This is my fifth Annual Report to Congress pursuant to 28 U.S.C.

' 595(a)(2). This office brought criminal charges against nineteen defendants, resulting in eight guilty pleas, six guilty verdicts, one adjudication of guilt pursuant to a nolo contendre plea, one pretrial diversion, and five not-guilty verdicts. We also reached two civil settlements and referred to other agencies four matters that resulted in public dispositions. In total, these cases secured penalties and fines for the United States Treasury of $9,975,100 and restitution totaling $1,619,481.

This office has completed its investigation. Its final prosecution, that of Alphonso Michael Espy, was brought to a close in November 1998 when the jury acquitted Espy of all charges. What remains for this office is the completion of post-trial matters, preparation of the final report, review of attorneys= fees applications, and other wind-down procedures.

The last two reports advised you of the disposition of this case against Secretary Espy=s former Chief of Staff. On December 1, 1997, a jury convicted Ronald H. Blackley of three counts of making false statements relating to his receipt of $22,025 in 1993 from prohibited sources (Mississippi agribusiness interests), after he became Secretary Espy=s Chief of Staff at USDA. Blackley made false statements on his 1993 Public Financial Disclosure Report by failing to disclose his receipt of the payments, and he subsequently lied to federal agents about these matters. On March 18, 1998, the trial court departed upward from the Sentencing Guidelines and sentenced Blackley to 27 months in jail, and 3 years supervised release.

Blackley appealed his conviction essentially on three grounds B that the prosecution was beyond my jurisdiction, that the indictment failed to advise him adequately of the nature of the charges against him, and that the trial court failed to give a specific instruction to the jury on one element of the charged crime. On January 26, 1999, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit affirmed the three-count conviction and 27 month sentence. On March 31, 1999, the D.C. Circuit denied Blackley=s petition for rehearing and suggestion for rehearing en banc.

On June 28, 1999, Blackley filed a petition to the Supreme Court for a writ of certiorari, reasserting each of the three grounds of his appeal. On July 28, 1999, this office filed a brief in opposition with the Supreme Court. The Supreme Court denied Blackley=s petition on October 4, 1999. The only issue we currently foresee remaining for resolution is the issuance of a surrender order from the District Court.

On April 27, 1999, the Supreme Court affirmed the D.C. Circuit=s reversal of the gratuities conviction. The Court held that the language of the statute, when read within context of the broader statutory scheme of criminal and ethical regulations governing public officials= acceptance of gifts, requires proof of a link between a thing of value conferred upon a public official and a specific official act for or because of which it was given.

In the wake of the Supreme Court=s decision, I had to decide whether to retry Sun-Diamond on the one gratuity count. While my office felt confident that we possessed sufficient evidence to obtain a conviction under the standard established by the Supreme Court, the retrial and subsequent appeal would substantially lengthen the duration of this office at continued expense to the tax payers. Since Sun-Diamond's convictions on the seven remaining counts were unaffected by the reversal of the gratuity count, I concluded it was not in the interests of justice to retry the case and, accordingly, we dismissed the gratuity count against Sun-Diamond.

First, we argued that, as to Counts Five through Nine, which charged violations of the Federal Election Campaign Act, the Sentencing Commission had not published specific or analogous guidelines for election crimes. Therefore, the Court had the authority and obligation to sentence Sun-Diamond on each of those five counts under 18 U.S.C. ' 3553(a)(2), which provides that the sentence should be adequate to serve the basic functions of sentencing B punishment, deterrence, rehabilitation, and protection. Thus, the only limit to the Court=s discretion in setting the fine would be the statutory maximum of $200,000 per count or $1,000,000 total. As noted infra, a fine in this amount was supported by the Department of Justice. While there was no appellate court precedent, we provided the Court with other District Court cases that had accepted plea agreements in which the parties stipulated that there is not a sufficiently analogous guideline for FECA violations and that the Court may sentence up to $200,000 per FECA violation. One of those cases, United States v. Lake, was a companion case to Sun-Diamond and before the same District Court Judge, who there recognized that there was not a sufficiently analogous guideline for FECA violations. Another case, United States v. Sun-Land Products, involved a subsidiary of Sun-Diamond that similarly made illegal campaign contributions and pleaded guilty to the FECA violations. Sun-Land Products' violations were discovered by this office during its investigation of Sun-Diamond and turned over to the Department of Justice for prosecution in the Northern District of California. In that prosecution, Sun-Land Products, which was represented by Sun-Diamond's counsel, agreed

that the provisions of 18 U.S.C. ' 3553(b) should control in this matter. The government and the defendant, therefore, agree to recommend that sentencing should be rendered by the Court pursuant to 18 U.S.C. '' 3553 and 3571 and that the fine imposed total $400,000, [$200,000 per count] which is the statutory maximum set forth in 18 U.S.C. ' 3571."

Second, we argued that the sentence should be adjusted upward because Sun-Diamond=s fraud involved a misrepresentation that Sun-Diamond was acting on behalf of a charitable organization, the Joint Center for Political and Economic Studies. The District Court, without any explanation, simply stated the evidence did not support this argument.

Finally, we argued that the Court should depart upward because Sun-Diamond had engaged in giving unlawful gratuities to the Secretary of Agriculture as alleged in Count One. Under the Supreme Court=s decision in United States v. Watts, 117 S. Ct. 633 (1997), a sentencing court may consider conduct of which a defendant has been acquitted so long as the court finds by a preponderance of the evidence that the acquitted conduct was proved. The Sentencing Guidelines encourage upward departures where a corporate defendant, in connection with the crime, provided either a bribe or a gratuity to a public official. We argued that the evidence clearly established that Sun-Diamond gave Secretary Espy gratuities for official acts, and that Sun-Diamond's conviction was overturned not for lack of evidence -- but because of a faulty jury instruction. Therefore, an upward departure was appropriate. The Court disagreed, finding without elaboration that the Afacts did not support the requested upward departure.@

      c. United States v. Jack L. Williams and Archibald R. Schaffer, III

On June 26, 1998, a District of Columbia jury returned a verdict of guilty against Archibald R. Schaffer, III (Schaffer), Tyson Foods= Director of Media, Public, and Governmental Affairs, on two counts of giving illegal gratuities to Secretary Espy B a $2,556 gratuity in connection with the Tyson birthday party in violation of the Meat Inspection Act of 1907 (22 U.S.C. ' 622) and a $6,000 gratuity for four tickets to a Presidential inaugural dinner in violation of the gratuities statute (18 U.S.C. ' 201(c)). On September 21, 1998, the trial court granted Schaffer=s post-verdict motion for judgment of acquittal and set aside the jury=s verdict. The Government appealed the trial court=s ruling, and Schaffer cross-appealed, asserting that if his conviction was reinstated he was entitled to a new trial.

On July 23, 1999, the D.C. Circuit reinstated Schaffer=s conviction on the Meat Inspection Act count and affirmed the judgment of acquittal on the gratuity count. The Court denied Schaffer=s cross-appeal. On September 3, 1999, defendant Schaffer filed a petition for rehearing, arguing that the Circuit=s ruling on the Meat Inspection Act count was based on mistakes of fact and ignored the Supreme Court=s decision in United States v. Sun-Diamond, and that the error complained of in Schaffer=s cross-appeal was not harmless error as the Circuit concluded. The D.C. Circuit denied Schaffer=s request for rehearing on September 21, 1999. Schaffer has stated that he will petition the Supreme Court for a writ of certiorari.

On August 5, 1999, this office moved the D.C. Circuit for expedited issuance of the mandate so that sentencing of defendant Schaffer could proceed without awaiting exhaustion of all subsequent appellate efforts. The Court granted that motion over Schaffer=s opposition on August 26, 1999. The District Court scheduled sentencing for November 9, 1999.

On March 8, 1999, the trial court sentenced Five M and Brook Keith Mitchell, Sr. to pay full restitution in the amount of $776,860 to the USDA, and each to the three years probation. Shortly thereafter, the defendants appealed their convictions, asserting that this office lacked the authority to prosecute them for their offenses. We moved to dismiss the defendant=s appeal arguing, inter alia, that the defendants waived their challenge to our prosecutorial authority by entering unconditional guilty pleas. By order dated August 19, 1999, the D.C. Circuit granted our motion and dismissed the defendants= appeal. On October 4, 1999, the defendants filed in the D.C. Circuit a petition for rehearing and suggestion for rehearing en banc.

The Independent Counsel Reauthorization Act of 1994 requires me to conduct all activities Awith due regard for expenses@ and Aauthorize only reasonable and lawful expenditures.@ 28 U.S.C. '' 594(l)(1)(A)(i) and (ii). I have made every reasonable effort to comply with this requirement. We chose office space in Alexandria, Virginia, where our cost per square foot is significantly less than that for comparable space in the District; we have continually maintained a system of financial controls, internal to this office and with personnel from the Administrative Office of the United States Courts, that are effective in assuring that costs are reasonable and proper. The General Accounting Office=s Audit Report covering my office=s expenditures through March 31, 1998 verifies accomplishment of this objective. To promote this goal, the staff I hired and retained to administer office operations were known to me, had experience with Independent Counsel operations, administration and financial management, and/or were familiar with the relevant federal laws and regulations.

Upon the completion of the Espy trial, we moved promptly to reduce staff size. The number of attorneys has decreased from nine full-time and five active part-time to two full-time and one part-time assisting with appellate work, the Final Report and related matters. There no longer are any agents detailed to this office from any agency, compared to seven agents and one on-call accountant at the end of last year. I have downsized the administrative and support staff to the minimum needed for completion of the Final Report and final shutdown: (i) the Administrative Officer; (ii) the Executive Staff Assistant who maintains the filing system and is responsible for archiving; (iii) my Confidential Assistant/Press Officer; (iv) the Information Systems Administrator; (v) one Paralegal; (vi) one Legal Secretary; and (vii) the Property Manager. Members of my staff are participating in an ad hoc working group with the National Archives in order to facilitate and expedite the archiving process which normally is undertaken after the final report is filed and the attorneys= fees issues resolved.

My office has fulfilled its statutory mandate to Afully investigate and prosecute@ the allegations that Secretary Espy accepted gifts from entities with business before the USDA, "and all related matters." I stand confidently behind each and every decision to prosecute, decline prosecution, and refer matters to other agencies. These decisions were made by a collective group of very experienced present and former federal prosecutors after a thorough consideration of the facts uncovered by our investigation, the DOJ procedures and policies, the applicable statutes, and the law. Although we were disappointed that not all the prosecutions resulted in convictions, I am proud of the achievements of this office and believe we fully and faithfully carried out the role of an Independent Counsel. The American public can feel confident that this investigation of a high-level member of the Executive branch was pursued vigorously and thoroughly, and that all prosecutorial decisions resulting from that investigation were made without favoritism or prejudice.