Federal probe of Menendez is far from dead

August 26, 2007 Star-Ledger

It was nearly a year ago, during the heat of U.S. Sen. Robert Menendez's election campaign, when federal investigators caused an uproar by issuing a subpoena for records of a real estate deal Menendez made.

The investigation yielded no criminal charges, and by the start of summer Menendez's attorneys asked federal prosecutors to declare him exonerated.

Not only was that request ignored, according to sources with knowledge of the meeting, but in recent weeks new subpoenas went out, delving into other matters involving the Hudson County Democrat.

Tom O'Neil, a spokesman for the Jersey City Medical Center, confirmed last week that the hospital has received two subpoenas from federal investigators. He said hospital officials were gathering documents to fully cooperate with authorities. He declined to disclose details.

The subpoenas, according to people familiar with the command, are for records regarding government-relations consulting contracts. The subpoenas were signed by Assistant U.S. Attorney Richard Constable, the prosecutor spearheading the Menendez case. The subpoenas are related to that probe, according to a source familiar with the investigation.

Only a handful of lobbyists have worked for the hospital in recent years, and among them was Menendez's former chief of staff, Kay LiCausi. She earned a total of $280,000 from the hospital from 2003 until her contract ended earlier this year, according to hospital officials.

Critics have previously raised questions about the senator's relationship with his former aide because after LiCausi left his office, she quickly built a successful lobbying firm enlisting clients, such as the hospital, that rely on government funding.

LiCausi did not return calls for comment.

On Thursday, Jonathan Metsch, who served as president and chief executive of the Jersey City Medical Center when LiCausi worked for the hospital, testified before a grand jury, according to two sources familiar with the investigation. Metsch, who resigned last year, did not return a call for comment.

The latest developments indicate a new direction for an investigation that has been surrounded by controversy from the start, when Menendez accused U.S. Attorney Christopher Christie, a Republican appointed by President Bush, of playing politics.

Menendez has since toned down his criticism but continues to vehemently deny any wrongdoing.

He has enlisted two prominent criminal defense attorneys, Marc Elias and Alfred DeCotiis. Elias said last week: "We remain confident and hopeful that this entire matter will be brought to a conclusion and it will be clear to everyone that what we've said all along is true: Senator Menendez has acted ethically and lawfully in all of his dealings."

In June, Elias and DeCotiis met with prosecutors at the U.S. Attorney's Office in Newark to request a letter clearing the senator, according to sources familiar with the meeting.

Michael Drewniak, a spokesman for the U.S. Attorney's Office, declined to comment.

POST-ELECTION TESTIMONY

The investigation started off in a highly charged atmosphere about two months before Election Day, as Menendez, a Senate appointee, was seeking election to a full term against Republican state Sen. Tom Kean.

Federal investigators subpoenaed documents from the North Hudson Community Action Corp. regarding a Union City building that the nonprofit agency rented from Menendez between 1994 and 2003.

The subpoena came two weeks after The Star-Ledger reported that Menendez had collected more than $300,000 from the organization over a nine-year period while he represented Hudson County in Congress. During that time, he also helped the agency acquire millions of dollars in federal funding.

Republicans made the investigation a centerpiece of Kean's campaign as he relentlessly attacked Menendez's ethics. Striking back, Menendez questioned the timing of the subpoena and accused the U.S. attorney of being part of an orchestrated campaign to destroy him.

Menendez handily defeated Kean in November, but the investigation heated up afterward. In December, a grand jury heard testimony from the woman who purchased the building from Menendez and an official with North Hudson Community Action who was familiar with the lease.

Lawyers for both said last week that federal authorities were no longer asking them about that matter.

"We have not heard from the government for some time. We hope and believe that is because we have fully answered all of the questions to their satisfaction," said Lawrence Lustberg, who represents the nonprofit group. He added, "We are absolutely confident that there was no wrongdoing whatsoever in connection with the North Hudson leases."

Last November, prosecutors also subpoenaed Danielle Leigh, Menendez's former campaign fundraiser, to appear before the grand jury. Leigh had abruptly quit Menendez's campaign earlier in the year, before the investigation began.

Remi Spencer, Leigh's attorney, said last week her client has not testified before the grand jury, but Spencer declined to comment on whether she or Leigh have had any further contact with federal investigators.