THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, October 20, 1995 TAG: 9510200494
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY JOE JACKSON, STAFF WRITER
BY JOE JACKSON, STAFF WRITER
DATELINE: NORFOLK LENGTH: Long : 187 lines
Richard M. Hirschfeld, a Virginia Beach lawyer and financier whose fortunes have been linked to luminaries like Muhammad Ali and Ferdinand Marcos, is out of federal prison and wants justice.
Sentenced in 1991 to six years for conspiracy and tax evasion, Hirschfeld wants his convictions overturned, saying the charges resulted from a personal vendetta by former U.S. Attorney Henry E. Hudson.
In court papers filed last month in U.S. District Court, Hirschfeld charged that Hudson pursued criminal charges because the prosecutor believed Hirschfeld was responsible for sabotaging his bid to become a Norfolk federal judge.
Hudson, the chief federal prosecutor for Eastern Virginia from 1986 to 1991, denied the allegations last week in a phone interview.
``I never discussed my interest in the federal judgeship with Richard Hirschfeld,'' said Hudson, now in private practice in Alexandria. ``The allegations are 100 percent incorrect. . . I think it's a delusion on Richard's part.'' Hudson added that he removed himself from the case when it was tried because of his acquaintance with Hirschfeld.
Hirschfeld - whose history has included bargaining for the release of the Iranian hostages and exposing Marcos in a weird plot to invade the Phillipines - has claimed in court records that a vendetta existed, but he never gave details. The newest accusations of Hudson's ``political and personal animus and vindictiveness'' include U.S. Justice Department documents that Hirschfeld obtainedthrough the federal Freedom of Information Act and that he uses to bolster his case.
In court papers, Hirschfeld also asked the prosecutor in his case, Assistant U.S. Attorney David Barger, to remove himself from future proceedings, claiming Barger acted under the direction of Hudson, his boss at the time.
Hirschfeld, 48, was best known as Ali's lawyer and confidant. He gained widespread notoriety for accompanying Ali to the Middle East in 1985 to lobby for the release of U.S. hostages.
He is a man with a history of intrigue. In 1987, he and business partner Robert Chastain secretly taped former Philippines President Ferdinand Marcos plotting to invade his homeland with 10,000 men to regain power. Hirschfeld relayed the information to a U.S. Senate subcommittee.
Then, in the late 1980s, the FBI and IRS started investigating Hirschfeld's business deals. In 1991, a federal jury convicted Hirschfeld on three counts: conspiring to defraud the IRS, conspiring to defraud the Securities and Exchange Commission, and filing a false 1984 income tax return. He was sentenced to six years in prison and fined $460,000.
The charges focused on an alleged phony $2.1 million lawsuit settlement that Hirschfeld took as a deduction on his 1984 income tax return. Prosecutors said he made the payment in the form of 75 million shares of penny stock to Chastain.
The government then charged that Hirschfeld devised a complicated series of transactions to disguise the fact that the securities were still under his control.
Hirschfeld claimed during the trial and afterwards that the charges were unfair. In a 1993 prison interview in the Richmond Times-Dispatch, he said: ``I exercised poor judgment but I didn't knowingly and willfully violate any statutes. . . . I arranged my financial affairs in such a fashion as to negate my tax liabilities. It's permissible to avoid taxes as long as you don't evade taxes. The conspiracy law is so over-reaching . . . we've just gone crazy.''
On his release, Hirschfeld vowed he would be vindicated in court. Now he is making his bid.
According to Hirschfeld's petition, his troubles with the law began when Hudson asked him for a favor and he didn't follow through.
Over dinner in Charlottesville on Jan. 11, 1988, and in the U.S. Attorney's office in Alexandria 16 days later, ``Hudson discussed his interest in being appointed'' to the Norfolk judgeship ``and sought whatever influence Ali and (Hirschfeld) could bring to bear with'' Sen. Orrin Hatch, R-Utah, Hirschfeld's motion says.
Hatch, a ranking Republican on the Senate Judiciary Committee and ``a close personal friend of both Ali and (Hirschfeld),'' could be influential in the confirmation process, the motion says.
Hirschfeld initially agreed to help Hudson, the motion says. But he later had a change of heart.
The judgeship was open after Sen. John Warner's first nominee, Shannon Mason Jr., withdrew his name from consideration. Federal court officials confirmed that Hudson was interested in the position, but was never an official nominee. The judgeship was filled in 1992 by Virginia Beach lawyer Henry C. Morgan Jr.
Hudson denied ever asking Hirschfeld for his help. ``I was never an active candidate,'' he said last week.
``I never said anything about it to Hirschfeld or Muhammed Ali. . .
``One day, out of the blue, I got a call that he (Hirschfeld) was bringing Ali into town,'' Hudson said. ``The next thing I know, Hirschfeld brings Ali into the office - he's shaking people's hands, going around the office, but we never discussed a judgeship.''
Hirschfeld said that on Jan. 28, 1988, he, Ali and Stephen Saltzburg, then a law professor at the University of Virginia and a friend of both Hudson and Hirschfeld, met with Hatch in his Senate office.
``When asked for his frank assessment of Hudson, (Hirschfeld) admitted to Senator Hatch. . . that Hudson was completely unsuited to be a federal judge because of his beliefs and temperament,'' the motion said. ``Hudson later learned of this conversation. . . and believed it had been influential in his failure to be nominated to the federal bench.''
Hatch recalled meeting with Ali and Hirschfeld ``but doesn't remember whether the judgeship was mentioned,'' Hatch's press secretary, Paul Smith, said last week. Hatch neither confirmed nor denied Hirschfeld's story, Smith said.
But Saltzburg, who was later appointed deputy U.S. attorney general under Edwin Meese, did remember the conversation.
``It was a social meeting, but the subject (of the judgeship) came up,'' Saltzburg said Friday. ``Hirschfeld said he thought Henry Hudson would not be a worthy candidate for a judgeship. I don't remember what Orrin Hatch said.''
Saltzburg also said he remembered seeing Hudson and Hirschfeld together at dinner earlier that January, as Hirschfeld claimed.
A photo, sent to The Virginian-Pilot by Hirschfeld, shows Hirschfeld, Hatch, Saltzburg and Ali standing together in Hatch's office, apparently after the meeting there on Jan. 28, 1988.
Justice Department documents, obtained by Hirschfeld through the Freedom of Information Act, show that the investigation into Hirschfeld's finances began around October 1988, nine months after the meeting with Hatch.
At first, officials with the Justice Department's tax division seemed unwilling to prosecute Hirschfeld.
``There is no tax harm to the Government,'' wrote Justice attorney David Farnham in a memo dated March 16, 1989. ``The conspiracy to defraud the United States by impeding and impairing the functions of the SEC . . . simply won't fly.'' He recommended that ``prosecution be declined and the grand jury authorization be terminated.''
Yet prosecutors in Hudson's office persisted, the documents show. By Sept. 1, 1989, they suggested that Hirschfeld be charged with misstating his 1984 tax return. Once again, Justice officials disagreed.
But two months later, the tide began to turn, the documents show. By then, Barger had convinced Justice officials that the government had a case. They agreed to prosecute, as long as Barger was in charge. But there was a proviso.
``The one real problem that I have is venue,'' Farnham wrote on Nov. 7, 1989. ``I am convinced that there exist nonlegal reasons for desiring venue in Norfolk.'' He pointed out that an FBI agent and an assistant U.S. attorney, both in Norfolk, had been investigated because of Hirschfeld's complaints, thus implying that there was at least the appearance of revenge.
``It appears that this is a very political case,'' Farnham wrote.
In November 1990, Hirschfeld was indicted by a federal grand jury in Norfolk. Six months later, he was convicted by a jury, sentenced and went to prison.
In September 1994, Hirschfeld was moved into a federal halfway house in anticipation of his pending release on parole.
One month later, the strangest act in the drama took place. The body of Hirschfeld's old business partner, Robert Chastain, was exhumed.
In December 1989, Chastain was found dead of an apparent suicide in a hotel in Vienna, Austria. During Hirschfeld's trial, prosecutors raised questions about the circumstances of Chastain's death. They said Hirschfeld received nearly $5 million from Chastain's life insurance policies.
Chastain died about two weeks after a suicide clause on the insurance policies had lapsed, enabling Hirschfeld to claim the money, prosecutors said.
Prosecutors hinted, in court papers, that Chastain was still alive somewhere, splitting the $5 million with Hirschfeld. They suggested that another body was buried instead.
Hirschfeld said he never got the money.
In October 1994, Judge Clarke issued a sealed order for the exhumation of the body buried under Chastain's tombstone in Purdy, Mo. On Oct. 18, 1994, Barger and agents from the FBI and IRS descended on the windswept cemetery.
Local and federal authorities struck a deal: If it was Chastain, the body would be returned to the same grave. If it was somebody else, he must be buried elsewhere.
Two days later, the man who was apparently Robert Chastain was lowered, again, into his grave.
It was a last-ditch effort by the government to keep him in jail, Hirschfeld later said. Federal officials have never commented on the exhumation.
Hirschfeld was released in March. Now he wants to clear his name.
He said last week he is willing to ``meet with Hudson and Barger at any time and any place to undergo a polygraph as to each and every one of the allegations in my motion.''
``There is other evidence, and it will come out,'' he said. ILLUSTRATION: Color photo
From left, Sen. Orrin Hatch of Utah, Richard M. Hirschfeld, law
professor Stephen Salzburg and boxer Muhammed Ali. The photo was
provided by Hirschfeld, who says it was taken during a meeting in
which U.S. Attorney Henry E. Hudson's judgship was discussed.
Photo
Henry E. Hudson, chief federal prosecutor for E. Virginia from
1986-91, denied that he pursued charges against Hirschfeld because
he believed Hirschfeld sabotaged his bid to become a federal judge.
by CNB