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Cisneros Indictment: Part One

From the complete, unedited text of Independent Counsel David M. Barrett's Dec. 11, 1997, indictment against former housing secretary Henry G. Cisneros and three co-defendants.

Note: Typographical errors from the original document are preserved. Others may have been introduced by the scanning process.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

HOLDING A CRIMINAL TERM GRAND JURY 97-1, SWORN ON JANUARY 31, 1997

UNITED STATES OF AMERICA
v.
HENRY G. CISNEROS,
LINDA D. MEDLAR,
SYLVIA ARCE-GARCIA,
and
JOHN D. ROSALES

Defendants.

INDICTMENT

Criminal No.

Violations:

18 U.S.C. § 371
(Conspiracy to Defraud; Conspiracy to Commit Offenses)
[COUNT 1 ]

18 U.S.C. § 1001
(False Statements and Representations; Concealment of Material Facts)
[COUNTS 2-17, 19-21 ]

18 U.S.C. § 1505
(Obstruction of Justice)
[COUNT 18]

THE GRAND JURY CHARGES:

BACKGROUND TO ALL COUNTS

At all times relevant to this Indictment:

Principal Entities

1. The United States Senate ("Senate") was a component of the Legislative Branch of the United States Government, established by Article I, Section 1, of the United States Constitution.

2. The President of the United States was vested with the power to nominate "Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments . . . shall be established by Law. U.S. Constitution, Article II, Section 2.

3. Any appointments made pursuant to such Presidential nominations were required to have been made "by and with the Advice and Consent of the Senate." U.S. Constitution, Article II, Section 2.

4. The Department of Justice was a department of the United States, charged with the duties and responsibilities of, among other things, representing the United States in legal matters generally, and enforcing the laws of the United States.

5. The Federal Bureau of Investigation (also referred to herein as the "FBI") was a component of the Department of Justice, charged with the duties and responsibilities of, among other things:

(a) investigating violations of federal laws;

(b) collecting evidence in regard to such violations; and

(c) "conduct[ing] personnel investigations requisite to the work of the Department of Justice and whenever required by statute or otherwise." 28 C.F.R. § 0.85.

7. The Clinton-Gore Transition Team was an entity formed at or around the time of the 1992 presidential election. One of its principal purposes was to "vet" highranking potential nominees of the President-elect in order to ensure that such individuals were "suitable" to serve in the Clinton Administration.

8. The Department of Justice Personnel Security Office was a component of the Department of Justice, Justice Management Division, charged with the duty and responsibility of, among other things, adjudicating whether high-ranking potential nominees of the President-elect were honest, trustworthy, and reliable so as to ensure (a) that their appointments would be consistent with the provisions of Executive Order 10450 and Executive Order 12356 and (b) that such individuals could receive top secret national security clearances. Pursuant to the terms of the Federal Personnel Manual, the Department of Justice Personnel Security Office's adjudicating authority was based on the "more critical question of whether the employment of [a Cabinet Secretary] can reasonably be expected to be clearly consistent with the nation's security interests."

9. The United States Department of Housing and Urban Development (also referred to herein as "HUD") was a department of the United States. The mission of HUD was, among other things, to oversee federal programs concerned with the Nation's housing needs, fair housing opportunities, and the improvement and development of the Nation's communities. For the years 1993 through 1996, HUD's annual budget was approximately twenty billion dollars.

10. The United States Senate Committee on Banking, Housing, and Urban Affairs ("Senate Banking Committee") was a committee comprised of members of the United States Senate charged, pursuant to its constitutional "Advice and Consent" power and responsibility, with reviewing, advising, and consenting to the nomination of the President-elect's designee to serve in his Cabinet as Secretary of HUD. The Senate Banking Committee, as well as other Congressional committees, also had "oversight responsibility" in regard to the conduct of HUD and its officials, including the Secretary of HUD.

11. The Internal Revenue Service ("IRS") was an agency of the United States, within the Department of the Treasury, charged with the duties and responsibilities of, among other things, collecting tax revenues and administering the tax laws of the United States.

The Clinton-Gore Transition Team And
The Background Investigation Process

1. On November 3, 1992, William Jefferson Clinton was elected as the 42nd President of the United States of America.

2. Pursuant to the Presidential Transition Act of 1963, in or around November 1992, President-elect Clinton and Vice President-elect Albert Gore, Jr. formed the Clinton-Gore Transition Team ("Transition Team").

3. The Presidential Transition Act of 1963 was promulgated in order "to assure continuity in the faithful execution of the law and in the conduct of the affairs of the Federal Government." Its principal purpose was "to promote the orderly transfer of the executive power in connection with the expiration of the term of office of a President and the inauguration of a new President."

4. The Transition Team's duties and responsibilities consisted principally of, among other things, (a) the selection and "vetting" of high-ranking nominees such as Cabinet officers to ensure their "suitability" to serve in the Clinton Administration and (b) the formulation of policy to be implemented during the Clinton Administration.

5. Pursuant to a Memorandum of Understanding ("MOU"), entitled "Federal Bureau of Investigation Background Investigations for the President-elect of the United States of America," the FBI was charged with conducting full-field background investigations at the request of the President-elect or his designated representative in order to ascertain facts and information relevant to potential high-ranking nominees of the Clinton Administration.

6. The MOU was executed by then-Attorney General William Barr on November 5, 1992. President-elect Clinton on November 6, 1992, and then-Transition Team Director Warren Christopher on November 10, 1992.

7. The results of the FBI background investigation were to be used to:

(a) determine the suitability for Federal government employment or retention in such employment in accordance with Executive Order 10450; and

(b) determine the honesty, reliability, trustworthiness, and good character for clearance for access to information classified under the provisions of Executive Order 12356.

9. Chapter 732, Subchapter 4 of the Federal Personnel Manual, entitled "National Security Standard (Executive Order 10450)," provided the following, in pertinent part:

4-2. RELATIONSHIP BETWEEN SECURITY AND SUITABILITY

Suitability means fitness or eligibility for employment. Potentially disqualifying suitability factors are listed in FPM chapter 731. The focus of a suitability adjudication is on whether the employment of an individual can reasonably be expected to promote the efficiency of the Federal service. The focus of a national security adjudication is on the more critical question of whether the employment or continued employment of the individual can reasonably be expected to be clearly consistent with the nation's security interests.

Security adjudications under E.O. 10450 and related national security interest authorities are made subsequent to a favorable suitability adjudication and are based on standards and criteria which include the suitability standards and criteria.

10. Chapter 732, Subchapter 5 of the Federal Personnel Manual, entitled "Security Adjudication," provided the following, in pertinent part:

5-1. BASIC SECURITY CRITERIA

Executive Order 10450 specifies factors that should be considered when determining whether the employment, or retention in employment, of individuals in the Federal service is clearly consistent with the interests of the national security. The specified security criteria are:

• Any behavior, activities, or associations which tend to show that the individual is not reliable or trustworthy.

• Any deliberate misrepresentations, falsifications, or omissions of material facts.

* * * *

• Any facts which furnish reason to believe that the individual may be subjected to coercion, influence, or pressure which may cause the person to act contrary to the best interests of the national security.

11. To discharge their duties and responsibilities fully, properly, and efficiently, Cabinet officers were required to possess and have access to classified information and materials.

12. Executive Order 10450, promulgated by President Dwight D. Eisenhower on April 27, 1953, entitled "Security Requirements For Government Employment," provided the following, in pertinent part:

WHEREAS the interests of the national security require that all persons privileged to be employed in the departments and agencies of the Government, shall be reliable, trustworthy, of good conduct and character, and of complete and unswerving loyalty to the United States; and

WHEREAS the American tradition that all persons should receive fair, impartial, and equitable treatment at the hands of the Government requires that all persons seeking the privilege of employment or privileged to be employed in the departments and agencies of the Government be adjusted by mutually consistent and no less than minimum standards and procedures among the departments and agencies governing the employment and retention in employment of persons in the Federal service . . . [t]he head of each department and agency of the Government shall establish [ ] an effective program to ensure that the employment and retention of any officer or employee within the department or agency is clearly consistent with the interests of national security.

SEC. 3. (a) The appointment of each civilian officer or employee in any department or agency of the Government shall be made subject to investigation. The scope of the investigation shall be determined in the first instance according to the degree of adverse effect the occupant of the position sought to be filled could bring about, by virtue of the nature of the position, on the national security, but in no event shall the investigation include less than a national agency check (including a check of the fingerprint files of the Federal Bureau of Investigation), and written inquiries to appropriate local law enforcement agencies, former employers and supervisors, reference, and schools attended by the persons under investigation.

13. In accordance with the terms of Executive Order 10450, the FBI was charged with developing information concerning, among other things, the following, in regard to Cabinet-level designees so that a "suitability" determination could be made by the Transition Team and a "national security" determination could be made by the Department of Justice Personnel Security Office:

(i) Any behavior, activities, or associations which tend to show that the individual is not reliable or trustworthy;

(ii) Any deliberate misrepresentations, falsifications, or omissions of material facts;

(iii) Any criminal, infamous, dishonest, immoral, or notoriously disgraceful conduct, habitual use of intoxicants to excess, drug addiction, sexual perversion, or financial irresponsibility;

(iv) An adjudication of insanity, or treatment for serious mental or neurological disorder without satisfactory evidence of cure; and

(v) Any facts which furnish reason to believe that the individual may be subjected to coercion, influence, or pressure which may cause him to act contrary to the best interests of the national security.

14. Executive Order 12356, promulgated by President Ronald Reagan on April 2, 1982, entitled "National Security Information," provided the following, in pertinent part:

This Order prescribes a uniform system for classifying, declassifying, and safeguarding national security information. It recognizes that it is essential that the public be informed concerning the activities of its Government, but that the interests of the United States and its citizens require that certain information concerning the national defense and foreign relations be protected against unauthorized disclosure. Information may not be classified under this Order unless its disclosure reasonably could be expected to cause damage to the national security.

15. One of the principal purposes of Executive Order 12356 was to ensure that classified information not be disseminated to individuals who were not approved to review classified information.

16. The Department of Justice Personnel Security Office promulgated a memorandum entitled "Identification and Resolution of Derogatory Information," which set forth criteria to be used by that Office in making its "national security" determination. Those criteria included the following categories, among others:

(i) whether the individual is unreliable, untrustworthy, or open to blackmail;

(ii) whether the individual is financially responsible; and

(iii) whether the individual is honest.

17. During the vetting process, on December 14, 1992, CISNEROS signed a "Memorandum for Prospective Appointees," which provided the following, in pertinent part:

This memorandum confirms in writing your express consent for the Federal Bureau of Investigation to investigate your background or conduct appropriate file reviews in connection with the consideration of your application for employment.

The FBI investigation will include the collection and use of relevant information concerning your personal history, and it is necessary that you authorize the disclosure of such information to the FBI. Information may be disseminated outside the FBI when necessary to fulfill obligations imposed by law.

By volunteering information concerning activities protected by the First Amendment, it will be assumed that you are expressly authorizing the maintenance of this information in the records of any Federal agency.

18. Previously, in August 1983, in regard to a previous appointment, CISNEROS had signed an "Authority To Release Information" ("Release"), which authorized the FBI to investigate CISNEROS's background. Pursuant to the Release, CISNEROS was informed of the following:

You should be aware that the authority to collect this background information is based on the President's executive powers in Article II of the Constitution. The information will be used to obtain necessary clearances to assist you in your work. The background information, which includes a review of FBI files, will be disclosed to another Federal agency, to assist in its process of clearing you. Willfully making a false statement, or concealing a material fact, may constitute a violation of Section 1001, Title 18, of the U.S. Code.

If you provide any information which indicates a violation of law, whether civil, criminal or regulatory in nature, it will be referred to the appropriate Federal, state, local or foreign agency.

19. On or about December 7, 1992, after executing the "Memorandum for Prospective Appointees," CISNEROS completed and executed a "Questionnaire for Sensitive Positions (For National Security)," commonly referred to as a Standard Form 86 ("SF-86"). The SF-86 provided the following, in pertinent part:

The U.S. Government has conducted background investigations for over 50 years. It does this to establish that applicants for or incumbents in sensitive positions, either employed by the Government or working for the Government under contract, are eligible for a required security clearance or for performing sensitive duties. We use the information from this form primarily as the basis for an investigation that will be used to determine your eligibility for a national security position.

The U.S. Government is authorized to ask for this information under Executive Order 10450; section 2165 of title 42, U.S. Code; parts 5, 732 and 736 of Title 5, Code of Federal Regulations, and other statutes authorizing background investigations.

Background investigations for national security are conducted to develop information to show whether or not a person is reliable, trustworthy, of good conduct and character, and loyal to the United States. The information you provide on this form, including any specific agency instructions of Question 14c, and any other special instructions, is confirmed by investigation. In addition to the questions on this form, inquiry also is made about a person's adherence to security requirements, mental or health disorders, dishonest conduct, sexual misconduct, vulnerability to blackmail or coercion, falsification, misrepresentation and any other behavior, activities, or associations that tend to show the person is not reliable, trustworthy, or loyal.

An interview with you is a normal part of the investigative process. This Personal Subject Interview is generally the first step in the investigation, and is conducted under oath, affirmation, or unsworn declaration. It provides you the opportunity to update, clarify, and explain more completely information on your form, which often helps to complete your investigation faster.

The U.S. Criminal Code provides that knowingly falsifying or concealing a material fact is a felony which may result in fines of up to $10,000, or 5 years imprisonment, or both. In addition, Federal agencies generally fire, do not grant clearance, or disqualify individuals who have materially and deliberately falsified these forms, and this remains a part of our permanent record for future placements. Because the position for which you are being considered is a sensitive one, your trustworthiness is a very important consideration in deciding your eligibility for security clearance. Your prospects of placement or clearance are better if you answer all questions truthfully and completely. In the course of an interview with a Federal official you will have adequate opportunity to explain any information you give on the form and make your comments part of the record.

20. The SF-86 further provided that any information contained therein may be provided to law enforcement agencies "responsible for investigating, prosecuting, enforcing, or implementing a statute, rule, regulation, or order."

21. On or about December 14, 1992, CISNEROS completed and executed a Supplement to the SF-86.

22. On or about December 30, 1992, CISNEROS was interviewed in Washington, D.C. by a Special Agent of the Federal Bureau of Investigation. That interview was conducted as part of the full-field FBI background investigation of CISNEROS.

23. On or about January 7, 1993, CISNEROS was interviewed in Washington, D.C. by Special Agents of the Federal Bureau of Investigation. That interview was conducted as part of the full-field FBI background investigation of CISNEROS.

24. CISNEROS's FBI interviews, the SF-86, and the Supplement to the SF-86, served as the principal bases for the FBI's full-field background investigation of him.