State Agribusiness Giant Faces Charges in Espy Probe

A federal grand jury on Thursday indicted Sun-Diamond Growers, a major California agricultural firm, for allegedly giving illegal gifts to former Agriculture Secretary Mike Espy and making illegal corporate campaign donations to Espy’s brother for his congressional race.

The nine-count indictment returned by the Washington-based grand jury was the first in a 2-year-old investigation by independent counsel Donald C. Smaltz to accuse Espy of receiving gratuities from anyone. It contends that Sun-Diamond lavished more than $9,000 in meals, transportation, luggage and other gifts on him.

The company said it “categorically denies all the charges,” adding that it “will vigorously defend against the indictment” until it is vindicated.

Although Espy was not charged Thursday, lawyers close to the case said they believe that Smaltz is attempting to lay the groundwork for his eventual prosecution. Smaltz, a Los Angeles lawyer, would say only that “the investigation is ongoing.”

Espy resigned from the Cabinet while under suspicion in October 1994, after repaying $7,400 to the government and to some private organizations for expenses and gifts he had received, including Super Bowl tickets and lease payments on a Jeep Cherokee. But Thursday’s indictment did not cover any items for which he had paid reimbursement.

The indictment said that Sun-Diamond, through an unnamed representative identified by others as Richard Douglas, had financed an expensive trip to Greece in May 1993, for Espy and a female friend, had given him five pieces of Hartmann luggage worth $2,400 and had paid for numerous meals, limousine rides and tickets to sporting events.

Sun-Diamond, of Pleasanton, represents cooperatives that grow raisins, nuts, figs and prunes and has done extensive business with the Agriculture Department. At the time it made the gifts, the company was receiving payments from the department to promote exports of U.S. farm products and it was seeking to slow down efforts to ban methyl bromide, a fungicide blamed for depleting the ozone layer, the grand jury said.

Washington attorney John M. Dowd said on behalf of Douglas that he “has never committed a single illegal act.” Dowd went on to say that “the meals and sporting-event tickets that are alleged to be improper in the indictment reflect nothing more than the existence of a 25-year friendship between Mr. Douglas and Mr. Espy.”

As to charges that Sun-Diamond made illegal corporate campaign donations by reimbursing Douglas, “the fund-raising with which Mr. Douglas was involved was completely open, above board and legal,” Dowd said.

Mike Espy’s lawyer, Reid Weingarten, said the indictment “marks yet another example of overreaching by the independent counsel in an effort to justify his multimillion-dollar investigation. . . . Mr. Espy never engaged in any official act to benefit Sun-Diamond as a result of any of the alleged events.” Espy and Douglas became close friends when they attended Howard University in Washington in the 1970s and their respective ascents in national political and agriculture circles were inextricably linked--even though Espy is a Democrat and Douglas a Republican.

Douglas, who served in the Agriculture Department in the Reagan administration and was a fund-raiser for Gov. Pete Wilson, advised and contributed to Espy’s first congressional campaign in 1986--long before the Mississippi congressman became President Clinton’s first Agriculture secretary.

Douglas then quickly became a highly visible outside advisor to Espy and was a frequent visitor to the secretary’s second-floor office suite.

The indictment also charges that Sun-Diamond gave illegal campaign contributions to help Henry Espy retire a debt from his unsuccessful 1993 primary campaign to fill the House vacancy created when his brother was appointed to the Cabinet.

The allegations were based on statements in connection with a guilty plea last year by James H. Lake, a prominent Republican lobbyist who helped Douglas represent Sun-Diamond.

Charges were filed against Lake last October. He later agreed to cooperate in the investigation, telling prosecutors that he arranged $5,000 in corporate gifts to Henry Espy from himself and three business associates after Douglas asked him for help on Mike Espy’s behalf.

In Thursday’s indictment, the four counts of illegal gratuities and a wire-fraud charge are each punishable by a maximum fine of $500,000 and each of the four counts of illegal campaign contributions are punishable by fines of up to $200,000.

Times staff writer Alan C. Miller contributed to this story.