Sources Report Wider Probe of Commerce Chief

Atty. Gen. Janet Reno has ordered Justice Department investigators to expand their investigation of Commerce Secretary Ronald H. Brown to pursue evidence that he may have illegally concealed his investment in a trouble-plagued, low-income apartment complex in suburban Maryland, according to knowledgeable sources.

The order was issued earlier this week in response to reports that Brown had reported his investment on his annual financial disclosure forms inaccurately. Deliberately providing false information on a government disclosure report is a felony.

The Times reported last Sunday that Brown’s investment, which he listed as rental property in the upscale suburb of Potomac, Md., is actually a drab, drug-infested apartment complex in one of the capital area’s poorest communities, Landover, Md. It is a part of the real estate empire of Brentwood millionaire A. Bruce Rozet, whom federal officials have criticized for failing to maintain many of his properties.

In Brown’s defense, his press secretary, Carol Hamilton, issued a statement Thursday saying that Brown did not intentionally conceal the true nature of the property. “The location was inadvertently listed as Potomac rather than Landover, Md., since the name of the fund is the Potomac Housing Fund Limited Partnership,” she said.

In addition, Brown’s lawyer, Reid Weingarten, insisted that the commerce secretary had no legal obligation to identify the location of the property on his report. He added: “This is a public relations disaster, but it is not a criminal case.”

In a news conference Thursday, Jamie S. Gorelick, deputy attorney general, declined to discuss any details of the Brown investigation, which was opened officially Feb. 15 in response to allegations that the commerce secretary had concealed income from a company that defaulted on a multimillion-dollar loan from a federally insured savings and loan.

Under the 90-day preliminary inquiry being conducted for Reno, she is required to decide by mid-May whether to ask a special three-judge court to appoint an independent counsel to conduct a full-blown criminal investigation into Brown’s finances and his disclosure practices. The new allegation increases the likelihood that Reno will appoint an independent counsel, according to lawyers familiar with the case.

Although President Clinton has defended Brown in response to previous charges, insiders at the Commerce Department said the secretary now recognizes that he must decide whether to resign if it becomes clear that Reno intends to appoint an independent counsel. Already, the charges have caused the White House to reconsider a plan to put Brown in charge of Clinton’s 1996 reelection campaign.

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Previously, Agriculture Secretary Mike Espy stepped down when an independent counsel was named to investigate gratuities he accepted from Tyson Foods, the Arkansas-based poultry producer. But Housing and Urban Development Secretary Henry G. Cisneros did not resign, despite Reno’s recent decision to ask for an independent counsel to examine why he misled the FBI about payments that he made to a former mistress.

Because the deadline for Reno’s decision in the Brown case is fast approaching, sources said, the inquiry into the housing investment was put on “a fast track.” FBI agents were instructed to go through The Times’ story “piece by piece” to substantiate the facts and interviews reported there, according to sources.

One of the most likely persons to be interviewed, these sources said, is Rozet, who specializes in recruiting investors for low-income properties. Like many of Brown’s business associates, Rozet is a heavy contributor to the Democratic Party, which Brown headed before he became commerce secretary.

Although Brown has said that he did not intentionally misrepresent his Maryland investment, Rozet told The Times that Brown must have known the location of the place. Three other men who invested in the property in 1983 at the same time as Brown told The Times that they were familiar with the location and the property.

In addition, sources said, the FBI has been instructed to interview a variety of other persons with knowledge of the investment in Los Angeles, Washington and perhaps other cities.

At the White House, Abner J. Mikva, the President’s chief legal counsel, said in an interview that he questioned Weingarten about the error on Brown’s disclosure reports after it was reported in The Times. Mikva declined to comment further on the case, but he said that the Administration would take no action until Reno has decided whether to appoint an independent counsel.

Contrary to Weingarten’s contention that Brown had no obligation to identify the location of the property, Gregory S. Walden, a Washington ethics lawyer who has been critical of Brown’s reporting previously, said that Cabinet appointees are required routinely by federal ethics officials to be as specific as possible in their descriptions of their holdings.

Under federal law, knowingly supplying false information on a financial disclosure report carries a maximum civil penalty of $10,000 and a maximum criminal penalty of five years in jail and a $250,000 fine.

Brown paid $71,000 in 1983 to join a limited partnership that owns Belle Haven Apartments in Landover. He later invested in three other Rozet-related projects, all of them in good condition and all accurately identified on his financial disclosure report.

Like Rozet, Stephen D. Moses, who originally organized the limited partnership of investors in the Landover apartment complex, said that Brown was fully informed about the property and its location. He said that Brown received a prospectus at the start and periodic reports thereafter.

Before the 1986 tax reform act, investments in low-income housing produced generous tax breaks for the investor. Moses estimates that Brown realized $175,000 in tax write-offs from his $71,000 investment in Belle Haven.

In many cases, according to HUD officials, investors in these properties do not maintain them properly. Owners of Belle Haven recently have defaulted on a $6-million rehabilitation loan that they received from the Maryland Housing Fund and more than a dozen units of the complex were declared “unfit for human habitation” earlier this year.