- Associated Press - Friday, June 3, 2011

RALEIGH, N.C. — A federal grand jury charged two-time presidential candidate John Edwards on Friday with soliciting and covering up the secret spending of more than $925,000 to hide his mistress and their baby during the peak of his 2008 campaign for the White House.

The grand jury’s indictment in the case of USA v. Johnny Reid Edwards contained six felony counts, including conspiracy, four counts of receiving illegal campaign contributions and one count of false statements for keeping the spending off his public campaign finance reports.

The indictment said the payments were a scheme to protect Edwards‘ White House ambitions. “A centerpiece of Edwards‘ candidacy was his public image as a devoted family man,” the indictment said.

Edwards knew that public revelation of the affair and the pregnancy would destroy his candidacy,” the indictment added.

The indictment and an arrest warrant were filed in Greensboro, N.C., which is in the district where his campaign was headquartered. Edwards, 57, was scheduled to make an initial appearance Friday afternoon before U.S. Magistrate Judge Patrick Auld in Winston-Salem, N.C.

Edwards attorney Gregory Craig issued a brief statement in advance of the hearing. “John Edwards will tell the court he is innocent of all charges, and will plead not guilty. He did not break the law and will mount a vigorous defense,” Craig said.

Negotiations between Edwards‘ attorneys and federal prosecutors to settle on a charge to which Edwards was willing to plead guilty continued through Thursday, but proved fruitless, according to people with knowledge of the negotiations. Prosecutors had insisted on a plea to a felony, which would endanger his ability to keep his license to practice law.

If convicted, Edwards faces a maximum penalty of five years in prison and a $250,000 fine on each of the six counts. First time white collar offenders usually don’t receive prison terms in federal court, but the Justice Department typically presses for at least a short prison sentence for public officials. While Edwards was a private citizen as a candidate, he was receiving taxpayer money for his presidential campaign.

Edwards‘ attorneys issued statements from campaign finance experts who argued the payments were not campaign contributions. One, former Federal Elections Commission Chairman Scott Thomas, said if the FEC had investigated it would have found the payments did not violate the law, even as a civil matter.

“A criminal prosecution of a candidate on these facts would be outside anything I would expect after decades of experience with the campaign finance laws,” Thomas said.

In recent days, his legal team also argued that the secret spending was designed to hide the affair from his wife, Elizabeth, who died of cancer in December.

Prosecutors said the spending was illegal because Edwards should have reported it on public campaign finance filings and because it exceed the $2,300 limit per person for campaign contributions.

The indictment was the culmination of a federal investigation begun by the FBI more than two years ago. The probe scoured virtually every corner of Edwards‘ political career. That included his political action committees, a nonprofit and a so-called 527 independent political group. It even examined whether he did anything improper during his time in the U.S. Senate, which ended seven years ago.

But the centerpiece of the investigation has long been the hundreds of thousands of dollars privately provided by two wealthy Edwards supporters — his former campaign finance chairman Fred Baron and Rachel “Bunny” Mellon, the 100-year-old widow of banking heir Paul Mellon. That money eventually went to keep mistress Rielle Hunter and her out-of-wedlock baby in hiding in 2007 and 2008, during the apex of the Democratic nomination campaign.

The indictment cited $725,000 in payments made by Mellon and another $200,000 made by Baron. It said the money was used to pay for Hunter’s living and medical expenses and for chartered airfare, luxury hotels and nearly $60,000 in rent for a house in Santa Barbara, Calif., to keep her hidden from the public. Other than Edwards, no one was named in the indictment but the indictment’s descriptions of others make clear who they are.

Mellon sent her money through her decorator. The indictment said she listed items of furniture in the memo lines of checks — written in amounts of $10,000-$200,000 for “chairs,” ”antique Charleston table,” and “book case” — to hide the true purpose. It said Baron gave an envelope with about $1,000 cash and a note that said, “Old Chinese saying: use cash, not credit cards!”

The conspiracy count accused Edwards of lying when he admitted to the affair during an interview on ABC but denied knowing about any payments. “I’ve never asked anybody to pay a dime of money, never been told that any money has been paid,” he said.

The indictment referred to Edwards‘ discussions with a former employee in summer 2009 in which they prepared a statement to the media in which he would admit he was the father of Frances Quinn Hunter. A person familiar with the investigation has identified the former employee as speechwriter Wendy Button. The indictment said Edwards told her that he was aware Baron provided money to hide Hunter from the media.

Edwards further told the employee that this was a huge issue and that for ‘legal and practical reasons’ it should not be mentioned in the statement they were preparing,” the indictment said. The statement Edwards eventually issued seven months later claiming paternity did not mention the money spent on Hunter.

Former campaign staffer Andrew Young, who initially claimed paternity of Hunter’s child, also has said Edwards was aware of the private financial support that helped keep the mistress satisfied and secluded.

The indictment said Edwards and Young began discussing who could provide money to support Hunter in May 2007, around the time she told the candidate she was pregnant. It says Young read Edwards a note he got from Mellon saying she was “furious” over media criticism of the candidate’s $400 haircuts.

“From now on, all haircuts, etc., that are necessary and important for his campaign — please send the bills to me,” the indictment quoted Mellon as writing. “It is a way to help our friend without government restrictions.” The indictment said Edwards and Young then solicited money from Mellon.

The case opens a new front in how the federal government oversees the flow of money around political campaigns. An attorney for Edwards said last week that the government’s case was “novel and untested” and argued that the government’s theory was wrong on both the facts and the law.

With one of Edwards‘ former campaign rivals now sitting in the White House, the case includes a measure of political intrigue. Craig, who was previously White House counsel for President Barack Obama, emerged as a leading figure on Edwards‘ legal team just as Obama’s Justice Department was reviewing the case that prosecutors in North Carolina had prepared.

Meanwhile, with the backing of North Carolina’s two senators, Republican-appointed U.S. attorney George Holding stayed on the job in the Obama administration to finish the Edwards probe.

“Democracy demands that our election system be protected, and without vigorously enforced campaign finance laws, the people of this country lose their voice,” said Holding. “The U.S. attorney’s office and the Department of Justice are committed to the prosecution of individuals who abuse the very system of which they seek to become a part.”

Edwards and Hunter began their relationship in 2006, just as the 2004 Democratic vice presidential nominee was plotting a second run for the White House. She was hired to shoot behind-the-scenes video footage of the prospective candidate. Edwards‘ political action committee and a nonprofit affiliated with him each paid Hunter’s video-production firm about $100,000 for the work.

Edwards initially denied having an affair with Hunter but eventually admitted to it in the summer of 2008. He then denied being the father of her child before finally confessing last year. His wife, Elizabeth, died of cancer in December.

Young has said that Edwards agreed in 2007 to solicit money directly from Mellon. And the long-time Edwards aide, now estranged from his former boss, has said he received hundreds of thousands of dollars in checks from Mellon sent through her decorator — some hidden in boxes of chocolate.

Assistant Attorney General Lanny Breuer, head of the Justice Department’s criminal division, said, “As this indictment shows, we will not permit candidates for high office to abuse their special ability to access the coffers of their political supporters to circumvent our election laws.”

Baron’s support was even more direct. The wealthy trial lawyer said in 2008 that he helped Young and Hunter move across the country to protect them from media scrutiny. Baron, who died a few months later, said Edwards wasn’t aware of the aid, but Young has said that Edwards did know.

Young, Hunter and Baron’s wife were among many Edwards aides and supporters who were called to testify before a federal grand jury or have been interviewed by investigators.

Pickler reported from Washington.

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