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 |
