Independent Counsel or Special Prosecutor For the Enron Investigation

Independent Counsel or Special Prosecutor For the Enron Investigation

Order Code RS21198
April 15, 2002
CRS Report for Congress
Received through the CRS Web
Independent Counsel or Special Prosecutor
For the Enron Investigation
Jack Maskell
Legislative Attorney
American Law Division
Summary
There have been within the media, as well as in other public commentary, calls for
the appointment of, variously, an “independent counsel,” a “special prosecutor,” or a
“special counsel” to conduct the criminal investigation of the so-called “Enron matter.”
There is at the current time no statutory mechanism existing under federal law for the
appointment of an “independent counsel,” as that provision of law was allowed to expire
and was not reauthorized by Congress after June 30, 1999. No “independent” counsel
or special prosecutor may, therefore, be appointed by a neutral three-judge panel upon
the request of the Attorney General, as had been provided for in the Ethics in
Government Act of 1978. The Attorney General himself, however, may name his own
“special counsel,” and may establish the framework and limits of this counsel’s
prosecutorial jurisdiction for an investigation which would be conducted under the
ultimate control and review of the Attorney General, under regulations promulgated by
the Department of Justice in June of 1999. The Attorney General may name such a
counsel when, in his discretion, he perceives a potential conflict of interest for the Justice
Department to conduct the investigation, or in other extraordinary circumstances, when
it would be “in the public interest” to name such a counsel. Furthermore, the Attorney
General would not be prohibited from issuing new regulations to appoint a more
independent, Watergate-style special prosecutor, similar to regulations authorizing the
appointment of and the investigations by Archibald Cox and Leon Jarworski, if such were
deemed needed by the Attorney General. Finally, Congress could enact legislation
similar to the Independent Counsel law, to direct the Attorney General to seek the
appointment of an independent counsel in certain circumstances.
Background. The financial collapse and bankruptcy of the Enron Corporation have
spurred a multitude of investigations within the Federal Government, including several
congressional investigations and hearings into various aspects of the potential causes of
the failure, its impact on workers and the financial markets, and concerning the need for
Congressional Research Service ˜ The Library of Congress

CRS-2
possible remedial legislation.1 Any criminal prosecutions on behalf of the United States
relating to the failure of the Enron Corporation, however, are to be conducted by the
Department of Justice, under the direction of the Attorney General of the United States
or his designee.2 As of this writing, the Department of Justice “task force established in
January [2002] to investigate all the matters that have arisen from that collapse”3 has
obtained its first criminal indictment in the Enron matter, on March 7, 2002, charging
obstruction of justice by Arthur Andersen, LLP, in alleging that the accounting firm
intentionally destroyed documents sought by the Securities and Exchange Commission
relating to Andersen’s audits and consulting work for Enron.4
Because of various allegations of the “purchase” by Enron of favorable Government
treatment or access through large and continuing campaign contributions to elected
officials and political parties, and the extensive lobbying efforts by the Enron Corporation
and those affiliated with Enron or with the accounting firm Arthur Andersen, there have
been various public calls for an “independent counsel,” a “special prosecutor,” or a
“special counsel” to conduct the criminal investigation and prosecution of the Enron
matter on behalf of the United States, rather than the regular Department of Justice
personnel. It has been noted in this context that the Attorney General of the United States
has already “recused” himself from personal participation in the Enron matter because of
the extent of political campaign contributions that the Attorney General had received from
those associated with the Enron Corporation,5 and that the entire Houston office of the
United States Attorney has been recused from the Enron investigation because of personal
or family ties to the Enron Corporation, its officers or employees.6 In light of these and
other alleged connections and personal communications among the Enron Corporation,
its officers, and highly placed persons in the Bush Administration, it has been argued that
the public interest, particularly the need for public confidence in the thoroughness and
impartiality of the Government’s investigation and prosecution of the Enron matter,
requires an investigation which is “independent” of the ultimate control and direction of
the President and his personally appointed officials in the Department of Justice.7
1 See, McGrain v. Daugherty, 273 U.S. 135, 174 (1927); Watkins v. United States, 354 U.S.
178, 200 (1957), re Congress’ oversight and investigative authority incident to its legislative
powers.
2 28 U.S.C. §§ 516, 519, 547. Federal law enforcement is an Article II, executive function.
Morrison v. Olson, 487 U.S. 654, 685 - 697 (1988).
3 News Conference with Deputy Attorney General Thompson, Thursday, March 14, 2002, at 1.
4 Indictment, United States v. Arthur Andersen, LLP, CR H-02-121 (S.D. Tex., Mar. 7, 2002).
5 Department of Justice Statement, January 10, 2002.
6 Department of Justice, U.S. Attorney’s Office, Southern District of Texas, News Release,
January 10, 2002.
7 Independent counsels have been called for by some non-partisan watchdog groups – including
Fred Wertheimer’s Democracy 21, and the Center for Public Integrity, see Los Angeles Times,
Saturday January 12, 2002; in media commentary – note Professor Erwin Chemerinsky,
“Independence is Essential in Enron Probe,” Los Angeles Times, January 23, 2002, at p. 13: “The
close ties between Enron and the Bush administration demand that the investigation be handled
outside the Bush Justice Department. A special prosecutor independent of the Bush administration
(continued...)

CRS-3
Opponents of the idea of seeking an “independent” investigation outside of the
normal channels in the Department of Justice, note that no specific allegations of
wrongdoing by anyone in the Bush Administration, vis-a-vis the Enron Corporation, have
been made. It is noted that without such specific allegations, no independent counsel
would have been automatically “triggered,” even under the expired independent counsel
statute. There is presented in the current fact situation, therefore, it is argued, no issue of
the inherent “conflict of interest” of having an Administration control an investigation “of
itself,” since there are no such allegations being investigated against anyone in the
Administration. Absent such a conflict of interest, there is missing the principal
justification that had given rise to the original “special prosecutor” (and later named
“independent counsel”) legislation in the aftermath of the Watergate scandal, and the
investigations that followed under that law.8
Independent Counsel Law; Expiration. No “independent counsel” or “special
prosecutor,” as those terms have been used since 1978, may now be appointed by an
independent judicial panel, upon the request of the Attorney General, to investigate or
prosecute a matter on behalf of the United States.9 The provisions of law which had
authorized the appointment of such “independent counsels,” originally enacted in the
“Ethics in Government Act of 1978,” were not reauthorized by Congress, and expired
after June 30, 1999.10 Since the law’s expiration, no new “independent counsels” can be
requested by the Attorney General to be appointed by (nor may such counsels be
appointed on its own accord by) the special three-judge panel of the United States Court
of Appeals, although independent counsels appointed before the law’s expiration in 1999
were expressly allowed to finish their investigations.11
Under the former independent counsel law, the mechanisms for appointing counsels
would have been “triggered” when the Attorney General received “specific” and “credible”
information alleging that certain high-level officials in the Administration had committed
7 (...continued)
is the only way that the public can be confident that the investigation is conducted properly and not
influenced by cronyism and partisan politics”; New York Daily News, “Enron: Countdown to
Scandal,” January 13, 2002, p. 8; Marianne Means, The Houston Chronicle, “Unleash Independent
Counsel on Enron,” January 19, 2002, at p. 40; and by some public officials – including Senator
Fritz Hollings , note Chicago Tribune, February 6, 2002, at p. 1.
8 Samuel Dash, “Enron Probe is on Track for Now,” Milwaukee Journal Sentinel, January 20,
2002; former independent counsel Joseph DiGenova argued that such matters should remain in the
Justice Department: “This is garden-variety fraud. Any good prosecutor can investigate this case,”
see Fort Worth Star Telegram, February 8, 2002, at 10; President Bush and the Justice Department
have rejected calls for an independent or special counsel, noting that the Enron matter is a
“business problem,” and does not raise conflict of interest issues for the Department of Justice.
Chicago Tribune, February 6, 2002, p. 1; Los Angeles Times, February 5, 2002, p.1.
9 Under the Ethics in Government Act of 1978, P.L. 95-521, Title VI, appointees of the special
judicial panel had originally been called “special prosecutors,” but were re-named “independent
counsels” in the provisions’ reauthorization and amendment in 1983.
10 These provisions of law had always included a five-year “sunset” clause, and the law was
reauthorized for the last time on June 30, 1994. P.L. 103-270, 108 Stat. 732, June 30, 1994.
11 28 U.S.C. § 599.

CRS-4
serious federal offenses, or when the Attorney General determined that an investigation
of allegations of a violation of a federal criminal statute by any person would create “a
personal, financial, or political conflict of interest” for the Department of Justice to
investigate or prosecute.12 Thus, while addressing the conflict of interest inherent in an
administration’s investigation of one of its own members was the principal purpose of the
statute, the law also provided a so-called “catch-all” provision, added in 1983, to allow the
Attorney General to request an independent counsel for anyone, whether or not the person
was in the President’s Administration, when the Attorney General perceived a conflict of
interest for the Department of Justice to investigate or prosecute the matter.
It is possible that Congress could reauthorize the independent counsel law, or
provisions of law somewhat similar to the former independent counsel law, to instruct the
Attorney General to seek the appointment of an “independent counsel,” named by an
impartial third-party panel, under certain circumstances.13 It may be noted in this regard
that the independent counsel law had, in fact, been allowed to expire previously for a
period of time: in 1992 the law expired when it was not reauthorized in the 102nd
Congress. It was not until the publicity of the so-called “Whitewater” matter, and the
allegations concerning the President’s and First Lady’s possible involvement in the
Arkansas land deal, that Congress eventually reauthorized the law again in 1994.
Special Counsels and Department of Justice Regulations. When the
independent counsel law expired after June 30, 1999, the Attorney General promulgated
specific regulations concerning the appointment of outside, temporary counsels in certain
circumstances.14 Such personnel appointed by the Attorney General from outside of the
Department of Justice to conduct investigations and possible prosecutions of certain
sensitive matters, or matters which may raise a conflict of interest for Justice Department
personnel, are to be called "Special Counsels." These special counsels are appointed by,
are answerable to, and may have their prosecutorial or investigative decisions
countermanded by, the Attorney General. The “special counsels” under these regulations
have, therefore, by express design, less “independence” from the Attorney General and the
Department of Justice than did the “independent counsels” under the Ethics in
Government Act of 1978, or the “special prosecutors” appointed by the Attorney General
for the “Watergate” matter. One Special Counsel has thus far been appointed under the
new regulations, that is, former Senator John Danforth, appointed by Attorney General
Reno on September 9, 1999, to be special counsel to investigate the “Branch Davidian
incident” near Waco, Texas, to determine if there had been any misconduct on the part of
federal law enforcement personnel.
Under the Justice Department regulations, the appointment of a “Special Counsel”
is completely discretionary with the Attorney General. The criteria for the Attorney
12 28 U.S.C. § 591(a), (b), and (c).
13 Although the former statute was phrased in mandatory terms (“shall apply”), the decision to seek
the appointment of an independent counsel was always a matter within the Attorney General’s
discretion, and was not reviewable in court. 28 U.S.C. § 592(f). Congress could not, in any event,
actually ever “order” the appointment of a prosecutor or independent counsel, under constitutional
separation of powers principles. Morrison v. Olson, supra at 693-694.
14 28 C.F.R. Part 600, §§ 600.1 to 600.10; 64 Fed. Reg. 37038-37044, July 9, 1999.

CRS-5
General’s decision is whether a prosecution or investigation of a “matter” or of a person
may raise a conflict of interest for the Department of Justice, or whether there exist “other
extraordinary circumstances,” and when, in light of these conflicts or circumstances, the
Attorney General finds that it is in the “public interest” to appoint such Counsel.15
The most significant departures in the “special counsel” regulations from the former
statutory “independent counsel” schemes are that: (1) the Attorney General, and not an
independent body such as the three-judge panel, actually names the person who is to be
the Special Counsel; (2) the Attorney General, and not an outside panel, establishes and
defines the prosecutorial jurisdiction of the Special Counsel; (3) the general jurisdiction
of the Special Counsel is limited to the specific matter referred to him or her (and not also
to “related” matters), as well as collateral offenses arising out of the investigation which
“interfere” with the investigation; (4) the Special Counsel is subject to all the notification,
and “review and approval” provisions of the internal Department of Justice procedures,
policies and practices (but may circumvent certain review and approval procedures by
consulting directly with the Attorney General); (5) the Attorney General must be notified
concerning significant actions that the Special Counsel is to take, and may countermand
any proposed action by the Special Counsel; (6) appeals of cases by the Special Counsel
must be approved by the Solicitor General of the United States, a presidential political
appointee; and (7) Justice Department regulations provide that a Special Counsel may be
removed by the Attorney General for “misconduct, dereliction of duty, incapacity, conflict
of interest, or for other good cause, including violation of Department policies,” while the
statute provided that Independent Counsel could be removed by the Attorney General for
“good cause, physical or mental disability.”
Ad Hoc Special Counsels or Special Prosecutors. In addition to the current
Justice Department regulations for “special counsels,” the Attorneys General of the United
States have on several occasions in the past exercised their own general discretion and
authority to directly name and appoint “special prosecutors” or counsels to handle selected
investigations or prosecutions for the Department of Justice on behalf of the United States.
Such “special prosecutors” or counsels are selected and named personally by the Attorney
General under the existing, general statutory authority of the Attorney General to direct
the activities and functions of the Department of Justice, to delegate authority to
employees, and to appoint staff, including special attorneys.16 It is thus possible in theory,
although unlikely in a practical, political sense (particularly in light of the absence, as of
this writing, of evidence of any particular Government corruption in the Enron matter),17
that despite the current Justice Department regulations on “special counsels,” the Attorney
General could issue new, “Watergate-style” regulations to appoint a special prosecutor
with significant autonomy and independence of action from the Justice Department.
15 28 C.F.R. § 600.1, also § 600.2. If the Attorney General is recused from a matter, then the
Acting Attorney General will appoint when deemed warranted. For a broader discussion of the new
“special counsel” regulations, see CRS Rpt. RL31246, “Independent Counsel Law Expiration and
the Appointment of Special Counsels,” January 15, 2002.
16 Regulations promulgated pursuant to such Attorney General appointments generally cite as
statutory authority, 28 U.S.C. §§ 509, 510, and 543, and 5 U.S.C. § 301.
17 See, generally, CRS Rpt. RL31288, “Soft Money, Allegations of Political Corruption, and
Enron,” February 12, 2002.

CRS-6
In recent history, prior to (and directly influencing) the enactment of the independent
counsel provisions of the Ethics in Government Act of 1978, special prosecutors Archibald
Cox, and later Leon Jaworski, were appointed in 1973 as “Watergate” special prosecutors
to investigate the allegations of the Nixon Administration’s complicity in or knowledge of,
and later “cover-up”of, the break-in of Democratic party headquarters in the Watergate
office complex. The regulations under which these special prosecutors were appointed
provided a great deal of autonomy to their investigations and prosecutorial decisions, and
provided for removal only for “gross improprieties.”18 In 1994, subsequent to the
expiration of the independent counsel statute in 1992, and before the statute’s
reauthorization later in 1994, Attorney General Reno had appointed a “special counsel,”
or a “regulatory independent counsel,” Robert B. Fiske, Jr., with autonomy and authority
similar to the statutory independent counsels, to investigate the “Whitewater” allegations
concerning the possible involvement of President Clinton and the First Lady.19
Other recent examples of “special” Attorney General appointees have included the
appointments by Attorney General Barr of special counsels Nicholas Bua (1989) to
investigate the so-called “Inslaw Affair,” which involved allegations that certain high level
Justice Department officials had stolen software from a small computer company; Malcom
Wilkey (1992), because of the “unique circumstances and sensitivities of th[e] matter,” to
conduct a preliminary review of the alleged abuses of the “House Bank” by Members and
officers in the House of Representatives;20 and Frederick Lacey (1992), to conduct a
preliminary investigation of any wrongdoing by the Justice Department or the CIA
concerning an illegal loan to Iraq from the Atlanta branch of an Italian bank, Banca
Nationale del Laroro.21 These special counsels were appointed at a time when the
independent counsel statute was in force, and had been criticized by some as an attempt
by the Attorney General, who had expressed philosophical opposition to the independent
counsel statute, to avoid the appointment of an independent counsel by the three-judge
panel.22 These special counsels were intended to conduct only what would be considered
“preliminary reviews” of the matters, and reported to the Attorney General without
conducting any prosecutions of their own. Other special appointments have included the
so-called “back-up” independent counsels appointed by the Attorney General during the
independent counsel statute's constitutional challenge in the federal courts in the 1980's.23
18 38 Fed.Reg. 14688, June 4, 1973, and 38 Fed. Reg. 30739, November 7, 1973.
19 28 C.F.R. § 603.1, 59 Fed. Reg. 5322, February 4, 1994. Upon reauthorization of the
independent counsel law, the special three judge panel of the United States Court of Appeals for
the District of Columbia replaced Special Counsel Fiske with Independent Counsel Kenneth Starr,
In re: Madison Guaranty Savings & Loan, August 5, 1994.
20 Department of Justice Press Release, Friday, March 20, 1992.
21 The Los Angeles Times, October 17, 1992, “Ex-Judge to Investigate Iraq Loans,” at A1.
22 The National Law Journal, February 12, 1996, “Spies, Lies and Politics,” at A10; The Recorder,
December 29, 1992, "A Limited Legacy; Outgoing AG Barr will be remembered best for his
conflicts with Congress over independent counsel,” at 1.
23 28 C.F.R. parts 601 and 602.