Start a War? Violate a Constitutional Privilege? Spur Economic Disaster?
For Al D’Amato, Nothing’s Too Much for a Big Donor.
One more sleaze story that puts Al D’Amato in bed with a contributor is like one more sex story about Ted Kennedy, in or out of bed. A decade of endless revelation has made New York’s two-term junior senator the Madonna of corrupt coupling. But since he is saluted as Senator Pothole as often as he is derided as Senator Shakedown, all that the electorate is left with is the perception that at least the state has a feisty senator who never fails to shake the pot. With the election less than a week away, despite almost a dozen years of saturation tawdriness, Al D’Amato’s most spectacular senatorial achievement is that he has somehow managed to immunize himself from ethics charges, at least in certain regions of the public mind, by making new sagas of his duplicity so “hopelessly” redundant that few readers have the patience to wade through them again.
Many of the millions of New Yorkers who will vote again for him next week will do so knowing he is a con man. You can see them holding up their hands when they are approached by reporters and insisting that they don’t want “to hear about the past.” They know he is taking care of himself — horse-trading with every special interest imaginable to pay for the $21 million worth of televised lies that have been protecting his Senate seat since 1981. But as long as he convinces these voters that he might also be taking care of them free of charge, they will tolerate his bartered service.
D’Amato’s campaigns are seen as raffles with enough prizes for everyone who plays to win a little something. Sure, those who buy a block of tickets get a Washington wallet-full, but ordinary voters out in Buffalo or Melville think they own a reassuring piece of him themselves, even if all they get is a promised tax break or a bone tossed to a personal bias. He will never be so lofty they can’t visualize him coming to their house for dinner, and bringing an expensive dessert. If he is Jesse James, it is not their bank deposits he is stealing.
Inside this review of D’Amato’s life and times are three new Fonz fables that show just how far he is willing to go for the ticket buyers who can afford the wallet-full. For friend and financier Donald Trump, he was willing to violate the constitution by volunteering privileged information on the witness stand. For Drexel-Burnham, he was just as prepared to submarine legislation that, had he pushed it, might have restricted junk bond influence on S&L collapses and hostile corporate takeovers. The story also reveals D’Amato’s shocking effort to manipulate the Manhattan U.S. Attorney’s office in ways that benefitted his Drexel donors.
The third episode in this trilogy of a contributor-conscious career exposes D’Amato as a senator whose attitudes about the Noriega government shifted with those of a longtime donor, even to the point of becoming an advance man for an invasion that would ultimately secure his client company’s oil pipeline interests.
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Of course, it’s a given that D’Amato believes in nothing. Though it has somehow passed unnoticed all these years, even his personal life is a fraud. As soon as he won his 1980 Senate race, just before he assumed office two months later, he separated from Penny, his wife of many years. Twelve years later he is still separated, yet they have never divorced. In the meantime he has dated half of Manhattan and Washington, demonstrating an ironic fondness for former and current prosecutors, yet maintaining the political sanctity of his Catholic marriage, a presumed prerequisite for reelection in a decidedly Catholic state. While other Catholic politicians with wayward views but less wayward lives must keep a wary distance from the unpredictably disapproving cardinal, tuxedoed Al D’Amato is welcome at the Al Smith dinner or at O’Connor’s hospital bedside afterward, photographed on his way to this corporal act of mercy by attending news cameras and allowed by a tolerant cardinal to wrap himself around a church pillar. Perhaps O’Connor thinks that Al, too, is a celibate.
The senator’s technical avoidance of the sinful stain of divorce, as well as his possible pillow talk with a top organized crime investigator, might ordinarily be fodder for the New York Post; but in recent years, it has been owned by the senator’s longtime finance chair, Peter Kalikow. It would not be too hard for the Post to source the story, since D’Amato began using his friend Kalikow’s Fifth Avenue apartment as his legal address when he left his wife all those years ago, even sometimes visiting the developer’s penthouse for a change of clothes.
Consistent with this counterfeit life, D’Amato has, in the final weeks of what may be his final campaign, shed a “principled” position a day, transforming himself into a Clinton Republican, redefining his abortion position, embracing gays, waffling on plans to punish the welfare pregnant. His commercials have been such transparent hokum — ranging from the ridiculous misuse of Benito Mussolini, Geraldine Ferraro, and 26-year-old assembly votes by opponent Bob Abrams — that D’Amato almost seems to be winking at the voters, offering up openly banal explanations so they can justify their otherwise indefensible urge to support him. This campaign of high-priced deceit has been such an outrage because D’Amato knows he is not just running for reelection; he is running for his life, painfully aware that a Justice Department liberated by a Democratic administration, with federal prosecutors in New York nominated by two Democratic senators, might not be as forgiving as those who’ve been in charge of the constant probes of him that have occurred in recent years.
While D’Amato may still be able to draw on this cynical grassroots acceptance and win, he knows now that a consensus has finally coalesced against him at the elite levels of New York politics. When Newsday and The New York Times brilliantly assailed him in same-day endorsements of Abrams last week, he officially became an outcast, revered only by the “he’s-never-been-charged-with-a-crime” Post. Even when he extended his hand for one final dance with his old partner Mario Cuomo, the governor slapped him in the face, apparently well aware that too many people were watching to resume their once mutually soothing tango. As the Times, which had endorsed D’ Amato last time, put it about the senator’s vice, enough was finally enough.
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Mike Armstrong, the savvy and loyal D’Amato lawyer and confidant, reminded me last week that the ethics cloud over D’Amato was first floated by the Voice during his bitterly reminiscent 1980 campaign. But when Jack Newfield, Joe Conason, and I finished that four-part series, we sadly came to realize that we’d actually helped him win his narrow victory. The grave charges we launched — all based on his prior career as a Nassau County official with a penchant for plunder — created such a stir that we’d go to an Alphonse press conference and the cameras would surround us. The D’Amatos, with brother Armand playing an aggressive role in the publicity war, successfully positioned themselves as the targets of the far-left, progay, anti-Italian Voice and rode the hard truth of our charges to triumph. (Then, as now, D’Amato declined to talk to the Voice.)
I remember the Fonz’s father, Armand D’Amato Sr., whom we unveiled as a double-dipper on public payrolls who collected exorbitant insurance brokerage fees from the county through his son, chasing our car down an Island Park street, shaking his fist at us. I remember our discovery during the series that D’Amato had hired a private investigator who’d once worked for Colombo capo Sonny Francese to tail us.
But mostly, I remember the salty taste in our mouths at the end, disappointed that we had been portrayed as mere partisans, though our portrait of the Nassau GOP machine was a carbon copy of our earlier work on the Brooklyn Democratic organization.
Since then, the breaking stories about Alfonse, published by every newspaper but the Post, have come nonstop. He is the only elected official in the state who’s been the recipient of three sets of illegal contributions, all of them earned by public performance on behalf of the compromising donors — $30,000 from Wedtech (“the most corrupt little company in America,” according to the subtitle of one book); $10,000 from Unisys, the defense contractor whose payments to brother Armand led to his current indictment; and $32,000 from a group of Puerto Rican HUD developers, who are also the subject of a pending criminal case.
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D’Amato is the only senator in America who has acknowledged having conversations on behalf of two mobsters with a United States Attorney, contacting Rudy Giuliani in one instance to “warn” him that “lawyers” thought he might be “embarrassed” over the possible loss of a racketeering and murder case against boss of bosses, Paul Castellano. Just as unique was D’Amato’s appearance as a character witness for mob-tied disco owner Phil Basile, whom the senator kissed on both cheeks in the courtroom after proclaiming him “a man of honor and truth.” D’Amato rents his office to this day — paying the highest congressional rent in America and far more than the market rate in the building — from a landlord who was involved in a parking lot deal with convicted felon Basile (both Basile and the building’s owner, who have contributed thousands of dollars to D’Amato, have also been represented by brother Armand).
Of course he has also distinguished himself before the Senate Ethics Committee, which found barely a year ago that he “conducted the business of his office in an improper and inappropriate manner” by letting his brother “systematically misuse” it for “personal gain,” writing a letter for Unisys on the senator’s stationery. While others in Washington have only bad checks to count, D’Amato may have set other kinds of Guinness records — seven immunized witnesses forced to testify about his actions, 41 wiretapped conversations from various federal jurisdictions where his name came up, 35 potential witnesses who took or said they would have taken the Fifth Amendment rather than testify about him, and four full days of sealed testimony by a senator seeking reelection.
Of course the committee never considered the charges now being entertained by a federal grand jury in Washington, which is reportedly examining the senator’s attempt to induce a HUD regional director to perjure himself for him. As Newsday‘s Bob Greene has revealed in recent days, the Washington prosecutors are also reviewing for possible perjury prosecution 11 pro-D’Amato witnesses who appeared before the Ethics Committee about the Island Park houses, and they are doing it on the recommendation of the Senate.
D’Amato has of course so far survived the recurring investigations that have dogged him, but conduct that so frequently attracts prosecutors yet falls short of an indictable offense is hardly an affirmation of innocence. Indeed these bouts with grand juries have become so routine that a self-conscious Newsday downplayed Greene’s exposé of the latest one, and the Gabe Pressmans of this city’s media pack have yet to shove a mike under the senator’s chin to even ask him about the alleged perjury coaching. A prospective deputy mayor who may or may not have harassed a female aide has gotten much more attention, even in the Times, than these criminal allegations against a senator up for reelection. Astonishingly, Greene’s second story, shaking the foundation of the Ethics Committee’s already hesitant findings on Island Park and announcing the probe of the 11 witnesses, was shunted off on page 23.
It is indisputable that if Abrams, rather than D’Amato, were suddenly revealed as the subject of a criminal probe, it would be banner headline news in every newspaper and would bury his candidacy. But even though the new charges against D’Amato resonate against a background of endless allegations (or perhaps because they do), they cannot compete with the media magnet of another black hard-on and have been relegated to the back pages. D’Amato is once again saved, in part because of the familiarity of his sins. It is as if the worse editors in this city’s media establishment believe he is, the less they will allow themselves to reveal it.
Almost every one of these D’Amato scandals has involved a contributor, an unsurprising fact for a public official who proudly told the Times that “only 35 per cent of those who give expect something in return.” Since that adds up to over $3 million in quid pro quo contributions since 1981 — at a mere $ 1000-a-head — the senator has been very busy indeed, by his own account, delivering to demanding donors.
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The irony is that he has successfully made Abrams’s questionable fundraising techniques a focus of his campaign commercials, zeroing in on the Feerick Commission’s conclusion that the Attorney General solicited a $15,000 contribution from a developer who had millions in condo plans pending before Abrams’s office. What no one’s noticed is that D’Amato himself has collected $23,500 since 1980 from the family and employees of this developer, who goes unnamed in the senator’s television commercial, and that D’Amato has done more for the developer than Abrams ever dreamed of doing. The developer is Donald Trump, who in addition to contributing actually hosted D’Amato’s annual fundraising dinner at the Grand Hyatt at a deliberately reduced rate five years in a row during the ’80s. The senator in fact may have decided not to mention his friend’s name in the commercial for fear of jeopardizing the possibility of spending another weekend at Trump’s dazzling Mar-A-Lago in Palm Beach, as D’Amato did in the late ’80s — a far cozier scene than Abrams’s breakfast with Trump.
While there is no evidence that Abrams ever personally participated in his office’s review of Trump’s condo plans, D’Amato himself took the witness stand for Trump in the biggest legal case of Donald’s life, the United States Football League’s $3 billion antitrust suit against the National Football League in 1986. D’Amato was used as a witness to lay the groundwork for a key contention in the USFL case that was, in the end, flatly rejected by the jury: that the NFL had engaged in a conspiracy with New York Jets owner Leon Hess to block Trump’s USFL team from getting a New York stadium and franchise. D’Amato testified about three conversations he had with Hess that supposedly proved this thesis, but a Voice review of the legal billings submitted to the USFL after the trial has revealed that a partner in the law firm Trump handpicked for the floundering league talked to D’Amato shortly before two of the conversations with Hess. The timing of these contacts suggests that the Fonz may have been acting as a conscious agent of Trump’s lawyers when he called Hess, setting the Jets owner up for testimony at trial.
The Voice has also obtained sealed sidebar discussions with the judge prior to D’Amato’s testimony revealing that the senator was planning to testify about much more than his Hess conversations, but was stopped by an embarrassing legal ruling. He was prepared to detail talks he had with other senators who supposedly told him that NFL Commissioner Pete Rozelle “was making personal threats to yank franchises unless they voted right” on certain key NFL antitrust legislation “or to grant franchises if they would go that way.” But U.S. District Court Judge Peter K. Leisure ruled that D’Amato’s proffered testimony would violate the Speech and Debate Clause of the U.S. Constitution, which bars senators from revealing in court privileged conversations with other senators. The judge prevented Trump’s lawyers from asking any questions about the Rozelle conversations, though D’Amato was apparently quite willing to break a senatorial confidence for his ingratiating supporter.
Such boldness, however, was a small matter compared to how far he would go for that other billionaire emblem of the ’80s, Mike Milken.
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What Jesse Kornbluth in his new book, Highly Confident: The Crime & Punishment of Michael Milken, called the “leveraged buyout of Al D’Amato” is already a fairly well-known story. First reported in 1986 by The Wall Street Journal, it is standard D’Amato fare, only this time with a peculiarly high level of impact. When the Fonz took the money and tanked it for Drexel, he managed, according to much of the hindsight analysis, to encourage the junk bond explosion in both corporate takeovers and S&L’s, leading eventually to the collapse of companies and banks laden with over-priced debt.
While the Senate Ethics Committee cleared D’Amato of “any improper conduct” on the Drexel charge, its carefully
worded finding addressed only the question of whether D’Amato had “changed his position on junk bonds” after he “promised to introduce restrictive legislation.” Since the committee restricted itself to reviewing the charge only in its most damning form — a callous reversal of position after collecting the cash — the result was predictable. Unless Drexel witnesses at the very top were willing to say that they told him they’d give him thousands if he would tank the swirl of 1985 reform bills, the committee was doomed to come up dry.
Instead, of course, something vaguer happened, and either Mike Milken, who personally hosted the May 31, 1985, D’Amato fundraiser at Chasen’s in Beverly Hills, nor D’Amato, who tried embarassingly hard in retrospect to insinuate himself deeply inside the glamorous Drexel fast track, is likely to ever say just what it was. But the fact is that the Milken party occurred, generating at least $34,000 for Alfonse barely two months after his subcommittee launched hearings on junk bond reform and just a week before Drexel CEO Fred Joseph testified. Then, one week after D’Amato produced a watered-down study bill on junk that December, Joseph and 34 other Drexel executives bought $500 tickets to a giant D’Amato fundraiser in New York.
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D’Amato called the timing “absolutely coincidental,” but what is not coincidental was just how often this sort of awkward happenstance has hit the senator. When these two large chunks of donations are added to those from Drexel’s PAC and other individual contributions, the Fonz’s total hits $70,750 by the end of 1986. Voice calls to many of the donors last
week found few willing to discuss their generosity, though one, Jon Jetmore, said that “someone” at the company asked him to give, indicating that “it would be good for Drexel” and explaining that “there were few in Congress defending Drexel publicly and that D’Amato was the only one the company felt would listen.” Jetmore, who contributed after D’Amato produced his toothless December bill, recalled that the Drexel donations might have been connected with the fact that D’Amato had “voted against inhibiting legislation” Drexel opposed.
If most of the donors were still shy about such a straightforward explanation, the senators who were pushing for restrictive legislation at the time no longer are. Former Wisconsin senator Bill Proxmire, who has never before been quoted on the subject, said in a Voice interview last week: “The legislation could’ve been very good for our economy because it would have prevented hostile takeovers and that is certainly one of the reasons we have so many major bankruptcies today. [D’Amato] got contributions because he was chairman of the securities committee; they were buying influence. PAC’s don’t contribute because they admire someone’s principles or their looks. I think D’Amato was unusually supportive of Drexel. That is why he got the contributions.”
Senator Howard Metzenbaum told the Times back in 1986, three weeks after D’Amato was reelected, that D’Amato had given him “a firm commitment” to introduce a bill aimed at curbing takeovers “before the July 4, 1985 recess,” but that it “never came to pass and I never heard another word about it.” Last week he told the Voice that D’ Amato later “offered a number of excuses for his failure to do so, none of which I considered compelling.” Metzenbaum added that D’Amato’s eventual bill came so late and was so weak it “effectively eliminated any possibilities of passing takeover legislation that session,” which came at an unusual, historical moment, when leading Republicans were temporarily outraged by Milken tactics. “It’s clear that by failing to move forward as promised, Senator D’Amato squandered a golden opportunity to enact meaningful reform at a point in time when it was needed most.”
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D’Amato counsel Mike Armstrong likes to point to a supposed discrepancy between Metzenbaum’s post-1985 comments and his attempt that November at typical senatorial back scratching when he praised D’Amato during a committee session for running “excellent hearings.” But the fact is that in the same brief statement, Metzenbaum said he was still hopeful his reluctant colleague would “soon introduce his own tender offer bill,” making his ultimate disappointment perfectly consistent.
Most of the reporting about D’Amato’s Drexel relationship ended with that bill, but the relationship itself didn’t. Prime Drexel clients like Integrated Resources dumped $58,750 into the D’Amato coffers, much of it in the midst of the 1985 machinations, and employees of Saul Steinberg’s various Reliance entities donated another $56,000. Everyone from Drexel raider Boone Pickens to the Milken-manufactured billionaire Nelson Peltz to several Drexel lawyers like Richard Sandler to Milken publicist Linda Robinson dropped change in the passing D’Amato hat.
The senator was flown out to Beverly Hills for four days in April of 1986 at Drexel’s expense, paid a $2000 speaking fee, and entertained at the infamous High Yield Bond Conference, better known, at least after Connie Bruck’s 1988 book, as “The Predators’ Ball.” Before bringing him out to the coast, Drexel paid for a strange stop in Denver, where D’Amato was apparently the beneficiary of another fund raising festival, collecting over $18,000 from 51 Colorado donors, led by executives of the MDC home building company. Described in S&L bestseller Inside Job as “a junk bond Frankenstein given the spark of life by Dr. Milken,” MDC president Larry Mizel kicked in $1000 for D’Amato, while his brother and several other company officials gave $300, the ticket price for the party (two Mizel companies later pled guilty to making illegal campaign contributions to a Colorado congressional race).
Once out in California, D’Amato stayed in the luxury Palm Desert, condo of Columbia Savings and Loan president Tom Spiegel, currently under indictment in Los Angeles for bilking his bank of millions and one allegedly illicit transaction with his mentor Milken. Drexel’s Dennis Levine, the insider-trading felon who wrote his memoirs in prison and was himself a D’Amato donor, recounts one brief exchange with D’Amato during the notorious conference festivities: D’Amato, “effusively working the room” at a Chasen’s dinner party and approaching his table, slapping Boone Pickens on the back and extending “a warm hello” to Boesky. When D’Amato moved on, Boesky muttered to Levine, “That bastard cost me five thousand dollars” — an apparent reference to past campaign contributions.
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The Republicans lost the Senate, and D’Amato lost his subcommittee, in the beginning of 1987. With Boesky’s indictment a few weeks earlier, Drexel, too, was in the midst of dramatic change. Instead of chasing every consumable company, they had suddenly become the quarry themselves. Ironically, Drexel’s pursuer was none other than an appointee and friend of Al D’Amato’s, U.S. Attorney Rudy Giuliani, whose office had wired up Boesky for meetings with Milken shortly before the inside trader’s $100 million guilty plea was publicly announced. The fear of Giuliani on Wall Street and in Beverly Hills was palpable at the time: pressing forward with new theories of securities prosecutions, he seemed both unreachable, in standard political parlance, and dangerously skillful when it came to making towering cases stick.
Before 1986 ended, Mike Milken’s brother Lowell, a top Drexel executive with potential exposure in the unfolding scandal, hired as his criminal attorney Mike Armstrong, the senator’s strong right arm. A former federal prosecutor and the principal powerbroker on the D’Amato screening panel that nominates federal prosecutors and judges in New York, Armstrong immediately flew out to California to meet with his client and his client’s brother. Over the next three years, Armstrong would play a broad role in the joint Milken defense, running up a fortune in Drexel and Milken bills (he still represents Lowell on outstanding civil matters).
Armstrong maintained in a Voice interview that neither Milken brother discussed his ties to D’Amato. At the time, however, Armstrong was starting his seventh year of periodic pro bono representation of D’Amato. Beginning in 1980, during the first Senate campaign, D’Amato asked Armstrong to advise him about the possible release of his earlier grand jury testimony about a Nassau County 1 per cent kickback scheme, which had become a hot issue in a close race. Named to D’Amato’s panel as soon as the senator took office in 1981, he continued representing D’Amato in a federal probe of the senator’s involvement with a Hempstead recycling plant, ultimately appearing in court with the senator when D’Amato testified at the trial of one recycling plant defendant. He was there again in 1983 when D’Amato appeared on behalf of Phil Basile, and later during the senator’s Wedtech testimony.
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Armstrong’s Legal Aid list for D’Amato, including aspects of the many HUD investigations and the Meade Esposito case, goes on and on. He didn’t charge D’Amato, however, until 1989, when he took on the senator’s defense in the Senate Ethics Committee probe. Today, a senator who claims a net worth of $60,000 owes Armstrong $400,000 for the concluded probe.
A few months after Armstrong went on Drexel retainer (he was paid by the company until the two Milkens were indicted in 1989, when Lowell was forced to pay his own bills), Al D’Amato called Giuliani and said he “wanted to talk politics,” inviting him to dinner and asking that he bring his wife, television newswoman Donna Hanover. Though D’Amato wasn’t any more specific than that, Giuliani discovered what the agenda for the August 1987 dinner was while riding there in his car. WTNS reported that D’Amato was trying to talk the politically ambitious Giuliani into running against Democratic senator Pat Moynihan. That night, for hours, and for weeks later, chummy Al kept the pressure on, promising to raise millions for the run. Giuliani, whose four-year term was winding up, was sorely tempted, even writing a declaration speech at one point. But U.S. Attorneys don’t have to leave when their term expires, and Giuliani was also reluctant to leave, with so many giant cases hanging in the balance.
He asked that D’Amato allow him to pick his own successor, announcing publicly his preference for an aide, Howard Wilson, but D’Amato balked. Then news reports appeared listing a half dozen finalists that Armstrong’s panel was considering to replace him, and describing prominent defense attorney Otto Obermaier as the frontrunner. This worried Giuliani, and he said so in news interviews, but only in the most general terms, expressing a concern that several of the senator’s prospective appointees specialized in representing the securities industries or white-collar criminals. When D’Amato charged that Giuliani’s reluctance was “provocative and not too smart,” Giuliani replied that he’d tried to “convey to the senator that I’m not being arrogant,” adding that he was “concerned about four or five very, very sensitive investigations.”
The concerns started with Armstrong, whom Giuliani refused to talk to about the transition, precisely because of the defense lawyer’s Milken conflict, a message Armstrong concedes was sent directly to him. Another powerful player on the panel, Paul Curran, represented Robert Freeman, the head Goldman, Sachs trader whose Wall Street handcuffing and arrest in early 1987 had caused a media stir. Obermaier had a client squarely in the middle of the same case. Bob Morvillo, a partner in Obermaier’s small, top-flight criminal firm, was just starting to represent Tom Spiegel, the senator’s California condo host whose S&L had $3 billion in Milken junk. The firm was also representing top Drexel brass, including one potential witness it has refused to identify when questioned by reporters to this day. While Obermaier seemed the allbut-certain designee, others on the published list of candidates were also involved in the securities cases, including a partner of Peter Flemming, Mike Milken’s principal attorney.
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The efforts to induce Giuliani to leave were so carefully monitored at Drexel that the weekly meetings of its so-called “War Council” — discussions that included 15 or so executives, lawyers, and consultants — were regularly interrupted by chitchat about his possible departure. Even Armstrong conceded in a Voice interview that he “may have talked about the Southern District situation in a conversational way” with his client Milken. “I didn’t agree with the way Rudy was running the office,” says Armstrong. “I wanted him to leave.” Armstrong had in fact convinced D’Amato to name John Keenan to the post in 1983, and the Keenan appointment was only blocked when Giuliani, who worked in the Justice Department then and had strong support there, prevailed on D’Amato to change his mind.
Armstrong also acknowledges that it was he who recommended Obermaier, an old colleague from their days in the U.S. Attorney’s office together, though he claims he was unaware of Obermaier’s published views, mostly in a New York Law Journal column, bashing insider-trading and other securities cases. It was this philosophy that most upset Giuliani, since not even an Obermaier recusal on an individual case where his firm had a client could protect the office’s securities prosecution from a wholly different point of view about everything from the use of the RICO statutes against white-collar criminals to deferring to the SEC on trading cases. Giuliani was so uncomfortable with these columns he carried them around with him and showed them to friends. “Otto had the same point of view as everyone else,” Armstrong argues now, listing several former securities prosecutors who shared Obermaier’s views, and not even noticing that all of them wound up with Drexel clients. “Rudy didn’t know shit from Shinola about securities cases,” Armstrong declared.
By early 1988, Giuliani had all but decided to pass on the Moynihan race. Wilson had appeared before the D’Amato panel, and Armstrong and Curran had left the room during his interview, implicitly recusing themselves on his review, though at least Armstrong was clearly involved in the ultimate selection. Neither Giuliani nor Wilson would return Armstrong calls on the matter or discuss it with him, until he finally cornered Wilson at the swearing-in of a federal judge. According to a memo Armstrong prepared — out of what he says was caution over how Giuliani might one day misinterpret his conversation with Wilson — he offered to make Wilson chief assistant under whoever was the new U.S. Attorney, and give Wilson control over “the ongoing investigations about which Rudy had expressed concern.”
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While Armstrong sees this memo as proof that Drexel wasn’t his motive in trying to facilitate a Giuliani departure, it is clear that Armstrong’s offer was a last-ditch proposition on the eve of Giuliani’s announcement that he would not run. Indeed the memo reports that Wilson told Armstrong that Giuliani had already decided not to run even though he very much wanted to.” Wilson says that Armstrong “may have said I’d be someone’s deputy, but I don’t think so”; he was “positive that the Drexel thing wasn’t presented.” Even Jesse Kornbluth, whose sometimes-persuasive Milken book is a staunch defense, spent hours discussing this pivotal period in the effort to block a Milken indictment with Armstrong, Milken, and many others, leading him to tell the Voice last week: “It’s pure projection; but it’s hard to believe that the effort to get Rudy out wasn’t fully discussed. God knows every other avenue of saving the Milkens was gone over innumerable times from 1986 to the end.”
When Giuliani announced he wouldn’t run, D’Amato seemed to lose whatever interest he ever had in fielding a Republican opponent against Moynihan, endorsing an obscure Long Island businessman who’d long been a backer of his, but declaring that he was “too busy” to campaign with him. Giuliani stayed in the office another year, took Drexel’s guilty plea but could not get Milken’s. In a sudden, and deliberately arranged maneuver, he resigned and brought back to the office from private practice a onetime top aide, Benito Romano, getting the Justice Department’s approval to install him as an interim U.S. Attorney in an end-run around D’Amato. One top Justice Department official who cut the Romano deal with Giuliani, Robin Ross, said that an angry D’Amato called him and was “quite blunt about his displeasure.” D’Amato immediately moved to nominate the ever-patient Obermaier, but Justice and the White House sat on his name for 10 months, leaving Romano in office.
That gave Romano time to finally either indict Milken or get a guilty plea. When the two Milkens did not meet a March plea deadline offered by Romano, he filed a racketeering indictment against them. Though Romano remained in office until October, Milken’s lawyers never resumed plea discussions with him. “I wanted to resolve the case before D’Amato’s replacement got there,” Romano told the Voice. “Whether they were waiting” for Obermaier, “you’d have to ask them.” A few months after Obermaier arrived, Mike Milken finally pled guilty to six felony counts, none of them on the racketeering charges, and the always-difficult case against Lowell Milken was dropped.
Obermaier recused himself on the case, as he has on at least 34 other cases that went to indictment since he took office. (Since the only information the office will provide about this unprecedented number of recusals is the press releases issued by the chief assistant when Obermaier is conflicted out, there is no way to count recusals in cases that never get to indictment. By contrast, the U.S. Attorney in Brooklyn, Andy Maloney, has recused himself on two cases though he’s been in office twice as long as Obermaier.)
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While there are certainly aspects of the office’s handling of Milken that have continued the tough traditions of the Giuliani/Romano era, the decision this summer to write a letter to sentencing judge Kimba Wood, citing his “substantial” cooperation, in direct contradiction to a letter sent by the SEC enforcement chief, has been widely questioned. What Giuliani himself says made the government’s position on sentence reduction so strange was that its letter offered no critique of Milken’s testimony as a defense witness for one Drexel client, even though Milken’s “appearance against the government was expressly rejected as unbelievable by the jury,” which convicted Milken’s friend anyway.
Wood, who wound up citing the letter from Obermaier’s office as a basis for reducing Milken’s sentence to two years (slightly less than Boesky, the witness who brought him down), did not dispute in her opinion the SEC contention that Milken was principally offering information to prosecutors about Drexel folks who’d cooperated in the investigation of him. The judge cited only one other letter in her decision — a voluntary submission helpful to Milken on the issue of his attempt to make restitution to those he’d damaged. The attorney who wrote it, Pat Hynes, represented a group of civil claimants whom Milken had agreed to make a sizable payment to, though she was hardly the principal litigant in these separate lawsuits. A close friend of D’Amato’s who Armstrong acknowledged used to date the senator, Hynes was recently dubbed by D’Amato to join the Armstrong screening panel.
In addition to the favorable treatment for Milken by Obermaier’s office, it has also recently passed on retrying the Drexel spinoff, a case against several traders from Princeton-Newport that was overturned principally due to a sentencing error by the judge, and also decided not to prosecute Columbia S&L’s Spiegel (eight months later, federal prosecutors in L.A. indicted him on largely different charges). Obermaier recused himself on these cases, as well he might since his law firm is extensively involved in both. But his recusal did not prevent him from summarily dismissing the prosecutor who’d tried Princeton-Newport and, though he’d since left the office, was available to work on its appeal. Obermaier used the assistant’s appearance in a television interview as a rationale.
While there is no smoking gun establishing what D’Amato’s purposes were in all the intricate machinations surrounding his Southern District appointment, the final proof is in the pudding. The office that once pioneered Wall Street cases has not made a new, significant securities prosecution since the “scholar-on-Ottomatic” got behind Rudy’s desk.
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It Is January 1983 and Al D’Amato, just starting his third year in the senate, is aboard a chartered flight to Panama City. He and his daughter Lisa are taking a four-day trip to Panama paid for by the Long Island petroleum giant that will soon employ her as an economic analyst, Northville Industries. While Northville will fly over 300 people down to Panama to join in ceremonies and receptions celebrating the opening of its new, 80-mile pipeline across the heart of the Isthmus, D’Amato is the only U.S. senator aboard. But he isn’t going just because of his daughter’s imminent job.
In fact his daughter’s job was an outgrowth of his own almost 30-year friendship with the president of this family-owned firm, Harold Bernstein. According to Northville vice-president Joseph Ackell, Bernstein and the company were major financial supporters of D’Amato’s during the early days in Nassau politics, and news reports indicate that on occasion, at least, he purchased oil from them as Hempstead’s presiding supervisor. Since D’Amato’s 1980 primary race against then senator Jacob Javits, the Bernstein family, the company PAC, and a few Northville executives and their wives have donated at least $28,000 to D’Amato campaign coffers. In addition, Bernstein was named by D’Amato as one of his six top fundraisers in a 1986 Times story.
The pipeline Northville opened that January was erected by the U.S. Congress. Its viability to this day utterly depends on the periodic renewal of a controversial piece of legislation barring the export of Alaskan oil anywhere outside the U.S. (its principal prior market was Japan). Originally instituted in the mad days of the 1970s energy crisis, and rationalized as part of a national strategy for oil independence, the ban led to the building of the pipeline in 1981 — D’Amato’s first year in the Senate. The senator has been a major force in the preservation of that ban ever since, helping to sustain the pipeline, which stretches from the Pacific coast port of Charco Azul to Chiriqui Grande Bay on the Caribbean and is designed to carry 800,000 barrels of oil a day.
Far cheaper than shipping the oil through the Panama Canal, the pipeline has become the principal conduit for the transport of Alaskan oil to markets along the East Coast of the United States. It also became, as spokesman Ackell described it in a Voice interview, “the biggest thing going in the Panamanian economy,” throwing off hundreds of millions in taxes, fees, and payments to Panama’s government, which is a partner with Northville in the ownership of the line.
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Of course, the government of Panama in 1983 was dominated by military strongman Manuel Noriega. Already serving as the number-two man in the Panamanian military that January, he was slated to become commander in chief by March under the terms of a prior agreement with his ally, Ruben Paredes (a short delay resulted in Noriega’s formal takeover that August). The country’s civilian vice-president, Jorge Illueca, a Noriega front whom he would later install as president, hosted the actual opening ceremony, which was held near a remote Indian village outside Panama City at the Atlantic terminus of the pipeline.
While Ackell says he did not see Noriega himself at the ceremony or any of the host of receptions and other events surrounding the four-day celebration, others remember his participation, including Noriega’s one-time minister of commerce and industry Mario Rognoni, who is currently the opposition leader in the Panamanian National Assembly. Ackell also tries to downplay the company’s relationship with Noriega during the flush years of 1983 to 1987, but he concedes that Northville “had to find a way to work with each administration.” Everett Briggs, the American ambassador to Panama during most of that period and current ambassador in Portugal, goes a bit further, recalling that “it’s safe to say” that the relationship between Northville and Noriega was “probably very good.”
Just how D’Amato fit into this relationship is somewhat murky, though Ackell acknowledges that the senator “might have been identified with the company” in the minds of Panamanian officials, then and now. The senator flew down to Panama for a second four-day stay paid for by Northville in December of 1983, after Noriega’s formal ascension to power, but Ackell said he could not recall why (Northville paid for a third D’Amato trip in 1988 as well, this time, to Pennsylvania).
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Escolastico Calvo, the editor of a Panamanian newspaper who once served as a close Noriega aide, specifically recalled a D’Amato meeting with Noriega in Panama, but was fuzzy about the timing. And legislator Rognoni was certain that D’Amato and the general “knew each other personally” and that D’Amato was “friendly” with the Noriega government “while he was dealing with his business interests,” which he identified as Northville. D’Amato routinely voted in favor of military and other aid appropriations for Panama during these years, though he hardly distinguished himself as particularly active on these issues.
What he did distinguish himself on was pipeline legislation. As a member of the banking committee, which has jurisdiction over the Export Administration Act, he became a cosponsor in 1983 of a bill that passed the Senate a year later extending the Alaskan oil ban for six years. D’Amato even went so far as to introduce, with a handful of other senators, an unsuccessful measure to extend the ban forever. This bill also attempted to void the conditions contained in the old law that permit the president to lift the ban, with the consent of Congress, if he could make a showing that it was in the national interest (D’Amato is still pushing this rather extraordinary bill, having cosponsored it again in 1990). The ban is still effective even though its last extension expired in 1990, since it remains in force unless the president meets the conditions set in the law for lifting it.
There is little doubt about why D’Amato has been such a pipeline champion. Ted Sorenson, the former Kennedy aide who has represented Northville for years, says D’Amato called him at one point in the 1983 controversy over the bill: “He said he was going to make a speech for it on the floor and I said fine.” Why was he on the inaugural trip and why has he been such a strong supporter of the ban? “He’s a friend of Harold Bernstein,” explained Sorenson. “They went way back.” Steve Toth, the Washington lobbyist for Chicago Bridge & Steel, which is a 20 per cent partner of Northville and the Panama government in the ownership of the pipeline, put it similarly: “D’Amato supports the ban because the principal owner is Northville Industries and Al supports his constituents. He shows his support with his votes.”
Like Northville and the other bulwark of the lobbying force behind this legislation, the maritime industry, D’Amato has resisted any efforts to modify this total ban. The coalition even opposed Alaska Republican senator Frank Murkowski’s amendments to permit the export of 200,000 barrels a day. Based on the premise that it is wrong to bar only Alaska from exporting its oil, Murkowski’s changes were nonetheless rejected, though he offered to continue to require that the exported oil be carried on U.S.-flag tankers.
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Critics of the ban, like Marshall Hoyler, who did a study for the Georgetown University Center for Strategic and International Studies, have branded it “a scandal,” saying it has “enriched a small number of individuals and corporations, who have formed a vocal interest group in its behalf.” Hoyler calculated years ago that federal revenues would jump over $10 billion over the next quarter century if the ban was dropped (and that oil costs would drop over the long haul). A staff economist for the Senate Banking Committee, Paul Freedenberg, explained the support for the ban when the D’Amato extension was under consideration in 1983 by observing: “Too many people are making money because of the way it is now.”
While the strongest rationale advanced for the ban is the need to reduce American dependence on foreign oil, William Silvey, the Energy Department’s planning director, argued when the ban was last extended that “the congressional perception” wasn’t taking into account that “there is one world petroleum market and that we are part of it,” concluding that because of the export restrictions, “we are charging ourselves more than we need to” for oil.
But there are indications that D’Amato’s ties to Northville help explain more than just the pipeline aspects of his Panama policy. All the public remembers about D’Amato and Panama is his explosive opposition to Noriega, when he moved center stage in the Washington debate about Panama policy in mid 1987, at first urging sanctions and eventually an invasion. Though D’Amato’s rage was ostensibly over Noriega’s cocaine trafficking (D’Amato called him “a tinhorn drug dealer”), it is hard to explain it on just those terms. Sy Hersh had revealed Noriega’s smuggling activities in June of 1986 on the front page of The New York Times, even detailing an American plot to assassinate the then lieutenant colonel in the 1970s as a common drug dealer. Yet D’Amato remained silent for almost a year.
Like many other senators, D’Amato moved when Gabriel Lewis, the former Panamanian ambassador to the U.S. and onetime Noriega ally, broke with the government and began lining up opposition to it in Washington. One of the architects of the Panama treaty, the well-connected and wealthy Lewis, who once hid the Shah of Iran in his Panama home as a favor to American authorities, struck up a close relationship with D’Amato. Long tied to the Kennedys, and close to Ted Sorenson, Lewis was one of three Northville appointees on the board of Petroterminal de Panama, the joint venture of Northville, Chicago Bridge & Iron, and the Panamanian government that owned the pipeline.
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Lewis pieced together the Kennedy/D’Amato alliance that suddenly turned the Senate into a firestorm of Noriega opposition. D’Amato even became a harsh Reagan administration critic on the issue, blasting the administration as
“cowards” for not moving against the general and provoking Defense Secretary Frank Carlucci to publicly object to D’Amato’s “insults.” The senator solidified his relationship with Lewis during this rhetorical war, getting so close that he has become a periodic visitor at Lewis’s Panama estate since Noriega’s ovenhrow.
It would be an oversimplification to attribute D’Amato’s sea change solely to a Northville agenda. While many factors were surely involved, D’Amato’s goal of compelling an American take-out of Noriega was perfectly compatible with Northville’s objectives. The company’s spokesman Ackell concedes that during this period, Northville was “very anti-Noriega,” including “everybody who worked for us down there, from the workers to the managers,” adding that the company was “pleased” with the December 1989 invasion. Indeed, on the eve of the invasion the Washington Post reported that if it “continues as planned, it should become easier for Northville Industries to do business in Panama.”
Relations between Northville and Noriega were so strained in 1988 and 1989 that the company stopped meeting altogether with its partners on the Petroterminal board, which Noriega had stacked with his brother-in-law, publicist, and finance minister. A freeze ordered by the Reagan administration, and expanded under Bush, barred Northville and other American businesses in Panama from making any payments to the Noriega government, and Northville pumped over $70 million due to Panama into an escrow account here. Northville got a waiver from federal officials so that they could keep the payments in its own account, rather than make them to the exiled Delvalle government, a shell entity recognized by the U.S. Fat with funds from other American interests, the Delvalle government retained as its lobbyist John Zagame, the former D’Amato aide who is still very close to the senator, and Rich Bond, the current head of the Republican National Committee.
Throughout these tense two years, the pipeline continued to function virtually uninterrupted, with Noriega apparently convinced that any disruption of the line might be used as a rationale for an American invasion. He even used his army to force striking electrical workers back on their jobs in early 1988, in part because the strike had knocked out a pumping station along the pipeline. While anti-invasion leaders like Rognoni believe that Northville was itself trying to cause a stoppage in early 1988 to provoke U.S. action against Noriega, Ackell says the company was simply biding its time.
Since Noriega was replaced with the current American-installed Endara government, relations with Northville, said Ackell, have been “very good, as good as things can go.” The only one left muttering is opposition leader Rognoni, who calls D’Amato a hypocrite and claims that Noriega himself once told him “how surprised he was that D’Amato had turned against him.” ❖
SPECIAL REPORTING ASSISTANCE BY SUSANNA DOYLE. RESEARCH BY SCOTT ANDERSON AND LOU PACILLI.
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LETTERS TO PRISON
While U.S. Senator Al D’Amato was ready to go to war in Panama to nail one drug dealer, his office relayed letters to federal prison officials on behalf of 23 drug dealers who were complaining about their treatment in jail, the Village Voice has learned. The senator also forwarded letters from two mob bosses, including Phil Rastelli, the former head of the Bonanno crime family.
While other federal officials also pass along similar letters, D’Amato has set a record for one more form of constituent service. The U.S. Bureau of Prisons says it sent 50 prisoner response letters in a recent year to D’Amato, compared with a mere 15 for D’Amato colleague Pat Moynihan, and a total of 13 to a sample group of five congressmen.
From 1987 10 1991, crimebuster D’Amato sent more than 200 such letters about inmates whose offenses ranged from heroin and cocaine distribution to murder and racketeering. The prisoners’ sentences ranged from a year to 75 years, including one drug dealer with a 20-year sentence. Because prison officials will only disclose fragments of the correspondence file, it is impossible to determine how many times D’Amato wrote his own letter on behalf of the prisoner in addition to relaying the prisoner’s letter.
The letter D’Amato forwarded for Phil Rastelli sought a transfer from Oklahoma to a prison closer to his New York home, citing medical reasons. The June 1987 letter to D’Amato was written only eight months after Rastelli began serving a life sentence. When D’Amato sent the Rastelli request to the bureau, his form letter took no position on the merits of the proposed move.
Robert Fueselo, executive director of the Chicago Crime Commission, said he regarded the routine forwarding of these letters “as inappropriate as can be to act on behalf of any prisoner who has been involved in hideous crimes, let alone an organized crime boss.” Rudy Giuliani said it was okay to forward this kind of letter without screening it, “except in the most notorious cases.” D’Amato forwarded more letters for drug offenders than any other criminal category. — W.B.