June 19, 1997

1. James Lake - well-known Washington lobbyist, representing Sun-Diamond Growers in matters before the USDA

• GUILTY of wire fraud and violations of the Federal Election Campaign Act in making $4,000 in illegal campaign contributions to Henry Espy for Congress.

2. Five M Farming Enterprises & Brook K. Mitchell, Sr. - friends of Secretary Espy

• GUILTY of conspiracy, false statements and false entries involving a $700,000 USDA commodity price support program.

3. Crop Growers Corporation - major publicly-owned crop insurance company, regulated by and dependent on the USDA

• GUILTY of conspiracy and concealing and disguising $46,000 in illegal corporate contributions to the Henry Espy for Congress campaign. The $2 million dollar fine, which has been paid, is the largest fine secured by any Independent Counsel to date.

4. Sun-Diamond Growers of California - large California agricultural cooperative regulated by the USDA

• GUILTY of illegally giving more than $6,000 worth of gratuities to Secretary Espy and $4,000 in illegal campaign contributions to Secretary Espy's brother. Sun-Diamond was fined $1.5 million and is on five years' probation.

5. Alvarez T. Ferrouillet, Jr. - New Orleans lawyer and Chairman of the effort to retire Henry Espy's campaign debt

• GUILTY of conspiring to defraud the Federal Election Commission, money laundering, illegal monetary transactions, defrauding a federal bank, lying to federal investigators, and participating in interstate transportation of stolen property. Fined $10,000 and sentenced to one year imprisonment.

6. John Hemmingson - Chairman of the Board and largest shareholder of Crop Growers Corporation, who used Henry Espy to obtain access to Secretary Espy

• GUILTY of interstate transportation of $20,000 taken by fraud and laundering that money into the Henry Espy campaign debt retirement account. Fined $30,000, sentenced to one year imprisonment, and $20,000 restitution.

7. Municipal Healthcare Cooperative, Inc. - Louisiana corporation that participated in defrauding a Mississippi bank in connection with the Henry Espy $75,000 campaign debt retirement loan

• GUILTY of one count of conspiracy and five counts of making false statements to a federal bank in connection with the $75,000 loan.

8. Ferrouillet & Ferrouillet - Louisiana law firm that guaranteed the illegal $75,000 Henry Espy campaign debt retirement loan

• GUILTY of conspiracy to defraud a federal bank. Fined $10,000.

9. Jack L. Williams - Washington lobbyist for Tyson Foods, Inc.

• GUILTY of making false material statements to two Special Agents of the USDA Office of the Inspector General and to Special Agents of the Federal Bureau of Investigation to conceal his role in providing a $1,009 airline ticket and $1,200 scholarship for Secretary Espy's girlfriend, Patricia Dempsey. (The trial court judge granted and set a new trial for August 11, 1997. We expect the outcome of the second trial also to be a guilty verdict.)

   Contrary to TIME's reporter's suggestion, these prosecutions and convictions are hardly trivial:

• First, Sun-Diamond's conviction represents the first person or entity convicted in approximately 100 years for giving a gratuity to a sitting Cabinet member. Corporate misconduct in connection with payments and gratuities to Cabinet secretaries is a pernicious act that pervades not only the official, but also the agency, and the public trust.
• Second, the dispositions against Crop Growers and Sun-Diamond are fundamental to the concept of corporate accountability. Crop Growers' plea to a violation of the Foreign Corrupt Practices Act and the Court's imposition of special conditions of probation on Sun-Diamond to ensure corporate responsibility highlight the importance of maintaining integrity in the corporate board room.
• Third, this office is the first prosecuting agency to charge and convict individuals for money laundering in connection with illegal campaign contributions. Senator Arlen Specter recognized the significance of this approach when he recently described as a "clear-cut evidentiary pattern of illegal conduct of laundering money" the reimbursed contributions to a Democratic National Committee fundraiser at the Hsi Lai Buddhist Temple in April 1996.

   There are, in addition, two other prosecutions pending -- one concerning Richard Douglas, former Vice President of Governmental Affairs for Sun-Diamond Growers for illegal gratuities to the Secretary, mail fraud, illegal campaign contributions and mortgage fraud, and another against Ronald Blackley, former Chief of Staff to Secretary Espy for false statements. The investigation of other criminal conduct is ongoing, and there may well be other indictments.

   TIME's article also referenced comments from the lawyer of the indicted former Chief of Staff to Secretary Espy and a suggestion of inappropriate use of support staff. Legally, I am prohibited from commenting about grand jury matters and cannot now answer Blackley's lawyer's claims about what did or did not occur. I am, however, conversant with all the facts and the prosecutors in my office conducted themselves properly. With regard to your statement that a junior staff member was required to be in the place where I was living when an outside cleaning service came, you are absolutely right. I have and will continue to take appropriate measures to ensure the security of all locations where my office conducts business.

   Upon application of the Attorney General of the United States, the Special Division of the United States Court of Appeals appointed me to determine whether Secretary Espy violated any federal criminal law "relating in any way to the acceptance of gifts by him from organizations or individuals with business pending before the Department of Agriculture;" and also to determine whether "any organization or individual . . . connected with or arising out of that investigation" violated any federal criminal laws. Federal law has long prohibited regulated persons and companies from buying access to public officials who regulate them. That is the essence of this investigation, not a few football tickets as your article proclaims.

   Notwithstanding TIME's unfounded criticism and efforts to trivialize this investigation even before its conclusion, I will continue to perform the duties for which I was appointed fairly, vigorously and expeditiously.

Sincerely,

Donald C. Smaltz
Independent Counsel