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In re Madison Guaranty Savings & Loan

January 23, 2004

IN RE: MADISON GUARANTY SAVINGS & LOAN (SCAIFE FEE APPLICATION)
DIVISION FOR THE PURPOSE OF APPOINTING INDEPENDENT COUNSELS ETHICS IN GOVERNMENT ACT OF 1978, AS AMENDED



Before: Sentelle, Presiding, Fay and Reavley, Senior Circuit Judges.

Per curiam.

ORDER

This matter coming to be heard and being heard before the Special Division of the Court upon the application of Richard Mellon Scaife for reimbursement of attorneys' fees and costs pursuant to section 593(f) of the Ethics in Government Act of 1978, as amended, 28 U.S.C. § 591 et seq. (2000), and it appearing to the court for the reasons set forth more fully in the opinion filed contemporaneously herewith that the petition is not well taken, it is hereby

ORDERED, ADJUDGED, and DECREED that the petition of Richard Mellon Scaife for attorneys' fees that he incurred during the investigation by Independent Counsel be denied.

Opinion for the Special Court filed PER CURIAM.

Richard Mellon Scaife petitions this court under Section 593(f) of the Ethics in Government Act of 1978, as amended, 28 U.S.C. § 591 et seq. (2000) (the "Act"), for reimbursement of attorneys' fees in the amount of $80,904.96 that he incurred during, and as a result of, the investigation conducted by independent counsel. Because we conclude that Scaife has not carried his burden of showing that he was a "subject" of the investigation or that the fees would not have been incurred "but for" the requirements of the Act, we deny the petition in its entirety.

Background

In the mid–1980's, Jim and Susan McDougal, along with former President William Jefferson Clinton and Hillary Rodham Clinton, were members of a Little Rock, Arkansas, partnership known as the Whitewater Development Company. At this time Jim McDougal was also the owner of a Little Rock savings and loan, Madison Guaranty, and David Hale was the owner of Capital Management Services, Inc. ("CMS"), a Little Rock company regulated, and in large part funded, by the Small Business Administration. Hale, the McDougals, and former Arkansas Governor Jim Guy Tucker apparently became involved in a fraudulent scheme involving Madison Guaranty and CMS. The investigation was initially conducted by the U.S. Attorney in Little Rock, but later transferred to the DOJ's criminal division. Robert B. Fiske, Jr., after his appointment by the Attorney General ("AG") in January 1994 as regulatory independent counsel, took over the investigation. In August 1994 this Court appointed Kenneth W. Starr as statutory independent counsel (hereinafter "IC" or "OIC") to investigate the Whitewater matter, and his office assumed the investigation of the fraudulent Madison Guaranty/CMS scheme. During the time period of these various investigations, indictments and convictions were secured with Hale's cooperation against the McDougals and Tucker for conspiracy and fraud involving Madison Guaranty and CMS. Indictments and convictions were also secured against Tucker for tax conspiracy and fraud involving CMS.

Thereafter, allegations arose that things of value had been given to Hale to influence his testimony in these matters. Specifically, it was alleged that a friend of Hale's, Parker Dozhier, had provided the things of value, and that FBI agents guarding Hale had witnessed these transactions. Further, it was alleged that Dozhier had received the funds to give these things of value from Stephen Boynton, an attorney who worked for American Spectator magazine, which was investigating possible misconduct by the Clintons in Arkansas. American Spectator, in turn, had received funds from one or more of the foundations controlled by Richard Mellon Scaife, the fee petitioner here. This situation led to public statements and allegations of improprieties on the part of Scaife by at least one member of Congress, John Conyers, Jr., who at the same time questioned an alleged financial relationship between Scaife and IC Starr. Conyers requested an investigation of the matter by the Attorney General. Conyers also sent a letter concerning the matter to Scaife.

Upon conferral between the AG and the IC, the IC established an Office of Special Review ("OSR") to investigate. During the investigation, Scaife was subpoenaed to appear before the grand jury. Ultimately, the OSR concluded that many of the allegations regarding the tendering and receipt of things of value were unsubstantiated or untrue, and recommended that no prosecutions be brought.*fn1 The findings and conclusions of the OSR were accepted by the IC, and the matter was closed.

Pursuant to section 593(f)(1) of the Act, Scaife now petitions this court for reimbursement of the attorneys' fees that he incurred during the OSR investigation. He seeks reimbursement in the amount of $80,904.96.

Discussion

The Ethics in Government Act provides for reimbursement of attorneys' fees expended by subjects in defense against an investigation under the Act. Specifically, 28 U.S.C. § 593(f)(1) states:

Upon the request of an individual who is the subject of an investigation conducted by an independent counsel pursuant to this chapter, the division of the court may, if no indictment is brought against such individual pursuant to that investigation, award reimbursement for those reasonable attorneys' fees incurred by that individual during that ...


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