Independent Counsel James McKay said in a report released Monday that Atty. Gen. Edwin Meese probably broke the law by filing a false income tax return and by violating a federal conflict-of-interest law.
But McKay said he decided not to prosecute Meese after a 14-month, $1.7 million investigation because he could not prove that the attorney general intended to commit the crimes or to benefit personally from them.
Despite McKay`s conclusion that the evidence did not warrant prosecution, the 814-page report said that in at least two cases, a reasonable evaluation of the facts would lead to the conclusion that Meese was guilty of
illegalities.
The report also gives a detailed account of Meese`s complex relationships with individuals on the edges of the law and of a variety of actions taken by Meese that, at one point, the report called ”highly unusual.”
The Justice Department is examining the report to determine whether Meese violated any governmental code of ethics.
At a news conference Monday afternoon to respond to the report, Meese said it was ”absolutely false” that he violated any law. ”I`ve always acted legally, ethically and properly,” he said.
Asked if he thought McKay had acted irresponsibly, Meese said,
”Absolutely.” But neither Meese nor his attorney, Nathan Lewin, would discuss whether they plan to take any legal action against McKay.
Meese, a former county prosecutor in California, declared: ”No responsible prosecutor would get away with what`s happened here, of saying,
`There`s no basis for prosecution. We`re not going to prosecute,` and then go out in public and say, `But the guy committed this offense.` If anybody did that in the Justice Department they`d be fired.”
McKay filed his report July 6 but it was kept sealed until Monday. Meese said at the time the report was filed that it ”fully vindicates me,” and announced he would resign later this month or in early August. President Reagan nominated former Pennsylvania Gov. Richard Thornburgh to succeed him.
”The President is pleased that, after extensive scrutiny, the independent counsel did not charge the attorney general with any criminal wrongdoing,” White House spokesman Marlin Fitzwater said Monday in Santa Barbara, Calif., where Reagan is on vacation.
”As he has said before, the President feels Ed Meese has been an outstanding attorney general and he will be able to look back with great satisfaction on the contributions he has made to the Justice Department and to the administration of justice in general,” Fitzwater said.
The report detailed actions that it said reasonable people could conclude were violations of the law. But, it concluded, ”There is no evidence that Mr. Meese acted from motivation for personal gain. There is no evidence that he acted out of self-interest.”
McKay said at a press conference Monday that he had reached this decision after ”many hours of deliberation” and after consultation with ”career Department of Justice officials.”
”If Meese were an ordinary person he probably would not be prosecuted,” McKay said.
In the report, however, McKay predicted that a ”trier of fact” would probably conclude that Meese violated a section of the Internal Revenue Service code by filing a ”materially false tax return.” The report said Meese`s 1986 tax form did not include a capital gain from the sale of some securities and that the attorney general did not pay tax on that gain.
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On Feb. 6, 1988, Meese filed an amended tax return on which he paid $2,454 in taxes on a capital gain of $14,606. Through an accounting error, the report said, the amount due was underestimated and should have been $3,479. The return was filed two months after the IRS began looking into Meese`s finances in connection with the McKay investigation.
Meese delayed giving his accountant the information for more than a year, the report said, even after numerous requests that he provide it.
McKay`s report said, however, that Meese ”never intended permanently to deprive the government of any relevant information or tax revenues.” The report said Meese was a procrastinator who routinely filed for extensions to pay his taxes.
The conflict-of-interest allegation involved Meese`s ownership of $14,000 worth of stock in the regional Bell companies in 1985 and 1986 while he was dealing with a Justice Department policy regarding the telephone companies. Federal law prohibits government officials from taking part in cases in which they have a financial interest.
Although a ”trier of fact would probably conclude beyond a reasonable doubt that Mr. Meese violated” the conflict-of-interest law, the report said, McKay decided not to prosecute because he determined that Meese`s intervention had no effect on the Justice Department policy and he realized no personal gain from his action.
In addition, Meese had once obtained a special waiver that allowed him to deal with the telephone company issues during some of the time he was in government service, though not as attorney general.
”Mr. Meese, knowing that he had a financial interest in the RBOC
(Regional Bell Operating Companies), nevertheless personally and substantially participated in two particular telecommunications matters as attorney general,” the report said. Meese then got another waiver, which permitted his participation from that point onward.
The investigation of Meese`s ethics has proved to be a political tool for Democratic presidential candidate Michael Dukakis. It has been a sure applause line around the country in Dukakis` campaign. With the McKay report and Meese`s decision to resign, Democrats` attacks on Meese could lose some of their sting.
Vice President George Bush, who has wrapped up the Republican presidential nomination and has had to fend off questions about the ethics of Meese and other administration officials, said the attorney general ”did the right thing” by deciding to resign after McKay filed the report.
Sen. Carl Levin (D., Mich.), a leader on the ethics issue in the Senate, said the report is ”devastating” for Meese and ”confirms in great detail what many-both Republicans and Democrats-have been saying for a long time: Mr. Meese has failed to live up to the standards required for public office.”
The report shed more light on Meese`s relationship with E. Robert Wallach, a law school classmate who has been indicted on charges of fraud and racketeering in connection with his work for Wedtech Corp., a New York defense contractor. Wedtech obtained a no-bid $32 million Army engine contract while Meese was White House counselor in 1982.
McKay said the ”available evidence” shows there was no criminal wrongdoing on Meese`s part in the Wedtech matter. However, he said his investigation of the dealings was hampered because four key witnesses refused to cooperate, including Wallach and W. Franklyn Chinn, a Wedtech director who was indicted along with Wallach.
However, the investigation turned up evidence on Chinn and Wallach that is being referred to the Justice Department for possible prosecution.
According to the report, Wallach convinced Wedtech officials that he had considerable clout with Meese and could assist Wedtech in getting the Army contract. Wallach also asserted he was in line for a top Justice Department job, the report said.
”Although Mr. Meese wanted Mr. Wallach to join him at the Department of Justice, Mr. Wallach was not so employed because Mr. Meese was advised against hiring a lawyer to whom he owed a debt,” the report said.
The independent counsel, in another matter, concluded that there was no violation of federal law in Meese`s involvement, at Wallach`s request, in a proposal to build a $1 billion oil pipeline in Iraq. But McKay said his investigation of this was hampered by the unwillingness of Wallach, Chinn and others to cooperate.
However, McKay concluded that Meese`s actions in the pipeline matter, including his request that Robert McFarlane, then Reagan`s national security adviser, talk to Wallach about it, were ”highly unusual.”
The pipeline investigation centered on a memorandum from Wallach that appeared to indicate that a secret payment might be paid to Israel`s Labor Party by pipeline developers for a guarantee from Israel not to harm the pipeline.
Meese`s attorneys, in their response, called the pipeline probe a
”mammothly expensive feckless venture” that produced nothing.
”This is probably the most poorly conceived, ill-founded and wasteful use of investigative resources in the history of American law enforcement,”
the attorneys said.