Notice: This opinion is subject to formal revision before publication in the
Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify
the Clerk of any formal errors in order that corrections may be made
before the bound volumes go to press.
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed February 27, 2004
Division No. 94-1
IN RE: MADISON GUARANTY SAVINGS & LOAN
(LARRY FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
–————
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ORDER
This matter coming to be heard and being heard before the
Special Division of the Court upon the application of Richard
M. Larry for reimbursement of attorneys’ fees and costs
pursuant to section 593(f) of the Ethics in Government Act of
1978, as amended, 28 U.S.C. § 591 et seq. (2000), and it
appearing to the court for the reasons set forth more fully in
the opinion filed contemporaneously herewith that the peti-
tion is not well taken, it is hereby
2
ORDERED, ADJUDGED, and DECREED that the peti-
tion of Richard M. Larry for attorneys’ fees that he incurred
during the investigation by Independent Counsel be denied.
PER CURIAM
For the Court:
Mark J. Langer, Clerk
By:
Marilyn R. Sargent
Chief Deputy Clerk
Notice: This opinion is subject to formal revision before publication in the
Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify
the Clerk of any formal errors in order that corrections may be made
before the bound volumes go to press.
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed February 27, 2004
Division No. 94-1
IN RE: MADISON GUARANTY SAVINGS & LOAN
(LARRY FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
–————
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ON APPLICATION FOR ATTORNEYS’ FEES
Opinion for the Special Court filed PER CURIAM.
PER CURIAM: Richard M. Larry petitions this court under
Section 593(f) of the Ethics in Government Act of 1978, as
amended, 28 U.S.C. § 591 et seq. (2000) (the ‘‘Act’’), for
reimbursement of attorneys’ fees in the amount of $44,930.69
that he incurred during, and as a result of, the investigation
conducted by Independent Counsel. Because we conclude
that Larry has not carried his burden of showing that he was
a ‘‘subject’’ of the investigation or that the fees would not
have been incurred ‘‘but for’’ the requirements of the Act, we
deny the petition in its entirety.
2
Background1
In the mid–1980’s, Jim and Susan McDougal, along with
former President William Jefferson Clinton and Hillary Rod-
ham Clinton, were members of a Little Rock, Arkansas,
partnership known as the Whitewater Development Compa-
ny. At this time, Jim McDougal was also the owner of a
Little Rock savings and loan, Madison Guaranty, and David
Hale was the owner of Capital Management Services, Inc.
(‘‘CMS’’), a Little Rock company regulated, and in large part
funded, by the Small Business Administration. Hale, the
McDougals, and former Arkansas Governor Jim Guy Tucker
apparently became involved in a fraudulent scheme involving
Madison Guaranty and CMS. The investigation was initially
conducted by the U.S. Attorney in Little Rock, but later
transferred to the DOJ’s criminal division. Robert B. Fiske,
Jr., after his appointment by the Attorney General (‘‘AG’’) in
January 1994 as regulatory independent counsel, took over
the investigation. In August 1994 this Court appointed Ken-
neth W. Starr as statutory independent counsel (hereinafter
‘‘IC’’ or ‘‘OIC’’) to investigate the Whitewater matter, and his
office assumed the investigation of the fraudulent Madison
Guaranty/CMS scheme. During the time period of these
various investigations, indictments and convictions were se-
cured with Hale’s cooperation against the McDougals and
Tucker for conspiracy and fraud involving Madison Guaranty
and CMS. Indictments and convictions were also secured
against Tucker for tax conspiracy and fraud involving CMS.
Thereafter, allegations arose that things of value had been
given to Hale to influence his testimony in these matters.
Specifically, it was alleged that a friend of Hale’s, Parker
Dozhier, had provided the things of value, and that FBI
1 We have had recent occasion to review the facts of this matter
in In re Madison Guaranty Savings & Loan (Scaife Fee Applica-
tion), 354 F.3d 900 (D.C. Cir., Spec. Div., 2004) (per curiam).
Rather than re-plow recently tilled ground, we have adopted from
that opinion much of the language in the background portion of this
opinion, and, where applicable, a portion of the analysis from that
decision as well.
3
agents guarding Hale had witnessed these transactions. Fur-
ther, it was alleged that Dozhier had received the funds to
acquire these things of value from Stephen Boynton, an
attorney who worked for American Spectator magazine,
which was investigating possible misconduct by the Clintons
in Arkansas. American Spectator, in turn, had received
funds from one or more of the foundations controlled by
Richard Mellon Scaife. This situation led to public state-
ments and allegations of improprieties on the part of Scaife
by at least one member of Congress, John Conyers, Jr., who
at the same time questioned an alleged financial relationship
between Scaife and IC Starr. Conyers requested an investi-
gation of the matter by the Attorney General. Conyers also
sent a letter concerning the matter to Scaife.
Upon conferral between the AG and the IC, the IC estab-
lished an Office of Special Review (‘‘OSR’’) to investigate.
During the investigation, Richard M. Larry, the fee petitioner
here, was subpoenaed to appear before the grand jury in his
capacity as president of the Scaife foundations involved in the
matter. Ultimately, the OSR concluded that many of the
allegations regarding the tendering and receipt of things of
value were unsubstantiated or untrue, and recommended that
no prosecutions be brought.2 The findings and conclusions of
the OSR were accepted by the IC, and the matter was closed.
Pursuant to section 593(f)(1) of the Act, Larry now peti-
tions this court for reimbursement of the attorneys’ fees that
he incurred during the OSR investigation. He seeks reim-
bursement in the amount of $44,930.69. As directed by
section 593(f)(2) of the Act, we forwarded copies of Larry’s
fee petition to the Attorney General and the IC and request-
ed written evaluations of the petition. The court expresses
its appreciation to the IC and the Attorney General for
submitting these evaluations, which we have given due consid-
eration in arriving at the decision announced herein.
2The report of the OSR remains under seal. The factual infor-
mation contained in this opinion has previously been publicly re-
ported elsewhere.
4
Discussion
The Ethics in Government Act provides for reimbursement
of attorneys’ fees expended in defense against an investiga-
tion under the Act by subjects who qualify under 28 U.S.C.
§ 593(f)(1). That section provides:
Upon the request of an individual who is the subject of
an investigation conducted by an independent counsel
pursuant to this chapter, the division of the court may, if
no indictment is brought against such individual pursuant
to that investigation, award reimbursement for those
reasonable attorneys’ fees incurred by that individual
during that investigation which would not have been
incurred but for the requirements of this chapter.
Because the Act ‘‘constitutes a waiver of sovereign immuni-
ty it is to be strictly construed.’’ In re Nofziger, 925 F.2d
428, 438 (D.C. Cir., Spec. Div., 1991) (per curiam). Under the
Act, therefore, we can only order reimbursement for attor-
neys’ fees when we determine, inter alia, that the fee peti-
tioner was a ‘‘subject’’ of the independent counsel’s investiga-
tion and would not have incurred the attorneys’ fees ‘‘but for’’
the requirements of the Act. See, e.g., In re Pierce (Kisner
Fee Application), 178 F.3d 1356, 1358 (D.C. Cir., Spec. Div.,
1999) (per curiam). The petitioner ‘‘bears the burden of
establishing all elements of his entitlement.’’ In re North
(Reagan Fee Application), 94 F.3d 685, 690 (D.C. Cir., Spec.
Div., 1996) (per curiam). For the reasons stated below, we
find that Larry has failed to establish the ‘‘subject’’ and ‘‘but
for’’ elements and is therefore not entitled to an attorneys’
fees award.
1. ‘‘Subject’’ Status
The statute by its terms provides reimbursement of fees
only to ‘‘an individual who is the subject of an investigation
conducted by an independent counsel.’’ 28 U.S.C. § 593(f)(1)
(emphasis added). Though the statute does not define ‘‘sub-
ject,’’ we have previously held that status as a ‘‘mere witness’’
is not sufficient to meet the elemental requirement of ‘‘sub-
ject’’ designation for purposes of the Act. In re North
5
(Dutton Fee Application), 11 F.3d 1075, 1078 (D.C. Cir., Spec.
Div., 1993) (per curiam). A fee applicant must establish that
he is a person whose conduct was within the scope of the
independent counsel’s investigation in the sense that ‘‘the
Independent Counsel might reasonably be expected to point
the finger of accusation’’ at him. Id. Otherwise put, he must
not merely have been a witness to the matters under investi-
gation, but a potential defendant of indictments that might
arise from that investigation. Although Larry argues that he
‘‘easily meets’’ the Act’s requirement for being a subject of
the OIC/OSR investigation, we are not persuaded that the
OSR, or at any other time the OIC, was focused on any
possible criminal culpability by Larry or Scaife.
Larry claims that the letter Scaife received from Congress-
man Conyers ‘‘suggest[ed] that [Scaife] had directed money
to a witness to encourage or reward testimony adverse to
President Clinton and his allies.’’ Larry asserts that ‘‘[t]his
money presumably passed through Mr. Larry’s hands, be-
cause it reportedly came from the two foundations that he
administered.’’ He goes on to argue that from the time
Scaife received the letter from Congressman Conyers until
the time that he (Larry) received notification from the OSR
that no prosecution would be initiated against him, he ‘‘under-
stood that he was accused of directing foundation donations
into the pocket of a government witness in exchange for or as
a reward for the witness’s favorable testimony.’’ Larry sums
up his claim to being a subject by stating that ‘‘[a]ny person
in his position would have reasonably believed that there was
a realistic possibility of his being charged with bribery or
offering an illegal gratuity TTT’’
In disputing Larry’s claim of being a subject of the OSR/
OIC investigation, the IC’s evaluation contends that Larry
was merely a fact witness. According to the IC, Larry’s
‘‘involvement in the investigation was solely as custodian of
the records of the foundations and as a person with knowl-
edge of the foundations’ activities.’’ The DOJ’s evaluation
leaves it to the IC to respond to Larry’s subject claim, but
briefly notes that Larry’s assertion that he was a subject of
the IC’s investigation because he was issued one or more
6
subpoenas in this matter is ‘‘not TTT sufficient to demonstrate
that Mr. Larry was a subject of the investigation.’’
We agree with the IC and the DOJ that Larry has not
carried his burden of establishing that he was in fact a
subject of the OIC/OSR investigation. The documents Larry
relied upon show that he was only a witness. Statements
from his petition, as well as documents attached thereto,
establish that he received a subpoena, superseded shortly
thereafter by another, to testify before the grand jury. The
subpoenas were addressed not to Larry personally, but to the
‘‘Carthage Foundation c/o Richard Larry’’ and the ‘‘Sarah
Scaife Foundation c/o Richard Larry.’’ This buttresses the
IC’s claim that Larry was merely a custodian of records
rather than a subject of the investigation. Furthermore, the
cover letter for the original subpoena was from the OIC/OSR
‘‘Witness Coordinator’’ and states that the Witness Coordina-
tor should be contacted for Larry’s entitlement to a ‘‘witness
fee’’ and that a ‘‘Fact Witness Voucher’’ should be executed.
Letter from the OIC/OSR, August 14, 1998. Cf. In re North
(Gardner Fee Application), 30 F.3d 143, 146 (D.C. Cir., Spec.
Div., 1994) (per curiam) (‘‘the Independent Counsel issued a
grand jury subpoena designating [petitioner] as a subject’’).
Additionally, the cover letter for the superseding subpoena
states that an interview of Larry will be necessary before his
grand jury appearance. Letter from the OIC/OSR to William
L. Gardner and H. Yale Gutnick, August 26, 1998. Other
than this interview and his grand jury appearance, there is no
evidence of any other contact between Larry and the OIC/
OSR. See In re Pierce (Sanders Fee Application), 198 F.3d
899, 902 (D.C. Cir., Spec. Div., 1999) (per curiam) (petitioner’s
involvement with IC’s investigation considered ‘‘minimal’’ in
that he was served one subpoena for documents and inter-
viewed once three years later). There is also no evidence
that Larry was ever informed that he was a subject of the
OIC/OSR investigation, either in writing, see, e.g., In re North
(Cave Fee Application), 57 F.3d 1117, 1120 (D.C. Cir., Spec.
Div., 1995) (per curiam) (petitioner received letter from OIC
specifically advising him that his status was that of subject),
or otherwise, see, e.g., In re Segal (Sagawa Fee Application),
7
151 F.3d 1085, 1088 (D.C. Cir., Spec. Div., 1998) (per curiam)
(IC did not contest petitioner’s claim that she was ‘‘expressly
informed’’ by his office that she was a subject); In re North
(Dwyer Fee Application), 120 F.3d 293, 296 (D.C. Cir., Spec.
Div., 1997) (per curiam) (IC in his evaluation stated that
petitioner could have reasonably believed that he was a
subject). In sum, it is apparent that Larry’s status was that
of witness, and ‘‘status as a ‘mere witness’ is not sufficient to
meet the elemental requirement of ‘subject’ designation for
purposes of the Act.’’ In re Pierce (Abrams Fee Applica-
tion), 190 F.3d 586, 590 (D.C. Cir., Spec. Div., 1999) (per
curiam).
2. Fees Not Incurred ‘‘But For’’ the Requirements of the
Act
We have in the past held that ‘‘[a]ll requests for attorneys’
fees under the Act must satisfy the ‘but for’ requirement of’’
the Act. In re Sealed Case, 890 F.2d 451, 452 (D.C. Cir.,
Spec. Div., 1989) (per curiam). On numerous occasions we
have also held that ‘‘the contemplation of the legislation is not
that subjects of independent counsel investigations will be
reimbursed for all legal fees, but only TTT for those legal fees
that would not have been incurred by a similarly-situated
subject investigated in the absence of the Act.’’ See In re
Madison Guaranty Savings & Loan (Clinton Fee Applica-
tion), 334 F.3d 1119, 1123 (D.C. Cir., Spec. Div., 2003).
Larry claims that he satisfies the ‘‘but for’’ element of the
Act under two theories previously identified by this court: (1)
when the petitioning subject has been prejudiced by the
Department of Justice’s failure to comply with the substantial
protective features of the Act, see In re Meese, 907 F.2d 1192
(D.C. Cir., Spec. Div., 1990) (per curiam); and (2) when high
public officials or derivative subjects were investigated under
the Act in circumstances where private citizens would not
have been investigated, see In re Nofziger, 925 F.2d 428, 442
(D.C. Cir., Spec. Div., 1991) (per curiam).
Under theory (1), Larry argues that Congressman Conyers
accused IC Starr of a lack of independence because of IC
Starr’s alleged financial ties to Scaife. Thus, when the AG
8
requested that IC Starr investigate the matter, ‘‘Mr. Starr
could not, in good conscience, decline to investigate Mr.
Larry, because the Starr/Scaife ‘relationship’ was the fulcrum
of the Attorney General’s referral.’’ According to Larry, IC
Starr was thus deprived of his prosecutorial discretion to
dismiss matters granted to him by Section 594(g), which
Larry describes as ‘‘the most important feature of the Act.’’
Larry was thus ‘‘robbed of the ability to have the independent
counsel exercise its discretion and dismiss the matter without
formal investigation.’’
In furtherance of this argument, Larry compares his situa-
tion favorably to that of the fee petitioner in In re Meese, 907
F.2d 1192 (D.C. Cir., Spec. Div., 1990) (per curiam). In that
case, the AG made a referral to the independent counsel
concerning Meese. According to Larry, that referral ‘‘was
based upon speculation and conjecture’’ with ‘‘the Court
conclud[ing] that the referral should never have been
brought.’’ Larry claims that his ‘‘situation is no different
than Meese’s’’ because ‘‘[t]here was never, at any time, any
evidence linking him to any payoffs of David Hale.’’ Quoting
from Meese, he states that his referral arose only from a
‘‘ ‘generalized suspicion based on associations of a personal
and personal business nature.’ ’’ Id. at 1200.
Under theory (2), Larry states that he ‘‘clearly and undeni-
ably has been subjected to a more rigorous application and
different standards of criminal law than are applied to per-
sons not covered by the Act.’’ He claims that at the time of
the ‘‘referral,’’ there was no evidence to establish a level of
guilt between him and Hale, see U.S. v. Sun–Diamond Grow-
ers, 526 U.S. 398 (1999), and he further states that ‘‘even the
most highly skilled prosecutor would have viewed as fruitless
an attempt to attribute Mr. Boynton’s conduct to Mr. Larry,
and then to attribute to Mr. Larry a culpable state of mind.’’
In this light, Larry argues that Scaife was investigated on a
‘‘frivolous allegation’’ because of his conservative views; that
he (Larry) was caught in the crossfire; that ‘‘[i]n any other
climate, there would have been no investigation’’; and that
therefore he would not have been investigated but for the
requirements of the Act.
9
The IC in her evaluation does not directly address Larry’s
‘‘but for’’ arguments; instead, she refers the Court to her
discussion of the Scaife fee petition and states that ‘‘[f]or the
same reasons, Larry’s arguments are without merit.’’ In her
discussion of Scaife’s petition, the IC argued that, even in the
absence of the Act, this matter would have been investigated:
The Department of Justice had received information
indicating that a government witness in a successful
criminal prosecution had committed perjury, obstruction
of justice, or other serious crimes. Even without the
requirements of the Act, given the Department’s interest
in these allegations, some federal prosecutor would have
investigated. The Department of Justice routinely inves-
tigates allegations of witness tampering or other obstruc-
tive behavior.
Independent Counsel’s Evaluation of Scaife Fee Petition, at
9–10.
The IC also noted there that the DOJ’s interest in investi-
gating this matter would have been particularly high because
of the allegations that FBI agents were involved in, or at
least had knowledge of, the acts. The IC further pointed out
that the allegations directly related to FBI agents who had
been assigned to regulatory independent counsel Fiske and
one of his cooperating witnesses. Therefore, even in the
absence of the Act, if Fiske had continued the investigation,
he ‘‘would [ ] also have conducted some investigation into
whether anyone had tampered with Hale.’’ Like the IC, the
DOJ notes that ‘‘[a]llegations that a witness in a prior stage
of an ongoing criminal investigation may have testified false-
ly, and may have been paid to make false statements, would
be taken seriously by any prosecutor, with or without an
Independent Counsel law.’’
We are not persuaded that Larry would not have incurred
his attorneys’ fees in the absence of the Act. In a companion
case, we noted that the IC’s investigation of the matter
known generally as Whitewater would have been undertaken
even in the absence of the IC statute. In re Madison
Guaranty Savings & Loan (Clinton Fee Application), 334
10
F.3d at 1127. In making this conclusion, we noted that the
Whitewater allegations looked into by IC Starr were, prior to
his appointment, investigated by various prosecutors, includ-
ing regulatory independent counsel Fiske. In this light, we
stated that ‘‘we harbor no doubt that in the absence of the
independent counsel statute the allegations surrounding the
Clintons, Madison Guaranty, and Whitewater would have
been similarly investigated and prosecuted by the Depart-
ment of Justice.’’ Id. So too here. As the IC points out, the
allegations surrounding Hale, Tucker, and the McDougals
concerning Madison Guaranty and CMS were already investi-
gated by the U.S. Attorney’s office and regulatory indepen-
dent counsel Fiske before being assumed by IC Starr. There
appears to us no reason why, in the absence of the statute
under which we appointed IC Starr, the investigation of this
particular matter would not have continued in the same
manner as it did under IC Starr. Consequently, the particu-
lar allegations surrounding Hale that were investigated by
the OIC/OSR concerning witness tampering are, as the DOJ
points out, serious matters ordinarily handled by the case’s
prosecutors, and which we are certain would have been
handled in a similar fashion by regulatory independent coun-
sel Fiske’s prosecutors in the absence of the Act.
CONCLUSION
The petition of Richard M. Larry for reimbursement of
attorneys’ fees is denied for failure to comply with the
‘‘subject’’ and ‘‘but for’’ requirements of 28 U.S.C. § 593(f)(1).