ward obtains
judgment against
Madison for $353 ,000
in commissions owed

Docld: 70104912 Page 114

Madison
appeals
Ward judgment

18-1621-000416

 Conflictof InterestChronology
of Events
Madison
- Hubbell
- Ward

1989

FDIC entered agreement
with FSLIC to act as
agent for FSLIC in
any conservatorship/
receivership appointed
for an insured Savings
and Loan association
after January 1, 1989
Vincent Foster of Rose ,
sends letter to FDIC
which generally solicits
bllsine ss in Arkansas
li10 mention of Madison
as either prior or
prospective client)
FSLIC appointed
conservator of Madison

1990

Hubbell becomes
involved in Ward's
lawsuit against the
Madison
Conservatorship

AMFnlCAN

pVERSIGHT

Wright , Lindsey &
Jennings develops
conflict regarding
Ward v. Madison and
withdraws as counsel .
Thomas Ray becomes
Ward 's attorney
FDIC accepts
appointment as FSLIC's
Managing Agent for
Madison
Gerrish discloses that
his firm is representing
3 sets of D&O's in
litigation against the
FDIC ; FDIC refuses
to waive conflicts

Webster Hubbell and other
members of Rose firm
retained to represent
government in Frost
malpractice case
FDIC substituted as party
in Frost case, matter
removed to Federal District
court for Eastern District of AR

Letter from Paul Jeddeloh
to April Breslaw expressing
concern about Hubbell/Ward
relationship
Letter from Breslaw to
David Paulson responding
to Jeddeloh 's letter of
6-8-89, Breslaw refuses to
replace Rose

RTC created by FIRREA
Letter from Ken Schneck
to John O'Donnell asking
him to look into possibl e
conflict of interest re:
Hubbell /Ward relationship

Letter from Hubbell to
Paulson stating Hubbell
had not represented Ward
in dispute with Madison ,
and had no intention of
doing so in the future

1990

P.O.M., Inc. files
suit against Duncan
Industries for patent
infringement; P.0.M .
represented by Rose,
primarily Hubbell

Madison Directors' and
Officers' Liability
investigation closed
(not cost effective);
Fidelity bond
investigation closed
(conditions precedent
to recovery under bond
cannot be met)

FOIA RD 5680{?,(URTS 16302} Docld: 70104912 Page 115

RTC appointed
Receiver of Madison

18-1621-000417

 Conflictof InterestChronology
of Events
Madison
• Hubbell
• Ward

1991

RTC approves
$1.025 .000
settlement of
Frost lawsuit

1993

Frost settlement
documents executed

Verdict rendered
in favor of
Duncan Industries
at P.O . M. trial

Ward pays ATC,
Madison lawsuit
settled

ATC Investigations (Kansas)
files 10 criminal referrals
which pertain to Madison

AMlHICAN

VERSIGHT

FOIA RD 56806 (URTS 16302) Docld: 70104912 Page 116

18-1621-000418

 FOIA RD 56806 (URTS 16302) Docld: 70104912 Page 117184621-000419

BIOGRAPHIES OF WITNESSES

ALFORD, JIMMY D.
Fonner Partner, Frost & Company. P.A. (Frost), currently Vice President for Corpora
te
Development, Pace Industries, Fayetteville, Arkansas. He was responsible for oversigh
t of
the two audits Frost completed for Madison Guaranty Savings and Loan Associa
tion
(Madison).
BASSETT (SCHAFFER), BEVERLY
Former Commissioner, Arkansas Securities Department (ASD), currently an attorney
in
private practice. She was appointed Commissioner by then Governor Bill Clinton.
BENNETT,B.l\1ICHAEL
Former Associate, Rose Law Finn (Rose). During Rose tenure, he worked on the First
American Savings and Loan Association v. Lasater and Company and the Home Federal
Savings and Loan Association v. United Capital Corporation lawsuits. He currently works
for a Dallas, Texas, law firm.
BRESLAW, APRIL A.
Counsel. Professional Liability Section (PLS). Division of Legal Services, RTC, Washing
ton,
D.C. She was the PLS Attorney for the Madison Conservatorship.
BURT, ANTONY S.
Partner. Hopkins & Sutter. Chicago, Illinois. Hopkins & Sutter was hired by the FSUC
to
handle legal matters for the First American Savings and Loan Association, Oak Brook,
lllinoi~ (First American), Conservatorship. He hired Rose to litigate the Lasater
and
Company lawsuit.

CASTLE, F. GUTHRIE, Jr.
Attorney. private practice. Formerly, an attorney with Gerrish & McCreary, the law firm
that Madison hired to file suit against Frost.
CLINTON, HILLARY RODHA.,1
Fom1er Partner. Rose Law Fim1. She performed a limited amount of work on the First
American v, Lasater and Comuany
lawsuit. She also represented Madison before the ASD.
I>EJ'JTON, HARRY DON

Former Madison executive who served as senior vice president and loan officer.
DONOVAN, RICHARDT.
Partner, Rose Law Firm. As an associate, he assisted Webster Hubbell with the Frost
lawsuit.

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DOWNING, JOHN T.
Senior Attorney, Legal Division, FDIC, Washington,
DaC. Assisted in the Legal Division's
review of the retention of Rose related to the Madison
Conservatorship.

EISENSTEIN, DAVID G.
Senior Counsel, PLS, Division of Legal Services, RTC,
Washington, D.C. He became Ms.
Breslaw's first-line supervisor in October 1989.

GERRISH, JEFFREY C.
Partner, Gerrish & McCreary law finn.
lawsuit.
GIROIR, C. JOSEPH
Fonner Partner, Rose Law Finn.
liahility claim with the FSLIC.

His finn was hired by Madison to file the Frost

He left the finn in 1988 when Rose settled a professiona
l

GOSS, PATRICK J.
Partner. Wright. Lindsey & Jennings law finn.
regarding the First American lawsuit.

He represented Lasater and Company

GRACE. DAVID A.
Partner. Hardin & Grace law finn. He represented
First American in the lawsuit against
Lasater and Company before being replaced by Rose.
HANDLEY, CHARLES F.
Assistant Commission. ASD. He was at the ASD in
1985 when Rose represented Madison
regarding a plan to recapitalize the institution by issuin
g preferred stock.
HERITAGE {HAYS), PATRICIA
Fom1er Executive Assistant. Madison. and fonner Rose
attorney. She reportedly falsified
minutes of Madison Financial Corporation's board of
director meetings. She is currently an
attorney with the City of Little Rock, Arkansas.
Hl1'1>ES, THOMAS L.
Assistant General Counsel. PLS. Division of Legal
Services, RTC.
Breslaw·s supervisor in May 1992.

He became Ms.

HUBBELL, WEBSTER L.
Fonner Partner, Rose Law Finn.
He was the partner in charge of the Madison
Conservatorship litigation against Frost. He is also
the son-in-law of Seth Ward, a fonner
Madison insider who had a lawsuit against Madison
during the time Rose was litigating the
Frost case.

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JEDDELOH, PAUL A.
Senior Program Attorney, Office of the Exec
utive Secretary, FDIC, Washington, D.C.
Former Intervention Attorney for the Madison
Conservatorship. He informed Ms. Breslaw
in a June 1989 letter, that Rose had a possible
conflict of interest due to the HubbeWWard
relationship.
JENNINGS, ALSTON, Sr.
Attorney, Wright, Lindsey, & Jennings law firm
. He represented Mr. Ward in his lawsuit
against Madison in 1988.
JONES, DOUGLAS H.
Senior Deputy General Counsel, Legal Division,
FDIC, Washington, D.C. He was the
Acting General Counsel of the Legal Division
when it conducted its review of the retention
of Rose regarding the Madison Conservatorship.
JO~'ES. JERRY C.
Panner. Rose Law Firm. Performed a limited
amount of work on the First American v.
Lasater and Company lawsuit.

KL"'l\lPE.PETER G.
Panner. Williams & Anderson law finn.
regarding the Madison litigation.

He was the attorney who represented Frost

LM1TELME. JAMES T.
Assistant General Counsel, Legal Division, FDIC
, Washington, D.C. He is a member of the
Outside Counsel Conflicts Committee, and he assis
ted the Legal Division in its review of the
retention of Rose regarding the Madison Conserva
torship.
LASATER, DAN R.
Fonner President and owner of Lasater and
Company.
Clintons.

He was an acquaintance of the

MASSEY, RICHARD N.
Panner. Rose Law Finn. He was the Rose asso
ciate who represented Madison before the
ASD in 1985 regarding its attempt to raise capit
al by issuing preferred stock.

MOUDY. DAN
Fonner In-house Counsel. Lasater and Company
/United Capital Corporation (UCC). He was
Lasater and Company's in-house counsel durin
g the First American litigation.
o•DONl'i"ELL, JOHN A.
Assistant Regional Manager, Division of Depo
sitor and Asset Services, FDIC, Atlanta,
Georgia. He was the S&L Project Coordinator
for Arkansas when Madison was placed into
conservatorship in 1989.

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PAULSON, DAVID
Fonner Managing Agent for the Madison Conservat
orship. He was the Managing Agent in
June 1989 when Ms. Breslaw was informed of the
Hubbell-Ward relationship.

RAY,THOMAS
Partner, Shults, Ray & Kunus law firm. Little Rock
, Arkansas. Represented Mr. Ward when
Madison appealed his judgement in 1989.
ROBINSON, MICHAEL D.
Director, Tax Division, Frost & Company. He
was a consultant to Madison in 1985
regarding Madison's recapitalization efforts. He also
provided a letter that was submitted by
Rose to the ASD regarding Madison's application
to engage in broker/dealer activities.
SCHNECK, KENNETH K.
Supervisory Liquidation Specialist, Division of Depo
sitor and Asset Services, FDIC, Chicago,
Illinois. He was the Credit Specialist for the Madi
son Conservatorship in August 1989, and
he informed Mr. O'Donnell about Rose's possible
conflict of interest regarding the HubbellWard relationship.
SCHULZ, THOMAS A.
Assistant General Counsel. Legal Division, FDIC,
Washington, D.C . Assisted in the Legal
Division's review of the retention of Rose by the
Madison Conservatorship .
SELIGA, BENITA M.
Staff Attorney. Litigation Section, Division of Lega
l Services, RTC, Overlan~ Park, Kansas.
She became the Intervention Attorney for the Madi
son Conservatorship in December 1989.
SHEA, PAMELA A.
Regional Counsel, Legal Division, Chicago Regional
Office, FDIC,
Chicago. Illinois. She was Mr. Jeddeloh's supervisor
in 1989 . She was informed by Mr.
Jeddeloh in 1989 of a possible conflict of intere
st for Rose regarding the Hubbell-Ward
relationship.
SIIE1\1IN, KENNETH R.
Partner. Rose Law Finn. He was asked to assist
Mr. Lasater in regaining control of UCC
and selling the assets to a third party . He provi
ded advice but ultimately decided not to
formally represent Mr. Lasater.

SMITH, DAVID A.
Partner, Rose Law Finn . He pc!rfonned work for
the Madison Conservatorship regarding
the Frost lawsuit.

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Sl\fiTH, JACK D.
Deputy General Counsel, Legal Division, FDIC, Washington, D.C. Assisted in the Legal
Division's review of the retention of Rose by the Madison Conservatorship.

SPEED, GARY N.
Partner, Rose Law Finn.

As an Associate, he assisted Mr. Hubbell with the Frost lawsuit.

SORENSON,LEE
Fonner Liquidation Assistant, Division of Depositor and Asset Services, FDIC. He assisted
Ms. Breslaw and Rose attorneys in the investigation of Frost. Specifically, he was involved
in detennining the amount of damages FDIC was alleging in the lawsuit.

STRAYHORN, SUE
Fonner Executive Secretary at Madison. She infonned Mr. Jeddeloh of Rose's possible
conflict of interest due to the Hubbell-Ward relationship.

lllO~fAS, JOHN V.
Associate General Counsel, PLS, Legal Division , FDIC, Washington, D.C. He was in
cha~c of the PLS office when Ms. Breslaw hired Rose for the Madison Conservatorship.
He remained Ms . Breslaw's supervisor until she was transferred to the RTC.

TIIO~tASSO~. PATSY L.
Fonner officer of Lasater, Inc. She is currently employed in the Administrative Office of
the White House. She managed Mr. Lasater's business interests for him while he was in jail
in 1987.

WARD, SETH
Father-in-law of Webster Hubbell. He was a consultant for Madison Financial Corporation .
in 1985 and 1986. He helped negotiate the purchase of property from the Industrial
Development Company for MFC. His lawsuit against Madison was on appeal when Madison
was placed into conservatorship. He obtained several loans from Madison, some of which
were charged off for nonpayment. lbcsc loans were included in some of the damage
calculations related to the Frost lawsuit .

\\'ARD, SETH, ll
Brother-in -law of Webster Hubbell . He was a co-owner of P.O.M., Inc., with his father and
Mr. Hubbell. He sued Madison in 1988, and the lawsuit was pending when Madison was
placed into conservatorship.

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