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April 16, 1998

VIA HAND DELIVERY

Attorney General Janet Reno
U.S. Department of Justice
Tenth Street and Constitution Avenue, N.W.
Washington, DC 20004

Dear Attorney General Reno:

This is in response to Deputy Attorney General Holder's letter of of April 9, 1998, referring to the Office of the Independent Counsel ("OIC") certain allegations that David Hale, a witness who has been cooperating with our office, may have received cash and other gratuities from individuals seeking to discredit the President. While noting that our jurisdiction explicitly includes obstruction of justice and witness tampering in connection with our investigation, Mr. Holder suggests that the OIC "would have a conflict of interest, or the appearance of a conflict, in looking into this matter."

Preliminary information indicates that most if not all of the alleged FBI-supervised contacts between David Hale and Parker Dozhier occurred prior to August 1994 -- i.e., while the investigation was being conducted under the auspices of the Department of Justice. To the extent that any activity of potential investigative interest may have taken place, it thus appears -- at least initially -- that it occurred almost entirely before the point at which I became Independent Counsel.

Nonetheless, after reviewing the allegations that have been made regarding Mr. Hale, we have concluded that any investigation of these allegations may involve at most the appearance of a conflict of interest on the part of the OIC. We also note, however, that the Department of Justice may have not only an appearance problem but multiple actual conflicts of interest in connection with an investigation of Mr. Hale, including (1) a conflict potentially arising from the fact that the Department of Justice, which under the Ethics in Government Act is statutorily precluded from investigating the matters that the OIC is currently looking into, would itself be investigating the OIC; (2) a conflict potentially arising from the fact that Mr. Hale has provided information that is damaging to the President of the United States; and (3) a conflict arising from the fact that, because the alleged FBI-supervised contacts between David Hale and Parker Dozhier appear largely to have been prior to August of 1994, any activity of investigative interest that may have occurred took place primarily during the time that the investigation was being conducted on behalf of the Department of Justice.

We are deeply concerned that the above considerations would create actual conflict of interest problems in any investigation of these allegations by the Department of Justice, particularly when viewed in combination with the positions that the Department has taken on the various testimonial privileges that are hindering our investigation.

To address these important issues, the OIC has developed several proposed alternate mechanisms for investigating this matter in a manner that comports fully with our respective obligations and with the public's interest in the proper and honest administration of justice. We believe it is appropriate for the OIC and the Department of Justice to attempt to reach agreement on which of these mechanisms should be implemented, to assure public confidence in the discharge of our responsibilities in our respective investigative jurisdictions. I look forward to the opportunity to meet with you, at your earliest convenience, to discuss these alternate mechanisms and our mutual interest in a complete, thorough, and unbiased investigation.

Sincerely,
/s/
Kenneth W. Starr
Independent Counsel