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March 16, 1998




Donald C. Smaltz, Independent Counsel In re Espy, announced:

   Richard Douglas, the former Senior Vice President for Corporate Affairs for Sun-Diamond Growers of California, pleaded guilty today to a charge that he had lied to the FBI when he earlier denied giving illegal gratuities to former Secretary of Agriculture Espy.

   Douglas admitted in his plea today that he had lied to the FBI about a variety of matters, including giving Espy about $17,000 in illegal gratuities on behalf of Sun-Diamond Growers which, at the time, had matters pending before the Department of Agriculture. A San Francisco jury's verdict convicting Douglas in November 1997 on one count of giving $7,600 in illegal gratuities to Secretary Espy was set aside in February 1998 because the trial court ruled that Douglas should not have been prosecuted in the Northern District of California. Douglas' plea brings to a close this matter and two other outstanding cases against him.

   Pursuant to the Plea Agreement, Douglas will cooperate with the Independent Counsel's investigation. Douglas will be sentenced on July 13, 1998 before the Honorable Thelton E. Henderson in the Northern District of California.

    Mr. Smaltz stated:

    Richard Douglas' plea of guilty now brings to a close the Sun-Diamond/Richard Douglas chapter of this investigation, and confirms the corporate arrogance of Sun-Diamond Growers in willfully and repeatedly violating the criminal proscriptions against the regulated giving gifts to the regulators. The corruptive effects on the workings of government, and the undermining of public confidence in our regulatory institutions resulting from these corrosive actions, require that this type of conduct be thoroughly investigated and, when appropriate, vigorously prosecuted.

   The Information charged Douglas with lying to the FBI in June 1994 in the following particulars:

      First, by representing that the only time Sun-Diamond paid any expenses for Secretary Espy was when Sun-Diamond brought then-Congressman Espy to California to speak at a convention when in fact Douglas gave the following illegal gratuities to Espy: (1) Hartmann luggage valued at $2,427; (2) tickets, limousine services, and meals valued at approximately $4,590 for the Secretary and the Secretary's girlfriend to attend the U.S. Open Tennis Tournament in New York; (3) meals valued at approximately $665; (4) $3,100 in cash for the Secretary's girlfriend so that she could accompany Espy to the World Tree Nut Congress in Athens, Greece; and (5) a minimum of $7,000 in contributions to be made to the Congressional campaign debt retirement of Henry Espy, the Secretary's brother.

      Second, by representing that Sun-Diamond had no issues pending before the Department of Agriculture subsequent to Espy becoming Secretary of Agriculture when in fact the following matters were pending before the USDA and Secretary Espy: (1) funding for research for alternatives to the pesticide methyl bromide in the event the Environmental Protection Agency would restrict or prohibit its use; (2) an Environmental Protection Agency regulation to phase out and eliminate the use of methyl bromide; (3) approval of the Market Promotion Program funding for the raisin industry, which would benefit financially Sun-Maid Raisins, a Sun-Diamond member cooperative, (4) a study of the Market Promotion Program, with a view to giving agricultural cooperatives preferences that were designated for small entities; (5) various pesticide issues; (6) the federally funded School Lunch Program; and (7) the Teamsters strike of Sun-Diamond member cooperative Diamond Walnut.

      Third, by claiming that he obtained tickets to a June 1993 Chicago Bulls-Phoenix Suns championship basketball game in Chicago for himself and Secretary Espy at no cost from a friend of his who was a professional basketball player, when in fact he knew that Secretary Espy had obtained the tickets from the Chief Executive Officer of Quaker Oats. Quaker Oats Co. was then regulated by USDA under a variety of statutes, including the Meat Inspection Act which has an absolute prohibition against any officer or employee of USDA soliciting or accepting anything of value from a company regulated under that Act.

   Under the Plea Agreement, the Government agreed to dismiss the remaining outstanding charges against Douglas. On March 5, 1998, the Office of Independent Counsel had filed a notice of appeal from the trial judge's February 20, 1998 dismissal for lack of venue of the jury's conviction of Douglas for illegal gratuities. In April 1997, the trial court severed nine wire fraud counts alleging Douglas committed fraud in his mortgage application for a half-million-dollar house in Oakland, California, from the gratuities and illegal campaign contribution counts in the indictment. The mortgage fraud trial was scheduled to commence on March 31, 1998. In April 1997, the Court also had dismissed two false statement counts, which the Independent Counsel had appealed.

   On September 24, 1996, a District of Columbia jury convicted Sun-Diamond Growers -- Douglas' employer -- of one count of providing illegal gratuities worth approximately $6,000 to Secretary Espy, two counts of committing mail and wire fraud resulting from a $5,000 illegal campaign contribution scheme, and five counts of making illegal campaign contributions to Henry Espy for Congress worth $4,000. On May 13, 1997, Sun-Diamond was sentenced to pay a fine of $1.5 million and was placed on five years probation with special conditions.

   Former Secretary of Agriculture Espy was charged in a 39-count indictment filed on August 27, 1997. The trial is currently pending without date, awaiting a ruling from the United States Court of Appeals for the District of Columbia on four dismissed counts, including three counts where the trial court ruled that the Meat Inspection Act's criminal proscription against accepting gratuities does not apply to the Secretary of Agriculture. Oral argument is scheduled for March 25, 1998.

   A copy of the Information and Plea Agreement may be obtained on request from the Office of Independent Counsel.

    The Independent Counsel's investigation is continuing.


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