|
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
Division No. 94-2
FINAL REPORT OF THE INDEPENDENT COUNSEL
In Re:
ALPHONSO MICHAEL (MIKE) ESPY
DONALD C. SMALTZ
Independent Counsel
www.oic.gov
Filed January 30, 2001
Published October 25, 2001
Washington, DC
ACKNOWLEDGMENTS
Every criminal investigation or prosecution is a team effort and, given its
scope and scale, this investigation and its resulting prosecutions against almost two
dozen defendants in four venues demanded a particularly talented, dedicated, and
hard-working team. While it is impossible to identify everyone whose contributions
aided the effort, I would like to take this opportunity to express my gratitude to the
many dedicated people who worked with me, often for very long hours and with
modest compensation, to bring our efforts to successful fruition. Many of these
people were required to relocate from their homes for extended periods of time,
and so their families, including mine, also deserve acknowledgment of, and
appreciation for, their many sacrifices.
An Independent Counsel office is by statute ad hoc. Its size and duration
are determined by the scope of its jurisdictional mandate and the extent of the
criminal conduct uncovered. It offers its employees no expectation of a "career path" or even a defined term of employment. The investigative agents,
attorneys, and staff who volunteer to work for the Office of the Independent
Counsel interrupt their career paths and forego future opportunities otherwise
available - a significant sacrifice. Moreover, both the OIC and they personally may
become the object of political polemics, a tactic frequently employed by opponents
of the investigation.
Notwithstanding these drawbacks, this investigation attracted an outstanding
array of legal talent from around the country, from both the public and private
sectors. I was particularly fortunate in being able to enlist a large number of highly
experienced former and current federal prosecutors, both as staff and as advisors.
All of my senior trial counsel had substantial trial experience as federal prosecutors.
Overall, about two-thirds of the Office's attorneys were current or former
prosecutors.
At the apex of the attorney staff were my successive Deputy Independent
Counsels, Charles G. Bakaly, III, Theodore S. Greenberg (team leader for United
States v. Sun-Diamond Growers of California, United States v. Tyson Foods,
Inc., and United States v. James Lake), and Robert W. Ray (team leader for
United States v. Archibald R. Schaffer, III and United States v. Jack L. Williams).
My immediate right-hand assistants were the Counsellors to the Independent
Counsel, first Theodore S. Greenberg and then William F. Fahey (team leader for
United States v. Ronald H. Blackley), followed by Robert W. Ray, and thereafter
Jacob S. Frenkel (co-team leader for United States v. Alvarez T. Ferrouillet,
Jr./John J. Hemmingson).
My Chief Appellate Counsel throughout the investigation was Charles M.
Kagay, whose service included significant trial court briefing in addition to appellate
matters and who also undertook primary responsibility for drafting this final report,
a daunting task given the breadth of the investigations.
The trial attorneys for our numerous cases included Adrienne R. Baron,
Barry Coburn (team leader for United States v. Five M Farming Enterprises, Inc.,
et al.), Michael R. Davis, Jacob S. Frenkel, Wil Frentzen, Joseph P. Guichet, Trent
B. Harkrader, Joe M. Hollomon (team leader for United States v. Norris J. Faust,
Jr.), Roscoe C. Howard, Jr., Benjamin B. Klubes, Mark J. Krum (team leader for
United States v. Henry William Espy, Jr.), Kathleen M. Nicolaides, William S.
Noakes, Jr., Robert O'Neill (team leader for United States v. Richard Douglas),
Eduardo G. Roy, Joseph F. Savage (team leader for United States v. Crop
Growers Corporation), and David Schertler. Other attorneys who worked on the
investigative, trial support, and appellate tasks of the Office included Bruce A.
Abbott, Walter F. Becker, Jr., James L. Brochin, Mark S. Brodin, George D.
Brown, Blanche L. Bruce, Kimberly S. Davis, Roberto Iraola, Stephen R.
McAllister, Charles P. Murdter, Nathan J. Muyskens, Allen L. Neelley, Jan
Patterson, Henry H. Rossbacher, David Smith, Elizabeth Taylor, George Van
Cleve, Thomson von Stein, L.C. Wright, and Tracy W. Young. Paul S.
Rosenzweig provided valuable input in the creation and review of this Report. I
was also extremely fortunate to be advised on an as-needed basis by a group of
very experienced attorneys serving without compensation under the title of
Advisory Independent Counsel - Leighton M. Anderson, Joseph F. Barletta,
Anthony R. Corso, Don DeGabrielle, Stephen H. Jigger, Steve Mansfield, George B. Newhouse, Jr., Daniel J. O'Brien, Melvyn H. Rappaport, and Michael I. Spiegel.
The backbone of this office's investigative efforts was a staff of extremely
capable investigative agents. The largest group of these agents came from the
Federal Bureau of Investigation and worked under the guidance of Mark B. Codd,
Supervisory Special Agent, who provided skilled leadership and sage counsel
throughout his tenure. The agents included J. T. Burns (who worked on the
investigation from beginning to end), Peggy Campane, John R. Cantalupo,
Margaret Carmichael, Brian K. Cosgriff, Cynthia A. Falls, Francis X. Gaughen,
Mark A. Grisham, Alexis Hatten, E. Leo Martinez, Carolyn Murphy, and Lawrence
J. Welk. The United States Department of Agriculture Office of Inspector General
also contributed a major contingent of special agents, headed by Supervisory
Special Agent Kim Widup, whose indefatigable determination was contagious and
whose highly skilled services spanned the entirety of the investigation through the
conclusion of all prosecutions. The United States Department of Agriculture
(USDA) agents included Neal H. Hasheider, Derrick N. Hurst, Don Meeks, Stacy
Rubey-deGuerrero, and Pam Taylor. Investigators from other agencies, who
contributed a multiplicity of talents, included Arthur L. Wicks, Ronald DiStefano,
and Stephen C. Dodge of the U.S. Customs Service; Leonard Thill of the
Securities and Exchange Commission (SEC); David P. Cyr of the U.S. Postal
Service; Ray Gregson and John D. Fort of the U.S. Treasury Department/Internal
Revenue Service; and retired F.B.I. agents James T. Burns, Jerry Marsh, Richard
O'Connell, Lewis L. Small, and Robert E. Smith.
The efforts of the attorneys and investigators could not have been as efficient
and effective as they were without the continual support of an excellent staff of
legal assistants. The corps of paralegals was ably and tirelessly headed by Barbara
P. Schultz, and included David L. Dunleavy, Rosemary A. Ficalora, William L.
Hurlock, Jacob D. Kortz, John A. Kruger III, James Lagomarsino, James D.
Manclark, William S. McNish, Brett L. Shelton, Kerry A. Stehn, Josephine J. Tao,
Carly B. Tolchin, Ruth M. Vogelsang, and Denise E. Washington. The law clerks
and legal interns serving our effort included David S. Hochman, Michael C.
Petronio, Lisa A. Rich, Lisa Stern, and Diane E. Wolf.
The work of this office also depended vitally on a talented troop of
accountants, auditors, and financial analysts supporting our efforts. Neill W.
Freeman, Laurence A. Mills, Ellen Faun, Fred Smolen, and James F. Chadbourne
III, provided expert forensic accounting services. Alvin A. Brown of the USDA
and Michelle Biess also provided accounting support. Leonard Thill of the SEC
provided accounting expertise in securities matters. Philip J. Rooney from
beginning to end supplied the accounting support and related advice necessary to
the administration of the office.
A small number of exceptionally skilled professionals provided essential trial
preparation, evidence presentation, and information dissemination services.
Providing jury consulting services were Dr. Donald E. Vinson, Steve Paterson, and
Norma Silverstein; Lorrie Messinger and Gayle Mumm assisted in the preparation
of demonstrative trial exhibits of complex evidentiary materials. Public response
advisors included Eric Dezenhall and Andy Shea; and William P. Kucewicz
provided editing vital to the completion of this Report.
No law office can function without its executive support staff, and we were
particularly fortunate in attracting dedicated and capable workers to fill these crucial
positions. I particularly want to acknowledge the indispensable assistance of my
most talented, tireless, and absolutely dedicated confidential assistant Janice M.
Drake, who also functioned as my secretary, confidant, press officer, and shepherd
for the Final Report. The role of confidential assistant was also briefly and ably
filled by Mae Chauvin, who also contributed as a trial assistant. Elizabeth Ray and
Peggy Thume exhibited total dedication and commitment as they assisted in a
variety of roles throughout the investigations and trials, and in the preparation of the
Final Report. The other helpful and highly effective members of the secretarial staff
included Eileen B. Aarons, Delores "Tiesha" Banks, Christine L. Brown, Judy
Buechner, Danielle L. Cannata, Lauren C. Davis, Angie R. Drehsler, Ann Fisher-Durrah, Frank E. Gillen, Ann T. McLean, Gwendolyn Shuler, Ruth Marion
Tichenor, and Avis C. Wilson. Ably supporting their efforts was a clerical staff,
including Clifton Z. Dameron, Carol Ann Daniel, Eric J. Dominitz, Frances D.
Johnson, Ramona R. Kerley, Thomas A. Kertscher, Joshua E. Miller, David
Tillotson, and Christopher von Stein.
The efforts of the above personnel would not have been possible without a
well-run home office in Alexandria, Virginia (with occasional satellites when
necessary). Fortunately, we were served by experienced administrative personnel
who kept this support structure running at high level of efficiency at all times. The
head of this effort was the office administrator, a role filled successively and always
capably by Carol McCreary-Maddox, Kerry A. Stehn and, since April 1998,
Margaret B. Jackson, assisted for a time by Lauren Daniel Thomas. The satellite
offices were administered in New Orleans, Louisiana, and Jackson, Mississippi, by
Luis Jeffrey Martorell, and in San Francisco by Ruth Vogelsang. The office's
computer network was ably managed at different times by Emmanuel S. Vouvakis,
William L. Hurlock, James D. Manclark, Josephine J. Tao, and, for the past three
years, James A. Reid, Sr., who also bore the responsibility for maintaining the
Office's website. Finally, no office of this scale can function without the jack-of-all-trades who can make everything work whenever and wherever as needed. The
absolutely indispensable Calvin S. Holt, Jr., whose duties and responsibilities far
exceeded his Property Manager title, most ably fulfilled that role in each of our
various offices.
Finally, I wish to acknowledge and publicly thank those citizens who served
as jurors. The grand juries in San Francisco, New Orleans, and Jackson,
Mississippi worked patiently and thoughtfully in consideration of the evidence
behind the indictments we obtained in those cities. In particular, the grand jury in
the District of Columbia labored tirelessly in anonymity to perform its vital
investigatory functions from October 1994 through April 1998. This body, so
essential to any meaningful investigation, met on a weekly basis, sometimes as
frequently as four days a week, to hear testimony and review documentary
evidence. Its patience, insightful countenance, and instructive comments
contributed significantly to our efforts. Similarly, the citizens who served as petit
jurors for our numerous trials deserve recognition for the time and thoughtful effort
they gave as essential participants in our system of justice.
I am immensely grateful to all of these people for their dedication and their
hard work. I am both pleased and proud to have worked in association with the
people in my office for an extended period of time. To each and every one, I
extend sincere thanks and congratulations for a job well done.
Don Smaltz
Independent Counsel
TABLE OF CONTENTS
ORDER
I. INTRODUCTION
A. Summary of Investigation
B. Background Information
1. The United States Department of Agriculture
2. Alphonso Michael Espy
a. Biographical Information
b. Secretary Espy's Knowledge of Ethical Constraints
C. Initial Allegations and Investigations
1. Investigation by the Office of Inspector General, USDA
2. Investigation by the Department of Justice
3. The Attorney General's Application for Appointment of an Independent Counsel
4. White House Inquiry
5. Allegations of Additional Improprieties
6. Appointment of the Independent Counsel
II. THE OFFICE OF INDEPENDENT COUNSEL'S INVESTIGATION
A. Gifts Solicited or Received by Secretary Espy
1. Gifts from Tyson Foods, Inc.
a. The Donors
b. Donors' Interest in Secretary Espy's Official Acts
(1) USDA Food Safety Initiatives
(a) Zero Tolerance for Pathogens
(b) Safe-Handling Labeling
(2) Fresh-Frozen Labeling
(3) Detainment of Chicken in Puerto Rico
c. Gifts Given
(1) Four Seats at a Presidential Inaugural Dinner
(2) The Russellville Weekend Musical Celebration
(3) Scholarship to Secretary Espy's Girlfriend
(4) The Dallas Football Game
(5) Basketball Tickets and Travel Benefits to Assistant Secretary
d. Allegations of Cash Payments from Tyson Foods to Public Officials
e. Summary Timeline
f. False Statements to Federal Investigators
g. Prosecution Decisions
2. Gifts from Sun-Diamond Growers of California and Richard Douglas
a. The Donors
b. Donors' Interest in Espy's Official Acts
(1) Methyl Bromide
(2) Market Promotion Program
(3) USDA Commodity Purchases
(4) Delaney Clause
(5) Teamsters Strike at Diamond Walnut
(6) Forest Service Land Swap (Relating to a Douglas Consulting Client)
c. Gifts Given
(1) Gifts Given by Sun-Diamond
(2) Gifts Facilitated by Douglas
d. Summary Timeline
e. False Statements to Federal Investigators
f. Prosecution Decisions
3. Gifts from Oglethorpe Power, Smith Barney, and EOP Group
4. Gifts From Quaker Oats
5. Gifts From Fernbank Museum
6. Gifts From Robert Mondavi Winery
7. Gifts From Morgan Stanley
8. Espy's Acceptance of Gifts Unrelated to Agriculture
a. Inaugural Party in Espy's Honor and Event Tickets
b. March 1994 Beverly Hills, California Trip
c. $2,800 Monotype
B. Espy's Concealment of Gifts Received
1. False Statements to Federal Officials
a. False Statements to the USDA Inspector General
b. False Statements to the FBI
c. False Statements to the White House Chief of Staff
2. False Statements in Disclosure Reports
3. After-the-Fact Reimbursements
4. Prosecution Decisions
C. Espy's Other Abuses of Office for Personal Benefit
1. Abuses Related to Government Vehicles
a. USDA Lease of Jeep Cherokee
b. Use of USDA Ford Explorer
c. Jeep Payments by Government Contractor
d. Prosecution Decisions
2. Abuses Related to Official Travel
a. Travel Expenses Paid by Subordinates and Others
b. The $71,000 Plane Charter to Facilitate Attendance at a Birthday Party
c. Frequent Travel to Mississippi at Government Expense
d. Prosecution Decisions
D. The Role of Espy's Staff in Avoiding Abuses
1. Instruction and Counseling on Ethical Matters
2. Espy's Reliance on Staff to Prevent Ethical Lapses
E. Henry Espy Campaign Offenses
1. Unlawful Campaign Contributions to Obtain Access to Secretary Espy
a. Henry Espy's Campaign Attracts the Interest of Agribusiness
b. Crop Growers Insurance Becomes Involved in the Henry Espy Campaign
(1) The USDA Role in Crop Insurance Reform Becomes Important to Crop Growers Insurance
(2) Crop Growers Insurance Makes Illegal Campaign Contributions to Henry Espy
(3) Crop Growers Insurance Obtains Access to Secretary Espy
c. Henry Espy Borrows Money to Cover His Campaign Debts
(1) Ferrouillet Arranges a Fraudulent Loan
(2) Secretary Espy Involves Himself in Retiring the Fraudulently Obtained Loan
d. The First Installment of the Loan Is Paid with Illegal Campaign Contributions
(1) Douglas Solicits Illegal Campaign Contributions
(2) Douglas Organizes the 116 Club Fundraiser
(3) Ferrouillet Makes the First Repayment on the Delinquent Loan
e. The Second Installment of the Loan Is Paid with an Illegal Campaign Contribution
(1) Hemmingson Provides a $20,000 Contribution From Crop Growers Corporation
(2) The $20,000 Check Is Laundered
f. Ferrouillet and Henry Espy Make the Final Payments on the Loan
2. Concealment of Campaign Offenses
a. Crop Growers Conceals Its Illegal Campaign Contributions in Its SEC Filings
b. Ferrouillet Makes False Statements to Federal Investigators
3. AFLAC's Illegal Contributions to the Henry Espy Campaign
4. Prosecution Decisions
F. Other Conflicts of Interest Within the Department of Agriculture
1. Ronald Blackley's Earlier Employment with USDA and Congressman Espy
2. Blackley Becomes Espy's Chief of Staff
3. Blackley's Receipt of Funds from Charles Fuller
4. Blackley's Receipt of Funds from David Cochran
5. Blackley's Involvement in USDA Program Fraud by Supporters of Espy
a. Rodalton Hart and Hart Farms
b. Brook Keith Mitchell, Sr. and Five M Farming Enterprises
6. Blackley and Secretary Espy's Efforts on Behalf of Mitchell
7. Blackley's Failure to Disclose Receipts from Agricultural Interests
8. Petition to the Special Division
9. Prosecution Decisions
G. Other Matters Investigated by the Office of Independent Counsel
1. Richard Douglas Mortgage Offenses
2. Irregularities in Secretary Espy's Congressional Campaign Account
a. OIC's Investigation
(1) The Campaign Committee's Initial Infrastructure and the Misuse of Funds
(2) Congressman Espy's Knowledge of the Misuse of Funds
(3) The House Bank Investigation
(4) The Transition Process
(5) White House Interest
(6) Fraudulent Means Used to Replace Campaign Funds
b. Petition to the Special Division
3. Richard Blackmore's Loan Application to USDA
a. OIC's Investigation
b. Prosecution Decisions
4. Thomas Espy's $3. 5 Million USDA Loan Request
a. OIC's Investigation
b. Prosecution Decisions
5. Sun-Land Products' Illegal Campaign Contributions
H. Litigation Regarding Privilege Claims Before the Grand Jury
1. AFLAC's Attorney-Client Privilege Claim
2. The CBS Journalists' Privilege Claim
3. The White House's Executive Privilege Claim
III. PROSECUTIONS, CIVIL ACTIONS, AND REFERRALS
A. The Indictment Process
B. Prosecutions Regarding Gifts to Secretary Espy
1. The Tyson Foods Cases
a. United States v. Tyson Foods, Inc.
(1) The Charges
(2) The Plea Agreement
(3) The Sentence
b. United States v. Jack L. Williams and Archibald R. Schaffer, III
(1) The Charges - The First Indictment
(2) The First Trial
(3) The Order Granting a New Trial
(4) The Charges - The Superseding Indictments
(5) The Second Trial
(6) Post-trial Motions
(7) The Williams Sentence
(8) The Schaffer Appeals
(9) Schaffer's New-Trial Motions Following the Espy Trial
(10) The Schaffer Sentence
2. The Sun-Diamond Cases
a. United States v. Sun-Diamond Growers of California
b. United States v. Richard Douglas
(1) The Charges
(2) Dismissal of False-Statement Counts
(3) The Trial
(4) Post-trial Dismissal
(5) The Plea Agreement and Sentence
c. United States v. James H. Lake
3. The Case Against Former Secretary Espy - United States v. Alphonso Michael Espy
C. The Henry Espy Campaign Contribution Cases
1. The Crop Growers Case - United States v. Crop Growers Corp. , John J. Hemmingson, and Gary A. Black
a. The Charges
b. Pre-trial Dismissals
c. Crop Growers' Plea
d. The Trial
2. The Henry Espy Case - United States v. Henry William Espy, Jr. , Alvarez T. Ferrouillet, Ferrouillet & Ferrouillet, Municipal Healthcare Cooperative Incorporated, and John J. Hemmingson
a. The Charges - Eastern District of Louisiana
b. The Trial - Eastern District of Louisiana
c. Sentencing - Eastern District of Louisiana
d. The Appeal
e. The Charges - Northern District of Mississippi
f. Plea Agreements - Northern District of Mississippi
g. The Trial - Northern District of Mississippi
h. Sentencing - Northern District of Mississippi
D. Prosecutions Regarding Conflicts of Interest within the Department
1. The Case Against Secretary Espy's Chief of Staff - United States v. Ronald H. Blackley
a. The Charges
b. The Trial
c. Sentencing
d. The Appeal
2. The "Mississippi Christmas Tree" Cases
a. United States v. Five M Farming Enterprises, Inc. , Brook Keith Mitchell, Sr. , and Brook Keith Mitchell, Jr.
b. United States v. Norris J. Faust, Jr.
(1) The Charges
(2) The Trial
E. Civil Actions
1. United States v. Smith Barney, Inc. 316
2. United States v. Robert Mondavi Corp.
F. Referred Cases
1. United States v. Sun-Land Products
2. AFLAC (Federal Election Commission)
3. United States v. Richard E. Blackmore
4. United States v. Rodalton Hart
IV. THE EVOLVING LAW OF GRATUITIES
V. FINANCIAL ANALYSIS
VI. CONCLUSION
VII. CHRONOLOGY
-- APPENDICES
-- COMMENT LETTERS
I. INTRODUCTION
In 1961, with regard to proposed legislation governing the receipt of
gratuities by government officials, President John F. Kennedy stated:
No responsibility of government is more fundamental than
the responsibility of maintaining the highest standards of
ethical behavior by those who conduct the public
business. There can be no dissent from the principle that
all officials must act with unwavering integrity, absolute
impartiality and complete devotion to the public interest.
This principle must be followed not only in reality but in
appearance. For the basis of effective government is
public confidence, and that confidence is endangered
when ethical standards falter or appear to falter.
It is axiomatic that the Federal laws and regulations controlling the receipt of
gifts by federal employees and officials implement a fundamental principle of public
service - that federal officials should not use their public office for their own
personal gain or give the appearance that they are not carrying out their official
duties with complete impartiality. The public's trust in the fairness and justice of
federal decision-making is irretrievably compromised when federal officials take
gifts from those whose conduct they regulate and oversee.
If a public official accepts a gratuity - a gift given for or because of an
official act - it calls into question the impartiality of his judgment on matters that
affect the giver. A public official's breach of legal and ethical standards -
standards that prohibit the receipt of gifts from those whom his decisions may
affect - undermines the confidence American citizens must have in the integrity of
their political leaders.
Gift-giving to a public official by those whose conduct he regulates is
pernicious behavior in any context. In matters of public health and safety it is
especially troubling. The United States Department of Agriculture is primarily
responsible for the quality and safety of the Nation's food supply, particularly meat
and poultry. In 1906, Upton Sinclair's famous book The Jungle illuminated the
corruption of public meat inspectors and unsanitary conditions in the meat packing
industry. In response, Congress established a federal meat inspection system and
enacted one of the most stringent anti-gratuity provisions on the books. For nearly
a century, every federal meat and poultry inspector has known that the Federal
Meat Inspection Act, 21 U.S.C. § 622, signed into law by President Theodore
Roosevelt, prohibits the receipt of all gifts, even such seemingly token items as a
Christmas turkey. The safety of the American food supply, and the integrity of
those who ensure its safety, is that important.
But if a poultry inspector on his daily rounds is so constrained, how much
more important is the integrity of the Secretary of Agriculture whose decisions have
nationwide impact? As a high public official, the Secretary of Agriculture is obliged
to perform his job in a manner that is free from self-enrichment, free from
corruption, and free from even the appearance of self-enrichment and corruption.
Public officials are trustees for the American citizenry - they owe America their
honesty, their loyalty and their impartial service.
Perhaps the gravest concern arising from the receipt of gratuities by high
public officials is the uncertainty it creates in the public mind. Typically, nobody
really knows why a public official decides a matter one way or another. In a 1957
review of conflicts of interest, the House Judiciary Committee observed:
More troublesome than outright bribery, however,
because of the obscurity of its motivation and the
subtlety of its effect, is the practice of modern lobbies
indiscriminately to befriend influential officeholders. In its
sophisticated form, this activity never includes a request
for a favor, but limits itself to the extension of amenities
and courtesies in the form of free transportation,
hospitality, and adjuncts to "gracious living." The sole
visible object appears to be the establishment of the
amiability of the lobbyist and his client. (1)
This observation rings especially true when a public official is charged with
balancing conflicting goals and duties - for example, both ensuring the safety of the
American food supply and promoting agricultural business development. When a
public official receives gifts from a regulated business and later makes a decision
affecting that business, the American public can only speculate, from the outside,
whether the gifts received played any role in the decision made. The gratuities laws
are designed to eliminate that uncertainty - the Nation should not be left to wonder
whether its chief food safety official made decisions based upon principle or upon
self-interest.
When public allegations that Secretary Espy solicited and received gifts from
agricultural interests he regulated first arose, the allegations raised a justifiable
concern that Espy's decisions were subject to improper influence. Did Espy's
receipt of more than $12,000 in gifts from Tyson Foods, Inc., the world's largest
meat and poultry processor, affect his decision on safe poultry handling label
regulations that would have cost Tyson more than $30 million? Was the more than
$14,000 that Sun-Diamond Growers of California, one of America's largest
agricultural cooperatives, spent to Espy's benefit a factor in his decision to support
Sun-Diamond's continued use of methyl bromide on its crops, notwithstanding the
contrary recommendation of the Environmental Protection Agency? The American
public should not have to entertain these questions, but Espy's actions brought
them front and center.
The anti-gratuities statutes also protect those regulated entities that truly
desire to conduct their business in an above-board, lawful manner. When a high
public official solicits gifts from those he regulates, even when there is no particular
decision regarding that business pending before him, he places the donors in an
untenable position. Declining to provide the requested gift risks alienating the
federal official, but giving the gift flies in the face of the public interest, if not the
criminal law. Such was the dilemma faced by the president of Quaker Oats, a
company with $180 million of business before the Department of Agriculture, when
Espy (whom he had met only once) called him to ask for the gift of two valuable
basketball tickets. An executive of Mondavi Winery, who was seeking to enlist
Espy's support on a variety of issues, found himself in the same bind when Espy's
advisor called him to ask that Espy be given some wine.
The Office of Independent Counsel (OIC) investigated all these allegations
relating to Espy's conduct, and all other matters related to its jurisdiction that arose
from the investigation. In the end, it brought numerous indictments for unlawful
gratuities, lying and concealment before federal agencies, fraud, and related
offenses. These efforts resulted in 15 convictions (of which nine were concluded
by pleas) and two successful civil prosecutions, although Espy himself was
acquitted of all charges.
There was, in the end, never any doubt that Espy and his family and friends
had taken gifts of substantial value from those whom Espy regulated. Espy's
principal defense, and the defense of those who had given gifts to Espy, was that
the OIC could not prove that the gifts had been given with the intent to influence
any particular, specific decision. Even though the evidence was ample to establish
that the gifts were given to Espy for and because of his official position, in the case
of Espy the jury was not convinced beyond a reasonable doubt that they were
given for or because of a specific official act.
At bottom, the Office's investigation illustrates the destruction of the public
trust arising from the actions of a high public official who places private gain before
public interest. As this Report details, Espy directly and indirectly received from
various agriculture businesses gifts valued at more than $30,000; his chief of staff
concealed payments he received under the table from his former agricultural clients;
his girlfriend solicited and received a valuable scholarship, employment, and travel
and entertainment; his brother received approximately $50,000 in illegal campaign
contributions because he could facilitate access to the Secretary; and Espy and
many of the donors and recipients concealed these gifts from the American public.
In short, this investigation showed how our leaders can be compromised in
their decision-making obligations and how others used unlawful means to influence
public policy. Espy gained substantial personal benefit, receiving a multitude of
gifts from persons and entities whose conduct he was supposed to impartially
regulate. The donors, in return, gained access to Espy; the influence this gave them
over his decisions can never be measured. The integrity of the federal decision-making process, the potential safety of the American food supply, and the
American public's trust in the impartiality of government all suffered.
A. Summary of Investigation
The Office of Independent Counsel's (OIC) investigation into the receipt of
gifts and gratuities by former Agriculture Secretary Alphonso Michael Espy
revealed a pervasive pattern of improper behavior by Secretary Espy and his top
aide, and by persons and companies regulated by or with business before the
United States Department of Agriculture (USDA). The investigation disclosed that,
among other offenses, companies with financially important matters pending before
USDA gave Secretary Espy - either directly or via members of his family or his
girlfriend - numerous gifts in an effort to garner his favor. (A complete list of gifts
OIC found Espy to have received from agricultural interests appears at Section
II.A.)
OIC's investigation culminated in the return of a 39-count indictment against
Espy, charging multiple violations arising out of his acceptance of things of value
from persons and entities regulated by USDA, his concealment of these gifts from
the public, and other abuses of his office. The indictment charged that he had
received more than $30,000 in gifts and benefits from agricultural interests. At trial,
Espy did not dispute receipt of the gifts, but he argued that these gifts did not
affect the decisions he made and that he did not have the criminal intent required for
a conviction. After a two-month trial, the jury found former Secretary Espy not
guilty on all counts.
All told, OIC charged thirteen individuals (including Espy) and six business
entities (2) with criminal violations regarding the provision of gifts and gratuities to the
former Secretary of Agriculture, the concealment of gratuities from federal
investigators, and/or related offenses. Of these, 14 were convicted of or pleaded
guilty to one or more offenses (3), and four were acquitted of all charges (4); one person
was placed into a pre-trial diversion program (5). OIC also instituted civil
prosecutions against two corporations (6) and referred several matters to other federal
enforcement agencies. (7)
In addition to the gratuities given directly to Espy and his girlfriend, the
investigation focused on election campaign contributions given to the account of
Espy's brother, Henry Espy. The donors were persons and companies regulated
by the Department of Agriculture who saw Henry Espy's campaign debt, and
Secretary Espy's personal concern over that debt, as an avenue to gain the
Secretary's favor. Beyond the impropriety of seeking to gain an advantage before
a governmental agency in this manner, many of these contributions and related
activities were substantively illegal under the election laws and other federal statutes.
The illegal contributions exceeded $50,000. Consequently, this area of the
investigation resulted in several prosecutions and convictions.
The investigation further disclosed that Secretary Espy's chief of staff,
Ronald Blackley, accepted money from persons with business before USDA and
concealed this fact from the public, and that Mississippi farmers with ties to
Secretary Espy defrauded USDA of federal subsidies. This part of the
investigation resulted in criminal convictions of Blackley and several persons and
one corporation he had represented.
OIC's investigation led to a number of significant prosecutions. The
investigation of Crop Growers Corporation, then the second-largest private seller
of federal multi-peril crop insurance, led to the first indictment and conviction in an
Independent Counsel proceeding of a publicly-held company and resulted in the
largest fine, $2 million, secured by any Independent Counsel up to the time. OIC's
prosecution of John J. Hemmingson, Crop Growers' chief executive officer, and
Alvarez T. Ferrouillet, a Louisiana lawyer who chaired an effort to retire the
congressional-campaign debt of Secretary Espy's brother Henry, was the first to
charge and convict individuals for money laundering in connection with illegal
federal-election campaign contributions. OIC's investigation later led to the first
conviction in approximately 100 years for giving a gratuity to a sitting Cabinet
member, with the guilty plea of Tyson Foods, Inc., the nation's leading poultry
producer. The plea resulted in a $4 million criminal fine and a $2 million payment
toward OIC's investigative costs. The prosecution of Sun-Diamond Growers of
California, a large, multi-crop agricultural cooperative, resulted in a Supreme Court
decision clarifying the scope of the federal gratuities statute. The civil actions OIC
brought against Smith Barney, Inc. and Robert Mondavi Corporation, Inc. were
apparently the first instances in which an Independent Counsel resolved charges
through civil litigation.
In total, OIC collected more than $10 million in criminal fines, civil
recoveries, and restitutionary orders for the United States Treasury. OIC also
referred three matters to the Department of Justice for prosecution and one matter
to the Federal Election Commission for civil disposition, resulting in the recovery
of an additional $560,000 for the United States.
B. Background Information
The focus of the investigation was Secretary Espy, and the setting in which
he was scrutinized was the Department of Agriculture. The following briefly sets
forth pertinent background information regarding both.
1. The United States Department of Agriculture
The United States Department of Agriculture (USDA), founded in 1862,
became a Cabinet-level department in 1889. The duties of USDA include the
regulation and inspection of the United States food supply, the improvement and
promotion of agricultural development and production in the United States, and the
promotion of United States agricultural products in foreign countries. In 1993,
USDA consisted of more than 43 different agencies and subagencies, (8) and had an
annual operating budget in excess of $65 billion, representing 4.3 percent of the
total federal budget. Its payroll of more than 112,000 staff employees was
exceeded only by four other federal agencies (the Departments of Defense, Health
and Human Services, Treasury, and the Veterans Administration). USDA has
offices or committees in nearly every county in the United States and personnel
stationed around the world.
The USDA departments of particular relevance to the Independent Counsel's
investigation were the following:
The Food Safety and Inspection Service (FSIS): FSIS, the public-health
agency within USDA, is responsible for ensuring that the nation's
commercial supply of meat, poultry, and egg products is safe and correctly
labeled and packaged. It inspects all raw beef, pork, lamb, chicken, and
turkey sold in interstate and foreign commerce, and it regulates production
and distribution to ensure compliance with applicable laws and regulations.
It also provides laboratory-analysis services to inspect samples of meat and
poultry products for disease, contamination, or other forms of adulteration.
The Agricultural Marketing Service (AMS): AMS directs and monitors
a range of activities in the areas of commodity promotion, market news,
agricultural transportation, and product inspection and grading; it also
procures food for domestic food-distribution programs. AMS further acts
to divert commodities or food products from normal channels of commercial
trade to relieve market surpluses, primarily through government purchases,
whenever the Secretary of Agriculture determines such a diversion is
necessary.
The Federal Crop Insurance Corporation (FCIC): FCIC, in
cooperation with various private insurance agencies, provides farmers and
ranchers federally subsidized crop insurance to protect against crop loss
resulting from floods, drought and other natural disasters.
The Agricultural Stabilization and Conservation Service (ASCS):
ASCS administers farm price support programs and conservation cost-sharing programs.
The Secretary of Agriculture, appointed by the President and confirmed by
the Senate, administers USDA. The Secretary is ninth in line of succession to the
Presidency.
2. Alphonso Michael Espy
In late 1992, President-elect Clinton chose Alphonso Michael Espy, a
Mississippi Congressman, to serve as the Secretary of Agriculture in his
administration.
a. Biographical Information
Espy was born November 30, 1953 in Yazoo City, Mississippi, a town
located in the Mississippi Delta. His grandfather had founded a chain of more than
two dozen funeral homes; his father had worked as a USDA county extension agent
in Arkansas during the 1930s and 1940s and had later joined the family funeral-home business in Mississippi. Espy graduated from Yazoo City High School and
earned a B.A. degree in political science from Howard University in Washington,
D.C. in 1975. In 1978, he received a law degree from University of Santa Clara
Law School, near San Jose, California.
Upon graduating from law school, Espy returned to Mississippi, where he
obtained an appointment as the managing attorney at Central Mississippi Legal
Services. In 1980, Espy became an Assistant Secretary of State and Director of
the Mississippi Public Lands Division, a position he held for the next four years.
From 1984 to 1985, Espy served in the Mississippi Attorney General's office as an
Assistant Attorney General in the Consumer Protection Division.
In 1983, Espy first entered the political arena as coordinator in Mississippi's
Second Congressional District for a candidate for Attorney General. The following
year, Espy served on the Democratic National Committee's Rules Committee. In
1986, Espy ran for Congress in Mississippi's Second Congressional District.
The Second Congressional District of Mississippi, geographically one of the
larger districts in the United States, is primarily rural, and agriculture is its main
industry. The district borders the Mississippi River and is approximately 275 miles
long and up to 180 miles wide. It has an estimated population of just under
500,000.
Running on a campaign of reform, Espy defeated two-term incumbent
Republican Congressman Webb Franklin by a margin of 52 percent to 48 percent
and became Mississippi's first black congressman since Reconstruction. Espy
was reelected three times, soundly defeating his opponents in the 1988, 1990 and
1992 elections. In the House of Representatives, Espy served as a member of the
House Agriculture Committee, the House Select Committee on Hunger, and the
Budget Committee. He also served with then-Governor William Jefferson Clinton
of Arkansas on the Lower Mississippi Economic Delta Commission and on the
Democratic Leadership Council.
Espy was an early supporter of Arkansas Governor Clinton in his successful
1992 presidential bid. Following the November elections, Espy actively sought the
Cabinet position of Secretary of Agriculture, and he eventually obtained the
approval of President-elect Clinton. After his confirmation by the Senate, Espy
resigned from Congress and was sworn in as Agriculture Secretary on January 22,
1993.
A divorced father of two, Espy dated Patricia S. Dempsey, an administrative
assistant for an accounting firm in Georgetown and subsequently for the D.C. Aids
Education and Training Center in Washington, D.C., throughout his term as
Secretary of Agriculture. Dempsey met Congressman Espy through a mutual
friend, and the two began dating in February 1992. Dempsey and Espy lived
together for most of the period from October 1992 through June of 1993 and
shared some expenses, as well as an American Express Card account. Dempsey
and Espy continued to date until November of 1995, at which time their relationship
apparently ended. Dempsey became a focal point for several matters investigated
by OIC, as she was the recipient of gifts and a scholarship from entities regulated
by USDA. For a time she worked for a consulting firm lobbying Espy on a variety
of issues, and in that position she intervened with Espy's staff on several
occasions.
Analysis of Espy's financial documents revealed that his annual expenses
increased more than his income after he left Congress to become Secretary of
Agriculture. Although his total income rose from $96,068 in 1992 to $100,172 in
1993, certain of his expenses, particularly credit card and consumer-loan payments,
increased by nearly $30,000 in 1993. In addition, Espy's total debt rose from
nearly $300,000 at the end of 1992 to almost $400,000 at the end of 1993 as the
result of increased mortgage loans, unsecured loans, and credit card debts. Thus,
the things of value he received from agricultural interests could well have been
beyond his means had he been personally obligated to pay for them with his own
resources.
b. Secretary Espy's Knowledge of Ethical Constraints
As a Congressman, Espy had been subject to federal rules and laws
prohibiting the receipt of gifts in certain circumstances. Although these rules
became more restrictive during his tenure in Congress, they were always more
lenient than those imposed on the Executive Branch. When Espy entered
Congress, the applicable ethics rules allowed members to receive gifts valued up to
$100 per year from each person having a direct interest in legislation before
Congress. The rules allowed outside sources to pay for travel, food, and lodging
for a member, spouse, his dependants if the congressman "substantially
participated" in an event. Members also were permitted to receive honoraria up to
$2,000 per event for speaking engagements. However, many of the congressional
rules changed effective January 1, 1991, when bans on honoraria, the solicitation of
things of value from "prohibited sources," and the acceptance of things of value
from prohibited sources, with certain specified exceptions, took effect.
Almost immediately upon his selection as Secretary of Agriculture, Espy
received a variety of memoranda designed to make him aware of the ethical
regulations that applied to his new position in the executive branch. Specifically, he
received materials regarding the prohibitions against gifts to public officials and the
requirements regarding financial disclosure.
For example, on December 29, 1992, within one week of his nomination to
the post of Secretary of Agriculture, Espy received a memorandum from Vice
President-elect Albert Gore's chief of staff summarizing the federal ethics rules.
The memorandum informed incoming administration officials that the ethics rules
required financial disclosure through annual financial disclosure reports
(government form SF-278) and that the rules forbade acceptance of gifts from
prohibited sources, with a few exceptions (such as gifts under $20). On the same
date, Espy also received a memorandum from the transition counsel specifically
regarding inaugural events and gifts. The memorandum warned:
As the Inaugural approaches, it is important that
presidential designees be aware of the federal rules
governing the receipt of gifts by executive branch
employees - including attendance at receptions, parties
and other events.
Additionally, on January 22, 1993, the day Espy was sworn in as Secretary
of Agriculture, a personnel assistant at USDA gave him a copy of the Standards of
Ethical Conduct for Employees of the Executive Branch and told him that "it was
a book he should read." The document stated the ethical regulations regarding the
receipt of gifts by executive-branch officials. These rules generally forbade the
acceptance of things of value from prohibited sources, except for gifts of less than
$20 value, gifts given solely out of friendship, and other minor exceptions. The
rules defined a "prohibited source" as any person or organization that seeks official
action by, does business with, or is regulated by a federal employee's agency, or
that has interests that may be substantially affected by the performance or
nonperformance of the employee's official duties.
Espy does not appear to have considered the executive branch's ethical
restraints significant. On an April 2, 1993 plane flight, for example, Espy discussed
the executive branch's ethical restraints with Environmental Protection Agency
Administrator Carol Browner. Secretary Espy stated (in Administrator Browner's
words) that he thought the tougher ethical standards put in place by the Clinton
administration were "a bunch of junk" and that, in ethics matters, he was going to
conduct himself as he had in Congress.
C. Initial Allegations and Investigations
Allegations of Espy's official improprieties first appeared in a March 17,
1994 Wall Street Journal article entitled "Tyson Foods, With a Friend in the White
House, Gets Gentle Treatment From Agricultural Agency." (9) Tyson Foods, Inc.,
the nation's largest poultry producer and also a pork and beef processor, is based
in Arkansas, the home state of President Clinton. Exploring the apparent close ties
between Tyson Foods and President Clinton, the article reported that the company
was a major Clinton supporter, having flown him on its aircraft and contributed to
his gubernatorial campaigns. Further, according to the article, President Clinton
had received $22,000 for his presidential campaign from Tyson Foods executives
and board members. The article also alleged that Tyson Foods had received very
favorable treatment from Clinton during his tenure as Governor of Arkansas.
With regard to USDA, the article first noted that Don Tyson, chairman of
Tyson Foods, had recently entertained Patricia Jensen, an Assistant Secretary of
USDA, in his skybox at the University of Arkansas in Fayetteville during a college
basketball game. The article quoted Jensen, who was under consideration to
become the USDA official in charge of meat and poultry inspection, as saying that
she felt she was being "looked over" by Tyson.
The article then disclosed that Espy "acknowledged meeting with Tyson
Foods lobbyists 'all the time,'" that Tyson Foods earlier in 1994 had feted Espy at
a Dallas Cowboys football game, and that company executives had contributed
$4,000 to Espy's brother's unsuccessful campaign for Congress. At the same
time, the article alleged, Tyson Foods was enjoying very favorable treatment from
USDA in several aspects of USDA's regulation of poultry and meat: "Few
corporations in America have stronger personal ties to Bill Clinton than Arkansas-based Tyson Foods, Inc., and few have fared better in their dealings with his
Agriculture Department."
The Wall Street Journal article specifically mentioned that a USDA "blitz"
of surprise sanitation inspections of meat-packing facilities over the previous year
had bypassed chicken processors, including Tyson Foods' 66 plants. It also
reported that USDA had favored Tyson Foods' position in a dispute over a
California regulation regarding whether to permit poultry frozen at or above zero
degrees Fahrenheit to be labeled "fresh." The article added that Espy had ordered
USDA employees working on a "zero tolerance" fecal-matter policy for chicken
processing (similar to one he had partially imposed for red meat), to drop the
initiative and turn over their work, including information on computers, to an Espy
aide.
1. Investigation by the Office of Inspector General, USDA
The Wall Street Journal article caught the attention of USDA's Office of
Inspector General (OIG). OIG is a separate agency within USDA charged with
preventing and detecting fraud and abuse in USDA programs and operations and
providing security protection for the Secretary and Deputy Secretary. OIG
investigates alleged or suspected violations of federal criminal law relating to the
employees, programs and operations of USDA and may refer matters to the
Department of Justice (DOJ). OIG is headed by the Inspector General, who
reports directly to the Secretary of Agriculture.
The article prompted OIG to interview Assistant Secretary Jensen on March
21, 1994. Jensen was responsible for USDA's Marketing and Inspection Services,
which included the Food Safety and Inspection Service (FSIS). She was
prohibited by federal law (21 U.S.C. § 622) from receiving gifts from a firm
regulated under the Federal Meat Inspection Act, such as Tyson Foods.
Jensen informed OIG agents that she met Jack Williams, a consultant for
Tyson Foods and the Mid-American Dairymen Association (MADA), in late 1993.
At Williams's invitation, she traveled on January 31, 1994 to Kansas City, Missouri
to address MADA and, the next day, to Fayetteville to visit Tyson Foods. Jensen
said that, while in Fayetteville, she attended a basketball game between the
University of Arkansas and Vanderbilt University, using a ticket that Archibald
Schaffer, Tyson Foods' director of Media, Public and Governmental Affairs
provided to her through Williams. At the game, she met Don Tyson and, after a
brief conversation, sat at the front of Tyson Foods' skybox to watch the game.
Jensen said she insisted on paying for the ticket, and ultimately mailed a personal
check to Williams for $13, the value of the ticket according to Williams.
Jensen said that, on the morning after the game, she gave a speech to
representatives of the Arkansas Poultry Federation and toured Tyson Foods'
facilities. She then flew to Nashville, Tennessee, where she met up with Williams,
who obtained their boarding passes for the flight to Washington, D.C. She
received an upgrade to first class on the flight and sat next to Williams. She
assumed Williams arranged her upgrade through a frequent-flyer program but was
unclear about the details.
On March 22, 1994, the day after their interview with Jensen, OIG agents
interviewed Williams. Williams said he represented issues before governmental
agencies and Congress as a lobbyist for various industrial clients, including Tyson
Foods. He then confirmed that he gave Jensen a ticket to the basketball game in
Fayetteville and provided her upgrade to first class on the flight from Nashville to
Washington, D.C., using his frequent-flyer upgrade stickers. Williams said that
Jensen sent a check to him as reimbursement for the basketball game and that he
endorsed the check to Tyson Foods. Williams stated that he offered to upgrade
Jensen as a token of his goodwill, not as a bribe, and that in his view the "stickers"
had no real value to him. He said he did not submit an invoice to Tyson Foods for
the cost of the upgrade.
OIG Agents asked Williams if he knew anything about Espy attending a
Dallas Cowboys football game with Don Tyson (an incident that had been reported
in the Wall Street Journal article). Williams replied that he did not know whether
Espy had gone to Dallas and attended a football game, except for what he had
heard through rumor and news reports. (10)
On March 22, 1994, on the basis of the information provided by Jensen and
Williams, OIG formally opened an investigation regarding "Gratuities to USDA
officials by Tyson Foods, Inc., Springdale, AR." As to the allegations regarding
Tyson Foods providing football tickets to Espy, OIG concluded that any
substantial investigation of Espy should be handled by DOJ and therefore did not
open a formal investigation into this matter. OIG agents decided, however, to meet
with Espy to question him generally about the items raised in the Wall Street
Journal article, to determine if there was a basis to refer the matter to DOJ.
On March 22, 1994, OIG informed USDA Counsel and Deputy Secretary
Richard Rominger of its need to meet with Espy to discuss the Wall Street Journal
allegations at a mutually convenient time. Two days later, OIG informed DOJ's
Public Integrity Section of the status of its investigation of Jensen and of its
intention to interview Espy. DOJ suggested some questions to ask Espy.
On April 1, 1994, OIG agents interviewed Espy in his office. The agents
first informed Espy of the status of the Jensen investigation and then asked him
about the Dallas football game that the Wall Street Journal article had reported.
Espy said that a week of official travel concluded on Friday, January 14, 1994, in
Lubbock, Texas. The USDA personnel traveling with him returned to Washington,
but Espy remained in Texas for the weekend. Espy stated that he paid for his own
hotel and meals and that on Sunday, January 16, 1994, he attended the Dallas
Cowboys-Green Bay Packers playoff game at Texas Stadium. Espy
acknowledged that Tyson Foods provided him with a skybox ticket and that he
watched the game from its skybox, but he said nothing about his girlfriend meeting
him in Dallas and accompanying him to the game as a guest of Tyson Foods. (11)
Espy further stated that after his office received an inquiry from a reporter
for The Wall Street Journal regarding the game, he asked one of his assistants to
determine the value of his ticket. The day after The Wall Street Journal printed the
article reporting his attendance at the game, Espy reimbursed Tyson Foods $68 for
the cost of his ticket.
After the discussion of the Dallas trip, the agents asked Espy if he had
received any other tickets or things of value from outside sources. Espy stated he
was limiting his response to his acceptance of things from Tyson Foods. He said
that in late spring 1993, after speaking at two graduation ceremonies in Mississippi,
he traveled to Arkansas, where he spoke to the Arkansas Poultry Federation, and
then traveled to a Tyson Foods management training center in Russellville,
Arkansas, where he had dinner and stayed the night. Espy explained that he
received a call the next day from the White House requesting his presence at a
dinner being held for the Cabinet, and that because there were no available airline
facilities Tyson Foods flew him back to Washington National Airport in its
corporate jet. Espy stated that he had USDA reimburse Tyson Foods for the
lodging and the equivalent of a first-class fare for the jet. Espy did not identify
anyone else as accompanying him to Russellville.
During the April 1, 1994 interview, Espy consulted certain documents which
he did not show the OIG agents and which the agents presumed were official
USDA trip itineraries. Espy was asked to provide copies of all itineraries in
support of the two trips discussed, and Espy agreed. The agents informed Espy
that they would prepare a memorandum following the interview and forward it to
DOJ and that the information he provided would be enclosed with the
memorandum. A week later, OIG agents received the itineraries from Espy's
office. As the agents had not seen the original itineraries, they were unaware that
Espy had directed his staff to redact the copies provided to exclude all references
to Tyson Foods and Espy's girlfriend. (12)
On April 19, 1994, OIG's Assistant Inspector General for investigations
formally referred to DOJ both the Jensen investigation and the Espy inquiry. The
referral relayed the relevant facts and the information provided by Espy and stated
in pertinent part:
We are asking that you determine whether the Federal
Meat Inspection Act is applicable to the actions of these
two officials. We also understand that even if you find
that the act is not applicable, the conduct may fall under
the Standards of Ethical Conduct for Employees of the
Executive Branch (5 C.F.R. 2635). Thus, we believe that
these public integrity questions involving two of the
highest officials of this Department can only be resolved
with your prompt guidance and advice.
2. Investigation by the Department of Justice
On April 25, 1994, the Federal Bureau of Investigation (FBI), under the
direction of DOJ's Public Integrity Section, initiated an investigation into the
matters OIG had referred. The investigation differed from a typical Department of
Justice investigation. It was narrowly focused, compulsory process was not used
to obtain documents and testimony, and agents were specifically instructed to limit
their inquiries. The Public Integrity lawyers instructed the agents to be concerned
only about the "receipt of tickets." There was no apparent reason for so limiting
the investigation and for not invoking normal investigative techniques and
procedures. The Independent Counsel Statute, which limits the scope of
preliminary DOJ inquiries, in particular prohibiting the use of compulsory process,
was not then in effect, but DOJ nevertheless adhered to the statute's restrictions. (13)
The FBI interviewed approximately 50 persons, including Espy, Williams,
Espy's girlfriend, Patricia Dempsey, and numerous witnesses from USDA, Tyson
Foods, and other agricultural interests. Information gathered during these
interviews confirmed that Tyson Foods had provided Espy and Dempsey with
tickets and limousine service to attend the 1994 Dallas Cowboys-Green Bay
Packers playoff game. Witnesses further confirmed that Espy, with Dempsey, had
attended a party at the Tyson Foods management training center in Russellville,
Arkansas and had flown back to Washington, D.C. on a Tyson Foods aircraft in
late Spring 1993.
The DOJ investigation also uncovered new information. Credible evidence
suggested that Espy had accepted other, previously undisclosed gifts. These
included tickets to the 1993 National Football League Super Bowl championship
game in Atlanta, Georgia; tickets to a 1993 National Basketball Association finals
game in Chicago, Illinois; tickets to the 1994 Academy Awards ceremony in Los
Angeles, California; and a $500 contribution to a 1993 birthday party for Espy.
FBI agents also heard assertions by senior USDA officials at FSIS, the
agency responsible for food safety and inspection, that they had been ordered in
March 1993 to stop working on the "zero tolerance" inspection system for poultry
they had been developing and to destroy all work produced to date on the matter.
The two members of Espy's immediate staff who purportedly delivered the halt
order, Counselor to the Secretary Kimberly Schnoor and Chief of Staff Ronald
Blackley, told agents that they did not issue such an order.
The FBI and DOJ disagreed sharply on the handling of the additional matters
disclosed in the course of the investigation. Some FBI agents complained about
restraints placed upon them by DOJ Public Integrity attorneys; they wanted
authority to conduct a broader investigation into whether Espy received gifts from
entities other than Tyson Foods and to pursue the "zero tolerance" issue. Internal
DOJ memoranda state that, at a June 7, 1994 meeting between DOJ and FBI, Public
Integrity lawyers wanted to complete the investigation as to "all known gifts" and
decline further inquiry. FBI agents wanted to keep the case open while they
continued to investigate what they believed to be evidence of additional gifts from
other sources.
The outcome was that DOJ authorized the FBI to conduct limited inquiries
for three more days. These limitations on breadth and time limited the FBI's ability
to examine and evaluate the facts fully and increased the likelihood that false
statements Espy and others made to investigators would paint a distorted view of
the facts. (14)
The Public Integrity Section subsequently closed the investigation, despite
the FBI's confirmation that Secretary Espy had received several things of value,
and despite open questions surrounding other gifts and the order to FSIS to halt
work on its "zero tolerance" plan. In a memorandum to the Assistant Attorney
General, Criminal Division, dated June 24, 1994, the DOJ Public Integrity Chief
declined prosecution of Espy for his receipt of gifts from Tyson Foods, stating in
part:
I hereby decline prosecution and close the investigation
of Secretary of Agriculture Mike Espy for violating the
bribe/gift provision of the Meat Inspection Act, 21
U.S.C. § 622. . . . Secretary Espy did violate the statute.
However, in light of the de minimis nature of the
violation; the disproportionality of the mandatory
minimum sentence required by the statute as applied to
this activity; and my firm belief that no amount of further
investigation will make this case more likely than not to
result in a conviction, I have decided to decline. . . .
Public Integrity's decision to close the investigation was reversed by the then
Assistant Attorney General, Criminal Division, on June 30, 1994. In a
memorandum to the file, she expressed concern that DOJ would decline at a time
when the reauthorization of the Independent Counsel Act had been passed by
Congress and was awaiting the President's review. However, neither Public
Integrity nor any other arm of DOJ conducted any further investigation. Instead,
the Attorney General chose to seek the appointment of an Independent Counsel
when the Independent Counsel Statute was reenacted effective June 30, 1994. (15)
3. The Attorney General's Application for Appointment of an Independent Counsel
The Independent Counsel Statute, 28 U.S.C. § 591 et seq., provided special
procedures for the investigation of certain top executive officials (including Cabinet
members such as the Secretary of Agriculture), presidential campaign committee
officers, and, in certain circumstances, members of Congress. It specified the
circumstances under which the Attorney General would conduct preliminary
investigations of these persons and, when appropriate, seek the appointment of an
Independent Counsel to investigate their actions.
The Statute's first enactment in 1978, and its subsequent reenactments,
contained a "sunset" provision that provided for its expiration after five years.
After the statute expired in December 1992, Congress did not reenact it until June
1994. The Clinton administration supported renewal of the statute; Congress held
hearings in 1993 but was unable to reach agreement. In May 1994, the Senate
passed an Independent Counsel Statute that paralleled previous Independent
Counsel Statutes, with certain modifications (e.g., extending the statute to cover
Congress and imposing various fiscal controls on an Independent Counsel). The
House passed the bill on June 21, 1994. President Clinton signed the legislation
into law on June 30, 1994 and stated:
Regrettably, the statute was permitted to lapse when its
reauthorization became mired in a partisan dispute in the
Congress. In fact, the IC [independent counsel] statute
has been in the past and is today a force for governmental
integrity and public confidence.
On August 8, 1994, Attorney General Janet Reno filed an application for the
appointment of an Independent Counsel to investigate Secretary Espy with the
division of the Court of Appeals for the District of Columbia Circuit for the
purpose of appointing Independent Counsels (Special Division). (16) The application
requested appointment of an Independent Counsel with authority to investigate
whether "any violations of federal criminal laws were committed by Secretary of
Agriculture Alphonso Michael (Mike) Espy, and to determine whether prosecution
is warranted." After noting that the source of the allegations against Espy was the
press report of March 17, 1994, the application stated:
Investigation developed evidence that Secretary Espy
accepted gifts from Tyson Foods in the course of two
separate trips, one to Arkansas in May 1993 and one to
Texas in January 1994. The gifts fall into the categories
of entertainment, transportation, lodging and meals. In
total, the gifts amount to at least several hundred dollars
in value.
In addition to the alleged gifts from Tyson Foods, the
Department's investigation also included preliminary
reviews of other instances in which Secretary Espy
allegedly received gifts from organizations and individuals
with business pending before the Department of
Agriculture.
In the application, the Attorney General specifically identified two applicable
criminal statutes: the Meat Inspection Act, 21 U.S.C. § 622, (17) and the gratuities
statute, 18 U.S.C. § 201(c). (18) With regard to the former, she wrote:
Section 622 is a strict anti-gratuity statute which prohibits
any Department of Agriculture employee or officer with
responsibilities under the Meat Inspection Act from
accepting any gift from any person engaged in
commerce, without regard to the intent of the donor or
the donee. . . . [T]he acceptance of non-trivial gifts of
entertainment, transportation, lodging and meals by a
Department of Agriculture official who has
responsibilities under the Meat Inspection Act, from an
entity that is subject to regulation by the Department of
Agriculture, falls within the purview of the statute.
As to the gratuities statute, 18 U.S.C. § 201(c), she wrote that it:
requires proof that a gift was given for or because of
official acts. No evidence has been developed during the
investigation suggesting that Secretary Espy accepted the
gifts as a reward for, or in expectation of, his
performance of official acts.
The Attorney General recommended that the Division grant the Independent
Counsel broad jurisdiction that extended not only to Espy's acts but also to
violations of any federal law by any organization or individual developed during the
Independent Counsel's investigation and connected with or arising out of that
investigation. (19)
4. White House Inquiry
On August 10, 1994, two days after the Attorney General made her
application to the Special Division, the White House publicly announced that it
would ask the Office of Government Ethics to conduct an inquiry into the
allegations of Espy's misconduct. Instead of requesting an Office of Government
Ethics investigation, White House Chief of Staff Leon Panetta asked White House
Counsel Lloyd Cutler to conduct an inquiry.
Panetta later testified that the purpose of the White House Counsel's inquiry
was not to establish whether Espy had committed criminal or ethical violations but
to provide information to the White House about whether Espy had engaged in
conduct that might create an appearance of impropriety and violate the standards
for the Cabinet established by the White House. Panetta stated that he gave
periodic reports of the White House Counsel's inquiry directly to President
Clinton.
The White House Counsel conducted little, if any, independent investigation
of the facts. He relied primarily on press reports to define the scope of inquiry and
on Espy's lawyers to establish the facts. Espy's counsel asserted to White House
Counsel that the allegations of wrongdoing were baseless, principally on the theory
that Espy had reimbursed many of the gifts after public disclosure and had not
performed any favors for the gift-givers.
The White House soon became aware of allegations concerning Espy's
personal use of a USDA-leased Jeep in Mississippi and his girlfriend's receipt of a
scholarship from Tyson Foods. As the White House had not previously been
aware of these two matters, Panetta informed Espy he wanted to discuss them.
On Friday, September 30, 1994, Panetta asked Espy to meet him in the Chief
of Staff's office at the White House. Those present included Panetta, Espy,
Espy's personal counsel, and the new White House Counsel Abner Mikva. Panetta
confronted Espy with the allegations regarding Dempsey's scholarship from Tyson
Foods. Espy told Panetta that he was aware Dempsey had received the
scholarship, that she had mentioned it to him at the time, and that, although he had
expressed some concern about it, no steps had been taken either to decline the
scholarship or to pay it back to Tyson Foods. Espy further told Panetta that
Dempsey did not compete in any way for the scholarship and that he understood a
Washington, D.C. lobbyist for Tyson Foods had arranged it.
Panetta asked Espy about the Jeep that Espy had leased while in Congress
and for which USDA had since assumed the lease payments. Panetta was
concerned that there was no apparent connection between the use of the vehicle in
Mississippi and USDA business. Espy answered that, although it was located in his
old congressional district, he was using the vehicle for purposes related to his
duties as Secretary of Agriculture. Espy also stated that he had approval of USDA
counsel for that use. Espy did not disclose to Panetta that he had represented to
USDA counsel that the Jeep was to be used only in the Washington, D.C. area, and
that counsel had approved its use in Washington, D.C. solely in lieu of a
chauffeured limousine.
Panetta asked Espy whether there were any other matters about which the
White House should be concerned. Espy responded that there were not.
Panetta considered Espy's responses with respect to the scholarship and the
Jeep inadequate and told Espy that he would expect Espy to resign on the following
Monday morning. Panetta and White House Counsel Mikva then went immediately
to President Clinton, informed him of what they had learned in the meeting, and told
him they recommended that Espy resign. The President concurred in the
recommendation. On October 3, 1994, Espy submitted his resignation to the
President, effective December 31, 1994.
On October 11, 1994, Mikva submitted a report on the Espy inquiry to the
President. The report indicated that the President had asked Mikva to examine two
questions in light of the Standards of Conduct for Employees of the Executive
Branch, 5 C.F.R. Part 2635: "(1) whether the President should direct that any
further action be taken with respect to Secretary Espy's conduct; and (2) what
actions should be taken to ensure that similar incidents are avoided by other
Members of the Cabinet." The report reviewed the applicable ethical regulations
and recounted White House Counsel's understanding of the background facts
related to Espy's conduct. Although the report purported to be a "review of these
matters under the Standards of Conduct," it did not reach any conclusions
regarding whether Espy had violated any of those standards. It stated that in light
of Espy's resignation (effective December 31, 1994), his recusal from meat and
poultry issues for the two months remaining in his tenure, his reimbursement for the
things of value he had received, and the institution of further methods to review his
travel, the White House Counsel felt that no further actions should be taken at that
time.
5. Allegations of Additional Improprieties
At about the same time that the Special Division was considering the
Attorney General's request for the appointment of an Independent Counsel and that
White House Counsel was investigating Espy, the press began to report a series of
new allegations against the Secretary, many of which would ultimately be examined
by the Independent Counsel. The following table summarizes the major publicly-reported events that OIC investigated:
| Date |
Publication |
Allegation |
|---|
| August 7, 1994 |
Chicago Star Tribune |
Espy solicited a ticket for a Chicago Bulls playoff game from the President of Quaker Oats. (See discussion at Section II.A.4.) |
| August 7, 1994 |
Des Moines Register |
Sun-Diamond executive threw a lavish party for Espy. (See discussion at Section II.C.2.b.) |
| August 19, 1994 |
New York Times |
Agricultural interests hosted a fundraiser to help Espy's brother Henry retire his campaign debt. (See discussion at Section II.E.1.d.(2).) |
| August 24, 1994 |
Associated Press |
Espy received tickets to the 1994 Super Bowl from the Fernbank Museum in Atlanta. (See discussion at Section II.A.5.) |
| August 27, 1994 |
Atlanta Journal-Constitution |
Espy's brother Henry had applied for, but was refused, a $3.5 million USDA loan guarantee. (See discussion at Section II.G.4.) |
| September 6, 1994 |
Los Angeles Times |
Espy showed favoritism toward Richard Douglas, an old friend who was an executive at Sun-Diamond Growers. (See discussion at Section II.A.2.) |
| September 12, 1994 |
Wall Street Journal |
Espy's Chief of Staff Ronald Blackley intervened in subsidy applications by former clients and Espy campaign contributors (See discussion at Section II.F.) |
| September 16, 1994 |
Washington Post |
Espy met with Oglethorpe Power regarding Treasury's rejection of its plan to pay off a federal loan, shortly after Oglethorpe's consulting firm, EOP Group, hired Patricia Dempsey, Espy's girlfriend. (See discussion at Section II.A.3.) |
| September 17, 1994 |
Los Angeles Times |
Espy made 20 government-paid trips to his home state of Mississippi in his first 20 months in office, many with light official duties. (See discussion at Section II.C.2.c.) |
| September 19, 1994 |
Newsweek |
Investigators were looking into eight contacts between Espy and Tyson Foods, including one shortly before USDA officials said they were told to destroy documents on new regulations opposed by the poultry industry. (See discussion at Section II.A.1.b.) |
| September 19, 1994 |
Associated Press |
Espy kept a government-leased Jeep in Mississippi and used it for personal transportation (See discussion at Section II.C.1.a.) |
| September 21, 1994 |
Associated Press |
Espy had begun reimbursing donors for benefits they had given him. (See discussion at Section II.B.3.) |
6. Appointment of the Independent Counsel
On September 9, 1994, thirty days after the Attorney General filed her
application for appointment of an Independent Counsel, the Special Division
appointed Donald C. Smaltz to the position. Smaltz was a 57-year-old California
trial lawyer who had begun his career as a federal prosecutor, first in the United
States Army, where he served as Captain in the Judge Advocate General's Corps,
and later as an Assistant United States Attorney and Special United States Attorney
in Los Angeles, California. He had been in private practice for 30 years,
specializing in white-collar criminal defense and complex civil litigation. (20)
One week after the Independent Counsel was appointed, Espy issued a press
release explaining that he had been an extremely busy Secretary with an "impressive
record of accomplishments." He said he was releasing his travel schedules, news
stories, speeches and a variety of other materials to provide a detailed account of
his "official activities" while Secretary of Agriculture. Acknowledging that he may
have been "inattentive" to the appearance of impropriety, he flatly asserted that he
had "not violated any laws or ethics regulations" and had "cooperated fully with the
USDA's Inspector General, [and] with the FBI." (21)
Part of the Special Division's function is to specify an Independent
Counsel's jurisdiction, and the jurisdictional grant in this instance tracked the
Attorney General's request. It gave to the Independent Counsel the full power,
independent authority, and jurisdiction to the maximum extent authorized by the
Independent Counsel Reauthorization Act of 1994 (22)
[to investigate] whether Alphonso Michael (Mike) Espy,
Secretary of Agriculture, committed a violation of any
federal criminal law, other than a Class B or C
misdemeanor or infraction, relating in any way to the
acceptance of gifts by him from organizations or
individuals with business pending before the Department
of Agriculture;
[to investigate] allegations or evidence of violation of any
federal criminal law, other than a Class B or C
misdemeanor or infraction, by any organization or
individual developed during the Independent Counsel's
investigation referred to above and connected with or
arising out of that investigation;
to seek indictments and to prosecute any organizations or
individuals involved in any of the matters described
above;
to fully investigate and prosecute the subject matter with
respect to which the Attorney General requested the
appointment of independent counsel . . . and all matters
and individuals whose acts may be related to that subject
matter, inclusive of authority to investigate and prosecute
federal crimes . . . that may arise out of the above
described matter, including perjury, obstruction of
justice, destruction of evidence, and intimidation of
witnesses.
The Attorney General's application for the appointment of an Independent
Counsel referred specifically to Espy's receipt of gifts in possible violation of 18
U.S.C. § 201(c), the general gratuities statute, and of 21 U.S.C. § 622, the gratuities
provision of the Meat Inspection Act. It also recommended that the Independent
Counsel's jurisdiction extend not only to Espy's acts, but also to organizations and
persons involved in those acts and, further, to violations of federal criminal law
connected with or arising out of the investigation.
The Special Division's definition of the Independent Counsel's jurisdiction
did not limit the range of possible offenses into which the Independent Counsel
could inquire. The Special Division adopted the grant that the Attorney General
proposed, and the Independent Counsel's jurisdiction extended to Espy's receipt
of gifts, to the giving of the gifts, and to other criminal violations arising out of and
in connection with the investigation. This broad authority gave the Independent
Counsel both the power and the responsibility to look at a wide range of possible
offenses touching on the receipt of gratuities, including mail and wire fraud under
18 U.S.C. §§ 1341, 1343, and 1346; salary supplementation under 18 U.S.C.
§§ 209 and 216(b); false statements to government officials under 18 U.S.C.
§ 1001; false recording of the gratuities under 15 U.S.C. § 78m(b)(2); failure to
report receipts as required by ethical regulations; and other violations of ethical
regulations to the extent such violations offend other criminal statutes. Later
referrals of related matters compelled the Independent Counsel to address a variety
of violations of other possible criminal statutes, such as the federal election laws.
During the OIC's investigation, the Attorney General and the Special Division
referred a total of five related matters to the Independent Counsel for investigation.
On September 14, 1994, shortly after the Independent Counsel's
appointment, the Attorney General referred as related matters the two allegations
that
(a) Secretary Espy hosted a fundraising dinner,
attended by agricultural lobbyists, the purpose of which
was to retire the campaign debt of his brother; and
(b) Debts of Secretary Espy, including an automobile
loan, were paid by a government contractor.
The investigation of these two matters is discussed in Sections II.E.1.f and
II.C.1.c, respectively.
On October 20, 1994, the Attorney General referred to the Independent
Counsel a third related matter - the allegation that
Secretary Espy was improperly influenced by Tyson
Foods to intervene, in February 1993, on behalf of U.S.
poultry producers in a dispute involving the labeling of
chicken shipped from the United States to Puerto Rico.
The investigation of this matter is discussed in Section II.A.1.b.(3).
On April 1, 1996, upon the Independent Counsel's request and over DOJ's
objection, the Special Division referred to OIC, as a fourth related matter, the
investigation of
any application, appeal, or request for subsidy made to or
considered by the United States Department of
Agriculture, for which Secretary of Agriculture Alphonso
Michael (Mike) Espy and/or his Chief of Staff Ronald
Blackley intervened in the application, approval, or review
process.
The investigation of this matter is discussed in Section II.F.
On October 15, 1996, the Attorney General referred to OIC, as a fifth related
matter, the allegation that
Richard Douglas [the executive of Sun-Diamond Growers
of California who had given gifts to Espy] may have
obtained a mortgage loan in 1993 by making false
representations and submitting false writings and
documents to a broker and a lender.
The investigation of this matter is discussed in Section II.G.1.
Early on in the investigation - in January 1995 - OIC requested the Attorney
General to refer either as a related matter or as an expansion of its jurisdiction the
authority to investigate Tyson Foods' gifts to other public officials. The Attorney
General refused this request. The matter is discussed in Section II.A.1.d. The
Independent Counsel sought one additional referral from the Special Division
concerning irregularities in Espy's congressional campaign account, which the
panel denied on June 12, 1998. The circumstances of this request are discussed in
Section II.G.2.
An Independent Counsel's statutory powers include conducting grand-jury
proceedings and other investigations, participating in civil and criminal court
proceedings and litigation, and appealing any decision in any case in which the
counsel participates in an official capacity. 28 U.S.C. § 594(a)(1)-(3). An
Independent Counsel has authority to obtain immunity for witnesses and to consult
with the United States Attorney in the district where crimes were allegedly
committed. His powers include "initiating and conducting prosecutions in any
court of competent jurisdiction, framing and signing indictments, filing
informations, and handling all aspects of any case, in the name of the United
States." He appoints employees, requests and obtains assistance from DOJ, and
may accept referral of matters from the Attorney General, if the matter falls within
the Independent Counsel's jurisdiction as defined by the Special Division. He is
required, except to the extent inconsistent with the statute, to "comply with the
written or other established policies of the DOJ respecting enforcement of the
criminal laws." 28 U.S.C. § 594(f). He has "full authority to dismiss matters within
[his] prosecutorial jurisdiction without conducting an investigation or at any
subsequent time before prosecution, if to do so would be consistent" with DOJ
policy. 28 U.S.C. § 594(g). (23)
II. THE OFFICE OF INDEPENDENT COUNSEL'S INVESTIGATION
A. Gifts Solicited or Received by Secretary Espy
The Independent Counsel's original mandate centered on allegations that
Secretary of Agriculture Alphonso Michael Espy received gratuities from
agricultural interests, in particular from Tyson Foods, Inc. The Office of
Independent Counsel (OIC) undertook a thorough inquiry into all things of value
Espy received from persons and entities that had an interest in Espy's official
actions and, more generally, in actions of the United States Department of
Agriculture (USDA). In the course of its investigation, OIC uncovered a wide
variety of benefits conferred on Espy, and indirectly on him through his girlfriend
Patricia Dempsey or members of his family, by representatives of companies
subject to USDA regulation who had significant issues awaiting resolution.
The things of value that Espy received from agricultural interests while in
office, and the companies whose agents gave or facilitated the giving of things of
value while they had matters before him, are set forth chronologically in the
following table:
| DATE |
THINGS OF VALUE |
SOURCE |
|---|
| 1/5/93 |
Dinner at Mr. K's Restaurant in Washington, D.C. (estimated value $123) |
Sun-Diamond Growers of California |
| 1/6/93 |
Dinner at Twenty One Federal Restaurant in Washington, D.C. (estimated value $73) |
Sun-Diamond Growers of California |
| 1/13/93 |
Dinner at Le Mistral Restaurant in Washington, D.C. (estimated value $50) |
Sun-Diamond Growers of California |
| 1/18/93 |
Four Presidential Inaugural Dinner seats ($6,000 value) |
Tyson Foods, Inc. |
| 3/14/93 |
Hartman luggage / dinner at Steamers Restaurant in Bethesda, Maryland (estimated value $2,427) |
Sun-Diamond Growers of California |
| 5/13/93 |
$3,100 cash to Secretary Espy's girlfriend for a trip to Greece |
International Nut Council (through Richard Douglas) |
| 5/14-16/93 |
Tyson birthday party in Russellville, Arkansas, including airfare, meals, lodging and entertainment (estimated value $2,556) |
Tyson Foods, Inc. |
| 6/7/93-3/95 |
Employment for Secretary Espy's girlfriend at EOP as "Seminar Planner and Staff Associate" from June 1993 to March 1995 (total compensation of $63,861) |
The EOP Group, Inc. |
| 6/18/93 |
Two tickets to Chicago Bulls-Phoenix Suns 1993 NBA championship game in Chicago (face value $95) |
Quaker Oats |
| 7/6/93 |
Lunch barbecue from Sutton Place Gourmet in Washington, D.C. (estimated value $75) |
Sun-Diamond Growers of California |
| 9/11-12/93 |
U.S. Open tennis tickets and limousines in New York City for Secretary Espy and his girlfriend (estimated value $4,446) |
Sun-Diamond Growers of California |
| 9/18/93 |
Three tickets to Congressional Black Caucus Foundation Annual Awards Dinner in Washington, D.C. (estimated value $1,500) |
Morgan Stanley |
| 9/26-29/93 | Weekend stay at Greenbriar Resort in West Virginia (cost $569) |
American Crop Protection Association (through Michael O'Bannon of EOP) |
| 10/29/93 |
Six bottles of wine (retail price $187) |
Robert Mondavi Winery |
| 11/10/93 |
Two tickets to Washington Bullets-New York Knicks NBA game in Washington, D.C. (estimated value $222) |
Sun-Diamond Growers of California |
| 1/4/94 |
$1,200 per-semester (8 semesters) college scholarship to Secretary Espy's girlfriend (total value $9,600 (of which $1,200 was paid)) |
Tyson Foundation |
| 1/15-16/94 |
Weekend trip to Dallas, Texas, including airfare, limousines and tickets to Dallas Cowboys-Green Bay Packers NFL playoff football game (estimated value $2,271) |
Tyson Foods, Inc. |
| 1/17/94 |
Waterford crystal bowl (estimated value $173) |
Sun-Diamond Growers of California |
| 1/29/94 |
Dinner at the Ritz-Carlton in Atlanta, Georgia (estimated value $50) |
Sun-Diamond Growers of California |
| 1/30/94 |
One NFL Super Bowl ticket (cost of $2,200) |
Oglethorpe Power/The EOP Group, Inc./Smith Barney |
| 1/30/94 |
Four NFL Super Bowl tickets (cost of $857) |
Fernbank Museum |
| 3/8/94 |
Dinner at Kinkead's Restaurant in Washington, D.C. for Secretary Espy and his girlfriend (estimated value $207) |
Robert Mondavi Winery |
| 3/11/94 |
Dinner at Ca'Brea Restaurant in Los Angeles, California (estimated value $77) |
Sun-Diamond Growers of California |
| 4/1/94 |
$10,000 in contributions to the Henry Espy for Congress Committee |
Sun-Diamond Growers of California/Richard Douglas |
Espy's counsel maintained at trial that some donors of these gifts were
personal friends of Espy. Similarly, Espy appeared, in his own mind at least, to
have justified the receipt of many of these things of value on two grounds: that they
were given to his girlfriend Patricia Dempsey, not directly to him or a blood
relation, and that some of the immediate donors were his friends - in particular
Richard Douglas of Sun-Diamond Growers and Michael O'Bannon of the EOP
Group. In his diary, he explored possible "book themes" to explain his legal
difficulties, including the following: "My errors - reliance on non-blood
relationships (Pat) reliance on friendship exception Richard Douglas, O'Bannon."
The "friendship exception" is a reference to regulations promulgated by the
Office of Government Ethics that specifically recognize "gifts based on a personal
relationship" as an exception to the general regulatory prohibition on receipt of any
gifts over $20 in value from prohibited sources. 5 C.F.R. § 2635.204(b). The
regulations provide that such exceptions apply to enforcement of the gratuities
statute, 18 U.S.C. § 201(c)(1)(B). 5 C.F.R. § 2635.202(b). However, the
regulations make clear that this friendship exception is limited:
Gifts based on a personal relationship. An employee may accept a gift
given under circumstances which make it clear that the gift is
motivated by a family relationship or personal friendship rather than
the position of the employee. Relevant factors in making such a
determination include the history of the relationship and whether the
family member or friend personally pays for the gift.
5 C.F.R. § 2635.204(b).
Espy's acceptance of these gifts was not protected by the friendship
exception because the gifts were given for business purposes and paid for by
businesses either regulated by or having matters before USDA. It is immaterial that
the person who presented the gifts on behalf of the companies happened to be
Espy's personal friends. Espy either knew or willfully ignored the source of the
expensive gifts he received.
1. Gifts from Tyson Foods, Inc.
Of all the entities investigated by OIC, Tyson Foods, Inc. was the largest
and best connected to President Clinton. It had direct entree to the White House
through its chairman, Don Tyson, a longtime supporter of President Clinton, and its
chief counsel, James Blair, was described in a White House memo as the
President's "close personal friend." Blair had an office at the corporate
headquarters of Tyson Foods in Springdale, Arkansas.
In December 1992, while still a congressman, Espy sought Don Tyson's
help in being appointed to the new Clinton administration cabinet. After Espy's
appointment, Don Tyson and other Tyson Foods officials subsequently sought to
maintain direct access to and influence with Espy through a pattern of gift-giving,
which began immediately before Espy was sworn in as the Secretary of Agriculture
and continued until shortly before publication of the March 17, 1994 Wall Street
Journal article that reported on these activities. During Espy's first year in office,
Tyson Foods gave Espy, Espy's girlfriend, and Espy's relatives things of value
worth a total of more than $12,000 for or because of official acts performed or to
be performed by the Secretary.
a. The Donors
In 1993 and 1994, Tyson Foods was the world's largest fully integrated
producer, processor and marketer of poultry-based food products. Its market
share of chicken products sold in the United States was approximately 23%. It
also had a smaller beef and pork division. The company's integrated operations
included breeding and rearing chickens and hogs, harvesting seafood, and
processing and marketing poultry, beef, pork and seafood. The company
processed approximately 3.9 billion pounds of consumer poultry and 518 million
pounds of consumer beef and pork during fiscal 1994. Tyson Foods' annual
sales in 1993 and 1994 were approximately $5 billion, with beef and pork
operations accounting for approximately 10% of its business.
Tyson Foods in 1993 and 1994 owned and operated approximately 60
poultry processing plants, 18 of which also processed beef and pork products, in
17 states and three foreign countries. USDA inspected all of Tyson Foods'
slaughtering and processing facilities and pervasively regulated their operations.
The company noted in its annual 10-K report for 1994:
The Company's poultry, beef, pork and Mexican food-based processing facilities are . . . subject to extensive inspection and regulation by the United States
Department of Agriculture.
As Tyson Foods' main lines of business were food processing and
distribution, it had an obvious reason to maintain Espy's receptive ear. The
company was subject to extensive USDA regulation in its everyday operations.
Tyson Foods routinely had numerous matters pending before USDA - matters
that could and did substantially affect the company's operations. During Espy's
tenure as Secretary of Agriculture, pending USDA policy issues had the potential to
affect more than $100 million of Tyson Foods' business.
Don Tyson, chairman of the Board of Directors, owned or controlled
approximately 90% of the voting shares of the company. Don Tyson was a friend
of and political contributor to Bill Clinton when he was Governor of Arkansas and
when he ran for the presidency of the United States. Don Tyson's son, John H.
Tyson, was president of the Beef and Pork Division and a director of Tyson
Foods in 1993.
Archibald R. Schaffer III was Tyson Foods' director of Media, Public
and Governmental Affairs. In this capacity, Schaffer acted as the company's
principal spokesperson and was responsible for overseeing all of Tyson Foods'
dealings with and lobbying of government officials, supervising all contacts with the
press and administering all public-relations efforts. His duties included reviewing
official comments that Tyson Foods' technical department submitted to
government agencies regarding proposed legislation and regulations. He was also
the primary contact between Tyson Foods and two trade associations to which it
belonged, the National Broiler Council and the Arkansas Poultry Federation.
Schaffer reported directly to John Tyson and supervised Tyson Foods'
Washington, D.C. lobbyist, Jack Williams. Don Tyson testified that he expected
Schaffer and his predecessor to advise him on the legalities of his dealings with
government officials, and in this respect Schaffer had let him down.
Jack L. Williams, a registered lobbyist, represented Tyson Foods'
interests before various governmental agencies, including USDA. Williams
reported to Don Tyson, John Tyson and Schaffer. He submitted monthly invoices
for "Legislative Liaison Services" to Tyson Foods, including a flat fee for services
rendered and a non-itemized amount for "additional Washington expenses" that
varied from month to month and that Schaffer reviewed and approved. Williams
also represented other clients before USDA.
The National Broiler Council (NBC), a trade association for the poultry
industry, described itself as "representing the producers/processors of 95% of the
broiler chickens consumed in the United States." Its purpose was to promote
poultry products and maintain a legislative liaison presence with regulatory
authorities and Congress. The $165,000 in annual dues paid by Tyson Foods,
nearly twice those of the next-largest member, comprised 8% of the NBC's annual
budget, making Tyson Foods the trade association's largest and dominant member.
The Arkansas Poultry Federation (APF) was a trade association that
represented the interests of the poultry industry in Arkansas before federal, state
and local government entities. Its membership consisted of poultry processors,
feed manufacturers, commercial egg producers and others. Each member
company paid up to a maximum $15,000 in annual dues; in each of 1993 and 1994,
Tyson Foods, the largest dues-paying member, paid $45,000 reflecting the three
companies it controlled.
The Tyson Foundation, Inc., an entity separate from Tyson Foods, was
formed in 1969 as a not-for-profit Arkansas charitable corporation funded with
Tyson Foods stock. It was organized, in part, to provide college scholarships to
needy students who resided in the vicinity of Tyson Foods' operating facilities. As
the Tyson Foundation stock increased in value, the foundation developed into a
significant charitable education enterprise, with assets in 1995 valued in excess of
$15 million.
After the 1992 presidential election, Mississippi Congressman Espy
approached John Rogers, president of C.B. Rogers, Inc., a large Mississippi
poultry company, seeking an introduction to Don Tyson. Espy was interested in
being nominated as Secretary of Agriculture or Commerce in the Clinton
administration. Because of his position as chairman of one of the world's largest
poultry companies and his reputed relationship with the President-elect, Don Tyson
appeared to be in an advantageous position to influence the new administration's
selection of the Agriculture Secretary. Rogers agreed to arrange the meeting.
Shortly thereafter, Espy, Ronald Blackley (Espy's Congressional district
agricultural representative and future Chief of Staff), Rogers, and Rogers's wife
flew in Rogers's private plane from Mississippi to Little Rock, Arkansas to meet
with Don Tyson.
John Tyson met the group at the airport in Arkansas. Espy, Blackley,
Rogers and John Tyson then traveled to Little Rock for lunch, where Don Tyson
joined them. During lunch, Rogers told Don Tyson that Espy wanted to be a
Cabinet member and urged him to use his influence with the President-elect to
assure that Espy be considered. Espy then informed Don Tyson of his
qualifications for the post and solicited his assistance.
After he became Secretary of Agriculture, Espy occasionally met Don and
John Tyson, primarily at social gatherings and events, and the Tysons made use of
such occasions to lobby Espy on matters of interest. Espy's most frequent
contact with Tyson Foods, however, came through lobbyist Williams, with whom
he frequently met to discuss policy matters affecting Tyson Foods. Espy's
calendar reflects that he met with Williams on at least the five following scheduled
dates: February 3, 1993; March 11, 1993; January 25, 1994; February 16, 1994;
and March 9, 1994. Williams also was known to show up unannounced on other
occasions to meet with the Secretary. Espy's notepads reveal either a meeting or a
telephone conversation with Williams on September 14, 1993, at which time the
topic of attending a Dallas football game came up. Espy also met with Tyson
Foods' governmental affairs director Schaffer from time to time.
b. Donors' Interest in Secretary Espy's Official Acts
The Secretary of Agriculture has a significant role in overseeing the nation's
meat and poultry industries. The Federal Meat Inspection Act (FMIA) (21 U.S.C.
§ 601 et seq.) and the Poultry Products Inspection Act (PPIA) (21 U.S.C. § 451 et
seq.) direct the Secretary of Agriculture to maintain meat- and poultry-inspection
programs designed to assure consumers that the meat and poultry products they
purchase are wholesome and unadulterated. Such inspections were required for
Tyson Foods to market its products. Tyson Foods was subject to numerous
USDA regulations that applied to many aspects of its integrated business, from the
slaughter of meat and poultry through their processing, distribution and sale to the
consumer.
USDA's Food Safety and Inspection Service (FSIS) has the responsibility
under these laws for inspecting both meat and poultry products and the facilities at
which they are produced. As part of its inspections, FSIS routinely monitors for
the presence of microbial contamination in commercial cooked or processed ready-to-eat meat and poultry products to assure they are safe.
FMIA and PPIA further direct the Secretary of Agriculture to assure that
meat and poultry products distributed to consumers are properly marked, labeled,
and packaged. The regulations grant the Secretary broad authority to determine
what must be disclosed on labels bearing the USDA inspection legend. One
important consequence of the Secretary's authority to mandate labeling is that such
mandates preempt inconsistent state and local requirements that might otherwise
restrict the flow of interstate commerce in meat and poultry products. The
Secretary therefore has significant power to limit state and local regulation.
(1) USDA Food Safety Initiatives
Before he was sworn in as Secretary of Agriculture on January 22, 1993,
Espy faced a major public-health crisis. On January 18, 1993, USDA learned that a
virulent strain of E.coli bacteria (E.coli 0157:H7) had caused an outbreak of food
poisoning from hamburgers sold at a fast-food restaurant in Washington state. The
incident captured the nation's attention as more than 500 people became ill and four
died. The E.coli outbreak caused a flurry of activity at USDA and had the potential
to affect severely the meat and poultry industries. FSIS, with the Secretary, was
responsible for coordinating USDA's response to the crisis.
One of Espy's first official acts as Secretary was a February 2, 1993 trip to
Olympia, Washington to meet with state officials and coordinate state and federal
efforts to control the outbreak. Dr. Russell Cross, administrator of FSIS,
accompanied Espy and briefed him on the details of a "two-track" system for
inspection reform that FSIS had had under development since the fall of 1992. Dr.
Cross had publicly disclosed these proposals to industry groups in mid-January
1993, before Espy took office. Soon after his trip, Espy announced his intention to
implement Dr. Cross's two-track program. On February 4, 1993, in a Washington,
D.C. conference with representatives of meat and poultry producers and
processors - including Tyson Foods representative Schaffer - Espy discussed
USDA's response to the E.coli outbreak and stated his intention to proceed with
substantial changes in the inspection systems for both meat and poultry.
The following day, February 5, 1993, before the Senate Agriculture, Nutrition
and Forestry Subcommittee, Espy testified that the then-current meat inspection
practices, which depended on visual examination of carcasses, could not detect
bacterial contamination. Espy said that he was directing USDA "to reinvent every
aspect of meat inspection" and testified that Dr. Cross had prepared a two-track
model for reforming meat and poultry safety procedures, designed to maximize the
effectiveness of the existing program while developing new meat and poultry
inspection regimens for the future. Track I, Espy explained, was to be
"evolutionary," in that it would take advantage of existing scientific technology and
techniques to improve meat and poultry inspection. Track II, he said, was to be
"revolutionary," with a wholly-revamped meat and poultry program capable of
dealing with the dangers posed by various harmful bacteria. Espy outlined a
number of proposed measures he planned to implement promptly, including filling
500 meat-inspector vacancies, using organic sprays more widely to reduce bacteria
on the surface of beef carcasses, and mandating safe-handling instructions on raw
meat and poultry products to heighten consumer awareness.
Dr. Cross, whose testimony followed Espy's, further detailed the two-track
approach. Track I involved the implementation of six initiatives, including
proposals to enhance detection and control measures to develop quantitative risk
analysis to encourage the use of technologies that reduce pathogens, and to
increase consumer awareness of safe food practices by disseminating information
on how best to handle meat and poultry products. Track II called for FSIS to
redesign all USDA safety programs for the future in cooperation with "outside
stakeholders such as Congress, professionals from the public health sector,
consumer groups [and] industry."
Throughout 1993 and 1994, USDA developed and implemented new
measures designed to increase food safety. FSIS increased its inspection of
slaughterhouses. The agency also conducted 90 unannounced inspections of cattle
slaughterhouses and temporarily closed 30 of them. In the fall of 1993, Espy
announced that USDA intended to conduct 1,000 unannounced inspections of meat
and poultry processing plants.
USDA also continued work throughout 1993 on two Track I policies of great
interest to Tyson Foods. First, FSIS refined and implemented a plan for pathogen
reduction on meat and poultry, an effort that acquired the name "zero tolerance."
Second, FSIS worked on developing a consumer education program that would
apply to all meat and poultry products. This effort culminated in an emergency
regulation mandating the use of so-called "safe handling labels" on all not-ready-to-eat products.
(a) Zero Tolerance for Pathogens
The January 1993 E.coli incident focused public attention squarely on FSIS
policies regarding the removal of pathogens from meats during processing. Dr.
Cross's February 5 Congressional testimony announced to the public that FSIS's
response would include maximizing performance of the then-existing system, which
consisted solely of inspection of animal products by sight, smell, and touch. |
