Saturday, September 8, 2012

How the Feds Started Investigating Ted Stevens and Moved Toward an Indictment


Here is the next installment of my series of columns on the Ted Stevens case in the Alaska Bar Rag.   This latest piece will appear in the edition of the official publication for the Last Frontier's lawyers that is published this month.    

How the Feds Started Investigating Ted Stevens and Moved Toward an Indictment

by Cliff Groh

Our understanding of the Ted Stevens case has grown substantially in the past several months from the U.S. Department of Justice’s Office of Professional Responsibility (“OPR”) report on misconduct in that prosecution, which comes on the heels of the report of the court-appointed special counsel (“the Schuelke report”).  

There is so much in the record now about the Justice Department’s development of the indictment against Ted Stevens, in fact, that this piece—the second in a series of offerings on this highly significant case—is only the first installment of my columns on the charging decisions in that case. 

The following analysis presents facts and opinions based on the more than 2,000 pages contained in those reports and the responses and rebuttals to them.   This column also relies on information gained from my in-person coverage of the five-week Ted Stevens trial in Washington, D.C. in 2008, my continuing coverage of the post-trial litigation and other cases arising out of the “POLAR PEN” federal investigation into Alaska public corruption, and dozens of interviews with participants and observers.        

Contrary to what many Alaskans believe, a search of the record does not show a malevolent plot to prosecute Ted Stevens so as to remove him from the U.S. Senate for partisan reasons or to retaliate against him for some old personal slight.  The Justice Department’s handling of the case can be legitimately faulted on a number of levels—the timing was ill-advised, the organization was chaotic, the management was dysfunctional, and the discovery violations were deeply disturbing.    There does not appear, however, to have been an evil mastermind behind the charges against Ted Stevens.    My reporting and analysis backs up the reporting of the Wall Street Journal and the Washington Post in pieces published at the time of the collapse of the Ted Stevens prosecution in April of 2009 regarding the absence of what the latter newspaper called “base political motivations.”  

The Ted Stevens Case Grows Out of Operation Polar Pen, and Operation Polar Pen Starts with Private Prisons

Let’s walk through the process that brought the charges.   The investigation that brought down Alaska’s most important public official began not with an examination of a U.S. Senator’s home renovations and his mandatory annual disclosure forms.    Instead, the probe that led to the prosecution of Ted Stevens started five years before his indictment as an investigation into private prisons.   In the dry words of the OPR report, the U.S. Attorney’s Office in Anchorage opened that corrections-focused investigation in July of 2003 “after the FBI developed information that an Alaska private prison company and a lobbyist were corruptly influencing state legislators.”    In a nod to the Last Frontier correctional origins of the investigation, the probe was dubbed “Operation Polar Pen.”

The investigation began with the work of an FBI agent named Mary Beth Kepner.   Her blond hair and trim physique made her look a lot more like a soccer mom than one of the grim-faced feds famous from the days of J. Edgar Hoover.   (Indeed, her achievements as a college soccer goalie still live on the Internet.)   Starting in Philadelphia—where she investigated complex white-collar and organized crime cases—Kepner had been with “the Bureau” for more than 10 years when she opened Polar Pen while working in the FBI’s small Juneau office.   

The investigation grew in depth and scope after the federal government got Frank Prewitt—a former Alaska Commissioner of Corrections turned private prison lobbyist and consultant for Texas-based Cornell Companies—to become a cooperating witness.  Prewitt started recording (“wiring up”) on various Alaskans and provided information that allowed federal investigators to get wiretaps on telephones.    (Setting aside whatever immunity Prewitt’s cooperation got him for his own potential exposure as a defendant, it is striking that Prewitt received $200,000 from the federal government for his work; it is indeed odd that Prewitt couldn’t find room to mention that payment in a 167–page book he wrote about his experiences as an informant.)         

The Justice Department’s Top Corruption Fighters Get on the Case

As Polar Pen ballooned, the lawyers working on the probe changed.    The Anchorage-based U.S. Attorney’s Office started receiving assistance in June of 2004 from the Justice Department’s Public Integrity Section.    Given that the Public Integrity Section soon came to direct all the prosecutions growing out of the Polar Pen probe—including the Ted Stevens case—a little examination of that unit is in order.

The Public Integrity Section was founded in 1976 on a wave of reforms following the Watergate scandals.    By its official mission, it “oversees the federal effort to combat corruption through the prosecution of elected and appointed public officials at all levels of government.”    Staffed with about 30 attorneys, the Public Integrity Section has had some high-profile successes.    Notable achievements included the Abscam investigation in the late 1970s and early 1980s (which led to the convictions of six Members of Congress) and the more recent probe into super-lobbyist Jack Abramoff (which has led to the conviction of more than a dozen people, including a Member of Congress and several executive branch officials and Congressional staff members).     

The Public Integrity Section had traditionally been known as an elite outfit and a breeding ground for stars like Attorney General Eric Holder and Reid Weingarten, one of a number of the unit’s lawyers who went on to a well-compensated career as a criminal defense attorney for the rich and famous.   
By 2004, however, the Public Integrity Section was in the midst of some turmoil.  Heavy turnover dogged the section during most of the 2000s, with the New York Times finding that only a quarter of the prosecutors who had been with the unit at the beginning of President George W. Bush’s tenure remained there at the end.   

The comings and goings were particularly frequent at the unit’s top.   The Washington Post reported in April of 2009 that the Public Integrity Section had had five heads in the past six years.  

Nick Marsh Comes to Probe Alaska Corruption

The lead attorney on the ground for the Public Integrity Section—Nicholas “Nick” Marsh—was new to his job as well, and his part in this story is important enough that it’s worth sketching out his background.   A slender and intense man in his early 30s when he began work on the Polar Pen probe in 2004, Marsh had only become a prosecutor about a year before he started traveling back and forth between the “Main Justice” headquarters in D.C. and Alaska.   

The boyish-looking Marsh had been a high-flyer in his relatively short life.  After clerking for Fairbanks-based Judge Andrew Kleinfeld of the Ninth Circuit Court of Appeals, the native Kentuckian had worked for two old-line law firms in New York City, rising to junior partner at the second.   

Marsh wanted to be a prosecutor, however, reflecting a passion for public service and a strong impulse to mix it up.   That last quality showed up in his lettering in lacrosse in college, a fact at odds with the wonky vibe he displayed in court.   He joined the Justice Department in 2003 and was assigned to the Public Integrity Section in the fall of that year.   After he completed a six-month detail in the Washington, D.C. U.S. Attorney’s Office, Marsh’s supervisors in the Public Integrity Section put him on Polar Pen.  

Marsh’s assignment on the Last Frontier was definitely not full-time, as the young attorney juggled a variety of cases around the country.   The new hire impressed his bosses by handling three appellate cases his first year, according to the National Law Journal.    Marsh also worked in 2004 on the Mississippi-based prosecutions flowing out of fraud in lawsuits involving the drug fen-phen, and he was on the government’s courtroom team at a 2005 trial in New Hampshire over a Republican campaign official’s involvement in jamming the phones on a Democratic Party get-out-the-vote drive.   

The Justice Department approved a partial recusal of the Anchorage-based U.S. Attorney’s Office in September of 2004 that gave Marsh a particularly big role in the Polar Pen probe.   While giving four lawyers from that office the job to “monitor, manage, and direct the day to day operation” of Polar Pen, the Deputy Attorney General simultaneously assigned the Public Integrity Section “overall responsibility” for the probe, including “investigative and prosecutorial decisions.”

Bolstered by more than 17,000 intercepted conversations caught on wiretaps, the Polar Pen probe into Alaska public corruption expanded to cover allegations that VECO executives corruptly influenced state legislators over the construction of a natural gas pipeline and related petroleum tax legislation.    Polar Pen progressed to the point that federal officials investigated at least 19 people, according to a filing submitted by one of the prosecutors involved in the investigation, while Alaska journalist Bill McAllister reported in 2007 after news broke of the probe that multiple sources had told him that it would result in the indictment of 26 people.     

Polar Pen Zeroes in on Senator Ted Stevens

Back when Polar Pen was still covert, the probe started focusing on its most prominent target, U.S. Sen. Ted Stevens, an Alaska icon and Capitol Hill powerhouse who had held his Senate seat for more than three decades.   

The record isn’t clear about when the investigation began that focus on Ted Stevens.  Some observers thought that the Los Angeles Times started that ball rolling with two articles in 2003.   The first focused on the links between the lobbying and consulting clients of Ted Stevens’ son Ben and legislative assistance provided by Ted Stevens to those clients, including VECO.    Another LA Times story published that year headlined “Senator’s Way to Wealth Was Paved with Favors” laid out how Ted Stevens became a millionaire “thanks to investments with businessmen who received government contracts or other benefits with his help.”     

At Ted Stevens’ trial, prosecutors introduced evidence of assistance that the Senator had provided to VECO on a Pakistani pipeline project referenced in one of those newspaper articles; on the other hand, federal investigators never interviewed Chuck Neubauer, the journalist who did most of the reporting and research on the two Times stories.  

Another straw in the wind comes from a statement in a Wall Street Journal article by reporter Evan Perez in 2009 that the Ted Stevens case “was investigated for more than four years.”    Given that the indictment and trial both occurred in 2008, that would put the start of the federal probe into Ted Stevens at no later than 2004.

The Department of Justice’s official history—the OPR report—says that it was a monitored telephone conversation between VECO executives Bill Allen and Rick Smith on October 19, 2005 that shifted the spotlight of the federal probe onto Ted Stevens.    In that call, Allen and Smith discussed benefits VECO had provided to Ted Stevens in the form of renovations at Stevens’ Girdwood residence.    The OPR report then states:   “Thereafter, the government obtained additional information about the Girdwood renovations, noting that Stevens had not reported the benefits on his United States Senate Public Financial Disclosure Reports for the corresponding years.”

Whatever the precise date federal investigators started looking hard at Ted Stevens, it is clear that very shortly after that telephone call the leadership of the Anchorage-based U.S. Attorney’s Office wanted no part of the probe.    

On November 5, 2005, the Justice Department approved what the OPR report describes as an “office wide” recusal of that office based on the office’s concern “[g]iven the high degree of sensitivity of such an investigation and the controversy likely to be engendered by investigating such individuals in the close knit Alaskan community.”    

This recusal left the Public Integrity Section in charge of the federal probe into Alaska public corruption.   Despite that “office wide” recusal, the investigation also proceeded with the assistance of two Anchorage-based Assistant U.S. Attorneys, Joseph Bottini and James Goeke. 

In practice, this recusal made Marsh Polar Pen’s “top dog,” as veteran Anchorage attorney Jeff Feldman told New Yorker writer Jeffrey Toobin.  This development meant that Bottini—who had been a prosecutor for approximately 20 years—was effectively supervised on POLAR PEN by a lawyer with about 10 percent of his experience as a prosecutor.    

The Polar Pen prosecution team increased to four in 2006 with the addition of Edward Sullivan, who was immediately assigned to the probe upon his joining Public Integrity.   (Confusingly, three unrelated Sullivans played significant roles in the Ted Stevens case—there was Edward Sullivan the prosecutor, Emmet Sullivan the trial judge, and Brendan Sullivan the chief defense counsel.)   Edward Sullivan had been a lawyer for 10 years when he started on Polar Pen, and he—like Marsh and Goeke—had clerked for a federal judge.    (It is a telling social commentary that the OPR report details federal clerking experience of these three lawyers while omitting Bottini’s experience clerking for a state court judge.)    Despite Edward Sullivan’s impressive resume, his prosecutorial experience was zero.

The Grand Juries Hear Evidence, While a Logical Source of Help Goes Largely Untapped

The Polar Pen team presented evidence regarding Ted Stevens to grand juries between November of 2006 and June of 2008.   One grand jury sat in Anchorage, and the other sat in Washington, D.C.   Despite the use of the grand jury in the nation’s capital, the Washington, D.C. U.S. Attorney’s Office had no significant involvement in the Ted Stevens case.

This was too bad for the prosecution, particularly since the Justice Department was aiming for a possible trial in Washington.    As Washington Post reporter Carrie Johnson pointed out after the government’s case collapsed in 2009, the government’s path could have been smoother if the Washington U.S. Attorney’s Office had been part of the case, thereby adding “players who were familiar with the courthouse and the personality of the trial judge.”   Such a role for that office would have not been at all unprecedented in a major public corruption case.   The Washington U.S. Attorney’s Office ran the prosecution of U.S. Rep. Dan Rostenkowski (D.-Illinois), the long-time chairman of the tax-writing House Ways and Means Committee, that produced his guilty plea in 1996 and a sentence that put him in federal custody for 17 months.      

There are varying explanations for the lack of significant participation by the Washington U.S. Attorney’s Office in the prosecution of Ted Stevens.    That 2009 Washington Post story reported that prosecutors in that office “were consulted about the Stevens case starting in 2006 but declined to participate, thinking that the charges were shaky, according to sources familiar with the discussions.”    That article also stated that sources said “The assistant U.S. attorneys also considered overly aggressive the prosecutors' early plan, later abandoned, to get a warrant to search the lawmaker's D.C. area home….”

On the other hand, the OPR report suggests that it was the competition for glory that blocked the participation of the Washington U.S. Attorney’s Office, not that office’s perception that the Polar Pen team was on the wrong track with Ted Stevens.   

Glen Donath, an Assistant U.S. Attorney from the Fraud and Public Corruption Section of the Washington U.S. Attorney’s Office, did attend at least one grand jury session in Washington in April of 2007 regarding Ted Stevens.   The Public Integrity Section ran him off the case quickly, however.   Donath—who had previously served on the team defending President Clinton at the impeachment trial—ended his slight participation in the Ted Stevens case after Public Integrity officials communicated to him that he was not needed and that any role he would play would be minor and merely an accommodation to his superiors.    Edward Sullivan told OPR that Public Integrity Section Chief William Welch spelled it out more bluntly, conveying the message that Donath was “coming in late” and would be viewed as a “fifth wheel.”

Charges the Justice Department Considered

Contemporaneous media reports in the Anchorage Daily News, the Associated Press, and Roll Call showed that the federal government conducted a wide-ranging investigation of Ted Stevens and his close associates.   As detailed in that coverage and in interviews, this probe included an examination of legislative assistance Ted Stevens had provided that had benefitted his son Ben (who was by 2006 President of the Alaska State Senate), Ted Stevens’ former long-time legislative aide Trevor McCabe, and Anchorage businessmen who had engaged in real estate deals with Ted Stevens that the Senator bragged about publicly.   As part of this investigation, the FBI Interviewed former state legislator and activist Ray Metcalfe, who had accumulated evidence to support allegations regarding real estate transactions and fisheries legislation.   The Justice Department also perceived early on in the investigation that tax charges could be brought against Ted Stevens, and the OPR report says that IRS agents remained part of the prosecution team through the Ted Stevens trial.

In the end, however, the prosecution’s charges did not relate to real estate transactions, fisheries legislation, or income taxes, and the word “earmark” appeared nowhere in the 28-page indictment issued on July 29, 2008.   

Instead, the prosecution focused during the three-month period before the issuance of the indictment on five charges:  

--Bribery under 18 U.S. Code Subsec. 201(b)(2);

--Illegal gratuities under 18 U.S. Code Subsec. 201(c)(1)(B);

--Honest-services fraud under 18 U.S. Code Secs. 1341-1351;

-- Conversion of services of government employees for personal use under 18 U.S. Code Sec. 641; and

--False statements, by concealment under 18 U.S. Code Subsec. 1001(a)(1) and by omission under 18 U.S. Code Subsec. 1001(a)(2).

Except for the potential conversion charge—which concerned Ted Stevens’ alleged use of Senate staff members to pay the personal bills of himself and his family—all these potential charges would have related to things of value received by Ted Stevens and not reported on mandatory annual Senate disclosure forms.   Most of those things of value involved renovations to the Senator’s Girdwood home provided by Bill Allen and/or VECO. 

There’s a common problem with the three charges listed above regarding Ted Stevens.    Conviction under the bribery or illegal gratuities statutes requires “official acts” in connection with the crimes.   Honest-services fraud—a favorite arrow in the federal prosecutor’s quiver before the U.S. Supreme Court sharply restricted the reach of the statute in 2010—does not explicitly require a quid pro quo between the receipt of a specific thing of value and a specific official act.   With honest services fraud, prosecutors have tended to look to prove the defendant received a stream of things of value in exchange for a series of official acts.       

At least one line prosecutor pushed hard for the inclusion of one or more of these counts in the Ted Stevens indictment.     Higher-ups at the Department of Justice, however, seemed to perceive that Stevens had delivered so much for so many Alaskans over four decades that it was difficult to say that the Senator was motivated by gifts to do official acts.    Those supervisors appeared to understand that it was difficult to throw a rock in any populated place on the Last Frontier and not hit somebody who had benefitted from an official act of “Uncle Ted”—whether it was a local appropriation or intervention with the federal bureaucracy—and that the great majority of those who had received help from the Senator had never given him a penny in campaign contributions, much less gifts (and had certainly never given his son Ben a lobbying or consulting contract).

It would have probably fortified the Justice Department brass in their rejection of bribery/illegal gratuities charges/honest services fraud charges against Ted Stevens if they had been aware of a conversation the lead FBI agent on Polar Pen had with a journalist in May of 2008.   Mary Beth Kepner met with reporter Tony Hopfinger at a coffee shop in midtown Anchorage.    This meeting occurred more than nine months after the FBI had executed a search warrant on the Senator’s Girdwood home and in the final throes of the Justice Department’s decision on the indictment.   In the conversation—later recounted in Crude Awakening, a book by Hopfinger and Amanda Coyne, and in a recent interview with Hopfinger—Kepner speculated that Allen had bribed Ted Stevens by renovating the Senator’s house.   The FBI agent then asked the reporter:   “What do you think the quid pro quo was?”

Given that this conversation occurred after the FBI had been investigating Ted Stevens for at least 2.5 years and in the last 90 days before the Justice Department announced the indictment, it was surprising that the lead FBI agent on the Ted Stevens investigation would at that point ask a reporter in a coffee shop for that reporter's opinion on a critical element of a case against Ted Stevens.    (Then again, Kepner was known for her ability to get people to tell her things, and playing dumb is one well-known way to do that.)

The prosecutors also considered a charge of conversion.   This charge would have been based on evidence that the Senator had for years arranged for Senate staff members to work on the Congressional clock to pay from his personal account his family’s personal bills—including his wife’s credit card bills, the family’s regular household bills, and the bills for the Senator’s participation in a horse racing partnership.  The 1994 indictment against another Congressional titan—Rep. Rostenkowski—had included a charge of conversion of federal funds based on the Congressman’s alleged use of Congressional staff members working on federal time to perform personal services for Rostenkowski.    As laid out in a 2007 article by John Stanton in Roll Call, Ted Stevens’ alleged use of a Senate staff member making more than $150,000 annually to serve as his “personal bookkeeper” substantially exceeded the occasional de minimis personal tasks some Senators asked of their own Senate staff.

Although Polar Pen’s line prosecutors expressed to their superiors in the spring of 2008 their belief that the evidence and the law supported a conversion charge against Ted Stevens, those lower-level lawyers advised against pursuing such a charge because it would significantly distract from a prosecution based on the Senator’s alleged falsehoods in his annual disclosure forms.    (The prosecution did use evidence that the above-described Senate staff member routinely paid Catherine Stevens’ department store credit card bills while cross-examining the Senator’s wife at his trial.)

Next:    The charges of failure to disclose required financial information that the Justice Department finally settled on

Cliff Groh is an Anchorage lawyer and writer who has worked as both a prosecutor and a criminal defense attorney.   He has blogged about the “POLAR PEN” federal probe into Alaska public corruption for years at, which in its entry for May 14, 2012 features an expanded and updated list of disclosures.    Groh’s analysis regarding the Ted Stevens case has appeared in media as diverse as C-SPAN, the Los Angeles Times, Alaska Dispatch, the Anchorage Daily News, and the Anchorage Press.    The lifelong Alaskan covered the five-week Ted Stevens trial in person in Washington, D.C. in the fall of 2008.   He welcomes your bouquets, brickbats, tips, and questions at