Coast Backer of Mrs. Clinton May Be Moving Closer to Plea
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A California businessman who says he spent nearly $2 million on an event that helped finance Senator Clinton’s 2000 campaign abruptly changed his legal strategy and may be moving closer to a plea bargain on securities-fraud charges he is facing.
Peter Paul, 56, recently dumped a lawyer provided by a litigious conservative watchdog group, Judicial Watch, and hired a former prosecutor as his defense attorney. At a hearing today in federal court at Long Island, Paul’s new counsel is expected to renew the former executive’s request to be released on bail.
Paul was co-founder of Stan Lee Media, a firm that developed Web-based and animated versions of comic books. The company was named for Paul’s partner in the venture, Stan Lee, creator of some of the world’s best-known comic-book characters, including Spider-Man and the Incredible Hulk. During the dot-com craze, Stan Lee Media’s stock price soared. At one point, the company had a market capitalization of $350 million. In August 2000, with the firm’s value near its peak, Paul helped finance a star-studded tribute to President Clinton. The event in the Brentwood neighborhood of Los Angeles also served to raise funds for Mrs. Clinton’s Senate campaign.
Later that year, however, the company’s stock price dropped sharply. Paul abruptly departed for Brazil, and the company filed for bankruptcy protection. In June 2001, a federal grand jury in New York indicted Paul, another company official, a stockbroker, and a stock promoter on charges of operating a “pump and dump” scheme that artificially inflated the trading price of the firm’s stock. Mr. Lee, 81, has not been charged with wrongdoing.
Paul spent two years in a Brazilian jail before being extradited to America last year. While the Justice Department pursued his extradition, another team of federal prosecutors launched an investigation into his claims that Mrs. Clinton’s aides deliberately understated expenses at the 2000 Hollywood gala to maximize funds available for the Senate race. “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,” an FBI agent, David Smith, wrote in a 2002 affidavit. Reports the campaign filed with the Federal Election Commission show only a $2,000 gift from Paul and an in-kind donation of $367,000 from his company, but Paul asserts that he spent several times that much on the event. The $2,000 gift was later returned.
In a lawsuit filed in Los Angeles, Paul is seeking millions of dollars in damages from the Clintons, the Senate campaign, and others. Paul claims he financed the Hollywood event as part of a deal in which Mr. Clinton would join Stan Lee Media’s board after leaving office. Prosecutors have also suggested that Paul, who in the 1980s was convicted of three felony charges, gave some of the money in a bid to get a presidential pardon that would clear his record. He was never pardoned.
Through their attorneys, the Clintons have denied wrongdoing. In an interview Friday, a lawyer representing the Clintons, David Kendall, defended the campaign-finance reports filed with the government. “The reporting was proper,” Mr. Kendall said. He declined to answer detailed questions for this article.
Earlier this year, Paul’s lawyer from Judicial Watch, Robert Sticht of Beverly Hills, Calif., asked that the charges against his client be thrown out on grounds of government misconduct. Mr. Sticht alleged that the financial crisis at Stan Lee Media was induced by one of the firm’s investors, Stanley Myatt. In court papers, Mr. Sticht alleged that Mr. Myatt was working as an FBI informant at the time. Prosecutors have acknowledged that Mr. Myatt has worked “on occasion” as an informant. Mr. Myatt could not be reached for comment.
At a hearing in August, Judge Leonard Wexler expressed exasperation with the legal tactics employed by Mr. Sticht and Judicial Watch.
“Let me ask you one question: Who is paying you?” Judge Wexler said. “You keep flying in. You keep making all this paperwork.”
When Mr. Sticht confirmed that he was being paid by Judicial Watch, the judge replied: “I don’t know anything about this organization, good or bad. I know they sue everybody, Republicans, conservatives, Democrats. … I don’t have enough information.”
Prosecutors argued Mr. Sticht might have a conflict of interest because of the Judicial Watch financing. The judge ordered that Paul be allowed to consult with an independent lawyer about the issue.
In October, Paul retained a new defense attorney, Joseph Conway of Mineola. Mr. Conway quickly withdrew the motion to dismiss the case, withdrew three pending appeals for bail, and indicated to the court that he did not plan to pursue the defense of government misconduct.
Last month, Mr. Sticht asked to withdraw from the case. In a motion filed with the court, Mr. Sticht noted that Mr. Conway “has just retired from the U.S. Attorney’s office in Brooklyn that is prosecuting Mr. Paul.” Mr. Sticht did not directly accuse the newly retained lawyer of any impropriety but complained with apparent bitterness that the recent legal moves “fly in the face of a global defense that Mr. Paul has been demanding and enjoying for nearly 4 years.” That defense was mounted at “enormous legal expense to third parties,” Mr. Sticht observed. He also said Paul was considering dropping the civil suit against the Clintons.
Mr. Sticht did not return several phone calls seeking comment for this story.
In an interview Friday, Paul’s new lawyer, Mr. Conway, denied any conflict stemming from his work for the same federal prosecutor who is seeking Paul’s conviction.
“I have no conflict,” Mr. Conway said. “I was in the United States attorney’s office for a long time, which I would think is my kind of strength.”
Mr. Conway, who left the government in October, said he never worked on the Stan Lee Media investigation. He also said he was based in the prosecutors’ Long Island office, while the probe was pursued from the main office in Brooklyn.
Mr. Conway attributed the language in Mr. Sticht’s motion to sour grapes. “I would imagine he’s somewhat probably upset that he got relieved,” Mr. Conway said.
In interviews last week, spokesmen for Judicial Watch denied that Paul is abandoning his civil suit against the Clintons.
“He’s not dropping the civil case. That’s proceeding,” the organization’s president, Thomas Fitton, said. Mr. Fitton attributed Paul’s change in attorneys to his frustration at being held without bail for more than a year. Paul is presently confined at the Nassau County jail.
Mr. Fitton said there was no major rift between Judicial Watch and Paul. “I’m not aware of anything that’s a great cause for concern,” the Judicial Watch official said.
Indeed, the organization has won several victories in the civil case. A judge has repeatedly rejected motions by the Clintons that they be dismissed as defendants in the lawsuit.
In October, the California Supreme Court rejected a petition from Mr. Clinton appealing that decision. Mrs. Clinton has a similar request pending before a California appeals court.
The government has recorded some wins in a related criminal case in California. In December 2002, Stephen Gordon, who was an executive of Stan Lee Media, was convicted of wire and bank fraud for his role in a check-kiting scheme that the government said contributed to the Web company’s demise. Gordon’s brother, Jonathan, a former stockbroker with Merrill Lynch, was convicted on similar charges by the same jury. Both men are serving federal prison terms as they pursue appeals and are also defendants in the pending New York case.