Rostenkowski Implicated in Postal Scam : Congress: Ex-head of House post office pleads guilty. He says Ways and Means chief illegally exchanged stamps and vouchers for cash.

The former head of the House post office pleaded guilty Monday to providing lawmakers with illegal cash for 20 years and implicated a congressman identified as House Ways and Means Chairman Dan Rostenkowski (D-Ill.) in the scandal.

Former House Postmaster Robert V. Rota admitted in federal court here that he conspired with members of Congress to provide them with thousands of dollars in cash in exchange for expense vouchers and stamps purchased with taxpayer money.

The plea agreement identified two congressmen who received cash from Rota only as “Congressman A” and “Congressman B.” Other documents and two sources close to the federal investigation confirmed that Rostenkowski is Congressman A. Records indicate that the Chicago Democrat received at least $21,300 in cash.

Rostenkowski, regarded as one of the most powerful members of Congress, had no comment Monday, according to a spokesman. He has vehemently denied any wrongdoing and criticized the 2-year-old investigation as politically motivated.

“Rota’s agreement to cooperate with prosecutors is a very big step in the direction of possible charges against Rostenkowski,” said a source involved in the investigation, which is being conducted by the U.S. attorney’s office here.

Democratic rules would force Rostenkowski to give up the chairmanship of the tax-writing committee if he is indicted. But it is uncertain what impact the new disclosure will have on his ability to continue to negotiate a compromise agreement with the Senate in closed-door meetings this week on President Clinton’s deficit-reduction bill, which raises taxes and cuts spending by $500 billion.

Rota’s surprise agreement to cooperate with prosecutors provides a major boost to an investigation that began after a low-level clerk was discovered to have stolen money from the post office. Rota became the ninth and highest-ranking former official to plead guilty in the inquiry.

Rostenkowski has long been identified by sources close to the investigation as the primary target. Last year, he refused to appear before a federal grand jury, citing the Fifth Amendement protection against self-incrimination.

Since then, several members of Rostenkowski’s personal staff and the Ways and Means Committee have been granted immunity and compelled to testify before the grand jury. Sources have indicated that the investigation has expanded beyond Rostenkowski’s dealings with the post office to include allegations about campaign spending and other office expenses.

Prosecutors negotiated for several months to obtain Rota’s cooperation. He agreed to plead guilty to three misdemeanors, provide information about the alleged scheme to investigators and possibly testify in court.

Calling the plea bargain a “significant step forward,” interim U.S. Atty. J. Ramsey Johnson said that Rota had admitted turning the House post office into “a convenient . . . and largely untraceable source of illegal cash for selected members of Congress.”

As described in court documents, the scheme was a relatively simple means of converting government funds into cash.

Each congressman has an office budget upon which vouchers can be drawn. Congressmen or staff members use vouchers to buy stamps at the post office for official mail that does not qualify for the free franking privilege.

However, Rota told prosecutors that soon after he started as postmaster in 1972, he conspired with congressmen to transform the operation into a small-scale money laundry. Court papers and prosecutors outlined two primary means for converting stamps and vouchers into cash.

In some cases, congressmen returned the stamps to Rota and received cash, which they pocketed. In other instances, Rota told prosecutors that he did not bother with stamps--he simply gave the congressmen cash in exchange for vouchers. Each act would constitute embezzlement of U.S. funds.

The charges against Rota list 12 separate instances in which Congressman A exchanged stamps or vouchers for cash from 1985 to 1987 and 1989 to 1991. The amounts ranged from a low of $900 to a high of $2,800.

Prosecutors also said that Rota gave lawmakers cash for political action committees but those transactions were not part of his plea bargain.

Johnson said that Rota acted at the insistence of certain congressmen and operated the scheme to keep his patronage job. Johnson said that Rota did not receive any money himself.

At various points over the years, Rota lied to federal and congressional investigators about exchanging stamps for cash. The scheme was interrupted in May, 1987, when Rota allegedly told Rostenkowski that he did not trust a new employee to carry out the scheme, according to court records.

Two years later, the employee was replaced by a patronage worker sponsored by Rostenkowski and the scheme resumed, according to the files. The patronage worker has been identified in other documents as James C. Smith, who also is cooperating with prosecutors.

Jay B. Stephens, the former U.S. attorney who initiated the investigation, said that he expects action soon.

“A speedy conclusion and action regarding members of Congress allegedly involved should come shortly unless there is some intervening action by the Administration,” said Stephens.

Congressman B was identified by sources and records as former Rep. Joe Kolter (D-Pa.). Attempts to reach him for comment were unsuccessful but he has previously denied wrongdoing.

The first impact of Rota’s cooperation is likely to be felt this week in the House-Senate negotiations over the federal budget. Democrats fear that Rostenkowski’s authority will be weakened there and as a chief proponent of the upcoming health care reform legislation and other key measures.

“It doesn’t look good for him,” said one House Democrat who said that he believes the tough-talking Chicagoan would be almost irreplaceable in passage of health care, trade and welfare reform legislation as well as the budget package. “It’s a disaster for the President and the party and the country--it’s our worst nightmare.”

Republicans gloated. “Just as in Japan, this is about corrupt one-party rule for four decades,” said Rep. Newt Gingrich (R-Ga.), the House Republican whip.

BACKGROUND

The House post office scandal came to light when low-level clerks were investigated on drug and embezzlement charges. The probe spread to include use of the mail operation as a place where House members could obtain cash illegally. Nine people have pleaded guilty in the investigation of the post office, which is a contract agency of the U.S. Postal Service staffed solely by House employees.