As news alert! was going to press, the Senate Judiciary Committee was negotiating with the Justice Department over the terms for holding a hearing on U.S. Attorney Janet Napolitano, a Clinton appointee who has been accused by Republican lawmakers of impeding federal child-pornography probes in Arizona. The Justice Department was insisting that the June 26 hearing be held behind closed doors on the grounds that an open one may compromise ongoing pom investigations in Arizona.
A closed session no doubt will help Napolitano weather the Republican squall. But a storm could be on its way for the U. S. attorney -- that is, if senators start taking an interest in the current conflict-of-interest allegations flying around Napolitano.
News alert! has discovered that a recent decision by Napolitano not to prosecute a savings-and-loan fraud case in the Grand Canyon State has prompted dismay in the U.S. attorney's office in Arizona and triggered accusations of improper behavior.
According to internal memorandums -- copies of which have been secured by news alert! -- Napolitano declined in February to prosecute an $18 million S&L fraud action that involved James Reiss, a client of her former law firm, Lewis and Roca.
She did this after apparently recusing herself from the case in accordance with Justice Department regulations. But shortly before Assistant US. Attorney Linda Boone was ready to seek indictments, Napolitano intervened and put a halt to the case.
According to a report of investigation by the Office of the Inspector General at the Federal Deposit Insurance Corp., Napolitano cited as her reasons for the declination that the case would require several months of trial and would become a battle of accounting experts." She also argued that a remedy could be found in a pending civil action by the Resolution Trust Corp., or RTC.
Her decision came after an exhaustive probe by Boone and RTC investigator Ray Plummery. The investigation concerned the 1991 sale of WESAV Mortgage Corp., a financial mstitution owned the RTC, to First Western Corp. of Scottsdale, Ariz. According to a 1994 RTC inspector general audit, several officers of WESAV rigged the bidding process, resulting in the institufion being sold for "about $18 million less than its fair value." The officers later were hired by First Western -- a move the RTC inspector general characterized as "improper."
It was around the time of Napolitano's Senate confirmation in November 1993 that Boone was contacted by Ed Novak of Lewis and Roca to inform her that he was representing Reiss, a partner at First Western. Boone immediately fired off a memo to Napolitano, who'd been a partner at Lewis and Roca before her appointment warning the new U. S. attorney that she faced a potential conflict of interest. Napolitano appeared to recuse herself
But in early 1996, Boone was notified that her boss had not recused herself and had decided on declination -- a decision that struck more than one federal law officer in Arizona as inappropriate.
In a memorandum dated Jan. 16,1996, Boone expressed her frustration with the decision to Plummery. I was verbally MM that the U.S. attorney [Napolitano] has decided to decline a" prosecution in the WESAV investigation... Apparently there was a meeting ... but I was not invitect consulted or questioned further.... Recall my earlier warning and do not sink into the depths of despair like I did this weekend:" In a lengthy Jan. 19 memo to Napolitano, Boone complained about "various mistatements of fact in the US. attorney's grounds for the declination. She noted: "Of course, US is a difficult case, because the proposed defendants will be fighting for their professional lives, as is usually the case in whitecollar crimes."
Boone's only public comment? I wasn't surprised by the decision I was disappointed. We should have prosecuted," she says.