When Attorney General Janet Reno told reporters last week that the charges of secret payments to key Whitewater witness David Hale demand "appropriate action" by the Justice Department, a pressing question hung in the air: Who will lead the investigation -- the Justice Department or independent counsel Kenneth Starr?
Although Starr would no doubt prefer to maintain control of such a sensitive probe of Hale -- who has given critical testimony about Bill Clinton pressuring him to make an illicit $300,000 loan to Clinton's Whitewater partners -- the political and personal conflicts of interest that have already injured Starr's credibility may require him to step aside.
What could block Starr from any role in examining the alleged payments to Hale is his tangled relationship with Richard Mellon Scaife, the right-wing Pittsburgh billionaire and financier of the Arkansas Project, a three-year, $2.4 million effort to discredit the president. As reported by Salon, witnesses have alleged that money from Arkansas Project representatives was paid to Hale while he was cooperating with Starr's investigation.
The nagging problem for Starr is that the same Scaife-controlled foundations that funneled money to the Arkansas Project have also contributed more than $1 million to the Pepperdine University School of Public Policy in California, where Starr will become dean after he completes his duties as independent counsel. Following the money trail of the alleged payments to Hale inevitably would lead to Pepperdine benefactor Scaife.
The possibility that Hale was paid by avowed adversaries of the president left Reno little choice but to open an investigation of the Arkansas Project. Ordinarily, an attempt to influence a witness in a criminal case would be handled by the case's prosecutor, but the circumstances surrounding Hale, Scaife and Starr are unusually sensitive and politically controversial. While Reno still could allow Starr to investigate the accusations against Hale, Justice Department officials have indicated that she is considering whether action by the department's public integrity section or office of professional responsibility would be more appropriate.
Stephen Gillers, an expert on legal ethics at New York University Law School, told Salon that "payments to David Hale, under certain circumstances, could be a federal crime, even if he was being induced to testify truthfully.
"Ordinarily, there would be no problem with a prosecutor investigating whether a favorable witness was suborned, bribed or paid a gratuity," Gillers said. "But there are two reasons why Starr should not investigate this matter. First, whether accurately or not, Starr is perceived to have a personal interest in making a case against Clinton. Hale is a central witness for Starr. Consequently, I don't think a Starr investigation of payments to Hale will win public credibility.
"The second reason, of course, is Scaife," Gillers continued. "Starr has acknowledged that when his investigation is concluded, he will walk into a prestigious and comfortable job funded by the man who is the alleged source for the money paid to Hale. Starr cannot investigate that man for possible violation of federal criminal law."
Columbia University law professor Gerald Lynch, a respected former federal prosecutor who served under two independent counsels, said that turning the probe of Hale and the Arkansas Project over to Justice Department personnel might thwart the purpose of the Independent Counsel Law, which is to remove any case involving the president from the purview of presidential apppointees. But, he added, in this case, "Starr's relationship with Scaife would give rise to the possibility of a conflict of interest there."
In determining how to approach Hale and the Arkansas Project, the attorney general must consider whether Starr can fairly and impartially investigate the role of Scaife, his Pepperdine benefactor. That problem first came to Reno's attention last year in the form of a complaint by a Connecticut public defender, Francis Mandanici, who has repeatedly petitioned federal judges in Little Rock, Ark., to disqualify Starr from the Whitewater case because of various alleged conflicts of interest, including the Pepperdine matter.
Mandanici's complaint bounced back and forth between the federal court in Little Rock and the Justice Department until last November, when Reno decided against taking action. A majority of the judges in Little Rock finally dismissed Mandanici's complaints, in part because the lawyer was perceived to be pursuing an ideologically motivated "vendetta" against Starr. But Senior Judge G. Thomas Eisele, a Republican, dissented from the majority opinion. "I have concluded that Mr. Starr is suffering under at least the appearance of a conflict in his relationships with Pepperdine University, Mr. Scaife and Mr. Scaife's foundations," the judge wrote. "I am further of the opinion that such a conflict is continuing and unwaivable."
For her part, Reno declined to act because, according to Michael Shaheen, then counsel for the Justice Department's office of professional responsibility, she believes her department has only limited scope under the Independent Counsel Act to discipline Starr. Only if the charges against him were serious enough to warrant his removal would she act, Shaheen explained in a series of letters to the federal judges in Little Rock -- and she did not believe the Pepperdine conflict aroused that level of concern.
But in an Aug. 19, 1997, letter, Shaheen denied an assertion by Starr that the Justice Department had "found that no conflict of interest exists."
"We did not intend to suggest ... that we would not investigate the Pepperdine-Scaife allegation if it involved an ordinary Department of Justice attorney instead of an Independent Counsel," Shaheen wrote. "To the contrary, because the Attorney General has available a variety of sanctions for a U.S. Attorney, the allegations might present issues that would be appropriately examined for an employee we directly supervise."
Probing Hale and his relationship with the Arkansas Project could prove awkward to Starr for other reasons as well. The funding for the Arkansas Project was funneled through the American Spectator Educational Foundation, the tax-exempt group that publishes the conservative American Spectator magazine. Starr's longtime friend and former law partner, Washington attorney Theodore Olson, is a Spectator board member and counsel to the magazine, and has also represented Hale.
The links between Scaife and Starr first drew wide attention in February 1997, when the independent counsel suddenly announced that he intended to step down and accept two deanships at Pepperdine University, a conservative institution in Malibu, Calif. Starr was invited to become dean of the Pepperdine law school and also of a new school of public policy. His decision immediately came under severe criticism, not only because he seemed to be abandoning the Whitewater case but also because the Pepperdine public policy school had been underwritten by $1.1 million in grants from Scaife-controlled foundations. Within a few days Starr rescinded his resignation, and Pepperdine officials said they would hold the jobs until he was ready to take them.
By then, the normally reclusive Scaife had attained a degree of notoriety for promoting the theory that Clinton confidant and deputy White House counsel Vincent Foster had been murdered, even though his gunshot death in July 1993 was officially determined to have been a suicide. Reports suggesting foul play in Foster's death and the subsequent investigations have been pursued obsessively in the Tribune-Review, a Pittsburgh-area newspaper owned by Scaife. He has funded a variety of conservative groups -- Accuracy in Media, the Western Journalism Center, National Empowerment Television and the National Taxpayers Union, to name a few -- that have amplified those suggestions.
As Starr noted last year, he has been criticized by some of those Scaife-linked groups because the results of his own investigation ratified the finding of suicide. Some critics wondered, however, whether Starr's decision to reopen the Foster case, and his long delay in reporting his findings, were swayed by political considerations.
Whatever their differences over Foster's death, Starr and Scaife certainly share an intense interest in the fate of the Clinton presidency. Scaife's unabashed desire to ruin Clinton is what led him to fund the Arkansas Project, which began in late 1993, almost a year before Starr was appointed as independent counsel.
While the Arkansas Project's specific activities remain somewhat murky, there is little doubt about its aims. Backed by Scaife's largesse, the project's operatives chased every conceivable allegation against the Clintons, from the Foster murder scenario and tales of an Arkansas cocaine-smuggling ring supposedly protected by then-Gov. Clinton to the more mundane charges of financial wrongdoing in the Whitewater development deal. In that pursuit they were assisted by private detectives and local conservative activists, including Parker Dozhier, the Arkansas bait shop owner who allegedly passed payments to Hale.
Any serious examination of the alleged payments from the Arkansas Project to Hale would involve tracing money back to the Spectator and Scaife foundations, and might also raise questions about the legality of using tax-exempt foundations for a political assault on the White House. As reported in the New York Observer, the Spectator's tax returns for 1993 through 1996 falsely listed the payments to Arkansas Project operative Stephen Boynton as ordinary "legal" expenses.
Now Reno and her advisors at the Justice Department must determine not whether Starr should be removed because of his ties to Pepperdine and Scaife, but whether they will permit Starr to oversee an investigation that could lead directly to Scaife. The stakes could not be higher for Starr. If it is proved that Hale was the target of attempts to influence him, the entire Whitewater investigation could be compromised.
And if Hale's previous testimony is found to have been tainted by the alleged payment scheme, even the convictions already won by Starr against former Arkansas Gov. Jim Guy Tucker, Susan McDougal and the late James McDougal could be overturned.