By John Solomon and Matthew Mosk
Washington Post Staff Writers
Saturday, March 31, 2007
Federal prosecutors have told Bernard B. Kerik, whose nomination as homeland security secretary in 2004 ended in scandal, that he is likely to be charged with several felonies, including tax evasion and conspiracy to commit wiretapping.
Kerik's indictment could set the stage for a courtroom battle that would draw attention to Kerik's extensive business and political dealings with former New York mayor Rudolph W. Giuliani, who personally recommended him to President Bush for the Cabinet. Giuliani, the front-runner for the 2008 Republican presidential nomination according to most polls, later called the recommendation a mistake.
Kerik rose from being a warden and police detective to become Giuliani's campaign security adviser, corrections chief, police commissioner and eventual partner in Giuliani-Kerik, a security arm of Giuliani Partners, which Giuliani established after leaving office in 2001. Kerik resigned his positions in Giuliani's firm after he was nominated to the homeland security job.
The former mayor is not in any legal jeopardy, according to legal sources directly familiar with the investigation, who spoke on the condition of anonymity because the inquiry is ongoing. He and his consulting firm have cooperated in the FBI's long-running investigation of Kerik.
During a recent meeting, federal prosecutors told Kerik's attorneys that they are preparing to charge Kerik with filing false information to the government when Bush nominated him to the Cabinet, according to the legal sources.
Prosecutors are also prepared to charge Kerik with violating federal tax laws, alleging that he did not declare on his tax returns gifts he received while serving as New York's corrections commissioner, including costly renovations to an apartment he had bought, the sources said. The FBI is investigating loans Kerik received while he was in private business with Giuliani, the sources said, as well as information Kerik had omitted from a mortgage application.
Kerik turned down last month an offer to plead guilty to federal charges that would have required him to serve prison time. His attorney, Kenneth Breen, said in an interview that his client had done nothing wrong.
"He's not going to plead to something that he didn't do," Breen said.
The case against Kerik that federal prosecutors are preparing could generate uncomfortable political attention for Giuliani because it focuses on Kerik's activities while the two men were in government together and were jointly running Giuliani-Kerik, which was paid millions of dollars for advising upstart companies, doing federal work and consulting with clients overseas.
Even as Giuliani prepared to announce his presidential bid, his political team had identified as a political liability the man who had stood stoically by the mayor's side after the Sept. 11, 2001, attack on the World Trade Center, according to a strategy memo that surfaced in January.
Kerik's legal troubles could damage the law-and-order image that is the bedrock of Giuliani's campaign, said Republican political consultant Nelson Warfield, who is not aligned with any 2008 candidate. "Kerik has potential to undermine his image as a competent leader and someone best fit to fight terrorism," Warfield said. "Either he had fundamentally bad information about Kerik, or he was reckless in not knowing enough about a man who was that close to him."
Last night, Giuliani's office declined to comment on Kerik, instead referring a reporter to remarks the former mayor made earlier this week in Teaneck, N.J. "I hope, when people evaluate me, they evaluate the things that I think I did that were wrong and that were mistakes and the things that I did that were right, and I think the public record has been one largely of great success," Giuliani said then.
In addition to charges involving false information and tax law, the U.S. attorney's office in New York City is also threatening to charge Kerik with conspiracy to commit illegal wiretapping in his dealings with the 2006 GOP candidate for New York attorney general, Jeanine F. Pirro, the sources said.
After Kerik left the Giuliani firm, Kerik arranged for two off-duty Giuliani firm employees to conduct surveillance on Pirro's husband. Pirro and Kerik also discussed bugging a boat where Pirro suspected her husband was having an extramarital affair. Kerik was heard on a wiretap telling Pirro that he did not want to do the bugging because it was illegal.
About a year earlier, Pirro, then the Westchester County district attorney, ordered the A&P supermarket chain to hire the Giuliani-Kerik security firm as part of a settlement agreement in a case involving underage alcohol sales. The security firm was ultimately paid $43,000, according to a knowledgeable source who spoke about the terms of the contract on the condition of anonymity.
Kerik's legal team has signaled its plan to fight any federal indictment, initiating an internal appeal to Justice Department officials about the possible tax charges -- a move that could delay any indictment for at least several weeks, the legal sources said.
Giuliani and Kerik first met in 1990 at a dinner for a fallen police officer, while Kerik was a narcotics detective. Three years later, Giuliani asked Kerik to be his driver and his mayoral campaign's advance man. After Giuliani was elected, he tapped Kerik to advise his corrections commissioner. Within a year, Kerik had become the commissioner, and his performance helped him become the city's top police official.
Kerik met Bush in the rubble of the World Trade Center. In 2003, he was dispatched by the Bush administration to Iraq to work with the Coalition Provisional Authority, which was helping train and organize a new Iraqi police force. His work in Iraq won personal accolades from the president.
After Bush was reelected, he nominated Kerik to be the nation's second secretary of homeland security.
But a week after his nomination, Kerik was forced to withdraw his name from consideration. The stated reason was his failure to pay Social Security taxes for a nanny. But other issues had also surfaced, including favors he did for romantic partners -- he once dispatched a homicide detective to find his girlfriend's lost cellphone -- and more serious legal concerns.
Within months, Kerik faced New York state charges -- to which he later pleaded guilty -- that he accepted nearly $200,000 in gifts while a public official -- including more than $165,000 spent on renovations to his apartment. The money came from companies affiliated with a New Jersey outfit that federal authorities and state gambling regulators had linked to organized crime.
In the fall of 2005, Kerik asserted his Fifth Amendment right against self-incrimination in refusing to answer questions before a New Jersey gaming regulatory body about his relationship to the people involved in the apartment renovations.
The contract with A&P was one of many deals -- some much more lucrative -- that the Giuliani-Kerik firm arranged using the partners' extensive political connections. The work included a Justice Department contract and multimillion-dollar consulting arrangements with business clients in the technology and security sectors worldwide.
In some cases, Giuliani and Kerik simultaneously advised a private company and the federal agency whose actions could affect it. Giuliani's firm, for instance, was hired by Purdue Pharma to help figure out how to keep sales of its popular painkiller OxyContin from being restricted by the government; street dealers were crushing and converting it into a powerful narcotic offering an instant high. Kerik was personally named to oversee security improvements at a New Jersey manufacturing plant.
At the same time, the Justice Department paid Giuliani-Kerik $1.1 million to conduct a management review of the organized-crime drug task force, whose responsibilities included stemming illegal use of OxyContin.
Likewise, Giuliani, Kerik and other firm partners were hired by cellphone carrier Nextel to win Federal Communications Commission approval for a new, emergency-only wireless spectrum for first responders.
The idea was to solve one problem for Nextel -- it had long been subject to complaints that its wireless signal sometimes interfered with the communications channels used by police, fire and rescue officials -- while creating an even stronger business opportunity for the cellular carrier.
At the same time, Giuliani's firm was brought in by the FCC to participate in a panel that was advising the agency in its efforts to address the future needs of a police, fire and rescue communications system in the aftermath of Sept. 11.