Rising GOP Star’s Donor Entanglements Present a Quandary Republican investigators risk dimming Rep. J.C. Watts’ luster if they investigate allegations.

Republicans have long been pleased to count J.C. Watts as one of their own.

A star college quarterback at the University of Oklahoma, he led the Sooners to national fame in the late 1970s, earning “most valuable player” honors in the Orange Bowl two years in a row.

Turning to politics, Watts at age 33 became the first black elected to statewide office in Oklahoma by winning a seat in 1990 on the state’s corporation commission, which regulates energy firms. Four years later, he ran successfully for Congress.

As the only black Republican currently in Congress, Watts has been the GOP’s point man for making inroads among minority voters. A charismatic figure in the eyes of his supporters, he was featured as a prime-time speaker at last year’s Republican National Convention. His speech included the line, “Character is simply doing right when nobody is looking.”

Those words, however, could come back to haunt Watts.

Investigators for the House Government Reform and Oversight Committee, recently searching for campaign-related financial shenanigans with possible ties to the Clinton administration, stumbled over an embarrassing episode whose cast of characters includes Watts. The sleuths discovered that an early 1990s political-influence scandal in Oklahoma, replete with such figures as key White House aide Thomas “Mack” McLarty and the late Commerce Secretary Ronald H. Brown, also seems to have rubbed off on their man.

Committee Chairman Rep. Dan Burton (R-Ind.), who has been chided by Democrats for an overly partisan approach to his task, thus faces a quandary. If, in its future hearings, the panel decides to zero in on the Oklahoma case, Burton runs the risk of potentially dimming Watts’ political glow.

The tale centers on an energy firm, known as Arkla, with business in Arkansas, Louisiana and Oklahoma. McLarty, just before his appointment as President Clinton’s first chief of staff, was chairman of the company. Some of its representatives were accused of making cash payoffs to state regulators, although no evidence has surfaced that McLarty was involved.

In the same period, Nora and Gene Lum--two Southern Californians who since have pleaded guilty to hiding $50,000 in illegal contributions to Democratic candidates--bought a rival oil-and-gas firm that was prepared to go to court to expose more details of the alleged payoffs in Oklahoma. The Lums installed Brown’s son as the firm’s president. Once the purchase was made, the new owners dropped the lawsuit that could have disclosed more payoff details.

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Although this Democratic political intrigue seemed worthy of exploration, the House GOP investigators were startled to come across the tracks of Watts.

What has surfaced, in public court records and in secret FBI tape recordings revealed recently by the Public Broadcasting System, is evidence that Watts, by his own admission, accepted between $1,200 and $1,400 in $100 bills to pay expenses in his campaign for the state corporation commission. And, later, he accepted envelopes that may have contained up to $1,500 more to pay off a campaign debt, according to the FBI tapes.

The money came from William “Tater” Anderson, a well-known attorney for Arkla and other big utilities who eventually went to prison for bribing Bob Hopkins, then Watts’ colleague on the state corporation commission.

Watts has acknowledged receiving cash from Anderson, calling it “old news” that surfaced in Anderson’s criminal trial three years ago. It did not, however, gain national attention at that time. Watts claims the cash was a campaign contribution and points out he has never been accused of any legal violation.

But Pat Hall, a state Democratic leader, charged recently that the cash was never reported, in violation of state law. Hall said Watts “should come clean or resign.”

Watts claims he reported the money in a general way but was not required to identify names of small donors, who he said made up much of the cash given him by Anderson.

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Marilyn Hughes, director of the state ethics commission, said she doubts the legality of such vague reporting, but she adds that the statute of limitations has run out on any potential charges arising from 1990 contributions.

In any event, Watts does not dispute that his voice and Anderson’s are on the FBI tapes, which first were played on the PBS show “Follow the Money,” a program reporting on national campaign finance abuses. One surveillance tape reveals Anderson talking to someone else about giving Watts what he called “walking-around money.”

Referring to Watts’ campaign for the state corporation commission, Anderson says Watts “told me most other people just ignored him during the campaign, but I’d meet him off and on, some out-of-the-way place, and might give him a little walking-around money.”

Watts acknowledged in a televised interview that Bob Anthony, a state commissioner who helped FBI agents gather evidence, had cautioned him to “stay away from Anderson . . . he’s trying to get us in trouble.” But Watts said he accepted Anderson’s cash nonetheless.

After his election to the commission, Watts continued to accept money from Anderson to help retire a campaign debt, according to court evidence. An FBI recording shows Anderson offering Watts $500 each from “three little independents,” referring to utility firms.

“And it’s just in cash,” Anderson adds, referring to the total of $1,500.

“OK, well, good deal,” Watts replies on the tape. “Well, I’ll tell you. Why don’t I--you want to meet somewhere this evening?”

Watts later drove to Anderson’s home and accepted the money in a plain envelope, according to court testimony. He claims he reported this, too, but news organizations in Oklahoma have been unable to find any record of it.

Anderson did not testify at his trial and has never elaborated on his relationship with Watts. Although he has been released from prison, efforts to reach him for comment through his Oklahoma City lawyer were unsuccessful.

A Republican consultant in Washington acknowledged the episode could tarnish Watts’ image, as well as make it difficult for Republicans to seek the higher ground on the campaign finance issue.

“It always makes it difficult to go after the Democrats when one of your own number may have a similar problem,” said the consultant, who declined to be quoted by name.

Some other Republicans, however, are more sanguine.

“It’s an old issue,” said Quineta Wyli, the Oklahoma state GOP chairwoman. “I don’t think this has hurt J.C.’s reputation at all.”

She added: “The Democrats are trying to damage him because he’s their worst nightmare: He’s African American, he’s conservative and he’s charismatic.”

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It remains unclear to what extent Burton’s committee will deal with Watts’ involvement in future fund-raising hearings, since planning by the committee staff is incomplete. But House Democratic sources, speaking on condition of anonymity, said their members intend to raise the issue if Burton tries to discredit McLarty.

“Watts took unreported campaign cash in unmarked envelopes from an Oklahoma oil lobbyist,” one source said. “An FBI surveillance tape caught him discussing it. He claims it was a legal contribution, but people in Oklahoma have been unable to find any disclosure of it.”