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February 24, 1997




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

   Today, in the case of United States v. Henry William Espy, Jr., Alvarez T. Ferrouillet, Jr., Ferrouillet & Ferrouillet, and Municipal Healthcare Cooperative, Inc., in the United States District Court in Oxford, Mississippi, on the first day of trial, Alvarez T. Ferrouillet, Jr., a New Orleans lawyer, and Municipal Healthcare Cooperative, Inc. each pleaded guilty to one count of conspiracy and five counts of false statements to a federally-insured bank in connection with a $75,000 loan to Henry Espy. The law firm of Ferrouillet & Ferrouillet pleaded guilty to one count of conspiracy to defraud the bank in connection with that loan.

   During the time period covered by the Indictment, Henry William Espy, Jr. was the Mayor of Clarksdale, Mississippi and the brother of Alphonso Michael Espy, then the Secretary of the United States Department of Agriculture. Henry William Espy, Jr. had been unsuccessful in his bid to obtain the Congressional seat vacated by his brother, Alphonso Michael Espy, when he was appointed Secretary of Agriculture by President Clinton in January 1993. Defendant Ferrouillet became the Chairman of the Henry Espy for Congress debt retirement committee following the election. Defendant Ferrouillet was a partner of Ferrouillet & Ferrouillet, a law firm in New Orleans, Louisiana. Defendant Ferrouillet was a director and 50% owner of Municipal Healthcare Cooperative, Incorporated, which was engaged in the business of developing healthcare plans for municipalities and corporations.

   Count 1 of the Indictment charged defendants, commencing April 1993, with conspiring to make material false statements for the purpose of influencing the actions of the First National Bank of Clarksdale, Mississippi to grant a $75,000 loan to Henry Espy, whose campaign debts totaled in excess of $100,000 following his unsuccessful Congressional race. It also charged an object of the conspiracy was to impair and impede the Federal Election Commission, the federal agency to whom Henry Espy's campaign was required to disclose all contributions.

   Counts 2 through 6 charged the defendants with various false statements made to the First National Bank of Clarksdale between April 28, 1993 and May 17, 1994 concerning the granting of a $75,000 loan to Henry Espy, and repayment extensions on that loan. The loan was made to Henry Espy so that he could pay down some of the numerous campaign obligations he incurred in his unsuccessful bid for Congress. It was guaranteed by Ferrouillet & Ferrouillet. The Indictment charged the conspiracy was in violation of 18 U.S.C. 371, and the false statements (Counts 2 - 6) were in violation of 18 U.S.C. 1014. On Counts 2 through 6, Defendant Ferrouillet could be sentenced to a maximum of 30 years in prison and a fine of up to $1 million per Count, while Municipal Healthcare Cooperative, Inc. could be sentenced to pay a fine of up to $1 million dollars per Count. Chief Judge Senter has not yet set a sentencing date for either Defendant Ferrouillet or Defendant Municipal Healthcare Cooperative, Inc. Chief Judge Senter today sentenced the law firm of Ferrouillet & Ferrouillet to a $10,000 fine in accordance with a plea agreement.

   Previously, Defendant Ferrouillet, on December 19, 1996, was convicted in a joint trial with John J. Hemmingson, Chairman of the Board and Chief Executive Officer of Crop Growers Corporation in 1994, of fraudulently obtaining a $20,000 check from Crop Growers Insurance, which they transported in interstate commerce from Montana to Louisiana. Ferrouillet and Hemmingson were also convicted of money laundering, as Ferrouillet cashed the $20,000 Crop Growers' check at a grocery store in Algiers, Louisiana, and deposited the two hundred $100-bills over a three-day period into the Henry Espy for Congress campaign account. In that trial, Defendant Ferrouillet was also charged with -- and convicted of -- lying to federal agents in connection with the Independent Counsel's investigation.

   Defendant Henry William Espy, Jr. has pleaded not guilty, and his trial started today before Chief Judge L.T. Senter, Jr., U.S. District Court, in Oxford, Mississippi.

   In other matters previously filed by the Independent Counsel:

  • On October 25, 1995, James H. Lake, a former Sun-Diamond lobbyist, pleaded guilty to participating in a scheme at the request of Richard Douglas, then a Senior Vice President of Sun-Diamond Growers, a California agricultural cooperative, to circumvent the federal campaign contribution laws to make illegal contributions to the failed campaign of Mike Espy's brother, Henry Espy in violation of the wire fraud statutes and the Federal Election Campaign Act. Mr. Lake has not yet been sentenced.
  • On September 24, 1996, Sun-Diamond Growers of California was convicted by a federal court jury in the District of Columbia of wire fraud, giving illegal gratuities to former Secretary of Agriculture Mike Espy, and Federal Election Campaign Act violations. Sentencing is set for March 26, 1997.
  • On November 13, 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.
  • On December 19, 1996, in a related case brought by the Independent Counsel in New Orleans, Louisiana, a federal court jury convicted John Hemmingson on three of the four counts against him, one count of interstate transportation of a fraudulently obtained $20,000 check from a subsidiary of Crop Growers, and two counts of money laundering. The jury also convicted Alvarez T. Ferrouillet, Jr., the Louisiana lawyer who was chairman of the Henry Espy for Congress Campaign debt retirement committee beginning in 1993, on each of 10 counts charging him with false statements to federal agents, interstate transportation of the fraudulently obtained $20,000 check from the Crop Growers subsidiary, and money-laundering. Sentencing is set for March 5, 1997.
  • On January 21, 1997, Crop Growers Corporation, the second-largest private seller of federal multi-peril crop insurance, was found guilty and sentenced to pay a $2 million fine for conspiring to defraud the Federal Election Commission by concealing and disguising $46,000 in illegal corporate contributions to the Henry Espy for Congress campaign in 1993 and 1994, and with falsifying its books and records to hide these illegal contributions.
  • On February 13, 1997, John J. Hemmingson and Gary A. Black were acquitted by a federal court jury in the District of Columbia of one count of conspiracy and two counts of causing false statements to the Federal Election Commission.
  • On February 14, 1997, Norris Faust, Jr. was acquitted by a federal court jury in the Southern District of Mississippi of three counts of lying to a federal grand jury sitting in Jackson, Mississippi.

    Other cases which have been filed by the Office of Independent Counsel and are awaiting trial are:

  • United States v. Jack L. Williams (D.D.C.), scheduled for trial on March 17, 1997; and
  • United States v. Richard Douglas (N.D. CA), not yet scheduled for trial.

The Independent Counsel's investigation is continuing.


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