in August 1995 after eight months of payments, according to Mr. Haney. Appendix A, at 11-12. Consistent with that testimony, Mr. Haney stopped paying Mr. Sasser the monthly retainer of $100,000 -- the last payment of $300,000 occurring in September 1995, for services during the month of August and two prior months for which Mr. Haney had not yet paid. Appendix A, at 134. But if the retainer agreement ended in August of 1995, it would appear that Mr. Sasser's contacts with the Office of Management and Budget in late September 1995 and with FCC Chairman Reed Hundt in mid-October 1995 were covered by the oral contingency agreement, and not the earlier written retainer. It also suggests that the oral contingency agreement may have occurred earlier than Mr. Haney and Mr. Sasser now recall. In January 1996, around the time of his swearing in as Ambassador, Mr. Sasser approached Mr. Mancuso, an attorney who works for Mr. Haney on a regular basis and had worked with both of them on the Portals project, and said: "Franklin [Haney] and I have an arrangement and I think it would be good if we got it reduced in writing." Appendix B, at 230; see also Appendix C, at 24.54 After conversations with Mr. Sasser and Mr. Haney, and based on his own personal knowledge of Mr. Sasser's legal services, Mr. Mancuso drafted a professional services agreement setting forth his understanding of the agreement between those two men, which was dated effective January 1, 1996, but was not signed until on or after January 26, 1996. Appendix B, at 226-232. - The agreement, as drafted and signed, provided that Mr. Sasser would be compensated for his services on the Portals loan and other matters including his work on the Portals lease amendments and a possibly related lease extension by the Tennessee Valley Authority (see Report Section VII, infra) -- if, and only if, the loan between Mr. Haney's company and the Portals partnership successfully closed. Appendix B, at 227-229. The amount of compensation was left blank by Mr. Mancuso because neither party told him the rate of compensation, which was penciled in by Mr. Haney as one percent of the loan amount, or $1 million. Appendix B, at 234. Thus, even though the $1 million fee was calculated as a percentage of the loan amount and was payable only upon the closing of that loan, the fee apparently was intended to cover all of Mr. Sasser's successful work for Mr. Haney on the Portals and TVA projects. Appendix B, at 231-233, 236-237." While both Mr. Sasser and Mr. Haney sought to distance themselves from the written agreement during their testimony on the subject (Appendix C, at 239-241, 248-251, 312-314), both men reviewed and signed the contract without making or even suggesting any changes to it. Appendix C, at 248, 312313. When questioned about this written agreement, Mr. Mancuso testified that he included Mr. Sasser's work on the Portals lease as part of the consideration for the $1 million because he had firsthand knowledge that Mr. Sasser actively participated in meetings at which lease changes were discussed and that the requested lease changes ultimately were made by GSA. Appendix B, at 236241. 54 55 Specifically, Mr. Mancuso testified that this conversation with Mr. Sasser Mr. Mancuso's testimony on this point is consistent with Mr. Haney's In his own testimony, Mr. Sasser made the inconsequential point that his work for Mr. Haney on the Portals related to financing the Portals project, and that he was not responsible for the leasing of the Portals. Appendix C, at 248, 262, 275. In fact, however, the lease changes that Mr. Haney sought were required by the bond underwriters and by Standard and Poor's in order to make possible the financing. Mr. Haney's financial expert testified that the sought-after lease changes were critical to the financing. Appendix B, at 10-13, 241. Indeed, Mr. Sasser himself admitted that, "if there's no lease, there's no loan." Appendix C, at 240. Further, Mr. Haney's testimony confirms that the primary reason he hired Mr. Sasser was to bring him credibility with government officials (including, specifically, GSA's General Counsel) -- which is why, according to Mr. Haney, he hired Mr. Sasser in the first place. Appendix A, at 11, 214. And credibility with government officials was necessary only to negotiate the Portals lease changes, not to complete the bond offering in the public markets. While the evidence demonstrates that Mr. Sasser met with two potential underwriters of the Portals bonds on several occasions, the testimony and documentation before the Committee reveal a very limited role played by Mr. Sasser in the project's financing." Mr. Sasser acknowledged this fact, stating that he was not a financial expert and never held himself out to be one. Appendix C, at 25. Rather, Mr. Sasser claimed that his $100,000 per month retainer and subsequent million-dollar contingency fee was solely for his advice and counsel to Mr. Haney about current events and macroeconomic conditions, such as general trends in the stock market and interest rates. Appendix C, at 24. Particularly with respect to the ultimate underwriters of the project, Lehman Brothers, the evidence shows that Mr. Sasser met with them on two occasions, both times after Mr. Haney already had engaged their services on this project. Appendix C, at 192, 202. Moreover, Mr. Mancuso testified that Mr. Sasser did not arrange these meetings with Lehman Brothers, nor did Mr. Sasser discuss any of the details of the financing plan during these same meetings. Appendix B, at 232-233. And when Committee staff asked Mr. David Klinges, the lead manager from Lehman Brothers on this project, to identify with whom on Mr. Haney's team he had worked, he listed several individuals but not Mr. Sasser. In fact, when Lehman Brothers sent out a proposed plan and schedule regarding the financing and closing of the deal, Mr. Sasser's name was not among the dozen or so recipients of this memorandum. Appendix C, at 90-97. B. - Sasser's Failure to Disclose the Agreement and the Extent of His -- Despite the fact that Mr. Sasser's nomination was still under consideration by the Senate at the time of the original oral contingency agreement, Mr. Sasser did not disclose that arrangement to either the Senate, the State Department, or to his own ethics counsel who specifically was retained for the purpose of advising Mr. Sasser on his disclosure obligations during the confirmation process until after he was confirmed and sworn in as Ambassador. In fact, Mr. Sasser's ethics advisor was not consulted until after Mr. Sasser had signed the written agreement at the end of January 1996 (Appendix C, at 238-239, 251, 273-274), while the State Department was not told about this arrangement until after the $1 million payment was received or about to be received by Mr. Sasser in April 1996. Due to a loophole in the ethics laws and regulations, nominees are not required to disclose earned income or other fee arrangements subsequent to their confirmation hearings, even if they are 56 57 As noted above, when he was a U.S. Senator, Mr. Sasser chaired the Senate In fact, when asked to explain what Mr. Sasser did with respect to the financing of the Portals project to earn his $1 million fee, Mr. Mancuso the financial expert putting together the deal -- testified that, to his knowledge, Mr. Sasser simply attended a meeting with Lehman Brothers and its counsel to discuss the project. Appendix B, at 232-233. not confirmed for several months and continue to take on new clients or earn monies in that time period." However, in light of the complexity of the governing rules and regulations, it is unclear how Mr. Sasser could have known this fact, given that he did not consult with his own private ethics counsel, the Senate committee counsel, or the State Department's ethics advisor. Indeed, when Mr. Sasser finally contacted his ethics counsel in late January 1996 to advise him of the existence of this agreement, Mr. Sasser requested at that time advice concerning disclosure requirements, and his attorney, Mr. Lake, responded by promising to research the matter and get back to him -- facts that Mr. Lake said were confirmed by his law firm's time records, as discussed with Committee staff during an interview of him." Thus, Mr. Sasser's testimony that his counsel firmly advised him, during this meeting in January, that he did not need to disclose the arrangement appears to be inaccurate. Appendix C, at 251. Similarly, his testimony that Mr. Lake did not request to see the written agreement at that time because he did not see any need to do so also appears inaccurate. Appendix C, at 251. In fact, Mr. Lake told Committee staff that he requested the written contract at their meeting in January 1996, but did not receive it until sometime in March 1996. a Moreover, the technicalities of the ethics rules and regulations do not answer the question whether Mr. Sasser should have disclosed the arrangement, even if he were not absolutely required to do so.60 Even at the time of his confirmation hearings in October 1995, the relocation of the FCC to the Portals was a highly controversial matter, and the Senate was in the process of deciding whether to increase GSA's authorization to procure space at the Portals for the FCC determination it made only days after Mr. Sasser's last confirmation hearing. In addition, the large face amount of the agreement, its contingent nature, its relationship to a government project, and the fact that it likely would not materialize until after Mr. Sasser became a government official may have raised legitimate questions in the minds of the State Department and the Senate. For some of these very same reasons, Mr. Lake -- after consultations with the State Department -- advised Mr. Sasser that he should voluntarily disclose the $1 million payment in advance of any requirement to do so (which Mr. Sasser did in May 1996). Mr. Lake also told Committee staff that, had he known about the oral fee arrangement in the Fall of 1995, he likely would have counseled Mr. Sasser the same way, so that Mr. Sasser could avoid any appearance that he was withholding relevant information from the State Department or other interested parties. However, this oral million-dollar agreement was not the only Portals-related information that Mr. Sasser omitted from his ethics disclosures. In response to a questionnaire from the Senate Foreign Relations Committee, Mr. Sasser stated that he had not engaged in any lobbying activity, but had represented clients in matters dealing with various departments of the Federal government. On October 10, 1995, the Senate committee asked the State Department to have Mr. Sasser clarify his response to this question, because the committee "want[ed] to be sure the legal services performed in relation to those agencies (to which he refers in his reply) did not relate to influencing public policy." Appendix C, at 121-123. On October 11, 1995, the State Department submitted a response from Mr. Sasser dated October 10, 1995, which stated in relevant part: On behalf of the Franklin L. Haney Company, I advised the company 58 59 60 Apparently this fact is why the only thing that Mr. Sasser can remember about the timing of this oral agreement was that it definitely was after his confirmation hearings. Appendix C, at 269. But, as noted earlier, other testimony and evidence suggest that the oral agreement may have been reached prior to these hearings. According to those time records, Mr. Lake concluded sometime in February 1996 that Mr. Sasser was not required to disclose the contract with Mr. Haney. As officials with the State Department's Office of Legal Advisor told Committee staff, contingency fees involving government projects do not raise only reporting and disclosure questions, but also concerns about conflicts of interest and the related criminal statutes, such as 18 U.S.C. § 203. refunding zero coupon municipal bonds, pursuant to applicable laws Appendix C, at 123. I Notably, Mr. Sasser did not mention the Portals by name, or the fact that the FCC was the intended tenant (as opposed to the phrase "for partial GSA use"). Mr. Sasser did not disclose that the purpose of the meetings with GSA was to seek GSA's agreement to certain lease changes in order to obtain favorable bond financing of the Portals -- a fact that would appear to fall within the questionnaire's request for information relating to lobbying or efforts to influence public policy. Mr. Sasser also did not disclose the meeting he arranged and attended with the Office of Management Budget on the Portals, which occurred on September 27, 1995, only two weeks before he made this supplemental submission. Nor did he disclose his meeting with FCC Chairman Reed Hundt, which occurred the very same day that he was submitting his supplemental disclosure, October 10, 1995.61 Furthermore, Mr. Sasser failed to disclose in a related Senate filing the extent of his payments from Mr. Haney, omitting the final payment of $300,000 he received in early September 1995 under the monthly retainer agreement. Appendix C, at 111, 179-180. These omissions and discrepancies, combined with the inexplicable failure to consult his private ethics counsel about this $1 million agreement, raise a legitimate question as to whether Mr. Sasser intended to mislead the State Department and the Senate concerning his involvement on the Portals project and his fee arrangements with Mr. Haney.62 Moreover, Mr. Sasser's unwillingness to cooperate with the Committee's investigation at all times prior to Mr. Haney's production of subpoenaed documents relating to his relationship with Mr. Sasser -- under the threat of prosecution for criminal contempt -- suggests a continuing effort on Mr. Sasser's part to conceal the nature of their relationship with respect to the Portals. C. Potential Civil and Criminal Violations Committed by Haney and Sasser The facts and circumstances described above raise legitimate and serious questions as to whether Mr. Haney and Mr. Sasser broke one or more laws, warranting further review and investigation by the Department of Justice. 61 62 While this meeting took place in the afternoon of that day, the follow-up request was not sent from the Senate to the State Department until after 10:00 a.m. that morning, and the disclosure amendment was not sent from the State Department to the Senate until the next day, October 11, 1995. Further, the meeting with Chairman Hundt had been scheduled and was on Mr. Sasser's calendar, so even if Mr. Sasser sent the updated disclosure to the State Department prior to meeting with Mr. Hundt, presumably Mr. Sasser was aware that he would be attending that meeting with Mr. Hundt later the same day on the Portals. The Committee is aware that the State Department Office of Inspector General, in conjunction with the Department of Justice, already is conducting an investigation to determine whether Mr. Sasser's activities in this regard may have violated any laws or regulations. As discussed above, Federal law prohibits the retaining or payment of an agent on a contingent fee basis with respect to the solicitation or obtaining of a Federal contract, such as a lease. 41 U.S.C. § 254(a). Mr. Sasser and Mr. Haney do not dispute that their arrangement was a contingency fee, but assert that it was on the financing of the loan transaction, not the supplemental lease amendments with GSA. Appendix C, at 248, 262-263, 269-271; Appendix A, at 234-236. While the triggering mechanism for the $1 million payment appears to have been the successful closing of the loan between Mr. Haney's company and the Portals partnership, a proper reading of the statute mandates a more probing analysis centered on two questions: What was the $1 million payment compensation for, and was it in any way conditioned upon the securing of a Federal contract, in this case GSA lease supplements? As for the first question, the agreement itself is quite clear, as is the testimony of the agreement's drafter, Mr. Mancuso: the $1 million fee was compensation for Mr. Sasser's work not only on the funding of the loan, but also on securing the GSA-Portals lease supplements (and apparently other matters). When questioned about this particular point, Mr. Mancuso testified that, while he could not say there was a "causal relationship" between Mr. Sasser's meetings with GSA and the eventual lease changes, "the proof was in the pudding." Appendix B, at 236. -- a Mr. Mancuso also explained Mr. Sasser's role in at least one of those GSA meetings meeting that he and Mr. Sasser attended in the Office of the GSA Regional Administrator on June 19, 1995: |