COMPLAINT

____________________________________________________________

 

In The Matter of:                                                                                           

 

Former Defense Policy Board Chairman Richard N. Perle,           

Former President William Jefferson Clinton,                                    

Former Secretary of Defense William S. Cohen,                                    

Current Democratic National Committee                                                

Chairman Terry McAuliffe                                                           

 

And                                                                                                    

 

Global Crossing                                                                                   

____________________________________________________________

 

March 28, 2003

 

BY CERTIFIED MAIL

 

The Honorable Amy L. Comstock, Esq.                        The Honorable Joseph E. Schmitz

Director                                                                        Inspector General

Office of Government Ethics                                                U.S. Department of Defense

1201 New York Avenue, NW                                    400 Army-Navy Drive

Washington, DC 20005                                                Arlington, VA 22202

 

The Honorable Clark Kent Ervin                                    The Honorable John Ashcroft

Inspector General                                                            Attorney General

U.S. Department of Homeland Security                        U. S. Department of Justice

Washington, DC 20528                                                950 Pennsylvania Ave NW

Washington, DC 20530-0001

Honorable Robert Mueller

Director

Federal Bureau of Investigation

U.S. Department of Justice

935 Pennsylvania Ave NW

Washington, DC 20535-0001

 

 


I.            INTRODUCTION.

 

Judicial Watch, Inc., (hereafter “Judicial Watch”) is a non-profit, public interest group that investigates and prosecutes government abuse and corruption.  Judicial Watch, in the public interest, hereby submits this complaint to the Office of Government Ethics, the Office of the  Defense Department Inspector General, the Office of the Homeland Security Inspector General, Attorney General John Ashcroft and FBI Director Robert Mueller.  Specifically, the conduct of (1) Mr. Perle and (2)  Mr. Clinton, Mr. Cohen and Mr. McAuliffe may be in violation of:

 

1.                  18 U.S.C. § 208 (Acts Affecting A Personal Financial Interest);

2.                  5 C.F.R. § 2635.101 (Basic Obligations of Public Service);

3.                  5 C.F.R. § 2635.402 (Disqualifying Financial Interest);

4.                  5 C.F.R. § 2635.403 (Prohibited Financial Interests);

5.                  5 C.F.R. § 2635.502 (Personal And Business Relationships); and

6.                  5 C.F.R. § 2640.103 (Prohibition)

 

II.            BACKGROUND AND FACTS RELEVANT TO MR. PERLE.

 

The Defense Policy Board was created in 1985 and has about thirty sitting members who are former government officials, retired military officers and members of the academic community.  Among the members are former National Security Advisors, Secretaries of Defense, and Directors of the Central Intelligence Agency.  The members serve without pay and meet several times a year at the Pentagon to review and assess defense policies.  The members have access to classified information and to senior policymakers.  The members provide advice across the spectrum from weapons procurement to military/political strategy.

 

Mr. Perle served as Foreign Policy Advisor during the Presidential Campaign of George W. Bush.  Secretary of Defense Donald Rumsfeld subsequently appointed Mr. Perle in 2001 as Chairman, Defense Policy Board - a position that Mr. Perle occupied until March 27, 2003.  Mr. Perle, although no longer Chairman, remains an active Member of Defense Policy Board.  As Chairman of the Defense Policy Board, Mr. Perle was considered to be a Special Government Employee and therefore subject to the Federal Code of Conduct which contains prohibitions against a special employee from participating in an official capacity in any matter in which he or she has a financial interest.  The intent of these prohibitions is to protect government processes against apparent and/or actual conflicts of interest.

 

Advisory panels like the Defense Policy Board bring private sector skills and expertise to bear, in confidence, upon public sector national security issues.  Due to inter-linking relationships related to Board members’ involvement with the defense industry, Defense Policy Board members necessarily encounter potential  conflicts of interest in the midst of performing their normal duties.  In such situations, Defense Policy Board members are required to recuse themselves from the deliberative/decisional process.

 


The New York Times reported on March 25, 2003 that Mr. Perle is an Advisor to Global Crossing, the large (and bankrupt) telecommunications company that is seeking to overcome opposition from both the Defense Department and the Department of Justice to its acquisition by Hutchison Whampoa, a Chinese conglomerate.  This opposition is premised upon national security and law enforcement grounds because the deal, if successful, would place Global Crossing (whose worldwide communications network is used by the United States Government), under foreign Chinese ownership and control.

 

In face of opposition from the Defense Department and the Department of Justice, Global Crossing withdrew its initial proposal last month so that it could regroup and resubmit a second proposal.  As an Advisor to Global Crossing, Mr. Perle’s fee, as outlined in bankruptcy proceedings, is $725,000, including an unusual contingent payment of $600,000 if Global Crossing succeeds in finally obtaining approval of its sale to the Chinese Company, Hutchison Whampoa.  In his March 27, 2003 resignation letter as Board Chairman to Defense Secretary Rumsfeld, Mr. Perle reportedly claimed that he would not accept compensation from Global Crossing. Irrespective of Mr. Perle’s claims and reported pledges concerning remuneration, Mr. Perle clearly served the corporate interests of Global Crossing while simultaneously acting as Chairman of the Defense Advisory Board.

 

Hutchison Whampoa is the holding company of billionaire Li Ka-Shing, a well-known Hong Kong Chinese businessman, whose companies comprise 15 percent of the market capitalization of the Hong Kong Stock Market.  Li Ka-Shing’s trans-national empire includes ports, telecommunications and energy assets around the world.  Today, Li Ka-Shing’s net worth is estimated at $13 billion.  According to recently declassified U.S. Government intelligence reports uncovered by Judicial Watch under the Freedom of Information Act, Li Ka-Shing’s relationship with the Chinese Government is both opaque and troubling from a national security perspective.  For example, a U.S. Army South “Intelligence Update” stated:

 

Li is directly connected to Beijing and is willing to use his

business influence to further the aims of the Chinese Government. 

He has positioned his son, Victor Li, to replace him in certain CK

[Cheung Kong Holdings, Ltd.] and HW [Hutchison Whampoa] operations

such as HW’s Hong Kong International Terminals.”  (Emphasis added)

 

*      *      *

 

“Li’s interest in the [Panama] canal is not only strategic, but also as a

means for outside financial opportunities for the Chinese government.”[1]

 

The declassified intelligence reports identify a direct governmental nexus.  It is supported by another “Intelligence Assessment” from the U.S. Southern Command’s  Joint Intelligence Center that states:


“Hutchison Whampoa’s owner, Hong Kong tycoon Li Ka-Shing, has

extensive business ties in Beijing and has compelling financial reasons

to maintain a good relationship with China’s leadership.”[2]

 

Clearly, Li Ka-Shing is an agent of the government of the Peoples’ Republic of China.  He is the founder and a board member of the China International Trust and Investment Corporation (CITIC).  A 1997 Rand Corporation report noted that CITIC acts as a “shell” or front operation on behalf of China’s Peoples’ Liberation Army (PLA).[3]

 

Indeed, the Defense Advisory Board, if it has not already done so, may be called upon to provide advice on the sale of Global Crossing assets to Li’s company.  Consequently, the pending Global Crossing contract with Hutchison Whampoa presents, in light of Mr. Perle’s past and current positions as both Chairman and Member of the Defense Advisory Board, grave national security implications and the appearance/reality of both ethical and financial conflicts of interest.  Only a thorough investigation will ascertain the underlying reality and prescribe remedial measures.

 

A.  MR. PERLE MAY HAVE VIOLATED CRIMINAL CONFLICT OF INTEREST LAW.

 

Mr. Perle may have violated 18 U.S.C. § 208 (Acts Affecting A Personal Financial Interest).   Specifically, 18 U.S.C. § 208(a) provides in pertinent part:

 

[W]hoever, being an officer or employee of the executive branch of the United States Government, or of any independent agency of the United States, . . . participates personally and substantially as a Government officer or employee, through decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise, in a judicial proceeding application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, or other particular matter in which, to his knowledge, he, his spouse, . . . has a financial interest - Shall be subject to the penalties set forth in section 216 of this title.

 


According to the regulations promulgated pursuant to 18 U.S.C. § 208, an employee is prohibited by this statute “from participating personally and substantially in an official capacity in any particular matter in which, to his knowledge, he or any person whose interests are imputed to him under this statute has a financial interest, if the particular matter will have a direct and predictable effect on that interest.”  5 C.F.R. § 2635.402(a).  “A particular matter will have a direct effect on a financial interest if there is a close causal link between any decision or action to be taken in the matter and any expected effect of the matter on the financial interest.”  5 C.F.R. § 2635.402(b)(1)(i).  “A particular matter will have a predictable effect if there is a real, as opposed to a speculative possibility that the matter will affect the financial interest.  It is not necessary, however, that the magnitude of the gain or loss be known, and the dollar amount of the gain or loss is immaterial.  5 C.F.R. § 2635.402(b)(1)(ii).  The regulation gives an example of a “direct and predictable effect” on an interest that is instructive here:

 

Example 1: An employee of the National Library of Medicine at the National Institute of Health has just been asked to serve on the technical evaluation panel to review proposals for a new library computer search system.  DEF Computer Corporation, a closely held company in which he and his wife own a majority of the stock, has submitted a proposal.  Because award of the systems contract to DEF or to any other offeror will have a direct and predictable effect on both his and his wife’s financial interests, the employee cannot participate on the technical evaluation team unless his disqualification has been waived.

 

5 C.F.R. § 2635.402(b)(1).  Another example of a violation of 18 U.S.C. § 208 that is analogous to the Perle’s matter, is contained in 5 C.F.R. § 2635.403(b):

 

Example 1: An Air Force employee who owns stock in a major aircraft engine manufacturer is being considered for promotion to a position that involves responsibility for development of a new fighter airplane.  If the agency determined that engineering and other decisions about the Air Force’s requirements for the fighter would directly and predictably affect his financial interests, the employee could not, by virtue of 18 U.S.C. § 208(a), perform these significant duties of the position while retaining his stock in the company .  The agency can require the employee to sell his stock as a condition of being selected for the position rather than allowing him to disqualify himself in particular matters.

 

“For purposes of 18 U.S.C. § 208(a) . . . the term financial interest means the potential for gain or loss to the employee, or other persons specified in 208, as a result of governmental action on the particular matter.  The disqualifying financial interest might arise from ownership of certain financial instruments or investments such as stock . . . .  Additionally, a disqualifying financial interest might derive from a salary, indebtedness, job offer, or any similar interest that may be affected by the matter.”  5 C.F.R. § 2640.103(b).

 

Mr. Perle may have violated 18 U.S.C. § 208.  Mr. Perle appears to have participated personally and substantially in an official capacity in matters in which he has a financial interest.

 

B.  WAIVER PROVISIONS PERTINENT TO MR. PERLE.

 


Pursuant to 18 U.S.C. § 208(b), an officer or employee may receive in advance of any actions that constitute a conflict of interest, a written waiver of the conflict of interest law.  Specifically, 18 U.S.C. § 208(b) provides in pertinent part:

 

(b) Subsection (a) shall not apply - (1) if the officer or employee first advises the Government official responsible for appointment to his or her position of the nature and circumstances of the judicial or other proceeding, application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, or other particular matter and makes full disclosure of the financial interest and receives in advance a written determination made by such official that the interest is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from such officer or employee

 

See also 5 C.F.R. § 2635.402(d)(2) (An individual waiver enabling the employee to participate in a particular matter may be issued in advance of the employee’s participation if the employee advises the Government of the particular matter, makes full disclosure of the nature and extent of his interest and the Government determines in writing that the employee’s financial interest is not so substantial as to be deemed likely to affect his services.).  The regulations promulgated pursuant to 18 U.S.C. § 208 provide more insight into the waiver provision.  5 C.F.R. § 2640.301(a)(5) states that the “waiver must be issued prior to the employee taking any action in the matter or matters.”  5 C.F.R. § 2640.301(b) describes what factors should considered by the official granting the waiver.  Of particular interest for this case is 5 C.F.R. § 2640.301(b)(4), which states in part that the deciding official, in determining whether the financial interest is sufficiently substantial to be deemed likely to affect the integrity of the employee’s services, should consider “[t]he value of the financial instrument or holding from which the disqualifying financial interest arises (e.g. the face value of the stock, bond, other security or real estate) and its value in relationship to the individual’s assets.”

 

Pursuant to 18 U.S.C. § 208(b), however, waivers must be obtained in advance of the employee’s participation in a particular matter.  Second, the waiver is not retroactive and cannot cover any past illegal conduct.  The statute clearly requires that the waiver be obtained in advance of any participation in matters that pose a conflict of interest or the appearance of a conflict of interest.

 

C.  MR. PERLE MAY HAVE ALSO VIOLATED ETHICS REGULATIONS.

 

Mr. Perle may also be in violation, and may continue to violate, several ethics regulations, because he may be illegally benefitting financially as a result of his position as Chairman of the Defense Advisory Board.  Specifically, Mr. Perle may have violated 5 C.F.R. § 2635.101 (Basic Obligations of Public Service), 5 C.F.R. § 2635.402 (Disqualifying Financial Interest), 5 C.F.R. § 2635.403 (Prohibited Financial Interests), 5 C.F.R. § 2635.502 (Personal and Business Relationships), and 5 C.F.R. § 2640.103 (Prohibition).

 

5 C.F.R. § 2635.101 provides in pertinent part:

 


(a) Public service is a public trust.  Each employee has a responsibility to the United States Government and its citizens to place loyalty to the Constitution, laws and ethical principles above private gain.  To ensure that every citizen can have complete confidence in the integrity of the Federal Government, each employee shall respect and adhere to the principles of ethical conduct set forth in this section, as well as the implementing standards contained in this part and in supplemental agency regulations.

 

(b) General principles.  The following general principles apply to every

employee . . .

 

(1) Public service is a public trust, requiring employees to place loyalty to the Constitution, the laws and ethical principles above private gain.

 

(2) Employees shall not hold financial interests that conflict with the conscientious performance of duty.

 

*     *     *

 

(7) Employees shall not use public office for private gain.

 

(8) Employees shall act impartially and not give preferential treatment to any private organization or individual.

 

*     *     *

 

(14) Employees shall endeavor to avoid any actions creating the appearance that they are violating the law or the ethical standards set forth in this part.

 

5 C.F.R. § 2635.402(c) provides in pertinent part:

 

Disqualification. Unless the employee is authorized to participate in the particular matter by virtue of a waiver or exemption described in paragraph (d) of this section or because the interest has been divested in accordance with paragraph (e) of this section, an employee shall disqualify himself from participating in a particular matter in which, to his knowledge, he or a person whose interests are imputed to him has a financial interest, if the particular matter will have a direct and predictable effect on that interest.  Disqualification is accomplished by not participating in the particular matter.

 

5 C.F.R. § 2635.403 provides in pertinent part:


An employee shall not acquire or hold any financial interest that he is prohibited from acquiring or holding by statute, by agency regulation issued in accordance with paragraph (a) of this section or by reason of an agency determination of substantial conflict under paragraph (b) of this section.

 

5 C.F.R. § 2635.502 provides in pertinent part:

 

(a) Consideration of appearances by the employee. Where an employee knows that a particular matter involving specific parties is likely to have a direct and predictable effect on the financial interest of a member of his household, or knows that a person with whom he has a covered relationship is or represents a party to such matter, and where the employee determines that the circumstances would cause a reasonable person with knowledge of the relevant facts to question his impartiality in the matter, the employee should not participate in the matter unless he has informed the agency designee of the appearance problem and received authorization from the agency designee in accordance with paragraph (d) of this section.

 

And finally, 5 C.F.R. § 2640.103 provides in pertinent part:

 

Disqualification. Unless the employee is authorized to participate in the particular matter by virtue of an exemption or waiver described in subpart B or subpart C of this part, or the interest has been divested in accordance with paragraph (e) of this section, an employee shall disqualify himself from participating in a particular matter in which, to his knowledge, he or any other person specified in the statute has a financial interest, if the particular matter will have a direct and predictable effect on that interest.  Disqualification is accomplished by not participating in the particular matter.

 

III.       THE GOVERNMENT OFFICE OF ETHICS’ AUTHORITY AND OBLIGATIONS WITH RESPECT TO MR. PERLE.

 


Pursuant to 5 C.F.R. § 2638.503, if the Director of the Government Office of Ethics has reason to believe that an employee is violating or has violated any ethics provision, the Director may recommend that an investigation be commenced.  When the head of an agency is the employee suspected of violating any ethics provision, the recommendation is made to the President.  5 C.F.R. § 2638.503(a)(1).  Under 5 C.F.R. § 2638.501 and 5 C.F.R. § 2638.505, the Director has the authority to order corrective and remedial action.  The Director is also charged with recommending disciplinary action.  5 C.F.R. § 2638.506.  When the head of an agency is the employee suspected of violating any ethics provision, the recommendation is made to the President.  5 C.F.R. § 2638.506(a).  According to the Office of Government Ethics’ website, it “exercises leadership in the executive branch to prevent conflicts of interest on the part of Government employees, and to resolve those conflicts of interests that do occur.”  This office claims to foster “high ethical standards for employees and strengthens the public’s confidence that the Government’s business is conducted with impartiality and integrity.”

 

In this matter, Judicial Watch has clearly described that Mr. Perle may have violated, and may continue to violate, 18 U.S.C. § 208(a).  In addition, Judicial Watch has described how Mr. Perle may have violated, and may continue to violate, several ethics regulations, which this office is responsible for policing.  As a result, the Government Office of Ethics has an obligation to investigate this matter and recommend the appropriate legal action forthwith.

 

IV.            CREDIBLE ALLEGATIONS OF FRAUD, WASTE AND ABUSE WITH

RESPECT TO MR. PERLE.

 

The respective Inspectors General of the Department of Defense, the Department of Homeland Security, the Department of Justice and the Federal Bureau of Investigation have separate and independent authority to investigate fraud, waste and abuse of process/office that are within their purview.   Mr. Perle’s tangled web of private/public sector business transactions merit serious investigation by the referenced Inspectors General.

 

V.            APPROPRIATE REMEDIES WITH RESPECT TO MR. PERLE.

 

According to 5 C.F.R. § 2635.102(e), there are several forms of corrective action that the Director of the Office of Government Ethics may take to remedy a past violation or prevent a continuing violation, including but not limited to “restitution, change of assignment, disqualification, divestiture, termination of an activity, waiver, the creation of a qualified diversified or blind trust, or counseling.”  In addition, pursuant to 5 C.F.R. § 2635.102(g), the Director may recommend disciplinary action, including but not limited to “reprimand, suspension, demotion, and removal.”

 

Because Judicial Watch has demonstrated that Mr. Perle may have knowingly and intentionally put his own financial interests ahead of his employer, the United States Government, and thus the people of the United States, the Office of Government Ethics should examine whether it should take corrective action against Mr. Perle to remedy this wrong.  In addition, because Judicial Watch has shown that Mr. Perle may be continuing this illegal conduct even to this day, this office should order Mr. Perle to cease and desist any illegal conduct.  Lastly, because of the egregious nature of the alleged offense, this office may have to make a recommendation to the Secretary of Defense that Mr. Perle be removed from Government Employment as a Member of the Defense Advisory Board. 

 

Finally, the respective Inspectors General should refer their completed investigations to the appropriate authorities for evaluation of criminal, civil and/or administrative proceedings/sanctions.

 

 

 


VI.            CONCLUSION: MR. PERLE.

 

The purpose of 18 U.S.C. § 208 is “to prevent an employee from allowing personal interests to affect his official actions, and to protect governmental processes from actual or apparent conflicts of interests.”  5 C.F.R. § 2640.101.  Mr. Perle may have allowed his substantial personal financial interests in Global Crossing to affect his official actions as Chairman of the Defense Advisory Board.  At the least, Mr. Perle’s actions have created apparent conflicts of interest.  Indeed, Mr. Perle, while Chairman of the Defense Advisory Board, was charged with showing “personal leadership in establishing, maintaining, and carrying out the agency’s ethics program.”  5 C.F.R. § 2638.202(a).  Judicial Watch, in the public interest, respectfully requests that the Office of Government Ethics and the respective Inspectors General of the Defense Department, Justice Department, Homeland Security Department and Federal Bureau of Investigation fully investigate this matter and bring any appropriate legal actions against Mr. Perle to the full extent of the law.

 

VII.            CONCOMITANT ALLEGATIONS OF GLOBAL CROSSING CONFLICTS OF INTEREST INVOLVING FORMER PRESIDENT CLINTON, FORMER SECRETARY OF DEFENSE COHEN AND CURRENT DEMOCRATIC COMMITTEE NATIONAL CHAIRMAN MCAULIFFE.

 

A.   BACKGROUND AND FACTS.

 

Global Crossing was formed in 1997 and its corporate officials allegedly “pumped and dumped” Global Crossing stock for personal gain by purportedly (a) using “swaps” to artificially inflate and enhance the price of Global Crossing stock; (b) selling their own stock holdings to unsuspecting buyers at fraudulently inflated prices; (c) inducing and otherwise causing unwitting shareholders and investors to hold and not sell Global Crossing securities; (d) improperly freezing 401k(k) retirement accounts of employees to stop them from selling and depressing the market for Global Crossing securities; (e) making or paying contributions, political payoffs, gratuities, and offering lucrative jobs on retirement to elected and appointed Government and Pentagon Officials in exchange for official action, favorable treatment and favors, including, inter alia, awarding a U.S. Military Contract worth approximately $450 million despite obvious national security problems in the possible transfer of sensitive technology and information, as well as unauthorized access to a sensitive U. S. Military Telecommunications Network, to foreign Chinese entities and individuals (including, inter alia, Hutchison Whampoa and Mr. Li Ka-Shing, the Chinese billionaire), (f) maneuvering secretly, for personal gain, using foreign entities and individuals (including, inter alia, Hutchison Whampoa and Mr. Li Ka-Shing) to sell bankrupt Global Crossing assets/affiliates at bargain basement prices substantially below true market value, and (g) donating to former President Clinton at least $1 million (ostensibly for the Presidential Library), awarding former Secretary of Defense Cohen with $500,000 in consulting fees plus a Directorship on Global Crossing, and showering current Democratic Committee National Chairman McAuliffe with $18 million in alleged capital gains – all in exchange for allegedly ignoring financial fraud and serious national security issues involving Global Crossing and its corporate officials.

 


B.   ALLEGATIONS OF FINANCIAL CONFLICTS OF INTEREST TOGETHER WITH CONCURRENT FRAUD, WASTE AND ABUSE.

 

Just as Mr. Perle and the current Republican Administration may have become inappropriately enmeshed in the financial dealings of Global Crossing (and Hutchison Whampoa and Mr. Li Ka-Shing), so too does  the prior Democratic Administration and some of its highly placed officials appear to have succumbed to the tentacles of Global Crossing and its sinister foreign connections. We therefore urge you in the strongest terms to conduct a thorough, impartial investigation of Mr. Clinton, Mr. Cohen, and Mr. McAuliffe for the same enumerated statutory/regulatory violations as Mr. Perle.

 

Thank you for your prompt attention to this important matter.

Sincerely,

JUDICIAL WATCH, INC.

 

 

Larry Klayman                                                 Thomas Fitton

Chairman and General Counsel                                    President

 



[1]“China Awaits U.S. Departure (U), 221333ZAPR98,” Deputy Chief of Staff for Intelligence, U.S. Army South, Intelligence Update, previously classified SECRET/NOFORN, attached.

[2]“Panama: Peoples’ Republic of China Interests and Activities (U),” U.S. Southern Command Joint Intelligence Center, Intelligence Assessment, 26 October 1999, previously classified SECRET/X-1, attached.

[3]James Mulvenon, “Chinese Military Commerce and U.S. National Security,” RAND Center for Asia Pacific Policy, June 1997.