By Philip Shenon
February 10, 1999
Washington -- The Justice Department on Tuesday dropped an eight-month investigation of Richard Holbrooke, President Clinton's choice to be the top American diplomat at the United Nations, after the veteran diplomat agreed to pay $5,000 to settle civil charges that he had violated federal lobbying laws.
The White House said the settlement, which did not include an admission of wrongdoing by Holbrooke, would allow his long-delayed nomination to be sent quickly to the Senate for confirmation. The Republican leadership of the Senate Foreign Relations Committee pledged close scrutiny over the nomination.
In settlement papers filed in federal District Court here, the Justice Department said that Holbrooke violated ethics laws when, within weeks of resigning from the State Department in 1996 to become an investment banker, he asked the American Embassy in South Korea to set up a meeting with the South Korean president. The department accused him of having violated the law by also helping arrange the guest list for an embassy lunch with senior Korean officials on a visit to South Korea in May 1996 and by inviting the American ambassador to the opening of a local office of Holbrooke's investment banking firm, Credit Suisse First Boston.
Holbrooke has denied that his embassy contacts were improper and, in a separate statement Tuesday, said, "I settled this matter in order to allow my nomination to proceed."
"All of my contacts with the U.S. government" since leaving the State Department three years ago "were in my role as an unpaid official consultant to the secretary of state and were entirely appropriate," he said. After resigning from the State Department, Holbrooke, a former ambassador to Germany and the architect of the 1995 peace settlement in Bosnia, remained a part-time American envoy to the Balkans and Cyprus.
In the court papers, prosecutors appeared to go out of their way to suggest that the violations of the law were technical and inadvertent. The ethics law in question bars former senior government officials from lobbying former colleagues for at least a year.
The Justice Department said specifically that it was not accusing the 57-year-old diplomat of a "willful violation" of the law, nor was it accusing him or Credit Suisse of having received "any direct financial gain" as a result of his contacts with the embassy in South Korea. The settlement noted, in fact, that "it may have been in the United States' national interest to have Holbrooke discuss certain foreign policy issues with certain high-level Korean officials."
The settlement was welcomed by the White House, which has been hindered for most of the last year by the lack of a high-profile diplomat to lead the American delegation through a series of diplomatic crises at the United Nations, notably during the showdown with Iraq over arms inspections. The previous top American diplomat at the United Nations, Bill Richardson, became energy secretary last year.
The chairman of the Senate Foreign Relations Committee, Jesse Helms, R-N.C., who is a leading critic of the United Nations, said again Tuesday that he would closely review the Justice Department investigation to determine whether prosecutors had treated Holbrooke too leniently.
The Justice Department investigation began last summer, shortly after Clinton announced that he intended to nominate Holbrooke, when the State Department received an anonymous letter that accused Holbrooke of a conflict of interest in his dealings with the American Embassy in Hungary in 1995.
Holbrooke has acknowledged through lawyers that in March 1995, while he was assistant secretary of state for European and Canadian Affairs, he asked the Embassy in Budapest to promote Credit Suisse as a competitor for a multimillion-dollar consulting contract with the Hungarian government. Credit Suisse won the contract. Friends of Holbrooke say that at the time he had not considered Credit Suisse as a potential employer, and the Justice Department did not charge Holbrooke on Tuesday with any wrongdoing as a result of those contacts. But a larger ethics investigation by the Justice Department turned up evidence of his contacts in 1996 with the American ambassador to South Korea, James T. Laney, and prosecutors found those contacts to be improper.
According to a chronology included in the court papers, Holbrooke wrote to Laney on March 21, 1996, on Credit Suisse stationery, and requested that the ambassador set up a "courtesy call" for him with President Kim Young-sam on his planned visit to South Korea in May 1996. The ambassador arranged a meeting, although it was later canceled because of scheduling conflicts.
In a letter on March 22, Holbrooke accepted Laney's offer of an embassy luncheon with "prominent Koreans." He wrote again to the ambassador on April 30 to suggest inviting the South Korean foreign and finance ministers. The luncheon, paid for by the embassy, was on May 10, and the guest list included two other Credit Suisse employees.
The Justice Department said in its papers Tuesday that Holbrooke's letters to Laney were illegal because they constituted requests for "official action by the Department of State" in violation of the one-year lobbying ban. The department also accused Holbrooke of having violated the law by inviting Laney to a ceremony for the opening of a Credit Suisse branch in Seoul on May 9, 1996. Laney attended the ceremony.
In his court papers Tuesday, Holbrooke denied that he had invited Laney. In an interview, Laney said that he could not remember exactly who had invited him and that he had no reason to doubt Holbrooke.
