Espy Trial Finds Much Laxity
In Regard To Ethics Standards

WASHINGTON —(AP)— A Washington consultant testified last Thursday he saw nothing amiss in hiring the girlfriend of former Agriculture Secretary Mike Espy, even though some of his clients did business with Espy's department.

Espy is charged with taking favors and gifts from companies he regulated, including one of consultant Michael O'Bannon's chief clients.

O'Bannon testified at Espy's federal corruption trial that Espy mentioned a friend who was job-hunting, but never asked him to hire the woman.

"He said he'd just like me to talk to her about the future," O'Bannon said. "He told me that she was a close friend of his."

O'Bannon hired Pat Dempsey in 1993, a few months after Espy took office as President Clinton's first agriculture chief. O'Bannon, an old friend of Espy's, said he did not know that Espy and Ms. Dempsey were living together at the time.

After she was hired, Ms. Dempsey was barred from doing work related to Espy's department, and her job never led to any special favors for O'Bannon or his company, O'Bannon testified.

Espy resigned under pressure in 1994, after an independent counsel began investigating his ties to various companies. He pleaded innocent to 38 charges, including several related to O'Bannon's firm, EOP Group Inc., and its client, a Georgia utility called Oglethorpe Power Corp.

Through the utility, Espy received a $2200 ticket to the 1994 Super Bowl in Atlanta.

At the time, Oglethorpe wanted permission to refinance about $3 billion in rural electrification loans administered by the Agriculture Department. Although Espy supported the refinancing, the deal never went through, O'Bannon and other witnesses have testified.

Since testimony began Oct. 1, Espy's lawyers have tried to show that he never did favors for companies that gave him gifts.

Several gifts to Ms. Dempsey are included in the corruption indictment against Espy, including her job at EOP. Ms. Dempsey also received cash, airfare and a scholarship from lobbyists or companies Espy regulated.

Espy's lawyers have tried to show that Ms. Dempsey took advantage of Espy's position and lied to him about the source of some of the corporate largesse.

O'Bannon described Ms. Dempsey's job performance as "sporadic, at best."

Even U.S. District Judge Ricardo Urbina chuckled when a prosecutor had O'Bannon read aloud from performance memos he sent to Ms. Dempsey. One memo noted her good work on one project but added: "Even though you are often late there should be some reward for good work. It would be more if you were on time."

In related developments last week, the prosecutor investigating Espy and his associates won a victory but also took a loss in court actions on the complicated, four-year inquiry.

The Supreme Court agreed to consider reinstating a California farm cooperative's conviction for giving illegal gifts to Espy.

In that victory for Independent Counsel Donald Smaltz, the court said it will hear Smaltz's argument that Sun-Diamond Growers of California could be convicted, even without proof the gifts were intended to influence Espy's official acts.

Smaltz did not fare as well in the case of Jack Williams, a former lobbyist for Tyson Foods Inc. A federal judge rejected prosecutors' request that Williams go to jail for twice lying to investigators during the Espy investigation, and instead sentenced Williams to pay a $5000 fine.

At Williams' trial in June, jurors acquitted him of giving illegal gifts to Espy. Prosecutor Robert Ray, a Smaltz deputy, nonetheless argued that the gifts and Espy's position as a decision-maker should be factors in sentencing Williams.

"The degree of involvement with (Espy) is much too tangential," for an increase in the sentence recommended by federal guidelines, U.S. District Judge James Robertson said.

Those guidelines called for up to a year in jail on the two charges.

Espy, meanwhile, began the second month of his trial on 38 charges related to allegedly illegal gifts from Sun-Diamond, Tyson and other businesses Espy regulated.

Espy has pleaded innocent. His federal corruption case is the culmination of Smaltz's four-year, $17.4 million investigation of the secretary and companies, lobbyists, friends and family associated with Espy's tenure as agriculture chief in 1993 and 1994.

Richard Douglas, a former lobbyist for Sun-Diamond, spent a fourth day on the witness stand Monday, continuing testimony that has both hurt and helped Smaltz's case.

"He knew I worked for Sun-Diamond," Douglas said of his old friend Espy. But Espy still wanted Douglas' advice as he moved into the top Agriculture Department job, and did not seem bothered by the possibility their relationship could seem inappropriate, Douglas testified.

Douglas said he promised his friend he wouldn't put him in an ethically awkward position by lobbying him on issues of specific interest to Sun-Diamond, but the two did talk about more general issues affecting Sun-Diamond.

"He did not give any favoritism to Sun-Diamond," Douglas testified.

The week before, Douglas testified that Espy asked him to lie to the FBI as the investigation began in 1994. It was the most direct allegation of wrongdoing since testimony began Oct. 1.

But Douglas, who admitted to a variety of crimes under questioning by Smaltz, also said prosecutors badgered him into cooperating.

Facing a possibility of four separate trials, nearly 60 years in prison and with legal bills of about $100,000, Douglas pleaded guilty in a related case and became Smaltz's "puppet," he said Friday.

"I knew they wanted Mike, and by giving them Mike I could get off the hook," Douglas testified.

Douglas is also at the heart of the Sun-Diamond case the Supreme Court will consider.

Sun-Diamond was convicted in 1996 of giving $5900 in illegal gratuities to Espy, including tickets to the U.S. Open tennis tournament, luggage and a crystal bowl from Douglas.

A federal appeals court threw out the illegal gratuities conviction and a $1.5 million fine imposed by a federal judge.

The U.S. Circuit Court of Appeals for the District of Columbia said the jury wrongly convicted Sun-Diamond without evidence the gifts were intended to influence Espy's actions.

Smaltz contends that in the Sun-Diamond case and in the current Espy trial, prosecutors are not required to prove that Espy did anything in return for the gifts.