Ron Brown: Making A Federal Case

Commerce Secretary Ronald H. Brown's troubles are mounting by the minute. After a year-long investigation of Brown's tangled finances, House Government Reform & Oversight Committee Chairman William F. Clinger Jr. (R-Pa.) is preparing a detailed report for the Justice Dept. that lays out a more extensive array of allegations against the Commerce chief than Republicans have charged so far.

While Justice has already launched a preliminary probe that could lead to the naming of a special counsel by spring, Clinger is expected to endorse the appointment of an independent counsel. That would transfer responsibility for the investigation from Congress to a prosecutor with sweeping investigative powers. What's more, Clinger wants the inquiry to include examination of two new allegations:

-- A report in the Los Angeles Times that while at Commerce Brown might have profited from stock in Kellee Communications Inc., a small company that has a pay-phone deal with AT&T. Contacted by BUSINESS WEEK, AT&T officials say they were unaware of Brown's stake in the venture and otherwise have no comment.

-- That Brown provided "inaccurate, incomplete, and misleading" information to congressional investigators about his role in trying to secure oil deals while serving as chairman of the Democratic National Committee (DNC).

By the end of February, Clinger intends to give Justice officials a point-by-point report alleging instances in which Brown may have broken federal laws. Commerce Dept. spokeswoman Carol Hamilton says Brown "will cooperate fully with any Justice Dept. investigation." Hamilton adds that Brown is confident that his business dealings have posed no conflict of interest with his duties as Commerce Secretary and that he will "be fully cleared of any allegations" of wrongdoing.

There's no doubt that Clinger's assault on Brown is tinged with partisan motives. Nevertheless, it will be hard for Justice to resist pressure from Clinger's panel to name a special counsel. And while President Clinton continues to support his Commerce boss publicly, he is no longer expected to name Brown to head his 1996 reelection campaign. "On that score, the Republicans have already accomplished their No.1 goal," says an aide to House Democratic leaders. Another senior Democratic staffer worries that Brown's troubles "are beginning to have a corrosive effect on the President's overall agenda."

But Brown's woes don't end there. The naming of an independent counsel will increase pressure on Brown to resign, despite the high marks he has won from corporate executives for vigorously promoting American exports. Concedes one weary Clintonite: "It's looking real bad."

The allegations arise from Brown's interest in a small consulting business--First International Communications Corp.--and his complex transactions with his partner in the company, Nolanda Hill. Republicans on Capitol Hill charge that Brown concealed $400,000 in 1993-94 income from the sale of his stake in struggling First International, in which he invested no money and claims to have had little direct involvement.

PAPER TRAIL. Company documents obtained by BUSINESS WEEK (BW--Feb. 27) show that while Brown has insisted he was a silent partner at First International, he was involved in two of its ventures to buy oil at discount prices in 1992: from SONANGOL, the state-owned oil company of Angola, and from a member of the Saudi royal family. The oil deals, which collapsed, stood to net Brown millions.

So far, Brown has kept a low profile, hoping the controversy will blow over. But with Republicans opening attacks on so many fronts, that's unlikely. Don't be surprised if the persuasive Brown launches a new promotion campaign: selling himself as an honest wheeler-dealer.

Brown's Mounting Woes

Congressional Republicans contend that an independent counsel is now needed to examine the beleaguered Commerce Secretary's tangled personal finances. Brown denies any wrongdoing. Here are the GOP's main allegations against Brown:

MISLED House Government Reform & Oversight Committee Chairman William F. Clinger Jr. (R-Pa.) by claiming he played a passive role in First International Communications Corp.

CONCEALED $400,000 in payments from business partner Nolanda Hill. Provided false, incomplete, and misleading information on his Public Financial Disclosure Report.

VIOLATED federal conflict-of-interest laws by not divulging his stake in a company with a multimillion-dollar joint venture with AT&T.


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