Menendez case before grand jury

A federal grand jury has begun hearing testimony in an investigation of U.S. Sen. Bob Menendez's relationship with a publicly funded community group.

Two witnesses linked to Menendez's onetime home and law office were questioned behind closed doors in Newark on Thursday, a month to the day after the Democrat's election to the Senate. Three knowledgeable sources described the panel as a special grand jury, a type usually assembled for a single extensive investigation.

The grand jurors heard from Edgewater restaurateur Lourdes Lopez, who bought the building from Menendez in 2003 and took over as landlord to the North Hudson Community Action Corp. Menendez had rented the building to the agency for nine years, during which he helped it get some of its federal money in his capacity as the area's congressman.

Also summoned before the panel Thursday afternoon was Lorraine Johnson, director of the North Hudson group's Head Start program, which provides federally subsidized preschool. The Head Start program has used the former Menendez building for its administrative offices since 1994.

A spokesman for Menendez reiterated that the senator does not expect federal prosecutors to find anything wrong with the lease.

"We're confident that, after any review, the U.S. attorney will come to the same conclusion as the House ethics committee, which is that this transaction was completely appropriate and legal," said the spokesman, Allyn Brooks-LaSure.

Lourdes Lopez's lawyer, Adolfo Lopez, declined to discuss the details of his client's testimony, saying authorities had asked that she not talk about the probe.

"She did testify pursuant to a subpoena, and she fully cooperated with the investigation," he said. "We don't want to interfere with the investigation in any way."

The attorney, who is not related to his client, added that Lourdes Lopez has been assured she is not a target of the investigation.

Johnson's lawyer, Lawrence Lustberg, did not return calls seeking comment Thursday afternoon.

Federal grand juries, which operate in secrecy, have the power to subpoena witnesses, records and other evidence of possible federal crimes. They can bring indictments if they find sufficient grounds to believe that crimes have been committed.

Unlike regular federal grand juries, which consider bringing charges in a variety of cases over the course of their terms, special grand juries are typically empaneled to investigate specific, complicated cases.

Prosecutors often use special grand juries to investigate official misconduct that may or may not have run afoul of federal laws. If they find wrongdoing that falls short of being criminal, they can issue reports instead of indictments.

After a hard-fought campaign, Menendez defeated Republican state Sen. Tom Kean Jr. last month to win a full term in the Senate seat to which Governor Corzine appointed him in January. Most of Kean's campaign was an assault on Menendez's character, featuring repeated references to the lease investigation that had first surfaced in September.

That was when the first subpoena in the case was served on the North Hudson organization, seeking records related to the lease and the agency's federal grants during the years when Menendez was its landlord and congressman.

Just days after his Nov. 7 election, federal agents served another round of subpoenas on people linked to the senator and the North Hudson group.

The North Hudson Community Action Corp. gets most of its funding from the state and federal governments. It also has long-standing ties to Hudson County political leaders, including Menendez. Both the group and its funding well predate Menendez's political career.

Because Menendez could influence federal funding, ethics experts have said his lease raised questions about a potential conflict of interest. To prove a crime, however, federal officials would have to show that Menendez was being paid more than the space was worth, experts say.

The senator has said the rent, which ranged from $3,100 to $3,400 a month while he was the owner, was at or below market rates. He has maintained that the deal did not amount to so much as an ethics violation because he had cleared it with a lawyer on the House Ethics Committee. The lawyer Menendez named, Ellen Weintraub, has said she does not remember the case but probably would have found it ethically sound.

Menendez and his former wife bought the home on 41st Street for $92,000 in 1983. They sold it to Lourdes Lopez and her son 20 years later for $450,000.

That was not the first time Lopez and Menendez had crossed paths. In 1993, a federal judge sentenced Lopez to a brief term in a halfway house for helping Union City's treasurer steal hundreds of thousands of dollars in city funds. Menendez was the city's mayor at the time.

Lopez, then a bank clerk, earned a light sentence by cooperating with authorities in the case, which ended with the guilty plea of the treasurer, according to court records. In the years since, Lopez has been successful in real estate and recently opened a tapas restaurant in Edgewater.

Menendez has said he was not aware of Lopez's involvement in the decade-old embezzlement case when she bought his house. Representatives for both Menendez and Lopez have said the two had no contact during the sale and were only vaguely familiar with each other.