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  •   Firm Guilty of Unlawful Gifts to Espy

    By Toni Locy
    Washington Post Staff Writer
    Wednesday, September 25, 1996; Page A01

    A federal jury convicted a major California agricultural cooperative yesterday of illegally showering former agriculture secretary Mike Espy with nearly $6,000 in gifts, including meals at fancy restaurants and an all-expenses paid trip for him and his girlfriend to the U.S. Open tennis tournament in New York.

    The guilty verdict against Sun Diamond Growers, one of the nation's biggest fruit and nut producers, is the first conviction for independent counsel Donald C. Smaltz. Appointed two years ago to investigate Espy, Smaltz has been accused of stretching his investigative mandate to pursue companies with ties to President Clinton.

    A smiling Smaltz, obviously emboldened by the win, used the verdict not only to validate his work but to lambaste lobbying in Washington. "I think it stinks," he said. "I think it's a disgrace what goes on here. I think if the average man on the street at 4th and Main, or Omaha, Nebraska . . . knew how these agency heads are sometimes feted by lobbyists that they would be very, very much disturbed."

    The lead prosecutor in the case, Theodore S. Greenberg, took an even tougher stance, describing lobbyists and the companies they work for as "merchants of corruption . . . who must be stopped."

    "We have in this case . . . at least $6,000 worth of gratuities going to a sitting secretary of agriculture, a member of the president's Cabinet," Greenberg said. "I don't recall a time, certainly in the last 50 years, where we've had a sitting member of the Cabinet to whom a corporation has been found guilty of giving illegal gratuities."

    Smaltz is pursuing other companies that dealt with the Agriculture Department, including Tyson Foods Inc., the Arkansas poultry producer whose lobbyist, Jack L. Williams, was indicted last week for allegedly lying to investigators about gifts to Espy. Three other indictments brought by Smaltz are pending.

    "I'm going to stay here until the job is done," Smaltz vowed.

    In a statement, Sun Diamond said it was "disappointed in and disagrees with" the verdict. It said it is considering an appeal. The firm's lawyer, Richard A. Hibey, defended the company's lobbying tactics, insisting it is "honest, law-abiding and absolutely without any corruptive intent."

    Sun Diamond faces a fine of up to $3 million. U.S. District Judge Ricardo Urbina set sentencing for Dec. 10.

    The jury of nine women and three men deliberated 9 1/2 hours over two days before convicting Sun Diamond of eight of nine counts in the indictment. The jurors found the firm guilty of one felony charge of giving Espy $5,958 in illegal gratuities. That included $2,295 for his share of the bill paid by the company for him and others to attend the U.S. Open tennis tournament in September 1993; $665 in meals at expensive restaurants; $524 for a framed print and a crystal bowl; and $2,474 for luggage. Espy, who resigned in December 1994, has not been charged with wrongdoing.

    Jurors also convicted the company of two felony charges of wire fraud and five misdemeanor charges of illegal corporate campaign contributions. Those charges involved contributions to Espy's brother, Henry, to help him pay off his debt in a failed run for Congress. The $4,000 contribution was arranged by former high-powered Washington lobbyist James H. Lake, who testified as a government witness.

    The jurors acquitted the company of an illegal gratuity charge stemming from the payment of $3,100 to Espy's girlfriend, Patricia Dempsey, so she could go to Greece with Espy when he spoke to an International Nut Council conference in May 1993. Evidence showed Espy was still paying for Dempsey's plane ticket on his credit card.

    During the trial, witnesses for the prosecution and the defense described several instances where Espy allowed others -- particularly his friend Richard Douglas, a former senior vice president of Sun Diamond -- to pick up expensive restaurant tabs from 1993 to December 1994. Douglas was not charged with any wrongdoing.

    Reid Weingarten, Espy's attorney, said, "I know that Mike Espy never did any official favors for Sun Diamond and that any gifts he received from Richard Douglas were based on a long-standing, warm and close personal friendship, and not on any efforts to influence a secretary of agriculture."

    Hibey, Sun Diamond's defense attorney, tried to convince the jury that Douglas was not trying to buy Espy off when he picked up meal tabs or bought outrageously priced tickets to the U.S. Open from a scalper. Douglas did it out of friendship, he said.

    Sun Diamond executives testified they knew about the friendship and had no intention of influencing Espy. Company officials admitted knowing and approving of all but one of Douglas's requests for reimbursement -- $8,400 he spent on scalped tickets to the U.S. Open for the two men and their girlfriends. Douglas did not go through the normal channels on reimbursement on that expense but used his authority to approve it.

    Smaltz called Sun Diamond's defense "bunk" and "a big lie." His prosecutors, Greenberg and Barry Coburn, said the friendship was not a crime or the issue. They argued to the jury that the crime arose from the fact Sun Diamond, not Douglas, ultimately paid for the gifts. "We are all adults. If we work for an employer and we incur a personal expense, we pay it out of our own pocket," Coburn said in his closing argument.

    Sun Diamond corrupted the friendship, Coburn said. "The defendant used it in a way they were not allowed to do," he said. "They gave gratuities to foster it, to nurture it, to encourage it, and that is illegal."

    Smaltz has also leveled indictments against a Mississippi farmer and his company for allegedly collecting improper crop subsidies by conspiring to lie to government officials; against Espy's brother, Henry, and others for allegedly lying so Henry Espy could get a bank loan to pay off his campaign debt; and against Crop Growers Corp. for allegedly making illegal contributions to Henry Espy's campaign.

    © Copyright 1996 The Washington Post Company

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