Independent Counsel Appointed to Investigate Espy : Probe: Court names L.A. lawyer to determine if the agriculture secretary accepted gifts from firms regulated by his department. He denies it.

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Los Angeles attorney Donald C. Smaltz was named as an independent counsel Friday to investigate whether Agriculture Secretary Mike Espy violated "any federal criminal law" by accepting gifts from a major poultry producer or other organizations and individuals regulated by his department.

"I pledge a fair, comprehensive and prompt investigation and if warranted vigorous and effective prosecutions," Smaltz said in an interview. "The investigation will be as comprehensive as required to get to the bottom of the allegations." Smaltz was sworn in Friday here.

Espy, who has denied wrongdoing, was in Bonn, Germany, on Friday for agricultural talks after concluding four days of meetings in Russia. Ali Webb, his spokeswoman, declined comment. But Reid Weingarten, the secretary's defense lawyer, said that Smaltz "has the reputation for being a competent, experienced, honorable attorney. We're looking forward to cooperating fully with the counsel and receiving Secretary Espy's exoneration in very short order."

Smaltz, a white-collar defense attorney and former prosecutor, is the second independent counsel to be named by a three-judge panel of the federal appeals court here to investigate Administration figures since President Clinton signed a new independent counsel law in June.

He is a Republican like the first, Kenneth W. Starr, solicitor general in the George Bush Administration, who was named to take over the Whitewater investigation from Robert B. Fiske Jr. Starr will be trying to determine whether Clinton was improperly influenced by his relationship with the owner of a failed Arkansas savings and loan who was his partner in a real estate venture.

The mandate detailed by the special court as it named Smaltz, 57, is as broad as that sought by Atty. Gen. Janet Reno when she asked for appointment of an independent counsel a month ago to investigate her Cabinet colleague.

Reno noted at the time that the investigation of Espy began after a press report last March that Tyson Foods Inc., an Arkansas-based poultry producer, had been receiving lenient treatment from the Agriculture Department on regulatory matters and that Espy had accepted gratuities from the firm.

The Justice Department investigation found evidence that Espy accepted gifts from Tyson Foods during trips to Arkansas in May, 1993, and to Texas last January. Reno said that entertainment, transportation, lodging and meals provided by Tyson amounted to "at least several hundred dollars in value."

The investigation is sensitive for the President and his wife because Tyson Foods President Don Tyson is a longtime Clinton backer. The firm's outside counsel, James B. Blair, helped First Lady Hillary Rodham Clinton make nearly $100,000 in commodity trading profits in 1978, 1979 and 1980 on an initial investment of $1,000.

In her application to the court, Reno said that the Justice Department investigation also made "preliminary reviews of other instances in which Secretary Espy allegedly received gifts from organizations and individuals with business pending before the Department of Agriculture."

Smaltz said he has found temporary quarters in Washington. He said he plans to hire an administrative assistant and three to five lawyers. Smaltz also will be able to call on the FBI for assistance. He declined to estimate how long it would take to complete the investigation.

A Pennsylvania native, Smaltz graduated from Penn State University in 1958 and Dickinson School of Law in 1961. He spent three years in the U.S. Army's Judge Advocate General Corps.

In 1964, he was hired as an assistant U.S. attorney in Los Angeles. Smaltz spent three years as a federal prosecutor, specializing in white collar crime cases--including bank, securities and tax fraud cases.

As a private attorney, Smaltz won a high-profile victory in 1975 when he and another lawyer persuaded U.S. District Judge Warren Ferguson in Los Angeles to dismiss charges against Frank DeMarco, former President Richard Nixon's tax lawyer, on grounds that the Watergate special prosecutor's office had failed to divulge information pointing toward DeMarco's innocence.

In 1990, he was one of four finalists for the U.S. attorney's job in Los Angeles. Then-President George Bush ultimately named Superior Court Judge Lourdes G. Baird at Gov. Pete Wilson's suggestion.

In recent years, Smaltz has handled numerous complex cases, including representation of California Overseas Bank, the financial institution that was used by the late Philippine dictator Ferdinand E. Marcos and his wife, Imelda, in their "looting of the Philippines," according to federal prosecutors.

While pleading the bank guilty to federal charges, Smaltz said on numerous occasions that he believed the U.S. government had no business getting involved in legal matters that he said should have been handled entirely in the Philippines.

Moreover, Smaltz has been an aggressive critic of what he has decried as overly zealous actions by federal prosecutors. In November, 1990, he chaired a Federal Bar Assn. conference in Los Angeles where Mrs. Marcos, who was acquitted on racketeering charges; former White House aide Lynn Nofziger, whose conviction of violating government ethics law was overturned on appeal, and others vented their anger at government lawyers.

Smaltz said Friday that he felt "very comfortable" taking on the Espy assignment: "The government must always turn square corners. That will be done in this case. You don't indict unless you believe the jury is going to convict."

Smaltz's mandate covers allegations that Ronald Blackley, Espy's chief of staff in March, 1993, ordered Agriculture Department officials to halt work on developing tougher poultry inspection standards and to erase a draft of the proposal from their computers' memories. Blackley has denied ordering a halt on the inspection standards, which were strongly opposed by poultry producers.

Moreover, the court gave Smaltz jurisdiction to look into other allegations or evidence of federal law violations arising from the original inquiry. It also empowered him to investigate any obstruction of justice, false testimony or recalcitrant witness.

The Justice Department's preliminary inquiry found no evidence that Espy accepted gifts as a reward for past or future acts, Reno noted in her application for an independent counsel. But the law says that the department cannot decline to ask for an independent counsel because of lack of evidence of the required intent "unless there is clear and convincing evidence that the person lacked such state of mind."

The 1993 trip cited in Reno's application involved a speech by Espy to the Arkansas Poultry Federation in Russellville, Ark., and a stay with a companion, Patricia Dempsey, at a group of Tyson cottages on a lake there. Espy and Dempsey returned to Washington on a Tyson plane, which Espy has explained by saying that he had to return quickly for an unexpected White House meeting. Tyson said that Espy reimbursed the company for the cost of a first-class ticket.

Last January's trip involved Espy and Dempsey sitting in Tyson's sky box during the National Football League's National Conference championship game between the New York Giants and the Dallas Cowboys. At the time, Espy has said, he was in Texas for a meeting with an Agriculture Department official.

The other instances in which Espy is alleged to have received gifts from organizations with business before his department are understood to include a ticket to a Chicago Bulls playoff game provided by Quaker Oats chief executive William Smithburg.

Government investigators also have been looking into allegations raised by some Agriculture Department officials, as well as others that Sun Diamond Growers of Pleasanton, Calif., a large prune and walnut producer, may have benefited from the relationship of its vice president, Richard Douglas, to Espy. Douglas and Espy are longtime friends.

Espy has been accused of trying to protect a controversial federal program that funds overseas promotion of U.S. agricultural products--including those of Sun Diamond.

A resident of Rancho Palos Verdes, Smaltz is married to Lois Smaltz, a Los Angeles Superior Court judge.

Ostrow reported from Washington and Weinstein from Los Angeles.

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