Attorney General Janet Reno said yesterday that she is reviewing allegations that David Hale, a critical witness in Kenneth Starr's Whitewater investigation, received numerous cash payments from an Arkansas man working with a clandestine anti-Clinton campaign funded by conservative billionaire Richard Mellon Scaife.
"What we're trying to do is look at all the matters and take appropriate action, and I am reviewing that at this point," Reno told reporters.
Reno's announcement that the Justice Department is weighing an investigation of a key Starr witness was another potential setback for the independent counsel's office after Wednesday's dismissal of the Paula Jones' sexual harassment suit. By publicly talking about a possible investigation of the reported payments to Hale, Reno was signaling that any probe of Starr's Whitewater inquiry would have the full weight of the attorney general's office behind it.
Salon first reported the allegations that Hale received numerous cash payments, during the time he was cooperating with Starr's probe, as part of an anti-Clinton campaign financed by Scaife called the Arkansas Project.
Two eyewitnesses to the alleged cash transfers -- Caryn Mann, a funeral home assistant manager from Bentonville, Ark., and her 17-year-old son Joshua Rand -- told Salon that the payments, ranging from as little as $40 to as much as $500, were made to made to Hale over a two-year period, from 1994 to 1996.
Two other sources familiar with Scaife's campaign independently confirmed the effort to funnel money to Hale. These sources spoke to Salon on the condition of anonymity.
Hale is key to Starr's Whitewater investigation because he has alleged that Clinton, while governor of Arkansas, pressured him to provide an illegal $300,000 loan to Susan McDougal, a partner of the Clintons in the Whitewater land deal. Hale's testimony was instrumental in helping Starr win criminal convictions against James Guy Tucker, then governor of Arkansas, and James and Susan McDougal, the Clintons' former partners in the Whitewater land deal.
Last week Salon reported that the FBI had recommended that the Justice Department investigate the alleged payments to Hale. An aide to Reno said yesterday that a final decision about how to proceed had been delayed because of the attorney general's trip to Jonesboro, Ark., scene of the recent schoolyard shootings.
"There is a normal process around here," said the official, "and that's what's going on. There is a decision-making process that takes some time. We are acting expeditiously, but we are also proceeding cautiously."
Two officials said that there has been some debate over who would lead the investigation of Hale, the Justice Department's public integrity section, its office of professional responsibility or even Starr. "Those discussions are still ongoing," said a senior official.
The senior official also angrily dismissed insinuations that the investigation was politically motivated, or that P.K. Holmes III, the U.S. attorney for Arkansas' western district, had initiated the investigation without the knowledge of other officials.
The Associated Press reported on Saturday that Holmes, whom AP identified as "a U.S. attorney in Arkansas appointed by President Clinton," ordered FBI agents to interview Mann and her son.
But the senior official said that the decision to interview Mann and her son was made by FBI officials in Arkansas. The official said that the AP report suggesting that Holmes dispatched agents to interview Mann was "nonsense." Holmes was in Colorado on a camping trip with family members on the night FBI officials first met with Mann and Rand.
The cash payments to Hale were allegedly made by Parker Dozhier, a representative of the Arkansas Project, a $2.4 million campaign funded from 1993 to 1997 by Scaife.
Scaife, an heir to the Mellon fortune, underwrote the Arkansas Project through two tax-exempt foundations that he controls, according to documents and sources.
Under the scheme, two of Scaife's charitable foundations transferred as much as $800,000 a year to a third charitable foundation, which owns the conservative American Spectator magazine, according to documents. The American Spectator then transferred most of the funds to Stephen S. Boynton, an attorney and conservative political activist with long-standing ties to Scaife. Boynton has repeatedly declined comment.
A portion of funds then went from Boynton to Dozhier, a 56-year-old sportsman and fur trapper, who then made cash payments to Hale, according to Mann and Rand. Mann and Rand told Salon they witnessed the payments while Hale, then cooperating with Whitewater prosecutors, was staying at Dozhier's fishing cabin complex in Hot Springs, Ark., between 1994 and 1996.
"Parker would receive money from Boynton," Rand told Salon. "He would essentially put that in his right pocket, and then he'd pull money out of his left pocket and give it to David Hale." Rand said that on several occasions Dozhier instructed him to take money out of the bait shop cash register for Hale.
Contacted by telephone, Dozhier denied the allegations that he had given money to Hale: "I never made any payments to David Hale in my life ... Not a dime."
Dozhier also told a reporter that Rand "was destined to be a chalk outline somewhere." Mann said that Dozhier had also threatened her life "if I ever talked about what he was doing to Clinton."