Loan guaranteed by donor first attracted FBI to senator's finances
By JOHN SOLOMON
The Associated Press
3/19/01 1:25 AM
and
LAURENCE ARNOLD Associated Press Writers
WASHINGTON (AP) -- A major political donor arranged and guaranteed a $100,000 loan that helped Sen. Robert Torricelli hit it big in the stock market and first attracted FBI interest in the New Jersey Democrat's political and personal finances six years ago.
Prosecutors opened a preliminary inquiry into whether the loan arrangement was an illegal gift and whether Torricelli provided favors to the donor in exchange. They interviewed the lawmaker in 1995 under oath, telling him his rights before asking questions, law enforcement officials and lawyers told The Associated Press.
But prosecutors turned down FBI requests for subpoenas, gave Torricelli time to voluntarily turn over all his financial documents and eventually ended the inquiry. One prosecutor told Torricelli the U.S. attorney's office was "going out of our way" to keep the investigation quiet "to protect your interest," documents show.
At the time, Torricelli was a House member preparing to run for the Senate.
Though conducted and closed without public knowledge, the inquiry led the FBI to new allegations that eventually spurred the Justice Department's current investigation of fund raising during Torricelli's 1996 Senate campaign, the officials said.
Six people have pleaded guilty to making illegal donations to Torricelli's campaign, and one current and two former aides have been told they could be indicted. Torricelli denies knowledge of any wrongdoing.
"The U.S. attorney's review of this 9-year-old transaction ended quickly for the most basic reasons -- every rule and regulation was considered and complied with at the time," Torricelli's lawyer, Abbe Lowell, said Sunday.
The 1995 inquiry focused on Torricelli's relationship with Grover Connell, a New Jersey businessman who provided speaking fees and free trips to dozens of members of Congress over the past two decades. His family and business have donated $1.8 million to politicians, mostly Democrats. That includes more than $100,000 to Torricelli's campaigns, legal defense funds and political action committee.
Connell's business interests have ranged from rice and sugar to tractors and real estate.
"The government affects any business in any number of ways, and not many Americans understand how the government works," Connell told the AP. "Nor do they have any interest. Well, we have an interest, and we do understand it."
He and Torricelli struck up a friendship in the 1980s. "We consider him virtually part of our family," Connell said. Torricelli told prosecutors Connell was a close friend who even accompanied him to his mother's funeral.
In 1992, Connell helped Torricelli hit it big in the stock market.
The lawmaker was offered a chance to buy preferred stock in First Savings Bank of Perth Amboy, N.J., a savings and loan owned by Torricelli friends.
Torricelli said he sought Connell's advice on the investment and wanted to borrow the money from his home equity loan to make the purchase, but did not have enough time to get the necessary home appraisal before the stock option expired.
Instead, Connell helped arrange a $100,000 unsecured loan for Torricelli at a New York investment firm. Connell's company put up a guarantee for the loan, meaning the company would assume the debt if Torricelli defaulted.
Torricelli told prosecutors he cleared the arrangement in advance with two personal lawyers who specialized in ethics, paid Connell market rates -- about $800 -- for the guarantee, and paid the loan interest and principal. The guarantee was never invoked.
Connell said he would have given the guarantee for free, but Torricelli insisted on paying for it.
"We'd do this for any friend," Connell said. "It was a favor."
Law enforcement officials, speaking on condition of anonymity, said the fact that Torricelli sought legal advice before the transaction weighed heavily in their decision to close the inquiry, though they questioned the accuracy of some of the lawmaker's answers.
The senator's spokesman, Dale Leibach, said Sunday that Torricelli wanted "to avoid even a question of special treatment by a close personal friend" and had the transaction reviewed by attorney Lowell. "As the inquiry found, there was no legitimate cause for concern, then and now," he said.
Lowell said he "reviewed and confirmed that the investment, loan and guarantee were arms-length, at market rates and properly documented. This was not even a close call."
Torricelli bought $100,000 of nonpublic stock with the loan proceeds, eventually selling it for $244,000.
He listed the loan and stock purchase on his congressional financial disclosure form. But Connell's role remained a secret; Torricelli had no obligation to disclose it on ethics forms.
Prosecutors questioned Torricelli about whether he tried to mislead reporters about the transaction, why he contacted potential witnesses such as Connell during the inquiry, and whether he may have dated the check for the stock purchase before he actually had received the loan funds.
The lawmaker acknowledged refreshing his recollection with Connell but denied any wrongdoing. And he said he wrote and dated the check only after Connell told him the loan was being approved.
Investigating for evidence of favors, prosecutors also questioned Torricelli about two overseas trips he took to places where Connell had business interests: Zaire and Turkmenistan. With Connell in attendance, the lawmaker met with the leaders of both countries.
"Our business was never discussed, of course," Connell said. "We never discuss our business, except in a very general way, with members of Congress."
Prosecutors pressed Torricelli about whether he helped Connell on several New Jersey matters as well. The lawmaker said he referred Connell to a lawyer for a real estate dispute with one town but never did anything legislatively to help him.
Two years after the interview, Torricelli sponsored a Senate amendment that killed two proposed flood-control basins, one which Connell opposed because it would have been built on his business property. Torricelli has said he pushed the amendment because environmental groups, including the Sierra Club, opposed the project.
The 1995 investigation was begun under U.S. Attorney Faith Hochberg, who, because of a judicial nomination, later recused herself in favor of chief deputy Robert Cleary, a 20-year career veteran who handled the Unabomber case. With help from Torricelli, both eventually were promoted -- Hochberg as a federal judge and Cleary as U.S. attorney.
Concerned the prosecutors went easy on Torricelli, FBI officials in 1997 took the rare step of providing investigative files to the Senate committee that reviews the nominations of judges and prosecutors, according to law enforcement and congressional officials.
FBI officials provided the Senate Judiciary Committee information about the Connell loan guarantee, the stock purchase and disputes between the bureau and the U.S. attorney over how to proceed with the inquiry.
Included were excerpts from Torricelli's interview in which Cleary acknowledged subpoenas were not issued because prosecutors sought to protect the lawmaker's privacy. Cleary made the comment at a time when Torricelli became reluctant to answer questions about his father's finances.
"We've gone out of our way to conduct this preliminary inquiry in a way that is never going to get picked up in the papers," Cleary said in the transcript.
"The only reason we refrain from doing that (subpoenas) is to protect your interest, your privacy," he added.
Cleary's spokesman, Michael Drewniak, said the prosecutor acted properly. "It is entirely appropriate that investigations be conducted in secrecy. We are obligated to take steps to ensure they remain secret until and unless criminal charges are brought," he said.
Cleary ultimately signed a letter to Torricelli's lawyer saying the U.S. attorney's office had decided to end the 1995 inquiry.
Later, Cleary transferred the fund-raising allegations involving Torricelli's campaign to the Justice Department. That investigation has continued for three years and cost Torricelli hundreds of thousands of dollars in legal fees.
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