E. Potential Civil and Criminal Violations Committed by Haney and Knight The facts and circumstances described above raise legitimate and serious questions as to whether Mr. Haney and Mr. Knight broke one or more laws, warranting further review and investigation by the Department of Justice or other appropriate law enforcement authorities. If Mr. Haney's $1 million payment to Mr. Knight was, as the evidence suggests, contingent upon Mr. Knight's successful effort to secure key amendments to the GSA-Portals lease, Mr. Haney apparently violated 41 U.S.C. § 254(a), which provides: Every contract awarded after using procedures other than sealed-bid This provision is a civil statute, and provides that a violation of this warranty gives the government the right to "annul such contract without liability or in its discretion to deduct from the contract price or consideration the full amount of such commission, percentage, brokerage, or contingent fee." 41 U.S.C. § 254(a). These remedies are, however, not exclusive. GSA regulations provide that a violation or suspected violation of this provision also may be referred to the Department of Justice for prosecution (48 C.F.R. 3.405(4)), and the Department has both civil and criminal avenues through which it can pursue alleged violators (discussed in detail below). Mr. Haney testified that he was aware of this prohibition at the time and that he would never pay a contingency fee on a Federal contract. Appendix A, at 24; Appendix C, at 303-304, 321. He also repeatedly suggested other defenses to any charge that he violated this provision -- namely, that he and his representatives were not negotiating, and had no power to negotiate, the lease changes, and that he did not become a partner and lender in the project until March of 1996, after the first supplemental lease agreement was signed by Parcel 49C. The suggestions implicit in these defenses are that, even if the $1 million fee were a contingency payment, it was not contingent upon the lease changes per se, and that he was not a "contractor" within the meaning of the statute. These arguments are without merit in light of the particular facts of this case. First, while Mr. Haney swore under oath that he "certainly would never pay a contingency fee" on a Federal contract (Appendix C, at 321), his actions not only in the Portals matter, but also with respect to the Ronald Reagan Building project and the extension of Federal leases with the Tennessee Valley Authority (see Report Section VII, infra), strongly suggest the opposite: that Mr. Haney's pattern of doing business was to incentivize and reward handsomely his agents and representatives upon the successful completion of projects, including government projects. Second, as discussed in detail in Report Section II, supra, the assertion that Mr. Haney and Mr. Knight were not soliciting or seeking to obtain changes to the Portals lease is contrary to the vast weight of the evidence. While Mr. Knight may not have been drafting specific lease language, his role clearly involved, by his own admission, "advocating" to GSA officials Mr. Haney's requirements with respect to these lease amendments -- amendments that were critical to the closing of the Portals deal in March 1996, which in turn funded his $1 million fee. As for the definition of the term "contractor," it is clear that Mr. Haney would not be considered a contractor for purposes of this statute when the initial certification and warranty by Parcel 49C was signed in August 1994, since Mr. Haney was not involved in the Portals project at all at that time. Mr. Haney also may not be considered a contractor when the first supplemental lease ہی agreement was signed by Parcel 49C and GSA in January 1996, since he was not a formal partner in Parcel 49C at that time.47 However, Mr. Haney formally joined Parcel 49C as a general partner as of March 22, 1996, four days before GSA agreed to the final lease changes sought by Mr. Haney -- changes that were codified in the second supplemental lease agreement dated March 26, 1996. According to GSA's General Counsel, this supplemental lease agreement contained a reaffirmation by the contractor that it had not retained any agent on a contingent fee basis, and included in the definition of the term "contractor" not only Parcel 49C, but -- consistent with the intent of the statute and general principles of partnership law -- all general partners of Parcel 49C as of that date. Appendix C, at 13-18, 429433.4 Thus, Mr. Haney's payment of what appears to be a contingent fee to Mr. Knight (and others) days after the supplemental lease was signed certainly would fall within the statute's prohibition."9 Accordingly, GSA and/or the Department of Justice should take immediate steps to recover the $1 million fee from Mr. Haney or Parcel 49C or deduct that amount from its contractual obligations to the partnership, as authorized by statute. GSA also should suspend Mr. Haney from contracting with the government in the future, as permitted by regulation. 47 48 49 However, there is little doubt that Mr. Haney and his representatives were GSA's interpretation of the statute appears to be quite convincing. When a partnership signs such a certification, it surely must cover all of the general partners individually, and possibly the limited partners as well. If it did not, a giant loop hole would exist that would permit the partnership itself to certify that it had not hired anyone on a contingent fee basis, while the individual partners could go out and hire people to wrongly influence the lease on a contingency basis. Thus, the fact that Mr. Knight was hired by Mr. Haney, rather than Parcel 49C, would not preclude a finding of a violation of this statute. The fact that Mr. Knight billed the $1 million fee in January of 1996 is irrelevant to the statutory analysis. As Mr. Knight himself testified, his arrangement with Mr. Haney was that he could bill the fee "at any time," but that it would not be paid until "funds became available." Appendix B, at 258, 273, 380. And that later circumstance did not occur until GSA agreed to the second supplemental lease in March 1996, which led to the successful closing of the Portals deal. That said, it should be noted that, at the time of the January 1996 invoice, Mr. Haney and his representatives thought that they had secured all the changes necessary to the portals lease to permit the closing of the deal. It was not until sometime later in January or February of 1996 that it became apparent that Mr. Haney's investors and underwriters likely would require additional changes to the lease. See Appendix C, at 133-135. As noted above, pursuing contractual remedies are not the only legal course of action available to the government where an apparent violation of the bar against contingent fees exists. For example, in a recent and well-publicized case, the Department of Justice brought a civil action against Prudential Insurance Company under the False Claims Act (31 U.S.C. § 3729) for entering into a contingent fee arrangement with Terry McAuliffe (another top Clinton-Gore fundraiser) with respect to a government lease. The case was brought on the theory that Prudential's certification to the government that it did not have any contingent fee relationships was a false claim filed for the purpose of receiving a financial benefit (i.e., a Federal lease). Prudential settled with the government and paid a fine roughly equivalent to the contingent fee, a little over $300,000. On the criminal side, the False Statements Act (18 U.S.C. § 1001(a)) makes it a Federal felony to knowingly make any materially false, deceptive, or fraudulent statement to any branch of the Federal government. The statutory penalty provides that violators "shall be fined under this title or imprisoned not more than 5 years, or both." In this situation, the apparent false statement is the partnership's reaffirmation of the lack of any contingent fee relationships. The fact that Mr. Haney himself never signed a certification or reaffirmation likely would not exempt him from personal criminal liability, however, because "[w]hoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal." 18 U.S.C. § 2(b). A Supreme Court decision closely on point held, in a case involving the prosecution of a bank teller under a statute proscribing the "mak[ing] of any false entry" on bank records, that: [t]o hold the statute broad enough to include deliberate action from which a false United States v. Giles, 300 U.S. 41, 48-49 (1937). Thus, even though the other Portals general partner, Mr. Grigg, signed the lease supplements containing the contingent fee reaffirmation, Mr. Haney can be held criminally liable upon a proper showing, and regardless of whether Mr. Grigg personally knew the certification was false.50 Compare United States v. Mattox, 689 F.2d 531, 532 (5th Cir. 1982) ("knowing failure to supply the information requested" in connection with government filing held sufficient to constitute violation of 18 U.S.C. § 1001); United States v. Murph, 707 F.2d 895, 896 (6th Cir. 1983) (defendant "caused" the filing of false statement by another where he "understood and fore[saw]" that his actions would lead to the false filing). In short, the evidence that Mr. Haney knowingly caused a false statement to be filed with the government with respect to his partnership's contingent fee relationships is sufficient to warrant investigation by the Department of Justice under the False Statements Act, or its civil analog, the False Claims Act. The general Federal conspiracy statute, 18 U.S.C. § 371, provides that: If two or more persons conspire either to commit any offense against the United 50 The Committee did not discover any evidence suggesting that Mr. Grigg was aware of Mr. Haney's fee arrangements with Mr. Knight or any of his other representatives until these matters became public late last year. conspiracy, each shall be fined under this title or imprisoned not more than five This statute not only makes it a crime to conspire to commit any offense (such as a violation of the bar against contingency fees on Federal contracts or the False Statements Act), but also creates a stand-alone crime of conspiracy to defraud the United States, which has been given a very broad meaning by the courts. "Defrauding" means "any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of government." Dennis v. United States, 384 U.S. 855 (1966). This statute has been used at least once to prosecute both the payor and payee for an alleged violation of a contingent fee certification. In that case, the U.S. Attorney's Office in Washington, D.C. brought a criminal conspiracy case against both the certifier and the agent who received the contingent fee, alleging a conspiracy to defraud the government by making false statements about their fee arrangement. See United States v. Buckley, 49 F. Supp. 993 (D.D.C. 1943) (prosecution dismissed due to insufficient evidence of willful intent). Given that Mr. Haney and Mr. Knight clearly had pre-existing knowledge about the unlawfulness of a contingent fee relationship on a Federal contract and the certification process under 41 U.S.C. § 254(a) (Appendix C, at 303-304; Appendix B, at 466), and given their active efforts to conceal this arrangement from the Committee, there is sufficient evidence of criminal intent and the existence of a conspiracy to warrant an investigation by the Department of Justice (or other appropriate law enforcement authorities) as to whether Mr. Haney and Mr. Knight conspired to violate Federal law or to defraud the United States by impairing the lawful functioning of a government agency, GSA, in violation of 18 U.S.C. § 371. 4. The Federal Perjury Statute (18 U.S.C. § 1621): 18 U.S.C. § 1621 makes it a Federal felony for anyone to lie under oath before any competent tribunal of the United States government, including a committee of Congress (provided that a quorum of committee members are present at the time of the perjurious statement). See Christoffel v. United States, 338 U.S. 84 (1949),51 In light of the powerful evidence that the $1 million fee was solely for the Portals and, in fact, was contingent upon the successful conclusion of the Portals lease supplements, the sworn testimony of Mr. Haney and Mr. Knight to the contrary appears to be false, and knowingly so. In particular, both Mr. Haney and Mr. Knight testified that the $1 million fee was meant to cover all of Mr. Knight's work on a variety of projects over a three-year period, including, specifically, the Reagan Building project. Appendix A, at 12, 24, 29, 114, 195, 239-240; Appendix B, at 256, 389; Appendix C, at 299-300, 302-304, 306, 320, 325-326. Both men also explicitly denied that the fee was contingent upon GSA agreement to certain lease changes. Appendix A, at 24; Appendix B, at 256 273. There is no question that these apparently false statements were knowing, willful, and related to material facts, which are the essential elements of the crime of perjury. Indeed, these assertions and denials were intended to thwart one of the central purposes of the Committee's investigation -whether Mr. Haney paid Mr. Knight an unlawful and extraordinary contingency fee in an attempt to influence government decisionmaking on the Portals. Accordingly, the evidence warrants an investigation by the appropriate authorities into whether Mr. Knight and Mr. Haney committed perjury or violated the False Statements Act in their sworn testimony and other representations before the Committee and Subcommittee, in violation of 18 U.S.C. § 1621 and/or 18 U.S.C. § 1001. 51 As required by Committee and House rules, a quorum of the Subcommittee on Oversight and Investigations (two Members) was present at each and every hearing held on the Portals matter (see Appendix A, at 1, 253; Appendix B, at 1, 251, 491; Appendix C, at 1, 329), and all witnesses were required to testify under oath, as is the common practice before the Subcommittee. V. THE MILLION DOLLAR FEE ARRANGEMENT BETWEEN HANEY AND A. The Chronology of Events Beginning in early 1995, Mr. Haney began an effort to expand his real estate development business into Washington, D.C., an area of the country in which he had no prior experience. According to his own testimony, he sought assistance from people who "were specifically knowledge[able] about Government and navigating the bureaucratic waters of Washington." Appendix A, at 11. He also said he "needed Washington wisdom, credentials, and credibility." Appendix A, at 11. So, Mr. Haney said, he turned to former U.S. Senator James Sasser, who recently had lost re-election to another term and left public office in early January 1995. Appendix A, at 11. Immediately upon leaving the U.S. Senate, Mr. Sasser and Mr. Haney entered into a written retainer agreement, under which Mr. Haney paid Mr. Sasser a staggering retainer of $100,000 per month. Appendix C, at 69. For this extraordinary amount of money, Mr. Sasser would provide Mr. Haney with "strategic advice, counsel, and wisdom in dealing with Washington issues." Appendix A, at 11. Even Mr. Sasser testified that he thought the amount of this retainer agreement was ten times greater than the going market rate for Washington representatives. Appendix C, at 224. Beginning around March 1995, Mr. Sasser began giving Mr. Haney advice with respect to the Portals project, possibly attending a casual meeting or two with Mr. Haney and Mr. Grigg. Mr. Sasser's calendars (Appendix C, at 181-202) also reflect subsequent Portals-related meetings with Paine Webber (a possible underwriter for the Portals bond offering), as well as two meetings with GSA officials on June 19, 1995 and August 14, 1995, a meeting with the Office of Management and Budget on September 27, 1995, and a meeting with FCC Chairman Reed Hundt on October 10, 1995. They also reflect that Mr. Sasser met with the eventual Portals bond underwriter, Lehman Brothers, on two occasions -- September and December 1995 -- both after Mr. Haney had signed a representation contract with Lehman Brothers with respect to the Portals. Appendix C, at 86-87.52 During this same time period, Mr. Sasser was being vetted by the Clinton Administration for the position of U.S. Ambassador to the People's Republic of China, leading to his formal nomination by President Clinton on September 22, 1995. The Senate Foreign Relations Committee held two days of hearings on his nomination on October 12 and 18, 1995, but he was not confirmed by the full Senate until December 14, 1995. Several weeks later, on January 10, 1996, Mr. Sasser was sworn in as U.S. Ambassador." 53 According to Mr. Sasser's testimony, sometime following his confirmation hearings but prior to the end of 1995, Mr. Haney informed him that his "assistance and counseling with regard to the financing of the Portals building would be rewarded with a success or contingency fee if the financing closed on that transaction." Appendix C, at 23. Under this oral agreement, Mr. Sasser would receive a "1 percent success fee on the face of the sought-after mortgage" on the Portals project, which would be $1 million based on this $100 million loan. Appendix C, at 23. While Mr. Haney concurred with the timing of the oral agreement -- stating that it was in "late 1995" -- Mr. Haney also stated that this agreement superseded the earlier written retainer agreement (Appendix A, at 11-12, 220-221; Appendix C, at 312), which indicates that the $1 million fee was intended to cover all of Mr. Sasser's work after the end of the retainer agreement. That retainer agreement ended 52 53 Mr. Haney testified that this agreement was not the operative agreement for the final Portals closing. However, despite a promise during his testimony to provide this alleged subsequent agreement with Lehman Brothers and repeated follow-up requests by telephone and in writing from Committee counsel, Mr. Haney failed to produce any evidence of another Lehman Brothers agreement. Accordingly, the Committee can only assume that the July 28, 1995 agreement was the operative arrangement between the parties. Mr. Sasser testified that his swearing-in occurred on January 11, 1995, but the State Department informed the Committee that official records show the correct date as January 10, 1995. |