An attorney whose obscure nonprofit foundation made a secret $50,000 contribution in 1995 to the legal fund of Paula Corbin Jones simultaneously served as the primary legal counsel to a covert, multimillion-dollar effort by conservative billionaire Richard Mellon Scaife to investigate President Clinton, Salon has learned.
The attorney, William Lehrfeld, provided legal advice about how to fund the secretive effort to Scaife -- an heir to the Mellon banking fortune and a fierce critic of the president -- and to two of Scaife's tax-exempt legal foundations, two sources said.
The four-year, $2.4 million covert campaign funded by Scaife was known as the Arkansas Project and financed the paying of private investigators, former law enforcement officials and political operatives to seek derogatory information about the president. Cash payments from the Scaife fund were also allegedly made to key Whitewater witness David Hale, as Salon reported in its March 17 cover story.
"Lehrfeld had the expertise to set this up" and do it in such a way that there would be as little "a paper [record] as possible," said a former associate of Lehrfeld who asked not to be identified. "He's an expert in tax-exempt organizations."
Lehrfeld has built a career out of providing tax-related legal work for a number of conservative foundations, political organizations and charities. Besides the Sarah Scaife Foundation, Lehrfeld has also performed legal work for the Heritage Foundation and the Washington Legal Foundation.
In a recent interview with Salon, Lehrfeld said he would not discuss whether he ever provided legal advice to Scaife's foundations or to Stephen S. Boynton, a Virginia attorney who disseminated most of the funds from the Arkansas Project. Lehrfeld cited "attorney-client privilege" in declining to comment.
Salon reported last week that an obscure, tax-exempt foundation headed by Lehrfeld, the Washington, D.C.-based Fund for a Living American Government, also known as FLAG, made a $50,000 contribution on Sept. 14, 1995, to the Paula Jones Legal Fund. The contribution was described to Salon by sources who have reviewed confidential financial records detailing the transaction.
It is not known who was the original source of the funds for the $50,000 contribution made by FLAG to the Jones legal fund. Lehrfeld declined to identify the names of contributors to FLAG.
A public disclosure statement for calendar year 1995, which FLAG is required by law to file with the Internal Revenue Service, contains no reference to the contribution to the Jones' legal fund. The disclosure statement does, however, report that the group paid out a total of $175,000 that year in "support of human and civil rights, secured by law via payments to lawyer and law firms."
Lehrfeld originally suggested in an interview that he, and nobody else, was the source of the $50,000 contribution by his group to the Paula Jones Legal Fund.
Asked about FLAG, Lehrfeld at first told Salon, "It's not a group. It's me. It's only one person. Me."
He added, "I use the fund to provide gifts to causes and organizations that I back. It's my way to finance gifts and thank some of my clients."
But Lehrfeld subsequently said that there were other contributors who funded FLAG as well. "Well, it is me and other people. It is me, but it is other people, too," he told Salon.
Before he allowed a Salon reporter to review the public IRS disclosure statement about FLAG, Lehrfeld said he needed time to "delete from the record" the names of various contributors to FLAG to protect their privacy.
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