In re Madison Guaranty Savings & Loan

• Decision Date: 27 February 2004
• Docket Number: Division No. 94-1.
• Citation: 358 F.3d 970
• Parties: In re: MADISON GUARANTY SAVINGS & LOAN (Larry Fee Application).
• Court: U.S. Court of Appeals — District of Columbia Circuit

358 F.3d 970

In re: MADISON GUARANTY SAVINGS & LOAN (Larry Fee Application).

Division No. 94-1.

United States Court of Appeals, District of Columbia Circuit.

Filed February 27, 2004.

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.

Opinion for the Special Court filed PER CURIAM.

ORDER

PER CURIAM:

This matter coming to be heard and being heard before the Special Division of the Court upon the application of Richard M. Larry 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 M. Larry for attorneys' fees that he incurred during the investigation by Independent Counsel be denied.

ON APPLICATION FOR ATTORNEYS' FEES

Richard M. Larry 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 $44,930.69 that he incurred during, and as a result of, the investigation conducted by Independent Counsel. Because we conclude that Larry 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.

Background¹

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 acquire 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. 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, Richard M. Larry, the fee petitioner here, was subpoenaed to appear before the grand jury in his capacity as president of the Scaife foundations involved in the matter. 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.² 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, Larry now petitions this court for reimbursement of the attorneys' fees that he incurred during the OSR investigation. He seeks reimbursement in the amount of $44,930.69. As directed by section 593(f)(2) of the Act, we forwarded copies of Larry's fee petition to the Attorney General and the IC and requested written evaluations of the petition. The court expresses its appreciation to the IC and the Attorney General for submitting these evaluations, which we have given due consideration in arriving at the decision announced herein.

Discussion

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

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 investigation which would not have been incurred but for the requirements of this chapter.

Because the Act "constitutes a waiver of sovereign immunity it is to be strictly construed." In re Nofziger, 925 F.2d 428, 438 (D.C.Cir.1991) (per curiam). Under the Act, therefore, we can only order reimbursement for attorneys' fees when we determine, inter alia, that the fee petitioner was a "subject" of the independent counsel's investigation and would not have incurred the attorneys' fees "but for" the requirements of the Act. See, e.g., In re Pierce (Kisner Fee Application), 178 F.3d 1356, 1358 (D.C.Cir.1999) (per curiam). The petitioner "bears the burden of establishing all elements of his entitlement." In re North (Reagan Fee Application), 94 F.3d 685, 690 (D.C.Cir.1996) (per curiam). For the reasons stated below, we find that Larry has failed to establish the "subject" and "but for" elements and is therefore not entitled to an attorneys' fees award.

1. "Subject" Status

The statute by its terms provides reimbursement of fees only to "an individual who is the subject of an investigation conducted by an independent counsel." 28 U.S.C. § 593(f)(1) (emphasis added). Though the statute does not define "subject," we have previously held that status as a "mere witness" is not sufficient to meet the elemental requirement of "subject" designation for purposes of the Act. In re North (Dutton Fee Application), 11 F.3d 1075, 1078 (D.C.Cir.1993) (per curiam). A fee applicant must establish that he is a person whose conduct was within the scope of the independent counsel's investigation in the sense that "the Independent Counsel might reasonably be expected to point the finger of accusation" at him. Id. Otherwise put, he must not merely have been a witness to the matters under investigation, but a potential defendant of indictments that might arise from that investigation. Although Larry argues that he "easily meets" the Act's requirement for being a subject of the OIC/OSR investigation, we are not persuaded that the OSR, or at any other time the OIC, was focused on any possible criminal culpability by Larry or Scaife.

Larry claims that the letter Scaife received from Congressman Conyers "suggest[ed] that [Scaife] had directed money to a witness to encourage or reward testimony adverse to President Clinton and his allies." Larry asserts that "[t]his money presumably passed through Mr. Larry's hands, because it reportedly came from the two foundations that he administered." He goes on to argue that from the time Scaife received the letter from Congressman Conyers until the time that he (Larry) received notification from the OSR that no prosecution would be initiated against him, he "understood that he was accused of directing foundation donations into the pocket of a government witness in exchange for or as a reward for the witness's favorable testimony." Larry sums up his claim to being a subject by stating that "[a]ny person in his position would have reasonably believed that there was a realistic possibility of his being charged with bribery or offering an illegal gratuity ..."

In disputing Larry's claim of being a subject of the OSR/OIC investigation, the IC's evaluation contends that Larry was merely a fact witness. According to the IC, Larry's "involvement in the investigation was solely as custodian of the records of the foundations and as a person with knowledge of the foundations' activities." The DOJ's evaluation leaves it to the IC to respond to Larry's subject claim, but briefly notes that Larry's assertion that he was a subject of the IC's investigation because he was issued one or more subpoenas in this matter is "not ... sufficient to demonstrate that Mr. Larry was a subject of the investigation."

We agree with the IC and the DOJ that Larry has not carried his burden of establishing that he was in fact a subject of the OIC/OSR investigation. The documents Larry relied upon show that he was only a witness. Statements from his petition, as well as documents attached thereto, establish that h...