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US is said to intensify probe of senator's fund-raising

FBI claims proof of improper acts

WASHINGTON -- The Bush administration's Justice Department is trying to secure the cooperation of an indicted businessman as it pursues Senator Hillary Rodham Clinton's 2000 Senate campaign for possible fund-raising violations, according to interviews and documents.

The FBI has told a US magistrate in Los Angeles it has evidence the former first lady's campaign deliberately understated its fund-raising costs so it would have more money to spend on elections. Prosecutors contend that businessman Peter Paul made donations because he wanted a pardon from Mrs. Clinton's husband.

Paul has denied he raised money for Mrs. Clinton in order to boost his chance for a pardon from President Clinton, and he asserted that campaign officials told him the contributions would be disclosed as required by law, his defense team said. He never received a pardon.

Noel Hillman, the Justice Department's top public corruption attorney and a career official, has met three times -- most recently in May -- with lawyers for Paul to discuss a plea deal. Justice wants to interview Paul to see whether he can substantiate his allegations that Clinton's campaign engaged in wrongdoing, the defense lawyers said.

Paul is a three-time convicted felon who hosted a Hollywood fund-raising event for Mrs. Clinton in 2000 and is currently facing stock fraud charges in New York. He alleges he underwrote most of the costs for the event. Prosecutors contend he did so in an effort to try to win a pardon from President Clinton.

Lawyers for Mrs. Clinton and the former chief fund-raiser for New York Senate 2000, David Rosen, say their clients have done nothing wrong. "New York Senate 2000 properly reported all donations in 2000," said David Kendall, Clinton's attorney.

The investigation, which has dragged on for more than three years, places the past-fund-raising of one of the Democratic Party's rising stars in the direct sights of a Republican-run Justice Department.

Senator Clinton is considered a possible presidential candidate in 2008 if Senator John F. Kerry loses this year. But she first faces a reelection battle in 2006 -- possibly against former New York City mayor Rudolph Giuliani or New York's governor, George Pataki.

Most allegations of campaign finance irregularities are handled administratively through the Federal Elections Commissions, although the Justice Department has investigated such matters in the past.

During the Democratic Clinton administration, when Attorney General Janet Reno ran the Justice Department, a department campaign finance task force charged more than two dozen individuals and two corporations with fund-raising abuses that occurred in the 1996 election cycle. Many of the abuses involved Democratic fund-raising.

Documents obtained by the Associated Press show an FBI agent told the Los Angeles magistrate two years ago that the government believes Mrs. Clinton's campaign understated its costs for the Paul fund-raiser.

"The event's costs exceeded $1 million, but the required forms filed by New York Senate 2000 . . . months after the event incorrectly disclosed that the cost of the event was only $523,000," said the 2002 FBI affidavit, which was unsealed in the summer.

"It appears that the true cost of the event was deliberately understated in order to increase the amount of funds available to New York Senate 2000 for federal campaign activities."

The document also said a $366,000 donation to the gala was incorrectly listed as coming from the company Paul cofounded, Stan Lee Media, when it really came from Paul personally.

Hillman, chief of the Public Integrity unit, has met with Paul's lawyers three times -- last Oct. 30, Feb. 11, and May 25 -- to discuss a possible arrangement but no deal has been reached, said Paul attorney Robert Sticht of Los Angeles. Sticht and lawyers for Judicial Watch, a conservative government watchdog group, comprise Paul's defense team.

Justice Department spokesman Mark Corallo said he had no comment.

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