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Justice Drops Pena Inquiry, Nixes Independent Council

By Pierre Thomas and Don Phillips
The Washington Post

Attorney General Janet Reno yesterday dropped a Justice Department inquiry that could have led to the appointment of an independent counsel to investigate Transportation Secretary Federico Pena.

The department's criminal division had been investigating Pena's ties to the recently opened international airport in Denver, where he once served as mayor. Justice criminal division lawyers also examined what role, if any, Pena played in the awarding of a Los Angeles transit system contract to his former investment firm.

The justice probe had begun on Feb. 15 after the Transportation Department's inspector general advised justice officials that "recent media reports about Pena suggested he might have violated federal criminal law." Under the independent counsel law, Reno had 30 days to determine if there was a specific allegation of criminal wrong doing from a credible source.

In a press release issued yesterday, Justice Department officials concluded "the criminal division has found no specific and credible evidence of any violation of federal criminal law. Accordingly, the matter has been closed."

Pena issued a brief statement saying, "I have always maintained the highest level of integrity in my life. I am pleased, but not surprised, that the Justice Department has found no evidence of wrongdoing in this matter. My focus has been and remains on serving the president and the American people as secretary of transportation."

Reno's action comes on the heels of a decision earlier this week to seek an independent counsel to investigate whether Housing and Urban Development Secretary Henry Cisneros lied to FBI agents during his background interview prior to confirmation. The action against Cisneros marked the third independent counsel Reno had sought. Independent counsels are already investigating the Whitewater affair and former agriculture secretary Mike Espy. Pena's probe was one of two pending inquiries that could have led to another independent counsel. Department officials are currently conducting a 90-day preliminary investigation of Commerce Secretary Ron Brown's financial dealing.

The Pena review stemmed at least in part from a Los Angeles Times report that Los Angeles transit officials had shifted management of some pension funds to Pena's former Denver firm, Pena Investment Advisors, when it became clear that Pena would become transportation secretary.

The Transportation Department at that time was in the middle of a multimillion dollar project to help build the new Los Angeles Red Line subway.

Pena said he had already severed ties with the firm by then, selling his stock at a loss. He noted that if the officials thought they were gaining favors, they wasted their effort because Congress had long ago earmarked funds for the project. He said that at one point, he withheld funds until local officials made management changes in the project.