Tough Questions For Ambassador Sasser

He may step down as envoy to Beijing. Why now?

Once former Tennessee Senator James R. Sasser was settled in as U.S. Ambassador to China, it didn't take long for Franklin L. Haney, his good friend from Chattanooga, to pop up in Beijing. In the fall of 1996, Sasser rolled out the red carpet for Haney and his wife: They stayed in the ambassador's residence, picnicked at the Great Wall, and took shopping trips to the cashmere markets and silk stalls.

And why not? Franklin Haney is well connected in Washington. For starters, he is a longtime friend of Al Gore and once served as an aide to the Vice-President's father, Albert Gore Sr., when he was U.S. Senator from Tennessee. Now a prosperous real estate developer, Haney had also been a generous contributor to Sasser's four Senate campaigns and had employed Sasser in the year between his upset loss and his confirmation as ambassador. Sasser even worked out of Haney's Washington offices, just a stone's throw from the White House.

But those 12 months, and the $1.8 million Haney paid Sasser during that period, may come back to haunt the ambassador. The Justice Dept., the State Dept., and House and Senate committees are all looking into various aspects of Sasser's work for Haney, and whether it was properly disclosed.

Earlier this month, Sasser "unofficially" notified the State Dept. of his desire to leave Beijing at the end of the year. Why resign such a high-profile post just 2 1/2 years into a surprisingly successful tenure? Sasser's decision is based on personal reasons and has nothing to do with his work for Haney, says Sasser spokesman James Pratt.

But sources say that Justice is investigating two of Haney's real estate deals in which Sasser served as an adviser. One involves a Haney-owned building in Chattanooga that is leased to the Tennessee Valley Authority and the other a controversial government lease on the Portals II building in Washington, half-owned by Haney.

A State Dept. official says Sasser's major problem is that he did not disclose to the Senate or the State Dept. that Haney agreed to pay him a $1 million contingency fee if a $120 million construction loan for the Portals building went through. Sasser reported the payment once he received it, but by then he had been sworn in as ambassador. Sasser's problem is further complicated by the fact that he and Haney signed a retroactive agreement, stipulating how much Sasser would be paid, more than two weeks after his Jan. 11, 1996, swearing-in. On a financial disclosure form, Sasser also underreported his monthly income from Haney by a total of $300,000, but he corrected the error in a recent memo to State Dept. lawyers, saying the omission was inadvertent.

Ethics laws require nominees to disclose all income, assets, and arrangements for payment. They also forbid federal officials from earning outside income once they are sworn in. Senate Foreign Relations Committee Chairman Jesse Helms (R-N.C.) on Aug. 20 asked State Dept. Inspector General Jacquelyn L. Williams-Bridgers to investigate whether Sasser had violated ethics laws.

Separately, the House Commerce Committee's subcommittee on oversight & investigations is seeking Sasser's testimony as part of its 10-month investigation into whether Haney received favorable lease terms on the Portals in exchange for campaign contributions. Besides Sasser, Haney retained Peter S. Knight, formerly a top Gore aide and chairman of the '96 Clinton-Gore reelection effort, to work on the Portals lease. Knight, too, received $1 million from Haney after the $400 million Portals deal closed. Around the same time, Haney and his lawyer funneled $250,000 to five state Democratic parties, whose records were subpoenaed in July by the Justice Dept. Haney, a lifelong Democrat who once ran for a Tennessee House seat, denies his donations played any role in the Portals deal or that any Democratic politician interceded on his behalf.

Still, it all adds up to one big legal headache for pol-turned-diplomat Sasser. Expectations were low when he first arrived in Beijing in the spring of 1996, still trying to master the nuances of U.S.-China policy and grappling with the language. But when the late June-early July summit between Presidents Clinton and Jiang Zemin went off without a hitch, Sasser got high marks. So his sudden request to return to the U.S. has taken China hands by surprise.

TVA TIES. Sasser, 62, spent 18 years in the Senate--six of them as Senate Budget Committee chairman. But Tennessee voters turned him out of office in the GOP onslaught of 1994. The blow was softened when he was nominated for the Beijing post. To top it off, home-state pal Haney agreed to pay him a $100,000-a-month retainer. His assignment: work on several pending real estate deals while awaiting Senate confirmation.

One of Sasser's very first tasks was to help Haney persuade the Tennessee Valley Authority to renew leases on five Haney-owned buildings, including the 17-story Chestnut Street Tower in Chattanooga. In the summer of '95, Haney wanted the TVA--the federal agency that is the nation's top electric-power producer--to renew the Chestnut Street lease for a second 10-year term even though, according to TVA documents, the agency's staff informally recommended terminating it as a money-saving measure. A lease worth almost $17 million was signed that November anyway.

Through spokesman Pratt, Sasser says he "may have" talked to TVA Chairman Craven H. Crowell about renewing the lease. Crowell had served Sasser from 1977 to 1983, first as press secretary and then as chief of staff. Sasser had interceded with the Clinton Administration to help Crowell get the TVA job in 1993, says a government source. Crowell, through a spokesman, denies wrongdoing and declines to say if he ever discussed the lease with Sasser.

While a knowledgeable source says the Justice Dept. is looking into the lease renewal, Sasser's Portals dealings might be a bigger problem. Foreign Relations Chairman Helms wants to know if Sasser, in October, 1995, intentionally misled the Senate and the State Dept. by not revealing his work on the Portals.

Even then, the Portals was a controversial project, and Sasser's involvement might have raised eyebrows. At the time, the Federal Communications Commission was supposed to move into the Portals but was resisting. A succession of FCC officials and many of its employees disliked the building's location in southwest Washington. And some congressional Republicans also didn't want the FCC to move, hoping instead to downsize the agency and loosen its grip on the telecom industry.

RESCUE. In mid-1995, Haney entered the picture, hoping to rescue the faltering project. But Haney wanted changes in the lease negotiated in 1994 by a previous developer, especially a fixed date for payments to begin and a clause guaranteeing that rent would continue uninterrupted even in case of fire or other severe damage. Haney wanted to finance the project by selling tax-exempt bonds, backed by the government's monthly rent payments, and both changes were needed for a favorable bond rating. To negotiate these changes, Haney or his representatives met over a dozen times with officials of the GSA and other federal agencies.

Sasser attended at least four of those meetings but failed to mention them during his confirmation. In the fall of 1995, for example, he met with the Office of Management & Budget official who oversees the GSA and with then-FCC Chairman Reed E. Hundt. (The FCC under Hundt agreed later that year to occupy the building but has since resumed its opposition even though the federal government has already paid out $14 million in rent.) Sasser did disclose two meetings at the GSA to discuss construction of an office building "for partial GSA use." He did not say that the building in question was the Portals.

And Sasser failed to disclose other items. On Aug. 4, the same day a House panel made public a document showing Haney's payments to Sasser, the ambassador sent State Dept. lawyers a memo revealing that he failed to report $300,000 of his 1995 income from Haney. Sasser wrote that the money "was inadvertently not recorded as a deposit in my law office's check register." An aide to Senator Helms says the committee was misled by Sasser about his Portals involvement. "It smells," the aide says.

ILLEGAL FEE? House Commerce Committee Republicans also consider several aspects of the Portals deal unsavory. Haney insists the $1 million fee he paid Sasser was for his work in securing the $120 million loan for Haney to complete the Portals project. But after sifting through thousands of subpoenaed documents, committee staff have found no proof that Sasser actually worked on the construction loan. And the "professional services agreement" in which Haney pledges to pay Sasser $1 million refers to Sasser's work on the Portals lease as well as the construction loan. Says Joe Barton (R-Tex.), chairman of the House oversight subcommittee: "Mr. Sasser apparently had nothing to do with getting the loan and everything to do with getting the changes in the lease" crucial to the bond sale. Under federal law, it would be illegal for Haney to pay Sasser a contingency fee on a government contract.

Sasser denied to Senate and State Dept. lawyers that he had ever lobbied any federal agency while a private citizen. But on Aug. 4, Haney told the House Commerce subcommittee: "I needed somebody to get me taken seriously. Mr. Sasser gave me instant credibility. People would stand up when he walked into the room, and they wouldn't if I walked into the room."

Now it's Sasser's credibility that is at issue. After a long career in the Senate and a triumphant turn as a diplomat, at least four inquiries await the ambassador when he returns to the U.S. That is certainly not the welcome home he might have been expecting.