Introduction Key Stories Opinion Key Players Matching Game Coffee Guests Overnight Guests Discussions Web Links

Politics Section
Special Reports

Democratic fund-raiser
Loral's Bernard Schwartz with President Clinton during a June 1997 Democratic fund-raiser in Washington. (AP File Photo)

Related Links
House Limits China Exports, Rebuking Clinton (Washington Post, May 21)

Gingrich to Create Panel to Probe Deal (Washington Post, May 20)

More Key Stories About Missile Allegations

Special Inquiry Rejected on Satellite Waiver Issue

By Roberto Suro
Washington Post Staff Writer
Thursday, May 21, 1998; Page A24

Senior Justice Department officials yesterday rejected an FBI suggestion to invoke the Independent Counsel Act in the ongoing investigation of whether campaign contributions illegally influenced President Clinton's China trade policy.

FBI officials argued at a department meeting that any inquiry into the matter should be handled as possible grounds for the appointment of an independent counsel because Clinton signed export waivers permitting U.S.-made commercial satellites to be launched by Chinese missiles and thus might become a subject of the inquiry, according to senior federal officials familiar with the discussions.

Congressional Republicans have alleged that in at least one case, a waiver given early this year to satellite maker Loral Space and Communications, the decision may have been tied to substantial contributions to Democrats on behalf of the company and by its chairman. Loral and the White House have denied any connection between the contributions and the waiver.

Led by Deputy Attorney General Eric H. Holder Jr., the Justice officials concluded that there are no specific allegations of wrongdoing against the president and so there is no need to make the probe an independent counsel matter, the officials said. Instead, the department's task force on campaign finance is likely to open its own criminal investigation into the handling of the waivers, the officials said.

By law, Justice is obliged to trigger Independent Counsel Act procedures if federal investigators find "specific and credible" information indicating that a president or another official covered by the act may have committed a crime, or the department itself has a conflict of interest in the investigation. Once the act is invoked by an attorney general, Justice is allowed a limited time for preliminary inquiries. If the allegations cannot be resolved, an independent counsel must be sought.

Justice Department officials, senior FBI agents and campaign finance prosecutors have met repeatedly in recent weeks, including twice this week, to devise an investigative strategy for a wide range of evidence and allegations involving the waivers.

All parties to the debate agree that some kind of investigation must explore claims by Johnny Chung, a Democratic fund-raiser, that a Chinese aerospace executive gave him $300,000 in the summer of 1996 to contribute to the Democratic Party. Chung, who pleaded guilty to campaign-related charges in March, is cooperating with the campaign finance task force.

Contributions by Loral and its chairman, Bernard Schwartz -- the largest single donor to the Democratic Party during the 1996 campaign -- would be examined separately.

Deciding the scope of an investigation of these separate but overlapping allegations has proved an unusually complex and controversial question. Because the president may be involved, a determination of the target of an investigation will also determine whether it goes the independent counsel route or is handled within the Justice Department.

During the meeting yesterday, Neil J. Gallagher, a deputy assistant director of the FBI, raised the possibility of an independent counsel, according to officials familiar with the talks. Although neither Gallagher nor other FBI officials at the meeting made a formal recommendation, the officials said it was clear the FBI favored opening a preliminary investigation as prescribed by the Independent Counsel Act.

Within the FBI, Clinton's personal involvement in granting the waiver to Loral this year, and earlier waivers to Loral and others, are viewed as sufficient grounds for triggering the act if there is going to be any investigation, according to federal law enforcement officials.

The fact that the Justice Department advised the White House against granting the 1998 waiver for Loral -- which is the subject of a separate criminal probe for allegedly transferring sensitive technology to China -- is regarded by FBI officials as the kind of internal conflict of interest that also justifies turning the matter over to an independent counsel, the officials said.

Within months after the campaign finance task force was established after the 1996 election, the FBI began to argue that the large number of allegations regarding Democratic fund-raising should be investigated by an independent counsel. FBI Director Louis J. Freeh formally recommended that to Attorney General Janet Reno in November.

In several decisions regarding campaign finance, Reno has insisted that the fact that presidential decisions benefited campaign donors is not enough to trigger the Independent Counsel Act. She has maintained there must be evidence of an explicit exchange of money for favors.

Holder and other Justice officials at the meeting yesterday did not get into a detailed discussion of the FBI suggestion or the reasoning behind it. But they left no doubt that they would not seriously consider starting the independent counsel process now, the officials said.

The Justice Department officials have argued that no evidence has been developed of an explicit link between campaign donations from Schwartz or any other U.S. aerospace executives and the waivers, which were consistent with U.S. policy toward China going back to the Bush administration, officials said.

Meanwhile, as they continue to investigate Chung's claims, Justice officials said they have found no evidence indicating that the president or any other officials covered by the Independent Counsel Act knew that some of Chung's contributions originated with an executive of the China Aerospace Corp.

Although that company benefited from the waivers granted by Clinton, officials familiar with Chung's revelations said that the executive, Liu Chao-Ying, never stated that she was looking for favorable treatment of a specific kind and never mentioned satellite waivers.

© Copyright 1998 The Washington Post Company

Back to the top

Go to Campaign Finance Report | Go to Politics Section
Navigation image map
Home page Site Index Search Help! Home page Site Index Search Help!