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What Did Ron Brown Know, And When Did He Know It?


Government: INVESTIGATIONS

WHAT DID RON BROWN KNOW, AND WHEN DID HE KNOW IT?

Ronald H. Brown is nothing if not consistent. As congressional and Justice Dept. investigations probe deeper into the Commerce Secretary's past business dealings at First International Communications Corp., Brown has insisted he was merely a silent partner at the Washington-based consulting firm. Even when it was revealed that he received $400,000 for his share in First International in 1993-94 though he never invested a dime in the company, Brown has maintained that he was oblivious to the company's dealings.

But sources familiar with First International's activities and documents obtained by BUSINESS WEEK appear to contradict Brown's assertion that he was a distant, hands-off partner in the firm. The documents, including internal First International memos, show that Brown was kept informed of at least two separate pending deals while serving as chairman of the Democratic National Committee--and was sometimes an active participant. In one memo, dated Apr. 29, 1992, Nolanda Hill, Brown's business partner at First International, refers to correspondence between Brown and Angolan contacts about a plan to buy oil at a discount price and exhorts him to move quickly on the deal "as the ball is in your court as far as I'm concerned."

Two months later, in a memorandum to Hill and copied to Brown, Fernando Pegado, a London middleman, outlined a deal to buy crude from Aramco, the Saudi state oil company. With a proposed $1.70-a-barrel discount, the deal could have fetched a profit of $2.5 million a year for Brown and Hill, based on market prices. Pegado is the husband of Lauri Fitz-Pegado. At the time, Fitz-Pegado, a longtime Brown associate, was a public relations executive. Now, she promotes overseas business development as head of the Commerce Dept.'s U.S. Foreign & Commercial Service. Through her attorney, Fitz-Pegado says she played no part in any oil deals involving Brown, and there's no evidence to suggest that she did.

"ALL TALK." Although both deals ultimately fell through and there's no suggestion that Brown did anything illegal, his pursuit of oil deals first as a prominent party figure and later while serving as Bill Clinton's nominating-convention manager are bound to heighten the debate about whether Brown was trying to profit from his rising political stature before he became Commerce Secretary in 1993. London oil traders who regularly do business with Aramco say the terms mentioned in the memos were so potentially lucrative that Brown and Hill may have been targets of a scam. But Steven Stylianoudis, a Washington defense contractor who worked for the Saudi royal family for five years, says such discount deals for influential politicians are a common practice among Arab oil states.

Through his attorney, Reid H. Weingarten, Brown denies any wrongdoing. "Yes, he tried to get involved in oil transactions in Angola," Weingarten acknowledges. "But he was never successful in doing so, and he has never advanced any private interests in his official capacity as Commerce Secretary." As for the Saudi deal, Weingarten says Brown was unaware of the plan and that Hill pursued it on her own. "It was all talk," says Weingarten. "Everybody was talking, and nobody was close to any oil." Hill, through her attorney, declined to comment.

Brown and Hill founded First International in 1990. Hill, a major Democratic donor, was running Corridor Broadcasting Corp., which owned TV stations in Needham, Mass., and Washington. First International, which operated out of Corridor's offices, appears never to have made a successful investment. Yet despite its seeming lack of success, First International appeared on Brown's 1993 financial disclosure report as his single largest asset--worth $500,000 to $1 million.

At various times, First International tried unsuccessfully to import alcohol and Beatles posters from Eastern Europe. Then, in the spring of 1992, Brown approached SONANGOL, the Angolan state oil company, through intermediaries about the possibility of arranging an oil deal, according to Angolan sources. It wasn't as far-fetched as it appears: Through his attorney, Brown contends that Angola was offering discount deals to leading black businesspeople in the U.S. as a gesture of African solidarity.

BROKEN AGREEMENTS. Documents suggest that Brown was kept informed about the details of the Angolan negotiations. In an Apr. 29, 1992, memo to Brown entitled "Projects and/or entities in which you have a Direct Ownership Interest," Hill outlined the status of the company's ongoing "Angolan Oil Project." She revealed to him that she had lined up the services of FFP Partners, an oil consulting firm in her home state of Texas, to negotiate the sale and delivery of crude. Attorneys for FFP declined to comment. In the end, SONANGOL rebuffed Brown's overtures to buy oil at discount prices, sources close to the negotiations tell BUSINESS WEEK.

But that apparently did not dampen Brown's appetite for an oil deal. Through his attorney, Nancy A. Luque, Pegado told BUSINESS WEEK that after he first talked to Brown, he sent a memo to Hill, copied to Brown, about an attractive deal to buy Saudi light crude from Aramco. Pegado, who says through his lawyer that he received no compensation for his role, asserted in the memo that it was possible to negotiate a contract for 50,000 to 100,000 barrels per day. The terms: First International and its consultants would receive a 70 cents-per-barrel discount. The final refinery buyer would get a $1-per-barrel price break to ensure that the deal would be made quickly.

Memos flew back and forth among First International's various intermediaries in 1992, just two weeks before the Democratic convention in July, to pin down final details. One document calls on the buyers to abide by the Saudi boycott of Israel, a violation of U.S. law. Through their attorneys, Brown and Pegado say they are unaware of any such document. Although it's not clear why, the Saudi deal also fell apart.

Brown claims the furor over his finances is nothing more than a GOP "smear campaign" to stop him from becoming chairman of Clinton's 1996 reelection campaign, a job change the White House has put on hold because of his difficulties. Representative William F. Clinger Jr. (R-Pa.), chairman of the House panel investigating his finances, has accused Brown of hiding the $400,000 he received from First International after he became Commerce Secretary. Brown denies the allegation. But that's not likely to tame the increasingly boisterous debate over the silent role that Brown insists he played at First International.

BROWN'S ADVENTURES IN OIL

Ron Brown has maintained that he was unaware of the business dealings of First International, the consulting firm he co-founded with Nolanda Hill. But he was kept apprised of at least two abortive deals during his tenure as DNC chairman:

APR. 29, 1992 In a memo to Brown, Hill outlines a plan to buy Angolan oil. She urges Brown to act quickly on the proposed deal, "as the ball is in your court." The deal is ultimately rejected by SONANGOL, Angola's national oil company.

JUNE 26, 1992 Fernando Pegado outlines a plan to buy Saudi crude from Aramco. In a memo to Hill, copied to Brown, he proposes an oil deal that could have produced annual profits of $2.5 million for Brown and Hill. It is never consummated.By Douglas Harbrecht in Washington and Paula Dwyer in London


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