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A Lobbyist's Lucrative Ties to Gore

By Bob Woodward
Washington Post Staff Writer
Friday, October 17, 1997; Page A01

In the spring of 1995, a low point in the political fortunes of President Clinton and Vice President Gore, longtime Gore aide and chief fund-raiser Peter S. Knight began looking for the money that was critically needed to launch the Clinton-Gore reelection campaign. Among the first he secured was a pledge from executives of a small Massachusetts hazardous waste disposal firm to raise $50,000.

Peter Knight/AP
Peter Knight in 1995, when he was named head of the Clinton-Gore campaign. (AP)

"Your participation in this program will give you a special place of significance with the vice president and put you first in line," Knight wrote Molten Metal Technology Inc. in a May 1 thank-you letter. ". . . I can assure you that this early and generous commitment will not be forgotten." In his own hand, Knight scribbled, "Thanks so much guys!"

In fact, Molten — which at the time was paying Knight $7,000 a month plus lucrative stock options as the firm's Washington lobbyist — already had a prominent place in line with the vice president. Less than three weeks before Knight's letter, Gore had visited Molten's Fall River plant to mark Earth Day 1995. Molten's hazardous waste cleanup technology, developed with the help of a multimillion-dollar federal contract, was "a shining example of American ingenuity, hard work and business know-how," Gore said during the April 18 visit.

On April 25, Molten head William M. Haney III wrote to Knight, thanking him for "orchestrating" Gore's trip. "I should have asked for the Pope, or the Stones," Haney enthused. "You hardly seemed to break a sweat in bringing the Vice President to Fall River."

On June 6, Haney and his wife were among about 50 couples, each of whom had agreed to help raise $50,000 for Clinton-Gore, attending a dinner with Gore at the vice president's official residence. "This effort," according to briefing papers prepared for Gore, "was conceived by and is chaired by Peter Knight."

This juxtaposition of events, and others since Gore first became vice president, have put Knight — and Molten — under the scrutiny of the Justice Department and at least three congressional committees investigating allegations of campaign finance abuses. Several of the principals, including Knight, Haney and former assistant energy secretary Thomas P. Grumbly, a onetime Gore staff member who oversaw the granting of the government contract to Molten, have testified voluntarily under oath before investigators from the Senate Governmental Affairs Committee who are looking into Molten's government contract, its contributions to the Democratic National Committee and the Clinton-Gore campaign, and the role Knight played in them.

All have said they did nothing wrong.

As investigators have sifted through documents related to Knight and his activities through the 1990s, the case of Molten Metal has provided a stark picture of how business and politics often overlap, demonstrating the advantage of having friends in high places and the ways in which Washington relationships can span both years and jobs, to the benefit of all concerned.

Gore's chief of staff through 13 years in the House and Senate, Knight ran both Gore's failed 1988 presidential effort and his 1992 vice presidential campaign. He worked on the Clinton-Gore 1992-93 transition team, overseeing sub-Cabinet appointments, including Grumbly's. In 1996, he headed the Clinton-Gore reelection campaign.

When he hasn't been directly employed by the campaigns, Knight since 1991 has been a partner at the Washington law firm now called Wunder, Knight, Levine, Thelen & Forscey, where he specializes in communications, environmental and pharmaceutical matters. In addition to Molten Metal, his client list includes aircraft giant Lockheed Martin Corp., the Walt Disney Co. and others with extensive regulatory and other business with the government.

Records show that Knight's involvement with the network of Gore supporters and friends, his political connections and his own business pursuits allowed him simultaneously to make money for himself, assist his clients as they sought and won federal business, and raise funds for the Democratic National Committee, the Clinton-Gore campaign and other Gore causes.

Molten's stock, for example, more than doubled in the months after Gore's visit, a fact that press accounts at the time attributed to the vice president's enthusiastic and explicit endorsement. In November 1995, Knight exercised a portion of the options he had received from the company, making more than $90,000 before taxes.

Knight declined to speak to a reporter for this article, but in a statement released by his attorneys he said: "Throughout my career, I have always acted in accordance with the highest ethical standards. No amount of baseless innuendo directed at me in this intensely partisan environment will ever diminish my pride in the work I have done for the Vice President, the Democratic Party and my clients."

"First, I have never talked to the Vice President about any federal contract or grant on behalf of any client. Second, any suggestion that I helped arrange a government contract or grant in exchange for any type of contribution is patently false. Third, I have asked an extremely wide range of people to support the efforts of the Democratic Party and several worthwhile charitable causes, including some past and present clients. I am proud of what I have done to help support these efforts."

Long-Standing Ties
Molten had cemented its relationship to the vice president long before Knight came looking for campaign contributions. In the spring of 1994, Gore wrote to Molten president Haney to thank him for a $50,000 donation to help endow a chair in environmental studies at the University of Tennessee to be named after Gore's sister, Nancy Gore Hunger, who died of lung cancer in 1984.

"Thanks, Bill!" Gore wrote at the bottom of the letter, typed on vice presidential stationery. "You will never know how much this means to me. You are a great friend."

The donation had been solicited by Knight, who sent out about 100 letters asking for money to fund the chair. More than half of the $425,000 eventually raised came from wealthy members of Gore's informal campaign fund-raising network, including Knight's then-current and future clients. "As you might expect," Knight wrote Haney in his own thank-you note, "this is a very personal priority for the vice president. . . . I can assure you that your contribution will never be forgotten."

Two days after the March 22 donation, the Department of Energy announced it would expand an existing $1.2 million research contract with Molten to develop technology for hazardous waste disposal by $9 million. As assistant secretary for environmental management, Tom Grumbly was the senior official involved in the decision on Molten's contract. One internal Energy memo, dated Nov. 23, 1993, noted that "This is the contract T. Grumbly wants to add $9 million to."

Grumbly, who left the government early this year, said through his attorney yesterday that he had no knowledge of any campaign or charitable contributions involving Molten, and that he had spent his government service doing his job managing environmental cleanup programs.

In testimony to Senate investigators, Grumbly said that he did not direct the Molten contract be expanded, but that "I felt a sense of urgency about moving this program ahead. . . . I was involved collectively in the decision to accelerate the funding."

In February, the month before the contract expansion was announced, a written DOE "progress review" of the Molten contract noted that "no analytical data/conclusions were available to document [the project's] results" during a late January DOE visit to the Fall River plant. The report noted that in the absence of such information "it is difficult to reconcile and determine the appropriateness of the invoiced costs, as relates to this contract activity."

In a statement yesterday, Gore spokeswoman Ginny Terzano said any connection drawn between Gore's involvement in the university chair named after his sister and companies receiving government contracts "is absolutely baseless and untrue." Terzano described as "offensive that the Gore family memorial to the vice president's deceased sister could be so abused through innuendo and speculation."

The ties among Knight, Grumbly and Gore go back at least to 1980. Knight was then-Rep. Gore's chief of staff when Gore hired Grumbly as staff director of the Science and Technology Committee's investigations and oversight subcommittee, which he chaired. The relationship continued into the 1990s, after Gore published his best-selling book "Earth in the Balance." Knight was chairman of the nonprofit Environmental Education Foundation Gore set up with some of the book royalties, and Grumbly was its secretary-treasurer.

After Gore's election as vice president, Grumbly testified last month, he told Knight he wanted a job in the Environmental Protection Agency or the Office of Management and Budget, but was offered neither. Instead, he told investigators, he first learned from Knight — then in charge of sub-Cabinet posts for the new administration — that he would be offered the job of assistant secretary in the Energy Department. An hour after he spoke to Knight, Grumbly said, Secretary-designate Hazel R. O'Leary called to offer the job.

By mid-1993, Knight had returned to full-time lobbying with new government contacts. In a June 3, 1993, letter to a potential client he boasted that "I am very familiar with DOE and close to Secretary Hazel O'Leary's new team."

That same month, Knight was hired by Haney to represent Molten Metal in Washington. His role, Knight has testified, was to be "strategic adviser . . . how to maneuver in a Washington environment."

Knight's main contact at Molten was Vic Gatto, the firm's vice president and head of government relations, and a classmate of Gore's in the Harvard class of 1969. In his deposition to Senate investigators last month, Gatto was asked, "One of the things that Molten Metal hired Peter Knight [for] was . . . influencing government decisions?"

"The simple answer to that is yes," Gatto replied.

Haney told investigators that "Contracting with the Department of Energy broadly, you know, did become a significant part of [Knight's] responsibilities."

In addition to the $50,000 raised by Molten executives for the Clinton-Gore campaign in 1995, Molten contributed a total of $51,950 to the DNC from 1993 to 1996. In his testimony to Senate investigators, Knight said, "I don't recall making a specific solicitation to Molten Metal Technology on behalf of the Democratic National Committee."

Asked about a specific Molten contribution — $15,000 recorded as received by the DNC on March 24, 1994 (the same day the $9 million DOE contract expansion was announced), Knight testified: "They had been solicited by people. I don't know by whom."

But Gatto, when asked by investigators whether that $15,000 was solicited by Knight, replied, "Yes."

"Mr. Knight solicited you for additional contributions later in '93, '94, '95 and '96?" Gatto was asked.

"Periodically," he said.

Internal Molten documents recording a $10,000 DNC contribution on April 25, 1996, note: "Solicitor P. Knight."

In a statement faxed to The Washington Post by a company spokesman in response to questions concerning Molten's relationship to Peter Knight, the company said: "We have never asked anyone representing Molten Metal Technology to do anything improper and, to our knowledge, they never have."

Concerning the status of the Justice Department investigation of Molten, the statement said the company "has been cooperating fully with the House and Senate committees looking at both Presidential campaign fundraising and the company's Department of Energy contracts. Those investigations involve representatives of the U.S. Department of Justice."

Dinners and Business
The initial draft of Knight's consulting contract with Molten said he would be awarded additional stock options if the company determined it had won "at least $100 million" in government contracts. Knight objected to the explicit link between his compensation and government money and it was dropped. But without the linkage, Knight agreed to accept a monthly fee of $7,000, and stock options. Knight testified that his standard fee was more in the order of "between $10,000 and $25,000 a month."

On June 28, 1993, Grumbly, newly installed assistant energy secretary, and Gatto accompanied Knight to a DNC presidential dinner at Knight's invitation.

Three months later, on Sept. 20, Grumbly flew with Knight to the grand opening of Molten's new Fall River plant, where he said in a speech that he expected $200 million to be available in government contracts for cleanup technologies such as Molten's.

In November 1993, Knight wrote Jack Quinn, then Gore's counsel in the White House, asking that Gore mention a Molten contract bid there to Mexican officials. Gore's spokesman told Time magazine, which first reported the Mexico overture, that no such appeal was made by the vice president.

Over the next two years, the Knight-Molten-Grumbly tie was reinforced.

In the summer of 1994, following problems discussed in the DOE progress report that February, DOE issued a partial stop-work order to Molten. The firm was making it difficult for auditors to monitor progress on the contract by spending contract money faster than agreed.

On Aug. 1, Knight wrote a memo to Grumbly at Energy. "As you might imagine, it is critical for Molten to maintain a strong and cooperative relationship with DOE. It will stop at nothing to assure that." In Molten's world, Knight recalled last month for investigators, "it was a huge deal."

The stop-work order was lifted Sept. 6, 1994. Three days later, records show that Knight, Molten president Haney and Grumbly lunched together at the Jefferson Hotel in Washington. When asked about the meeting, Knight told investigators he did not recall it, "but I can't say it didn't occur."

On Feb. 13, 1995, a $5 million additional expansion of the Molten contract was finalized. Eight days later, Knight met at the Hay Adams Hotel with Grumbly and Haney. Asked if the $5 million expansion came up, Knight testified, "I don't recall. . . . I don't recall the specifics of the conversations."

On July 13, 1995, records show that Knight dined in Washington at the Prime Rib restaurant with Grumbly and Molten executives Haney and Gatto. "I don't recall that," Knight testified. "I'm not saying it didn't happen, but I don't recall that."

Haney, in his deposition to Senate investigators, also failed to recall the Prime Rib dinner. "You know," he said, "I meant when I was in Washington to go see what [the restaurant] looked like, to see if it would wake up my memory, but I didn't do it."

Haney acknowledged that in various dinners with Grumbly, he asked for more DOE funding. "I do remember generally pushing for more support, more money, more help — just more help, money for the program." (By 1996, Molten's government research and development contract would reach $33 million, more than the combined total distributed to the 18 other companies in the program, including General Electric Co. and Westinghouse Electric Corp.)

On Nov. 9, 1995, Knight exercised 4,000 of his 27,500 options for Molten shares when the stock price reached $37. According to records of the transaction, Knight made $92,247 before taxes. The stock had been trading at $18 that April, when Gore visited. (Molten Metal Technology stock closed yesterday at $5 3/8.)

On Nov. 21, 1995, records show that Knight had dinner at Sam and Harry's Restaurant with Grumbly and Molten executives. Knight testified he "vaguely" recalled the meeting, but not any specifics.

Grumbly testified that he did not recall the substance of most of what he said were two to three dozen phone conversations with Knight from 1993 to 1996.

In the 217-page transcript of Knight's six-hour deposition last month to Senate investigators, Knight testified on 155 occasions that he could not "recall," "recollect" or "remember," or that he had "no recollection." On 57 occasions, he said he could recall or remember the event about which he was questioned. On six occasions, he said he could only "vaguely recall."

A Manager and a Gift
At a DNC gala dinner at the D.C. Convention Center on May 8, 1996, Clinton praised Knight. "Any man who can pick your pocket and still win your applause," he told the 3,000 guests at the $2,000-a-plate event, "deserves to be the campaign manager of the Clinton-Gore campaign."

On May 15, Knight officially started work as head of the Clinton-Gore reelection effort, taking a substantial cut in pay. Knight told Senate investigators he officially stopped work for his law clients at that point.

A week later, on May 22, Haney and his wife gave $20,000 in Molten stock as an outright gift to Knight's son, Zachary, then age 12. Haney later testified the gift was out of friendship and was "completely unrelated to any business activities of Molten Metal or to Mr. Knight's role in the Clinton-Gore campaign."

"I like Peter and like his wife, Gail," Haney said, "and it's not uncommon for me to give stock. I mean, if I was a painter, I could give paintings."

Asked how he learned of the gift, Knight testified: "I believe it came in the mail."

Researcher Jeff Glasser contributed to this report.

© Copyright 1997 The Washington Post Company

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