Justice Dept. Certain to Examine Meese Report
The highly critical report on Atty. Gen. Edwin Meese III by independent counsel James C. McKay, while not calling for any criminal prosecution, shed light Monday on new facts and questions that are certain to be examined in an internal Justice Department investigation of the attorney general.
The report said that San Francisco attorney E. Robert Wallach, Meese’s longtime friend, had provided Meese with a number of favors and benefits at a time when Wallach was seeking help from the attorney general on behalf of his associates or clients. It said that both men might have federal income tax problems.
And Meese, the report suggested, may have failed to live up to a pledge he made to a Senate committee in 1985 that he had developed “a much higher level of sensitivity” to ethical problems and would seek to avoid appearances of conflict of interest.
Criminal Probe Possible
Michael E. Shaheen Jr., whose Office of Professional Responsibility will be conducting the internal Justice Department investigation, could recommend a wide range of actions against Meese, from formally censuring him to reopening a criminal investigation.
The office, which has a longstanding reputation for independence, already has begun its inquiry into Meese’s ethical conduct and could finish as early as September. Meese announced earlier this month that he would resign as attorney general by early August.
The close relationship between Meese and Wallach long has been known, including Wallach’s lobbying of Meese for his help in winning a $32-million Army engine contract for scandal-plagued Wedtech Corp. in 1983. Beyond that, McKay ticked off a long list of actions “taken by Mr. Wallach that benefited Mr. Meese.”
These actions, McKay noted, included Wallach’s introduction of Meese to W. Franklyn Chinn, a San Francisco investment adviser who nearly doubled Meese’s $55,000 investment over a two-year period with a series of trades in highly volatile new stock issues.
Meese withdrew his money last year after Chinn’s name surfaced as a former director of Wedtech who was under federal scrutiny. Chinn and Wallach have since been indicted in the scandal by a grand jury in Manhattan.
Cites Deeper Involvement
McKay also cited a deeper involvement by Wallach than previously known in arranging a $40,000-a-year salary for Ursula Meese, the attorney general’s wife, to be paid by the tax-exempt foundation of a Washington developer who was seeking to lease an office building his real estate partnership owned to the Justice Department for 10 years.
The McKay report revealed that Wallach personally escorted Ursula Meese to a job interview at a radio station owned by the developer, Howard M. Bender, before she settled on working for the Multiple Sclerosis Society in a job funded by the Bender Foundation at Wallach’s suggestion. Her salary went into the Meese’s joint bank account, the report said.
McKay concluded that there was “insufficient evidence” Meese had taken any actions that directly benefited Wallach. However, the ethical questions raised by receipt of such favors are certain to be examined by Shaheen’s office.
There were other favors, too.
McKay’s report stated that “there is evidence that Mr. Wallach assisted Mr. Meese in securing two bank loans at conventional terms,” one for $80,000 “obtained within the space of one day” on Sept. 14, 1983, and a $260,000 mortgage loan on the Meeses’ residence in July, 1986.
Wallach, who had represented Meese during his 1984 Senate confirmation fight without compensation by the attorney general, also provided “gifts, meals, entertainment and other favors” to the Meeses, the report said. The amount of these favors “was not insubstantial” but was “not extraordinary in the context of the longstanding friendship” between Meese and his former UC Berkeley Law School classmate, McKay concluded.
Weighed Appointment
The report also revealed that Meese, upon resigning as White House counselor and taking office as attorney general in February, 1985, sought to appoint Wallach to a high position at the department. Memos released by Senate investigators last year showed that Wallach was telling Wedtech officials he could do more for them at the Justice Department but that they had better pay him before he took a government position.
The McKay report said that Wallach’s appointment fell through only because Meese was advised that “hiring a lawyer to whom he owed a debt” could violate a federal regulation.
Shaheen is also expected to examine McKay’s finding that Meese technically may have violated federal tax laws by failing to report capital gains from the sale of securities on his 1985 tax return. He did so belatedly in an amended return but understated the capital gain by $6,000 through an accounting error, McKay said.
Similarly, Wallach failed immediately to report to the Internal Revenue Service a fee of $150,000 he received in 1985 for work on an Iraqi pipeline project on which he enlisted Meese’s help, McKay said.
“When the independent counsel requested production of certain of Mr. Wallach’s federal income tax returns, Mr. Wallach informed his tax lawyer of the income, who promptly filed an amended income tax return in June, 1987,” the report said.
A Matter for Tax Division
McKay said that he was referring this matter to the Justice Department’s tax division “for further investigation and possible prosecution.”
In enumerating Meese’s ties to Wallach and his repeated ethical problems, the independent counsel cited, with a tone of irony, Meese’s promise to the Senate Judiciary Committee in early 1985 after he had won a stormy confirmation battle in which other aspects of his personal financial affairs had been questioned.
“I can assure you,” Meese said, “that I have a much higher level of sensitivity to these matters now than I did when I arrived in Washington. And I can assure you that I would take great pains to avoid any kind of a situation or circumstance that might give rise to a misunderstanding or a misinterpretation of my acts or what I intended.”
