Unformatted text preview: The Ted Stevens Scandal
The Ted Stevens Scandal
or “Prosecutors Gone Wild” White Collar Crime
CRJU E491W Fall 2011
William C. Smith "In 25 years on the bench, "In 25 years on the bench, I've never seen anything approaching the mishandling and misconduct that I've seen in this case," U.S. District Judge Emmet Sullivan Ted Stevens
Ted Stevens Stevens was a United States Senator from Alaska who served from December 24, 1968 until January 3, 2009, and was, thus, the longest
serving Republican senator in history.
Stevens and several other Alaska state and federal politicians were targeted in the federal investigation of political corruption known as “Operation Polar Pen.” VECO and the Stevens Scandal
VECO and the Stevens Scandal Understanding the scandal that led to the indictment and trial of Senator Ted Stevens, and his subsequent “vindication,” requires first realizing the role played by a company called “VECO.”
Originally founded in 1969 as VE Construction, VECO Corporation had become the largest oil field services company in Alaska by 2007.
VECO’s influence on Alaska politicians was legendary and its attempt to gain political influence ensnared a multitude of them besides Ted Stevens. The Roots of Corruption
The Roots of Corruption A broad federal investigation of public corruption in Alaska, involving the FBI, the IRS, and the DOJ’s Public Integrity Section, began likely as far back as 2004, although the investigation was not widely known until August 31, 2006, when teams of federal agents executed search warrants at more than 20 locations around the state, including the offices of six state legislators.
The federal corruption investigation centered around connections between VECO, its CEO, Bill Allen, and several prominent Alaska politicians. The StevensVECO Connection
The StevensVECO Connection VECO first became a known force in Alaska politics in the late 1980s when its CEO, Bill Allen, in 1989, while attempting to donate to candidates who would support legislation that would benefit oil field services such as his, was fined $28,000 for making illegal campaign contributions by funneling the contributions through employee payroll. Stevens first financial involvement with Bill Allen apparently came in 1999 when Allen “traded” Stevens a new Land Rover, valued at approximately $44,000 for a 1964 1/2 Mustang, valued at less than $20,000, and $5,000 cash.
Later that same year, Stevens held up action on federal legislation affecting removal of trade sanctions against Pakistan until the Pakistani government settled a dispute with VECO over a $70 million pipeline that VECO had built for Pakistan but for which it had not yet been paid. In 1999, VECO was awarded a fiveyear National Science Foundation contract worth $70 million to provide logistics and support for polar research without having any previous experience in the field. In 2004, VECO won a sevenyear follow up contract worth up to $100 million. At the time of the awards, Stevens was Chairman of the Senate Appropriations Committee and also had oversight of the National Science Foundation in his role as the senior member on the Senate Commerce Committee. In 2000, Stevens began renovations on his Girdwood, Alaska home that would double its size to over 2400 square feet. Work on the home was valued at in excess of $250,000 but Stevens paid approximately $130,000 to VECO forthe completed work. From 20012006, Ted Stevens’ son, Ben, a member of the Alaska Senate, received $243,250 in “consulting fees” from VECO.
Later, Bill Allen, VECO’s CEO, would testify that Ben Stevens was paid “about $3,000 to $4,000 a month” by VECO “for giving advice, lobbying colleagues, and taking official acts in matters before the legislature.” In 2002, VECO CEO Bill Allen and Stevens were listed as members of the company Alaska's Great Eagle, LLC, a partnership, which owned a race horse. That same year, Bill Allen urged legislators to help ease construction of a $20 billion natural gas pipeline in Alaska. Stevens stated publicly in his reelection kickoff campaign for 2002 that he was making the gas pipeline his number one priority for his next six years in the U.S. Senate. In 2002 and 2003, Stevens tried to build financial incentives into federal energy legislation for the companies that would build the pipeline, including Yukon Pacific and VECO, but the efforts failed. The incentives included loans, tax credits and guaranteed prices in case the price of natural gas dropped below a certain level.
The guaranteed price floors were designed to ensure that transporting and processing the natural gas remained profitable, even if prices or demand declined. In 2005, Stevens approached Bill Allen about getting a new car for his daughter, Lily. Allen arranged for a new Jeep Grand Cherokee. The deal was made between Lily and a VECO employee “for the purpose of hiding Allen's involvement in the transaction.” Allen wrote a personal check to the employee for $35,000, who bought the Jeep for a little more than $34,000 from a dealer.
Lily Stevens then paid the VECO employee $13,000 plus her old car, the 1999 Land Rover previously provided by Allen and then valued at about $9,000, for the $34,000 Jeep. Other Stevens “Deals”
Other Stevens In February 2001, Stevens and his wife, Catherine, signed a purchase contract with a development company agreeing to buy a notyet
built garden unit condo in Florida for $360,000. The contract required a 10 percent down payment, $36,000, but Stevens only put down $5,000 and the remaining $31,000 was provided to Stevens as “an interestfree loan.” In August, on Stevens’ behalf, the company accepted an offer on the apartment for $515,000. After he was paid his $115,000 return on the investment, Stevens sent two checks totaling $31,000 for the earlier loan to the developer. The Investigation
The Investigation In March 2006, the government had begun tapping Bill Allen’s phones and recorded Stevens asking a lobbyist to ask Allen for a job in Phoenix for one of his three sons.
Allen ordered company officials to find a job for the son in Arizona in the summer of 2006. Stevens' son accepted the position with VECO and also received a personal loan from Allen. In September 2006, an article in the Washington Post reported that the FBI had removed “unknown documents” related to Ted Stevens in a raid of his son Ben’s state legislative office.
In May 2007, three Alaska state legislators, Vic Kohring, Pete Kott, and Bruce Weyhrauch, were indicted for accepting cash and favors from VECO in return for their support on legislation that favored VECO. The Corrupt Bastards Club
The Corrupt Bastards Club The name “Corrupt Bastards Club” was a term used to describe the multitude of Alaskan politicians implicated in the massive ongoing federal corruption investigation. The targeted legislators used the term to describe themselves and even had hats and coffee cups made with the term printed on them. In May 2007, VECO CEO Bill Allen and Vice President Rick Smith pleaded guilty to bribery, extortion and tax fraud. As part of a plea deal with the Department of Justice, they admitted giving more than $400,000 in illegal payments to Alaskan public officials and issuing bonuses to VECO employees as compensation for their donations to politicians. On May 29, 2007, the Anchorage Daily News reported that the FBI and a federal grand jury were investigating the “extensive” remodeling project at Ted Stevens' home in Girdwood, Alaska which had been organized by VECO.
The repairs were estimated to have cost $250,000, but Ted Stevens was alleged to have paid about $130,000. The Girdwood home was raided by the FBI and IRS on July 30, 2007. The Indictment
The Indictment Stevens was indicted by a federal grand jury on July 29, 2008 on seven counts alleging that he received hundreds of thousands of dollars in gifts that he did not declare on his US Senate financial disclosure forms
The indictment charged Stevens with engaging in a nearly eightyear scheme to conceal his receipt of more than $250,000 in things of value from VECO Corporation and Bill Allen, the CEO of VECO at the time. The Trial
The Trial The trial of the Stevens case was a hotly contested affair between the original DOJ attorneys assigned to prosecute the case and Stevens’ defense team led by Brendan Sullivan, Jr.
Numerous accusations emerged by the defense regarding the prosecution’s failure to either turn over exculpatory evidence or to make it available in a usable format.
At one point, the trial judge, Emmet Sullivan, ruled that the DOJ lawyers, including Brenda Morris, the chief prosecutor, and William Welch, head of DOJ's Public Integrity Section, were in contempt for failure to comply with his orders and ordered them removed from the case. The “Other” Corruption
The Three new DOJ lawyers were assigned to try the case, Paul O'Brien, David Jaffe and William Stuckwisch.
As they were preparing for an April 15 status hearing they found notes from two prior prosecutors taken during an interview in April 2008 of the government's chief witness, Bill Allen. The notes contradicted testimony Allen gave at trial regarding the value of renovations on Stevens' Girdwood home and to what extent Stevens was billed for the work. Stevens, who maintained he paid for all the work at his home for which he received bills, was accused of failing to report more than $250,000 in home repairs and gifts. The new information could have been used to undercut Allen's credibility, a focus of the defense strategy. On the witness stand, Bill Allen said a mutual friend told him not to expect payment for Stevens' home renovations because the senator only wanted the bill to cover himself. It was damaging testimony that made Stevens look like a scheming politician trying to conceal his freebies.
But in the previously undisclosed meeting with prosecutors, Allen had no recollection of such a discussion. And he valued the renovation work at far less than what prosecutors alleged at the trial.
The new DOJ team also reported to the Court that other evidence had not been turned over to the defense.
On April 1, 2010 Attorney General Eric Holder Jr. announced he was moving to dismiss the Stevens case with prejudice, five months after the conviction on public corruption charges. Judge Sullivan, on Holder’s motion, dismissed the corruption convictions of Stevens and ordered a criminal investigation into DOJ prosecutors who were initially involved in the case. Judge Sullivan also appointed a special prosecutor, Henry Schuelke III, to investigate the lawyers who repeatedly withheld evidence from defense attorneys and the judge during the month long trial. The subjects of the criminal probe were Brenda Morris; Nicholas Marsh, Edward Sullivan; Alaska federal prosecutors Joseph Bottini and James Goeke; and William Welch. What Else DOJ Withheld
What Else DOJ Withheld A complaint filed by one of the two FBI agents assigned to the Stevens investigation alleged that prosecutors covered up evidence and tried to keep a witness from testifying. The agent also stated that the other principal agent on the Polar Pen investigation, Mary Beth Kepner, had an “inappropriate relationship” with the prosecution’s chief witness, Bill Allen. Despite the prosecutorial misconduct, the trial clearly revealed that Stevens, regardless of Allen's discredited testimony, accepted a massage chair, a stainedglass window and an expensive sculpture but never disclosed them on Senate documents. In July 2010, Chad Joy, the FBI agent who was the whistleblower for corrupt prosecution practices in the Polar Pen investigation, left the FBI. On August 10, 2010, Ted Stevens was killed in an airplane crash near Dillingham, Alaska. On September 26, 2010, Nicholas Marsh, one of the prosecutors under criminal investigation, committed suicide. VECO was acquired by Coloradobased CH2M Hill in 2007. ...
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This note was uploaded on 02/20/2012 for the course CRJU E491 taught by Professor Mr.smith during the Fall '11 term at South Carolina.
- Fall '11