The Fall of the House of Zeus (25 page)

Lackey was incensed over the power that Scruggs held over public officials, and he wondered where he might turn.
On the morning of April 11, two weeks after his meeting with Balducci, the judge telephoned his old friend John Hailman, a prosecutor in the U.S. Attorney’s Office in Oxford, and told him, “Something’s come up and I really need to see you.”

    
Hailman was an interesting character, an honest-to-god Renaissance man who made his home in Oxford years before it became a Renaissance community. He had come south from Indiana to play baseball and basketball at Millsaps College and wound up, after a youthful, circuitous journey, speaking French fluently and acquiring an appreciation of wine so sophisticated that he once wrote on the subject for
The Washington Post
. He developed these talents almost by accident. As a college student Hailman decided he needed some savoir faire after being rebuffed by a Delta girl, he set off for Paris to study at the Sorbonne. Instead of returning home after his year abroad, he stayed to work as an English-French interpreter for Air France. On trips to London, he began spending spare time watching trials in courtrooms at the legendary Old Bailey, and he grew intrigued by law.

He graduated from Ole Miss law school in 1969 after working part time for legal services programs that were thought by many Mississippians to be the instruments of left-wing devils. Then he clerked for two years for a federal judge overseeing school desegregation cases in the state before he took a job in Washington with John C. Stennis, the more moderate of Mississippi’s two U.S. senators. When Stennis was shot and wounded by a gang of thieves, Hailman spent days at the old man’s side at Walter Reed Army Hospital in Washington, listening to Stennis rail at the slowness of the federal investigators while he helped the senator prepare for the trial of his alleged assailants. When prosecutors convinced one of the defendants to testify against the other two men charged in the case, a tactic that resulted in guilty pleas for all, Hailman thought for the first time that he might like to be a prosecutor himself. That opportunity arose when he was lured from a faculty position at the Ole Miss law school to join the local U.S. Attorney’s Office in 1974. He signed for a two-year stint. By the time Judge Lackey called him, Hailman had been there thirty-three years. He was chief of a criminal division with twenty lawyers, but planned to retire in a few months.

Hailman had known Lackey for years. He prosecuted some of Lackey’s clients before Lackey became a judge, but that did not damage their relationship. Both men were easygoing, natural storytellers who enjoyed each other’s company. Once Hailman had taken a small delegation from the justice ministry of Oman, visitors attired in ceremonial robes and turbans, to visit the judge, and Lackey entertained the group with folksy observations about the American judicial system. More recently, Hailman had been notified by security personnel about a curious package Lackey had left for him. Upon inspection, Hailman found that it was a fruit jar filled with homemade blackberry wine. The bottle bore a phony label of “Appelation Controlee,” with the claim that the contents had been pressed by virgins and bottled by Baptists.

    When Lackey came to Hailman’s office at lunchtime, the two men talked of wine and legal affairs for nearly twenty minutes until Lackey, visibly agitated, changed the subject.

“John, I hardly know how to begin, but there’s something really serious that’s bothering me. I’ll tell you right out: a lawyer I’ve been like a father to came to me and offered me a bribe.”

Lackey described his relationship with Balducci, then gave his account of the meeting with him.

“John, I wanted to do two things—to throw up and to take a shower. Normally I’d lose my temper, but I was so shocked I didn’t do anything. Tim talked on and on. Finally, I had to say something, so I told Tim: ‘The case is new. I need to read the pleadings.’ ”

Lackey asked if the conversation with Balducci merited attention as judicial bribery.

Just as Lackey had been struck by the potential enormity of the case when Scruggs’s name was mentioned, Hailman immediately realized the gravity of what Lackey was telling him.

Hailman assured Lackey that he had done the right thing to report the meeting.

As soon as Lackey left the building, Hailman walked down the hall to the office of the man who would soon take his place as head prosecutor, Tom Dawson.
Hailman closed the door behind him and said, “You’re not going to believe what I just heard.”

    Dawson proved to be receptive to allegations against Scruggs. When Scruggs had moved to town a few years earlier, Dawson and Hailman had figuratively rolled their eyes. They knew of Scruggs for his exploits as a plaintiff’s attorney, and they felt that he and some of his associates had been skating on the edge of illegal activity with judges and juries. Unsure of exactly what they had on their hands, the two prosecutors set up another meeting with Lackey. If there was to be a case, there had to be evidence.

“
Henry,” Hailman instructed the judge, “it’s important to remember things that happened. Balducci may claim you misinterpreted what he said. Write down now everything you remember each of you saying. And don’t go to another meeting or take another call without a tape recorder.”

He asked the judge if he was willing to wear a wire.

Lackey sighed. “Absolutely,” he said, adding, “I knew you’d ask that. I feel horrible.” He expressed the hope that Balducci might back off.

Hailman persisted. “Play this out,” he told Lackey. “You can’t let it drop.” He instructed the judge about the rules regarding entrapment, how it was permissible to lay down bait but improper to entice someone to seize it. “Don’t get cute. Don’t question too much and scare them off,” Hailman warned. “Just let him do what he’s going to do.”

    
The prospect of dealing with a case that might implicate Scruggs stimulated all kinds of sensitivities in the U.S. Attorney’s Office
in Oxford. First of all, it raised concerns about Scruggs’s brother-in-law, one of the most influential Mississippians in Washington. Though Trent Lott’s relations with the Bush administration had been strained in the years since the White House had greased his slide from power in the Senate, he still had plenty of Republican markers to play. There had been suggestions that federal prosecutors in the Southern District of Mississippi had failed to indict Scruggs in the Paul Minor case because of the inhibiting presence of Lott in the background.

At the top level, the office of U.S. attorney is inherently political, chosen by the president, and acting at the behest of political allies in each state. Jim Greenlee, head of the Oxford office, had been nominated for the job by Republican senator Thad Cochran. Though Cochran and Lott were not close, they generally worked together to find mutually acceptable candidates when vacancies occurred for federal judgeships and U.S. attorneys in the state. Thus, Greenlee had been dependent upon Lott’s approval when he was selected. It was not well known, but Greenlee was part of the extensive political network that could be traced back to Lott’s Sigma Nu house at Ole Miss. Those outside the Sigma Nu sphere laughed at Lott’s allegiance to his college club; it seemed sophomoric for a senator. But it was a very real factor in Lott’s decision making, and Greenlee’s background on fraternity row at Ole Miss had been helpful.

As soon as Hailman and Dawson took the news of Lackey’s visit to Greenlee, the case was plunged into a thicket of bureaucratic infighting and personal antagonisms that divided the offices of the U.S. attorney and the FBI in Oxford.

Greenlee had worked in the office’s civil division before he was tapped for promotion. After the political move, he became a subject of scorn among some of the assistant attorneys who considered their jobs a career opportunity and served for years regardless of which party held power. They felt they had earned their positions because of their talents and not through their political connections. Greenlee’s mannerisms, which were sometimes petulant, also grated on them. Behind his back, the prosecutors called him Queeg, a reference to the mad captain in
The Caine Mutiny
.

Despite Greenlee’s relationship with Lott, he authorized an investigation of the senator’s brother-in-law. But it would have to involve the FBI, and this created another problem.

·    ·    ·

    
A serious schism had developed between the U.S. Attorney’s Office and the local FBI that threatened their ability to work together. The two units responsible for bringing federal cases to trial had simmering differences over both policy and procedure. A more vituperative argument between personalities also existed.

The bureaucratic clash grew out of post-9/11 activites, when the U.S. Attorney’s Office in Oxford plunged into President Bush’s war on terrorism with enthusiasm. In 2003, Greenlee developed a “Convenience Store Initiative” that targeted scores of Arabs and Muslims operating small gas station–food stores in North Mississippi. To conduct the investigation, Greenlee’s office called upon representatives of the Drug Enforcement Administration (DEA), the Internal Revenue Service’s criminal investigation division, and the Bureau of Alcohol, Tobacco and Firearms (BATF). But agents assigned to the Oxford FBI, considered the key investigatory unit in the region, wound up feeling left out of the loop.

To the consternation of several agents, they discovered that some of their undercover contacts in the Arab-Muslim community, shopowners who had been cooperating in investigations, had been drawn into the dragnet. Many of the convenience store owners were actually American citizens with Palestinian or Yemeni backgrounds. Though some were believed involved in the sale of Sudafed and other medical products that were used to manufacture illegal methamphetamine, the increasingly popular drug known as crystal meth, few were considered potential terrorists.

After learning more about Greenlee’s initiative, the FBI agents were angered further when they found that the names of many suspects had been provided to the federal prosecutors by the police department in the small town of Byhalia, whose source was a lone and dubious “confidential informant.”

Acting on the source’s information, nearly eighty grand jury subpoenas were issued to the Arab Americans. The convenience store owners suffered other adversities. The U.S. Attorney’s Office called for tax investigations of many individuals who had never been suspected of any illegal activity.

Arguments ensued between the FBI and Greenlee’s office, and the FBI agents eventually challenged decisions made by three men who would later have critical roles in the Scruggs case: Greenlee, Hailman, and Dawson.

In a confidential report drafted in September 2004 by Hal Neilson, the supervisory senior resident agent in charge of the Oxford office, and endorsed by four of his agents, the U.S. Attorney’s Office in Oxford was accused of deceit and excessive zeal. Neilson’s report said, “It was determined through conversations with DEA and IRS-CID agents that the only individuals targeted by the CSI (Convenience Store Initiative) were of middle eastern descent and the only apparent nexus for investigation was ethnicity.”

According to the document, when the FBI pointed out, in one meeting with the prosecutors, that the initiative had ignored federal “restrictions regarding the targeting of U.S. citizens,” Hailman had waved off the claim and said these restrictions “did not apply” to the U.S. Attorney’s Office. The report, which was sent to FBI director Robert S. Mueller, also compained that Dawson had tried to base a grand jury probe on a preliminary DEA inquiry that never resulted in a formal investigation.

“Out of an abundance of caution and in the interest of insuring the civil rights of U.S. persons,” the Oxford FBI agents asked for legal guidance “regarding this situation.”

The report lay fallow for months.

In the meantime, the U.S. Attorney’s Office opened its own investigation of Neilson, the top FBI agent in Oxford, in connection with his role in a partnership that owned a building that became the local office for the bureau. Although no formal charges were brought against Neilson at the time, he was accused of hiding his financial interest in the building.

Neilson’s supervisors subsequently took him off several high-level cases.
In March 2006, Neilson filed a second report with the special agent in charge of the FBI in Mississippi appealing for personal safeguards through provisions of the federal Whistleblower Protection Act.

Knowledge of the feud was quietly confined to the FBI and the federal prosecutors, who had their own office across town. But it simmered.

The dispute would be deepened by the handling of the Scruggs investigation, and ultimately the two offices would become locked in a miniature version of the nuclear age theory of “mutually assured destruction,” in which fear of retaliation prevents one power with nuclear capability from deploying atomic arsenals against another. In this case, Neilson was being secretly threatened with indictment at the same time he was prepared to level charges of misconduct against the prosecutors. Yet neither side seemed ready to pull the trigger.

·    ·    ·

    
Determined to keep the Oxford FBI office in the dark in the Scruggs case, Greenlee, Hailman, and Dawson drove to Jackson to meet secretly with the state supervisors of the FBI.

While bypassing the Oxford FBI, the prosecutors were taking the explosive case to FBI personnel in another federal court district where agents had investigated the Paul Minor case and were still smarting over the failure of the U.S. Attorney’s Office in Jackson to seek an indictment against Scruggs.

The Oxford prosecutors explained that they wanted “absolute operational security,” an undercover effort that would prevent the Oxford FBI from knowing about an investigation in their own backyard. This was, after all, a case involving a lawyer with a national reputation whose brother-in-law was a powerful U.S. senator.

The Jackson FBI unit detailed Bill Delaney, an agent who had already been working on a criminal case in North Mississippi involving a failed beef processing plant that had cost the state more than $50 million. During the course of the investigation, Delaney had become a familiar figure in the U.S. Attorney’s Office in Oxford, so it was thought no one would suspect a thing.