Phone Transcripts Play Role in FBI Probe of Cisneros : Cabinet: Agents are reviewing taped conversations between HUD secretary, ex-mistress to determine if he lied about payments to her.

By ROBERT L. JACKSON and RONALD J. OSTROW

Nov. 25, 1994 12 AM PT

TIMES STAFF WRITERS

WASHINGTON — “It’s going to be dicey,” the Cabinet nominee confided in a telephone call to a close acquaintance. “The FBI is crawling all over everything.”

A few days later, his mood seemed to have brightened. The FBI agents were “gossipers and scandalizers,” he said in another telephone conversation and “real bad at tracking down financial things.”

According to transcripts of the calls now in the hands of federal investigators, Henry G. Cisneros expressed those thoughts in early 1993, not long before he was confirmed as President Clinton’s secretary of housing and urban development.

The excerpts from two telephone conversations are among 86 between Cisneros and his former mistress, Linda Medlar, who secretly recorded the calls and prepared transcripts of them. She later gave some of the transcripts to a tabloid television show, which paid her $15,000 for an interview.

The full 40 hours of recordings and the transcripts are being reviewed by FBI agents and lawyers from the public-integrity section of the Justice Department’s criminal division. The investigators are trying to determine whether Cisneros told FBI agents the truth about his financial relationship with Medlar when they questioned him before his Senate confirmation.

The answer to that question could determine not only whether Cisneros can keep his job but whether he deliberately misled federal investigators and Congress and should face criminal charges.

Agents are now about a month into the 90-day preliminary inquiry, which Atty. Gen. Janet Reno will rely on in deciding whether to seek appointment of an independent counsel to conduct a full-scale investigation. But indications are that because of the sensitivity of the case, the FBI may take the rare step of going beyond 90 days to complete the preliminary inquiry. The law provides for an extension of up to 60 days.

Medlar’s transcripts--which may be the subject of a legal challenge from Cisneros’ attorneys on authenticity grounds--suggest that he was concerned that his payments to Medlar could sink his nomination. Copies of most of the transcripts--parts of which previously have been made public--were obtained by The Times.

The recorded calls introduce potentially embarrassing details that the FBI appears not to have known when it questioned Cisneros as a Cabinet nominee.

For example, Cisneros apparently agreed to have Morris Jaffe, a controversial San Antonio entrepreneur and Democratic contributor, make payments to Medlar on his behalf, as has been reported previously. In one conversation, according to the transcripts, Cisneros urged Medlar to accept between $5,000 and $17,000 from Jaffe, although he then expressed concern about the arrangement.

That Cisneros, a married man, carried on a long relationship with Medlar was not news to Clinton’s Cabinet selection team.

The relationship began in 1987, when Cisneros was mayor of San Antonio and Medlar was his employee. The romance was revealed--and confirmed by Cisneros--in a front-page story in a San Antonio newspaper in October, 1988, several months after Cisneros had announced that he would not seek another term. By then, Medlar had left Cisneros’ office. She subsequently was fired from consulting jobs for two other politicians because of publicity about the affair.

What the public did not know, however, was that after the romance ended in late 1989, Cisneros began sending money to Medlar to compensate her for lost income resulting from the relationship.

While neither side disputes that the payments were made, they disagree on the amount and regularity of them. Medlar has insisted that by mutual consent, Cisneros agreed to send $4,000 a month until her teen-age daughter graduated college--a recognition that she could not find work and that her health had suffered because of the publicity about the affair.

Cisneros’ Washington lawyer, Cono R. Namorato, said the payments were irregular and that Cisneros never kept a record of them. As to whether Cisneros had any obligation to pay Medlar, he said: “I can’t answer the question. . . . That is the subject of an ongoing lawsuit.”

Medlar has filed a civil suit in Texas state court over the arrangement, seeking $256,000 in support payments from Cisneros that she claims are owed her under terms of a verbal agreement.

Seagal Wheatley, Cisneros’ Texas attorney, has filed a motion to dismiss the lawsuit on grounds that “there is no legally enforceable contract.”

Transcripts of the Cisneros-Medlar conversations indicate that he was deeply concerned that the payments could derail his selection for the Cabinet job.

According to the transcripts, both agreed that continuing regular payments to Medlar would be more difficult financially, as well as politically, if he accepted a Cabinet post at a salary much lower than he earned in private business.

Whatever the future financial arrangement, the two agreed that they would keep it secret. According to the transcripts, the two were willing for federal officials to know that Cisneros had made payments to her in the past but wanted them to believe that no financial arrangement existed for the future.

“The big problem is future payments,” Cisneros said in one transcript. He added that he “clearly gave the impression” to Clinton aides and FBI agents screening his background that no more payments were being made to Medlar.

At one point, when Medlar asked how he would handle questions about the payments at his Senate confirmation hearings, Cisneros replied, according to the transcripts: “The subject probably is not even going to come up.”

Later, according to the transcripts, he told Medlar:

“If it does, I’ll tell them what we agreed and the only person in the world who can sink me at that point . . . and I’m talking contempt of Congress--jail--is you.”

As it turned out, the matter was not raised publicly at the hearings by the Senate Banking, Housing and Urban Affairs Committee. Chairman Donald W. Riegle Jr. (D-Mich.) declined to comment on the matter.

The tapes also reveal Cisneros’ deep concern about possible discrepancies between the tens of thousands of dollars he already had provided and a much lower figure--as well as a different understanding of the payments--in the minds of FBI agents who interviewed him in 1992 and early 1993 before his appointment.

According to a transcript dated Dec. 12, 1992, Cisneros told Medlar that federal officials “wanted to know the total amount of what I had done in increments” and “I told them: ‘Well, it came to $10,000--$15,000 over a year.’ ”

Medlar’s lawyer, Bruce Magness of Lubbock, Tex., said the payments at the time actually amounted to more than $100,000.

According to the same transcripts, Cisneros said he had told authorities that the largest single sum he had ever given Medlar was $2,500--even though his regular monthly payments had totaled $4,000 starting in January, 1990. That was in addition to $16,000 he gave her in 1992 for a down payment on a house in Lubbock and $7,500 later that year to cover her medical bills.

Magness said that in March, 1990--two months after the payments started--Medlar began secretly taping her phone conversations with Cisneros, upon the advice of a friend. They reasoned that because he already had reneged on a promise to divorce his wife and marry Medlar, she should keep an accurate record of their relationship. Their affair had ended by that time.

Cisneros made sporadic payments to Medlar during his first year as HUD secretary--starting in January, 1993--but no payments have been received since last January, Magness said.

The transcripts indicate that Cisneros had some concerns about the money paid to Medlar by Jaffe on Cisneros’ behalf. At one point, according to the transcripts, he declined to act as a go-between, expressing concern that Jaffe would be required by law to disclose any money he gave to a federal official. Instead, he urged Medlar to approach Jaffe herself.

Medlar eventually made such a call and subsequently received a $5,000 check from Jaffe marked “loan,” according to transcripts of a conversation she had with Cisneros in December, 1993. (Another source familiar with the payment said that it actually was $7,600.) Later she said she received $12,000 more from Jaffe through a small company owned by her brother.

Transcripts show that Cisneros referred to Jaffe as “a savior.”

There is nothing illegal in any of the actions attributed to Jaffe. He declined to comment.

In the reported conversations in 1992 and early 1993, Cisneros assured Medlar repeatedly he would not take a job in Washington unless he could find a way to continue supporting her financially.

Cisneros is quoted as assuring her in a transcript dated Nov. 22, 1992: “I would not do that.”

Cisneros’ lawyer, Namorato, acknowledging that he was “speculating,” said Cisneros may have made some of the statements captured by the tape merely to calm Medlar. “I’m speculating, but she seems like a very erratic person. He may have been minimizing the whole thing to her for fear of setting her off.”

The authenticity of the tape transcripts may be challenged because of Medlar’s own description of how they were prepared. In a sworn statement in late September as part of her civil suit, she said the transcripts were prepared by her sister-in-law, who checked with Medlar when she could not hear some words.

The accuracy of the transcripts may not matter. The FBI, following standard procedure, is making its own transcripts.

As for the account of the relationship that Cisneros gave FBI agents in 1992 and 1993, there are no verbatim transcripts. Rather, agents wrote reports of the interviews based on their notes--a standard FBI practice.

Even if discrepancies are found in the explanation Cisneros gave FBI agents, the preliminary inquiry would have to determine whether they were “material,” and the kind of matter that prosecutors would normally pursue under the federal criminal code that outlaws lying to federal agents.