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Tuesday, Oct. 5, 2004

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  Noel Hillman, the Justice Department's top public corruption attorney and a career official, has met three times, most recently in May, with lawyers for Peter Paul to discuss a plea deal. Justice wants to interview Paul to see whether he can substantiate his allegations that Clinton's campaign engaged in wrongdoing, the defense lawyers said.

Paul is a three-time convicted felon who hosted a Hollywood fund-raising event for Mrs. Clinton in 2000 and is facing charges of stock fraud in New York. He alleges he underwrote most of the costs for the event. Prosecutors contend he did so in an effort to try to win a pardon from then-President Bill Clinton.

Lawyers for Mrs. Clinton and the former chief fund-raiser for New York Senate 2000, David Rosen, say their clients have done nothing wrong. "New York Senate 2000 properly reported all donations in 2000," said David Kendall, Clinton's attorney.

The investigation, which has dragged on for more than three years, could cast a shadow on a top Democratic Party star's career.

Possible Candidate for President

Sen. Clinton is considered a possible presidential candidate in 2008 if Sen. John Kerry loses this year. But she first faces a re-election battle in 2006, possibly against former New York City Mayor Rudolph Giuliani or New York Gov. George Pataki.

Most allegations of campaign finance irregularities are handled administratively through the Federal Elections Commissions, although the Justice Department has investigated such matters in the past.

During the Democrat Clinton administration, when Attorney General Janet Reno ran the Justice Department, a department campaign finance task force charged more than two dozen individuals and two corporations with fund-raising abuses that occurred in the 1996 election cycle. Many of the abuses involved Democrat fund raising.

Documents obtained by The Associated Press show an FBI agent told the Los Angeles magistrate two years ago that the government believes Mrs. Clinton's campaign understated its costs for the Paul fund-raiser.

"The event's costs exceeded $1 million, but the required forms filed by New York Senate 2000 ... months after the event incorrectly disclosed that the cost of the event was only $523,000," said the 2002 FBI affidavit, which was unsealed in the summer. "It appears that the true cost of the event was deliberately understated in order to increase the amount of funds available to New York Senate 2000 for federal campaign activities."

The document also said a $366,000 donation to the gala was incorrectly listed as coming from the company Paul co-founded, Stan Lee Media, when it really came from Paul personally.

Hillman, chief of the Public Integrity unit, has met with Paul's lawyers three times - last Oct. 30, Feb. 11 and May 25 - to discuss a possible arrangement but no deal has been reached, said Paul attorney Robert Sticht of Los Angeles. Paul's defense team comprise Sticht and lawyers for Judicial Watch, a conservative government watchdog group.

'Anxious'

"Hillman was anxious to get moving," Sticht said in an interview. Sticht said the public corruption prosecutor also told him, "If you think all of the evidence came from your client, let me assure you that it's not true."

Justice Department spokesman Mark Corallo said he had no comment on the investigation.

The negotiations could help determine whether charges are brought against people involved with Mrs. Clinton's successful campaign for the Senate four years ago.

Rosen, the campaign's finance director, is a subject of the criminal investigation, said legal sources who could not be quoted by name because it is a grand jury matter. A subject is a person with relevant information, who later could face potential charges

"From my review of all the facts, I am convinced that Mr. Rosen has done nothing improper. To the contrary, he has done everything right," said Paul Mark Sandler, Rosen's attorney.

Paul alleged to the FBI that hundreds of thousands of dollars contributed to Clinton's campaign went unreported, much of the money payments for the private Hollywood fund-raising event he hosted on Aug. 12, 2000, FBI documents show.

An FBI document written in 2001, based on an interview with Paul that year, said Rosen worked in Paul's office for one month putting together the Hollywood party. According to Paul, Rosen watched him write checks totaling about $1.5 million to pay for the gala.

"Paul stated that none of the campaign reports list the names of the companies used by him to pay for the party," an FBI document said.

Another 2001 FBI document based on an interview with Paul said, "Paul advised that David Rosen sat in on every planning meeting [for] this event and met every supplier."

The indictment against Paul does not mention campaign contributions, but a prosecution memo by Assistant U.S. Attorney Catherine Youssef last July does make a link. Youssef, a prosecutor in New York, describes in the memo some evidence the government may produce at a trial.

She said that in August 2000, Paul borrowed approximately $225,000 from business partner Stan Lee, telling Lee he needed the money for a party for Bill and Hillary Clinton.

In the summer of 2000, the memo said, Paul sought to bribe Bill Clinton in an attempt to win a pardon for his three felony convictions. Part of the alleged bribe was Paul's financing the bulk of fund-raising events for Mrs. Clinton's campaign, Youssef wrote.

© 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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