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FOR IMMEDIATE RELEASE

December 19, 1996

 

PRESS RELEASE

 

Donald C. Smaltz, Independent Counsel In Re Espy, today announced:

   In a case brought by this Office entitled United States v. Alvarez T. Ferrouillet, Jr. and John J. Hemmingson, the jury today found defendant Alvarez T. Ferrouillet, Jr., a Louisiana lawyer who was Chairman of the Henry Espy for Congress Campaign debt retirement committee in 1993 and 1994, guilty on all of the 10 counts in which he was charged. The jury also found Defendant Hemmingson, who was Chairman of the Board and Chief Executive Officer of Crop Growers Corporation in 1994, guilty on three of the four counts against him. Crop Growers Corporation is a publicly-traded company on the NASDAQ and is the second-largest crop insurance company in the United States.

   Both defendants were charged in Count One (18 U.S.C. 2314) with interstate transportation of a $20,000 check which was obtained from Crop Growers Insurance, Inc. by fraud. The defendants used a false retainer letter from the New Orleans law firm of Ferrouillet & Ferrouillet to conceal the true purpose of the transaction -- that the $20,000 was an illegal corporate campaign contribution. Counts Three (18 U.S.C. 1956) and Four (18 U.S.C. 1957) charged both defendants with cashing the $20,000 corporate check at a grocery store in the Algiers section of New Orleans, Louisiana with the intent to conceal and disguise the money so it could be funneled to pay down the then-existing $50,000 campaign debt of Henry Espy, a defeated congressional candidate in the Second Congressional District in Mississippi.

   The jury separately convicted defendant Ferrouillet on five additional money-laundering Counts (Counts Two, Five, Six, Seven, and Eight) which related to the $20,000 cash received from the grocery store, deposited in the Omni Bank in New Orleans over a four-day period, and then wired to the First National Bank of Clarksdale to pay down a campaign loan to Henry Espy. Defendant Hemmingson was acquitted on Count Eight.

   In addition, defendant Ferrouillet was separately charged with lying to agents from the FBI and the USDA Office of the Inspector General on one occasion, and on another occasion with lying to an agent of the U.S. Customs Service concerning the source of the $20,000 cash (18 U.S.C. 1001). Ferrouillet initially stated that the $20,000 was contributed by 46 individuals who made the $20,000 cash contribution. Later, he stated the individuals were not contributors but, rather, pledgers.

   Independent Counsel Don Smaltz was lead trial counsel for the government. During the eight-day trial, at which 47 witnesses testified, the evidence revealed the $20,000 was contributed as a result of a fundraiser for Henry Espy held at the 116 Club in Washington, D.C. on March 31, 1994, and that Hemmingson's motive in contributing was an effort to curry the favor of the then-Secretary of Agriculture, Mike Espy, who was very concerned about his brother's outstanding campaign debt. Hemmingson, as the Chief Executive Officer and largest shareholder of Crop Growers, had a significant interest in the Federal Crop Insurance Reform Act, which was introduced by Secretary Espy in March 1994, and was then pending before Congress. In fact, Hemmingson met with Secretary Espy on at least three occasions regarding crop insurance and wrote Secretary Espy three times regarding matters of concern to Hemmingson. The government successfully argued that Hemmingson and Ferrouillet defrauded the shareholders of Crop Growers, who were the true owners of the $20,000, by disguising the payment as a legal fee to defendant Ferrouillet. The trial evidence revealed that in 1993, before the election, Hemmingson was responsible for similar conduct -- reimbursing 26 $1,000-contributions by officers, directors, and related parties of what became subsidiaries of Crop Growers when it went public in 1994. The government argued that Hemmingson was also responsible for causing these reimbursements, described in the financial records as travel advances, an advance on crop loss adjustments, purchases of personal computers, expense account advances, and consulting fees.

    Mr. Smaltz stated:

      It was a sincere privilege and pleasure to be back in the courtroom as a federal prosecutor trying a case. I thank the jury for the time, attention, and full and impartial consideration of all of the evidence presented by the 47 witnesses in this case. The jury was thoroughly attentive throughout, and diligent in its deliberations.   This verdict demonstrates that the jury was not in the least bit misled by the defendants' denials that they wilfully and repeatedly violated the federal criminal laws.   I am tremendously appreciative of the dedication, effort and commitment of the lawyers, agents and staff who worked so hard and tirelessly on this investigation and trial.

   Judge Edith Brown Clement, who presided over the trial, has set a sentencing date of March 5, 1996, at 3:00 p.m.

   The statutes under which defendants were convicted provide the following maximum penalties:

COUNTS ALVAREZ T.
FERROUILLET, JR.
JOHN J.
HEMMINGSON
Count 1
2314 (Interstate Transportation of
Stolen Property)
10 years x 1 count = 10 years
$250,000 x 1 count = $250,000
10 years x 1 count = 10 years
$250,000 x 1 count = $250,000
Counts 2, 3, 5 ,6, 7
1956 (Money Laundering)
20 years x 5 counts = 100 years
$500,000 x 5 counts = $2,500,000
20 years x 1 count = 20 years
$500,000 x 1 count = $500,000
Counts 4, 8
1957 (Money Laundering)
10 years x 2 counts = 20 years
$250,000 x 2 counts - $500,000
10 years x 1 count = 10 years
$250,000 x 1 count = $250,000
Counts 9, 10
1001 (False Statements)
5 years x 2 counts = 10 years
$250,000 x 2 counts = $500,000
 

   This is the second completed trial arising from this investigation. In other matters previously filed by the Independent Counsel:

  • In September 1996, Sun-Diamond Growers of California was convicted by a federal court jury in the District of Columbia of fraud and making illegal gratuities to former Secretary of Agriculture Mike Espy. Sentencing is set for February 7, 1997.
  • In October 1995, James H. Lake, a former sun-Diamond lobbyist, pleaded guilty to participating in a scheme at the request of Richard Douglas to circumvent the Federal campaign contribution laws to make illegal contributions to the failed campaign of Mike Espy's brother, Henry Espy. Mr. Lake has not yet been sentenced.
  • In November 1996, Brook K. Mitchell, Sr. and 5M Farming Enterprises, Inc. each pleaded guilty to four felony counts of conspiracy, false statements, and false entries in a scheme to defraud the U.S. Department of Agriculture of more than $700,000. A sentencing date has not yet been set.

   Five additional cases have been filed by the Office of Independent Counsel and are awaiting trial. These are:

  • United States v. Jack L. Williams (D.D.C.), scheduled for trial on January 13, 1997;
  • United States v. Crop Growers Corporation, John J. Hemmingson, and Gary A. Black (D.D.C.), scheduled for trial January 23, 1997;
  • United States v. Faust (S.D. MS), scheduled for trial on February 4, 1997;
  • United States v. Henry William Espy, Jr., Alvarez T. Ferrouillet, Jr., Ferrouillet & Ferrouillet, and Municipal Healthcare Cooperative, Inc. (N.D. MS); scheduled for trial on February 24, 1997; and
  • United States v. Richard Douglas, (N.D. CA), which has not yet been scheduled for trial.

    The Independent Counsel's investigation is continuing.

 

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