Rostenkowski Faces 17 Counts : Congress: Allegations against influential lawmaker in indictment are far broader than expected. The prosecutor charges ‘extensive fraud on the American people.’

Rep. Dan Rostenkowski (D-Ill.) was indicted on 17 felony counts of fraud and embezzlement Tuesday, a far broader set of charges than many expected, for alleged acts that ranged from taking kickbacks of government funds from a son-in-law to buying cars for his family with public and campaign money.

The 35-year congressman also is accused of personally tampering with a witness last September by instructing him not to reveal potentially incriminating information to the federal grand jury investigating the case and of using government wages to pay employees who performed little official work but did such personal chores as photographing one of his daughter’s weddings and mowing the lawn at his summer home.

The indictment, which covers more than 20 years of alleged corruption, also charged Rostenkowski with using postage vouchers to steal cash from Congress and of cashing campaign fund checks at the House post office to disguise them as stamp purchases, an outgrowth of an investigation of the now defunct House post office.

U.S. Atty. Eric H. Holder Jr. announced the charges after plea-bargaining talks collapsed and one day after Rostenkowski proclaimed that he is innocent and would not accept a plea bargain. Holder said that Rostenkowski “used his elective office to perpetrate an extensive fraud on the American people” that amounted to hundreds of thousands of dollars.

The prosecutor said that the cost of the alleged misconduct “must also be measured in terms of the corrosive effect it has on our democratic system of government and on the trust our citizens have in their elected officials.”

“The criminal acts of a few feed the cynicism which increasingly haunts our political landscape,” Holder said. This causes “too many of our citizens to assume that all persons in public office are motivated by greed and self-interest and to succumb to the defeatist notion that we must resign ourselves to the fact that a certain level of political misconduct is a way of life.”

House Speaker Thomas S. Foley (D-Wash.), contending that Rostenkowski “clearly deserves the presumption of innocence,” said that the congressman has stepped aside as chairman of the House Ways and Means Committee until the charges are resolved, in keeping with the rules of the Democratic Caucus. Rep. Sam Gibbons (D-Fla.), ranking member of the panel which has a crucial role in handling health care reform, will become acting chairman. But Rostenkowski “will continue to be fully involved,” Foley said.

President Clinton tried to minimize the impact on health care legislation, saying that “real momentum” has been created and that he is confident the legislation will pass this year.

But the political fallout of the grand jury’s action appeared to be substantial. Rarely have Rostenkowski’s deal-making skills been more sorely needed than now, when Clinton is asking a Democratic Congress to take a risky leap on health care reform shortly before an election.

Following the battle over health care, Ways and Means will be at the center of other issues that could be crucial to the success of Clinton’s presidency--most notably welfare reform, trade and, once again, revamping the Social Security system.

Yet while Rostenkowski’s giving up the chairmanship will make the already difficult task of passing health legislation even more difficult, few believe that the survival of health care reform hinges on having him there to cut deals. The political forces at work on the issue are so large that they transcend any one person’s influence--even one as important as Rostenkowski.

As things now stand, sources said Tuesday, the Democrats are within one vote of the number they need to pass the bill that Rostenkowski has been putting together in private meetings for weeks.

Indeed, despite the negotiations surrounding the impending indictment, Rostenkowski has devoted himself to the health care bill with a single-mindedness that many of his colleagues have found remarkable. “Rostenkowski’s (bill) is damn near ready,” said one Administration official.

Because he did not agree to a plea bargain that would have forced his resignation from Congress, Rostenkowski will remain on the committee. As long as it remains possible that he will return to the chairmanship, he can still exert influence. And because the committee Democrats will be drafting their bill behind closed doors, Rostenkowski may still find a way to operate as the panel’s de facto chairman, while Gibbons assumes the public role.

If Rostenkowski were convicted of all the felony counts, he theoretically could be sentenced to 110 years in prison and fined a maximum of $365,000, excluding any restitution that he might be ordered to pay. But all the charges are subject to federal sentencing guidelines, which prescribe ranges of punishment depending on such factors as whether the crime involved an abuse of trust.

Holder said that he expects the trial to take place here and last several weeks. While arraignment will take place within 10 days, Holder would not forecast when the trial would begin.

The 49-page indictment alleged that Rostenkowski created an elaborate scheme to defraud Congress and taxpayers through the misuse of congressional allowances involving his office payroll, the House stationery store, the House post office and purchase of vehicles. He also was charged with embezzlement, conspiracy, obstruction of justice and concealing material facts from Congress and the Federal Election Commission.

In the payroll allegations, Rostenkowski was charged with misappropriating approximately $500,000 in taxpayer funds by placing at least 14 people on his payroll who did little or no congressional work.

The workers included a former son-in-law of Rostenkowski who allegedly received $10,400 in government salary but performed no work in the congressional office and was required to give most of the money back to his former father-in-law as cash kickbacks.

In another arrangement, prosecutors said that the son of an Illinois state senator, not identified in the indictment, drew about $48,400 in salary from Rostenkowski’s congressional office, though he did no official work. Over the same 1983-86 time period, the indictment charged, the state senator paid two of Rostenkowski’s daughters a total of $48,000 through his payroll.

In the House stationery store scheme, Rostenkowski allegedly obtained more than $40,000 worth of valuable merchandise, most of which he handed out as gifts to personal friends and associates. But he was accused of charging the items to his official expense allowance, which Congress paid.

The obstruction of justice count involved a House engraver whom Rostenkowski allegedly put on his payroll to engrave 50 brass plaques and attach them to 50 crystal sculptures of the Capitol that he obtained from the House stationery store and charged to his official expense allowance. The employee would engrave the recipients’ first names, add a phrase such as “our pal” and the first names of Rostenkowski and his wife--”LaVerne and Dan.”

Last September the engraver was subpoenaed to testify before the federal grand jury looking into Rostenkowski. Before testifying, however, the engraver, whom Holder declined to identify, allegedly was instructed by Rostenkowski during a telephone call not to tell the grand jury about the Capitol sculptures he had engraved for the congressman.

Holder declined to discuss the provisions of the plea bargain that Rostenkowski rejected, against the advice of his lawyers. But a source familiar with the negotiations said that it involved admitting some elements of the stationery store allegations, the acquisition of vehicles on false grounds and the ghost employee charges. The proposed deal also called for Rostenkowski to resign from Congress and to serve a six-month jail sentence, the source said.

The plea bargaining put a strain on relations between Rostenkowski and his lawyers, Robert S. Bennett and Carl Rauh, but Bennett was still representing him Tuesday morning, Holder said.

Bennett and Rauh could not be reached on the question of whether Rostenkowski is moving to discharge them in favor of what would be a fourth set of attorneys to represent him.

Rostenkowski had no comment Tuesday and the lawmaker’s press spokesman, James Jaffe, left a recording on his answering machine saying: “We have no statements to issue, we have no schedule, we have no bananas.”

The Case Against the Congessman

The 49-page indictment, which capped a two-year investigation, accuses Rep. Dan Rostenkowski of using taxpayer money for his personal benefit.

THE MAIN CHARGES

* Embezzlement, conspiracy and other charges for allegedly receiving thousands of dollars from the House post office in exchange for stamp vouchers lawmakers submit for postage spent on official mailings.

* Tampering with a witness by asking him not to tell a grand jury about engraving 50 glass crystal sculptures of the U.S. Capitol that Rostenkowski gave to friends.

* Embezzling public funds including $500,000 in payroll abuses--among them paying a son-in-law for no work.

* Concealing a material fact from Congress.

* Wire fraud.

* Aiding and abetting a crime.

Source: Times staff and wire reports

Other Ethics Cases

Ethics or legal problems facing current members of Congress:

* Sen. Bob Packwood (R-Ore.): His is the only publicly announced case before the House or Senate ethics committees. The Senate ethics panel is investigating allegations that he made unwanted sexual advances to more than two dozen women; intimidated or used his staff to intimidate several of the women; altered his personal diaries in anticipation of a committee subpoena; and helped arrange job offers to his wife by lobbyists.

* Rep. Joseph M. McDade (R-Pa.): Is asking a federal appeals court in Philadelphia to dismiss his federal racketeering indictment. He is accused of enriching himself with extorted bribes, favors and illegal gratuities from defense contractors.

* Sen. David Durenberger (R-Minn.): Faces trial Aug. 16 on two federal felony counts charging that he sought Senate reimbursement for rent he paid on a condominium he owned. Denounced by the Senate on July 25, 1990, because of accusations of financial misconduct involving a publishing deal and the condominium. He is not seeking reelection this year.

Source: Times wire reports