to Mr. Hundt's chief of staff that the FCC now withdraw its conditional acceptance of the Portals space, the chief of staff overruled him.29 GSA officials clearly believed that the FCC's ultimate cooperation in this move would only come "top-down," as Mr. Lawson described his and Mr. Peck's belief in an internal GSA e-mail dated January 15, 1996. Appendix C, at 509. In fact, in his interview with Committee staff, Mr. Lawson expressed his belief that, by late 1995 or early 1996, Chairman Hundt was finally "on board" with the relocation, while Mr. Fishel continued to oppose the move for various reasons. Notably, Mr. Fishel -- who was the top career official at the Commission and had day-to-day responsibility for the Portals matter -- was never, at any time, invited to or even informed about the numerous meetings that the FCC's political officials were having with Mr. Haney and his representatives on the Portals. Appendix C, at 384-385. Mr. Fishel testified that he often consulted with Mr. Peck about what positions the Commission should take with respect to various matters relating to the Portals, and thus "it came as a surprise to me that I had not been informed about [those meetings], at least after the fact, so I would know what transpired." Appendix C, at 384. He further stated that it would be "unusual" for him not to be advised of such meetings because "I continued to have responsibilities in the area where any knowledge of discussion relating to the topic would have helped me represent the agency." Appendix C, at 384. Mr. Peck, however, testified that he did not believe Mr. Fishel had any need to know about these meetings. Appendix C, at 385. The preceding chain of events leads to the following conclusions. First, while Mr. Haney may not have cared whether the Portals tenant was "the FCC or the Bureau of the Prison" (Appendix A, at 20), a willing and cooperative tenant any tenant was something that the investment community and potential purchasers of his Portals-backed bonds certainly would view as important in deciding whether to provide financing. Thus, Mr. Haney had a strong interest in making sure that the intended occupant of the Portals, the FCC, ceased its opposition and delay tactics, and he and his representatives took steps to ensure that outcome (however fleeting the FCC's cooperation ultimately may have turned out to be). Given these facts, Mr. Haney's clear denial, under oath, that his partnership and financing decisions were not influenced in any way by the FCC's decision to end its opposition and accept the Portals space assignment is in conflict with the sworn testimony of his own representatives, and appears to be designed to insulate him from charges that he sought to influence the FCC's decision on this matter. Accordingly, further investigation by the Department of Justice is warranted as to whether Mr. Haney violated the False Statements Act, 18 U.S.C. § 1001, and/or the Federal Perjury Statute, 18 U.S.C. § 1621, in his sworn testimony before the Subcommittee on this particular matter. Second, the assertions by FCC officials that the Commission did not change its position on the acceptability of the Portals location after Mr. Haney's involvement only tell half of the story. While its "official" position may have remained unchanged -- namely, that it was willing to relocate to the Portals provided that space and other details could be worked out the FCC's official and unofficial actions as late as early 1995 reflect an opposition rooted in its dislike of the remote, southwest Washington, D.C., location of the Portals site and are simply not consistent with the notion that the Commission ever would accept this space willingly. While the FCC was, for obvious reasons, reluctant to express publicly its objection to the location per se, its continuing effort to find other faults with the Portals was viewed by many at GSA and in Congress as a ruse to mask the Commission's true objection. It also appears clear that the FCC's change in position was, as GSA acknowledged, driven not by the career officials ostensibly in charge of this matter, but rather by the 29 While Mr. Fishel testified that he did not recall actually recommending this rejection to Mr. Blair Levin (who was Mr. Hundt's chief of staff at that time), in an earlier interview with Committee staff, Mr. Fishel stated unequivocally that he, in fact, recommended that the FCC reject the space assignment, but that Mr. Levin told him the Commission would not do so because it would not be consistent with its prior public statements on this matter. Both Mr. Levin and Mr. Peck told Committee staff that they did not recall any conversations with Mr. Fishel or with each other about this particular matter. top political officials at the FCC, who had been meeting with Mr. Haney and his representatives throughout 1995.30 Similarly, the Commission's recent public claim that it was "committed by law" to move to the Portals since the August 1994 court decision requiring GSA to resume the procurement process also is highly misleading. Ms. Steiman -- the Commission's principal legal advisor on the Portals matter -- told Committee staff that the agency's legal view at that time was that the court decision did not require either GSA to award the procurement to Parcel 49C or the FCC to relocate to the Portals site. Her recollection is supported by both contemporaneous and recent Commission documents, as well as a Committee interview of GSA's legal counsel, Ms. Roach, who confirmed that the FCC took such a legal position following the court opinion. Appendix C, at 480-487, 527. In addition, the claim that the FCC move to the Portals was a legal fait accompli prior to Mr. Haney's involvement ignores the fact -- as repeatedly stressed by GSA -- that GSA never waived its right to substitute any tenant for the Portals space and never was required by law to assign the space to the FCC,31 IV. THE MILLION DOLLAR FEE ARRANGEMENT BETWEEN HANEY AND The Committee's current investigation was prompted by information suggesting that Mr. Knight had received a lump sum payment of $1 million from a client -- Molten Metal Technology -that already was under investigation by the Committee because of questions surrounding its receipt of tens of millions of dollars in grants from the Department of Energy. As part of that earlier investigation, Mr. Knight was questioned by Committee staff about whether he had received a $1 million payment from Molten Metal or related entities shortly before leaving his firm to run the Clinton-Gore re-election campaign in May 1996, and he flatly and vehemently denied it. When the Committee later was informed by the managing partner of Mr. Knight's law firm that Mr. Knight had received a "performance" payment from an unidentified client in April 1996, Subcommittee Chairman Barton attempted to question Mr. Knight about the payment at a public hearing in November 1997 on Molten Metal's funding. At that time, Mr. Knight refused to acknowledge the payment or state who the client was or for what performance he received the payment. Shortly after that hearing, Time magazine reported that Mr. Haney had acknowledged making the $1 million payment to Mr. Knight. Thus, as it turned out, Mr. Knight did, in fact, receive a $1 million payment from a client shortly before taking his leave of absence from his firm -- but it was not from Molten Metal chief William Haney, rather it was from Portals developer Franklin Haney. In that same article (Appendix C, at 163), Mr. Haney described the fee as payment for "general legal work on the [Portals] project" (emphasis added). - Based on Mr. Haney's disclosure, a related Associated Press article from November 1997, and an October 1997 Business Week article entitled "Did Gore Open A Door?" which contained allegations of political favoritism on the Portals deal coupled with significant campaign contributions (Appendix B, at 333-335) -- the Committee formally launched an investigation in November 1997 into the circumstances surrounding the planned relocation of the FCC to the Portals. In particular, the Committee sought to learn the nature of Mr. Haney's fee arrangement with Mr. 30 31 Although broad statements have been made about the unwillingness of the FCC to It also would be inconsistent with Mr. Peck's testimony that he believed, and informed Mr. Knight, that there was only a "50/50" chance of the FCC moving to the Portals. If, in fact, the FCC had been required to relocate to the Portals under a court order, both Mr. Knight's question about whether the FCC was going to move there and Mr. Peck's response that a move was far from certain would be illogical. Knight, and whether it was a contingency or performance fee for successfully obtaining GSA lease changes or the FCC's commitment to relocate to the Portals. Due to the risk of improper influence arising from such arrangements, Federal contractors are required under Federal law to certify that they did not retain anyone to assist in obtaining their contracts on a contingent fee basis. 41 U.S.C. § 254(a). After the Committee initiated this investigation, Mr. Haney quickly changed his public position with respect to the $1 million fee, stating through his spokesman that the payment was for Mr. Knight's work over three years on multiple projects, not just the Portals. In letters to the Committee, Mr. Haney's attorney, Stanley Brand, made the same representations about the nature of the $1 million fee on Mr. Haney's behalf. Furthermore, when questioned by the Subcommittee about this matter and his earlier statement to Time, Mr. Haney repeatedly stated that the $1 million fee was for all of the projects on which Mr. Knight was working, and that he did not recall ever speaking with anyone from that magazine or making the statement that was attributed to him. Appendix A, at 24, 29, 109, 114, 195, 240; Appendix C, at 307.32 Yet the evidence developed by the Committee over the past year strongly suggests that Mr. Haney was telling the truth the first time -- before the Committee's public investigation began -- and that his subsequent representations and sworn testimony to the contrary were knowingly false. According to the testimony of Mr. Knight, when he began working for Mr. Haney in May 1995, they did not have any formal understanding with respect to compensation. Appendix B, at 388-389. Rather, Mr. Haney simply told Mr. Knight "don't worry about that, we will be generous," and Mr. Knight. "trusted" him. Appendix B, at 262, 389. Thus, despite the lack of any written retainer agreement or specified compensation, Mr. Knight actively represented Mr. Haney for the next five months, arranging meetings for him with GSA and FCC officials on the Portals.3 In October of that year, Mr. Knight -- in what he described as an attempt to "get some clarity" about their fee arrangement (Appendix B, at 262) -- sent Mr. Haney a written engagement letter on October 23, 1995. That letter, which was drafted and signed by Mr. Knight personally (Appendix B, at 267, 389) and later counter-signed by Mr. Haney, provided that Mr. Knight's law firm would represent Mr. Haney's company for three years, beginning June 1, 1995, on "real estate projects of interest to the Haney Company," and that the firm "will bill the Haney Company on a project-byproject basis at a rate to be determined." Appendix B, at 319-320. Both Mr. Knight and Mr. Haney testified that, as of that date, this agreement accurately reflected their understanding of the terms of the engagement -- that is, Mr. Knight would be compensated (apparently "generously" since the actual fee is not specified) on a project-by-project basis. Appendix B, at 261-262; Appendix A, at 113.34 However, according to Mr. Knight and Mr. 32 There no evidence that Time ever ran a correction of this story. 33 34 The failure of Mr. Knight -- a practicing attorney in the District of Columbia -- to formalize, in writing, the details of the engagement and the compensation therefor prior to engaging in significant work for Mr. Haney could be a violation of the D.C. Bar's Rules of Professional Ethics, which require a written retainer agreement, specifying the fee, before the outset of a new engagement or within a reasonable time after commencement of the representation. See Rule 1.5(b) of the District of Columbia Rules of Professional Conduct. Further, even when Mr. Knight finally did send Mr. Haney a retainer letter, it failed to specify the fee, as required by the bar rules. The former managing partner of Mr. Knight's firm, Mr. Bernie Wunder, testified that not only did Mr. Knight's actions appear to violate the ethics rules, but that they also violated firm policy. Appendix B, at 523-525. Mr. Knight acknowledged in his testimony that his normal practice would be to include the fee in the retainer agreement (Appendix B, at 268), and his executive assistant testified that Mr. Haney was the only client whose engagement letter did not specify the actual fee. Appendix B, at 525. Haney, sometime between the end of October and mid-December of 1995, they orally modified this written contract, agreeing instead to a $1 million flat fee to cover all of Mr. Knight's work over a three year, mostly prospective period on projects determined by Mr. Haney. Appendix B, at 256, 262, 389; Appendix A, at 109-110, 114-115, 194-195, 238-241. Mr. Knight testified that, under this arrangement, he could bill Mr. Haney the $1 million fee "any time I wanted it to be billed, and it would be paid when he had funds available." Appendix B, at 380. When questioned by the Subcommittee about the circumstances surrounding the making of this oral modification to their contract, neither Mr. Knight nor Mr. Haney could recall anything other than the $1 million deal -neither man could recall if this agreement took place over the phone or in person or any other details about the timing, location, context, or substance of the conversation. Appendix A, at 238-240; Appendix B, at 262-263. This alleged oral modification of the formal written retainer agreement was never memorialized in writing, despite the requirements of both the local bar association and Mr. Knight's law firm that fees and other details of an engagement be specified in writing. Appendix B, at 523-525. B. The Actions of Knight and His Law Firm Concerning the $1 Million Fee - - Mr. Knight decided to bill the $1 million fee in December of 1995. Appendix B, at 273. Sometime in mid-to-late December 1995, Mr. Knight had a conversation with his executive assistant, Ms. Jewelle Hazel, concerning the end-of-year billings. In that conversation which Ms. Hazel testified occurred between December 12 and December 19, 1995 (Appendix B, at 576) -- Mr. Knight told her "to bill a million dollars a flat fee of a million dollars" to Mr. Haney. Appendix B, at 544.35 In accordance with those instructions, on January 3, 1996 -- which was the same day that GSA and the Portals partnership formally signed the first supplemental lease agreement -- she prepared an invoice for Mr. Haney containing a $1 million fee for "legal services rendered 1994 and 1995." Appendix B, at 322. The invoice did not state that the fee was a retainer for three years of mostly prospective work -- as Mr. Knight and Mr. Haney now allege. When questioned about this matter, Ms. Hazel testified that she had made a "mistake," that she had not discussed any particular invoice language or time frame with Mr. Knight, and that she did not know why she had specified on the bill those particular years or why she had used the past tense term "services rendered" as opposed to the term "retainer" to describe the fee. Appendix B, at 537-538. She had earlier acknowledged that virtually all of Mr. Knight's other clients were on retainer (Appendix B, at 528), making her independent use of the phrase "legal services rendered" even more difficult to understand. But Mr. Knight, in his testimony, made clear that the use of the past tense term "legal services rendered" was not a mistake and that he intentionally instructed his firm that the $1 million was for work performed in 1995. Appendix B, at 387. When he was asked why he chose to bill this fee in December of 1995, he responded: Because of the accounting practices that we have in the firm, it was Appendix B, at 380. In other words, had Ms. Hazel described the fee as a retainer for work through 1998, as Mr. Knight now claims it to be, he would not have received the distribution of the bulk of this fee in 1996, as he admits he did. Appendix B, at 490. Thus, it appears that the manner in which Ms. Hazel structured and worded the invoice was no "mistake."36 35 36 This conversation took place after GSA had agreed to Mr. Haney's terms as a condition for making the loan to Parcel 49C. See Appendix A, at 345-346. As for the peculiar reference to services performed in 1994, both Mr. Haney and Mr. Knight testified that the latter was not performing any Haney-related services in 1994. Appendix A, at 209; Appendix B, at 381-382. However, the inclusion of This conclusion is reinforced by the testimony of Mr. Knight's partners and the law firm's accountant. Mr. Bernie Wunder, the managing partner of Mr. Knight's firm at the time, testified that firm distributions are based on when the work was performed, not when the fee is paid, and acknowledged the rarity of clients paying in advance of the work actually being performed. Appendix B, at 502-503. Two other former partners, Mr. William Diefenderfer and Mr. Larry Higgins, concurred, testifying that had Mr. Knight told them the $1 million was for future work, they would have "suggested that we set up a trust account for the client" and billed against it as the fee actually was earned. Appendix B, at 503-504. The firm accountant, Ms. Suzie Reeder, testified similarly, stating that, if the invoice had described the fee as a prospective retainer that had not been fully earned, "nothing would have been booked other than what was earned": Appendix B, at 556-557. Ms. Reeder added that, in her past experience with the firm, when a client paid a partner in advance of the work being performed, she segregated the money and billed against it as the fee was actually earned. Appendix B, at 505-506, 557. By contrast, the $1 million check actually was accounted for as money that had been fully earned by the firm in 1995 (Appendix B, at 514-515, 557), when -- if Mr. Knight's version is to be believed -- it should have been booked and treated as a firm liability, which was not done. Appendix B, at 520-521, 542.37 These accounting issues, however, are not the only evidence suggesting that Mr. Knight viewed this fee as money already earned for past performance. On April 1, 1996 -- just days after GSA agreed to the final lease changes demanded by Mr. Haney in order to close on the Portals financing -- Mr. Knight and Mr. Haney met in the latter's offices, and Mr. Haney wrote out the $1 37 two calendar years on the bill as opposed to just 1995 -- certainly could dampen suspicions about the amount of the fee and the work that was performed for it, since Mr. Haney was not involved in the Portals project in 1994. Similarly, it would appear that, if the fee was for three years of work, the income |