clock menu more-arrow no yes

Filed under:


Independent counsel James McKay concluded in a report released Monday that Attorney General Edwin Meese III probably willfully filed a false income tax return, failed to pay taxes on time and broke a criminal conflict-of-interest law.

But McKay said he had decided not to seek criminal charges against the attorney general because "there is no evidence that Mr. Meese acted from motivation for personal gain . . . (or) out of self-interest."In an 814-page report, McKay said Meese's 1985 tax return did not declare some capital gains from the sale of securities and that Meese did not pay income tax on his capital gains from those sales when he filed the return.

"A trier of fact would probably conclude beyond a reasonable doubt that Mr. Meese violated" a section of the Internal Revenue Code by filing "a materially false tax return," said McKay, who added that Meese probably also violated a section of the Internal Revenue Code for "willfully failing to pay tax at the time required by law."

Meese also probably violated a criminal conflict-of-interest law in connection with his holdings of $14,000 in regional Bell telephone stock, but the independent counsel who investigated Meese for 14 months disclosed Monday that he had decided not to prosecute the case.

McKay said Meese owned the stock in the regional Bell companies in 1985 and 1986, when he set in motion a review process that led to a reversal of Justice Department policy. McKay also found that Meese participated in discussions of proposed legislation to shift regulatory responsibility for the breakup of AT&T from a federal court and the Justice Department to the Federal Communications Commission.

McKay also said that "a trier of fact would probably conclude beyond a reasonable doubt that Mr. Meese violated" a federal conflict-of-interest law. That law makes it a felony for a U.S. official to participate personally and substantially in a particular matter in which he or his spouse has a financial interest.

As for the tax return, Meese's investment manager, W. Franklyn Chinn, sold securities for Meese and his wife, Ursula, in May and June 1985 and deposited the proceeds of $54,581 in the Meeses' account.

The Meeses realized a net capital gain of $20,706 from these sales. They owed $3,479 in taxes, initially due on April 15, 1986. The Meeses were granted extensions for filing their return until Oct. 15, 1986.

A week before the Oct. 15 deadline, Meese told his accountant, John McKean, that the securities had been sold in 1985. But Meese did not identify the securities or tell the accountant what the sale proceeds were or what their cost had been, facts necessary to calculate the capital gain.

According to McKay, Meese had not yet located or assembled that information.

McKean suggested to Meese, and Meese agreed, that the return be filed by the deadline without any reference to the securities sales and that an amended return disclosing the required information be filed as soon as possible.

McKay said that Meese finally filed an amended tax return on Feb. 6 of this year declaring a capital gain on the securities sales of $14,606 and that Meese paid the tax due on that amount plus interest.

"Mr. Meese had a duty to report the securities sales and to declare his capital gains income on his tax return filed Oct. 15, 1986.

"Because that return did not disclose any information about the 1985 securities sales, it was materially false," McKay declared.

"It incorrectly stated the income and tax due without any notation or other reference explaining that those figures did not include any information about the securities sales," said McKay's report.

In regard to the phone stock, McKay's report said that "Congress has declared . . . that it is a criminal offense for an official personally and substantially to participate in a particular matter in which he knows he has a financial interest."

But McKay went on to say Congress did not seek to limit a prosecutor's discretion in determining whether or not a probable violation of the law warrants actual prosecution.

McKay said that "there is no substantial federal interest in prosecuting probable violations resulting from an official's participation in matters when a similar kind of participation . . . was covered by waivers for periods both before and after the probable violations occurred."

McKay added that there was "no evidence of deliberate circumvention of the waiver process, concealment of the financial interest, motivation for personal gain, or effect on government decision-making."

The independent counsel said that an argument could be made that prosecuting an attorney general "would serve as a significant deterrent" to other high-ranking public officials.

He said he had considered that argument and "concluded that Mr. Meese's particular position in government should not be the determining factor in the prosecutive decision" in a case in which a prosecution is not otherwise warranted.