White House Looked Past Alarms on Kerik

As with every nominee, Kerik was given detailed financial disclosure and personal history questionnaires to fill out, all intended to unearth anything that might prove embarrassing in a confirmation hearing. Giuliani's firm assisted in filling out the forms, according to a source familiar with the situation, and the papers are now an issue in the federal criminal investigation. Kerik, his attorney and Giuliani Partners spokeswoman Sunny Mindel declined to comment.

Presidential nominees typically go through a full-fledged FBI background investigation before their appointments are announced. But because it is hard to keep Cabinet selections secret for so long, they are vetted only by the White House counsel's office before being made public. The FBI then conducts its full probe before Senate confirmation hearings begin.

The counsel's vetting depends heavily on honest responses from a nominee, officials said. Yet in Kerik's case, a quick FBI search and research by the White House turned up a host of problems in the couple of weeks before the nomination was announced. According to the sources, who spoke on the condition of anonymity because of White House policy against discussing personnel matters, Bush aides discovered that:

--Kerik was fined $2,500 by New York City for using police detectives to help him with his autobiography. He was also a defendant in a civil lawsuit accusing him of retaliation against a corrections official who had disciplined a female prison guard with whom Kerik was having a relationship. Kerik was scheduled to give a deposition in the case right after his nomination was to be announced.

--One of Kerik's former top deputies was convicted of stealing money from a foundation that Kerik ran while serving as Giuliani's corrections chief. The foundation was funded by rebates from tobacco companies selling cigarettes to prison inmates.

--Kerik, who filed for bankruptcy as a police officer, became rich almost overnight after leaving office. Just before his nomination, he made a quick $6.2 million without investing a dime by exercising stock options from his service on the board of Taser International, a stun-gun firm seeking business with homeland security agencies.

--Kerik's tenure in Iraq generated strong criticism of his management. Iraqi officials complained to U.S. authorities about $1.2 billion Kerik spent to train Iraqi police officers in Jordan, spending they called wasteful. Iraqis also questioned why Kerik spent tens of millions of dollars to buy weapons for Iraqi trainees when the U.S. military had confiscated plenty of such weapons after the invasion.

A Friend Accused of Mob Ties

The loudest alarm bell was Kerik's relationship with Lawrence Ray. The best man at Kerik's wedding in 1998, Ray went to work for a New Jersey construction company, Interstate Industrial Corp., that was seeking a big New York City contract and trying to overcome concerns inside Giuliani's administration that it had mob ties.

Ray, who told friends that he worked with the FBI, military and intelligence agencies in the 1990s, was indicted in 2000 along with organized-crime figures in what prosecutors described as a scheme to manipulate the stock market. He pleaded guilty and was spared prison time.

The White House had the perfect person to question Kerik about his relationship with Ray: Julie Myers, who arrived in the White House personnel office in November 2004 and had worked in the same U.S. attorney's office in Brooklyn that prosecuted Ray. She flagged the relationship and other concerns about Kerik for her White House colleagues, sources said. She aggressively questioned Kerik about Ray and other affiliations. He bristled at her tone, sources said.

In an interview last week, Ray said he had told the FBI and U.S. attorney's office as early as 1999, as he tried to stave off indictment, that he had incriminating information about Kerik. After his guilty plea in 2001, Ray said, he told the FBI that Kerik had agreed to help Interstate Industrial and its owners, the DiTomasso family, try to win city business despite their alleged ties with organized crime. At the time, Kerik solicited and received gifts from company sources, including $165,000 in renovations for his apartment.

"They knew 100 percent of it," Ray said. "There was no way they didn't. I was driving the ball on that."