Funeral Case Targets White House Counsel Gonzales

A nasty, long simmering lawsuit involving allegations of political favors and big money campaign contributions in Texas is threatening to ensnare one of the rising stars of the Bush administration: White House counsel Alberto Gonzales.

Gonzales, a longtime Bush aide, is widely thought to be at the top of the president's "short list" to fill the first available vacancy on the U.S. Supreme Court-a spot that some believe could open up as early as this summer. So the last thing that Bush aides want at this point is to have Gonzales questioned under oath in a politically charged lawsuit by hostile lawyers out to embarrass the administration.

But that possibility, NEWSWEEK has learned, has moved one step closer as a result of court papers filed in Austin late last week. In a document entitled "Motion to Compel Deposition of Alberto Gonzales," lawyers for Eliza May, a former whistleblower who served as executive director of the Texas Funeral Services Commission, the state agency that regulates the funeral business, seek a court order to require the White House counsel to answer questions in the case.

Specifically, the lawyers want to grill Gonzales about a recently uncovered April 22, 1996, memo sent to his office when he was Bush's gubernatorial counsel. The memo, written by the chief lawyer for the funeral agency, suggested possible improprieties by two funeral commissioners with ties to Service Corporation International, a huge Houston-based funeral conglomerate headed by Robert Waltrip-a longtime friend and generous financial patron of the Bush family.

OBSCURE AND MACABRE

May's lawsuit has been a thorn in the side of Bush and his aides ever since it was first filed more than two years ago. Although many of the issues seem obscure and even macabre, the case at its heart revolves around allegations that Bush's office interfered with an aggressive state investigation into SCI's embalming practices that was then being spearheaded by May after receiving complaints from Waltrip, who had contributed $45,000 to Bush's gubernatorial campaigns and more than $100,000 to the elder George Bush's presidential library. (Funeral industry sources have also confirmed that the same year the dispute with May took place, SCI paid the elder Bush a $70,000 honorarium to speak at a national convention of morticians.)

May, a one time official in the Texas state Democratic Party, was later fired from her job-an action that has formed the basis for her whistleblower lawsuit alleging she was the victim of "political" retaliation because she was threatening the interests of a well-connected political patron of the governor.

Bush and his top aides have heatedly denied the charges and suggested the entire matter was drummed up by Democratic lawyers with political motives. And until now, they have remained insulated from the proceedings that have moved along at a snail's pace in Austin. But the recent discovery of the 1996 memo-followed by last week's court papers-represent the first time Gonzales's name has been dragged into the dispute.

Gonzales, the motion states, is a "critically important witness in this case." But, through lawyers representing him at the Texas attorney general's office, Gonzales has so far refused to "voluntarily" agree to a deposition on the grounds that "he claims not to 'remember' the matter," the lawyers for May write. Given the "extraordinarily analysis" in the 1996 memo and the "players involved,"-namely Waltrip and two funeral service commissioners with financial ties to SCI (including one appointed by George W. Bush)-Gonzales's claim not to remember "is, on its face, incredible" and "strains credulity far beyond the breaking point," they add.

POLITICALLY SENSITIVE

They conclude by asking Texas state judge John Dietz to order Gonzales to submit to a deposition in Washington on June 9. That's just one day after May's lawyers-with Dietz's blessing-are slated to take another politically sensitive deposition in the case: that of Joe Allbaugh, Bush's former chief of staff in Austin and later presidential campaign manager, who now serves as director of the Federal Emergency Management Agency (FEMA.)

Reached at his White House office on Saturday, Gonzales dismissed the latest legal development-"it doesn't concern me"-and indicated he will continue to resist being deposed. "I really don't remember anything about this," he told NEWSWEEK. "So I think it would be a waste of time to take my deposition."

Whether May's lawyers will succeed in compelling Gonzales's deposition-thereby allowing them to confront him with documents and hammer him with hostile questions about his work for Bush-is not clear. In August, 1999, after Bush had already begun his campaign for the presidency, they sought to compel Bush's deposition. They cited comments by SCI lobbyist Johnnie B. Rogers to NEWSWEEK that he had briefly spoken to the then governor in April, 1998 when he and Waltrip arrived at Bush's office to hand-deliver a letter to chief of staff Allbaugh. The letter alleged May was using "storm-trooper tactics" by raiding the offices of SCI funeral homes and demanded that May's investigation be halted.

NO CONVERSATIONS

"Hey Bobby [Waltrip], are those people still messing with you?" Bush said to Waltrip when he saw him in Allbaugh's office, according to Rogers's account at the time. Rogers later disputed the quote and Bush insisted in a sworn affidavit that he never had "any conversations" about the SCI case. In any case, the judge then denied May's efforts to question Bush, saying that they should first question others with more extensive knowledge of the facts in the case.

Judge Dietz' recent order requiring Allbaugh to submit to a deposition is one indication that the May legal team may be making some progress. And May's lawyers believe they have at least some limited ammunition at their disposal this time: a paper trail in the form of the April 22, 1996 memo written by Marc Allen Connelly, then general counsel to the funeral services commission.

In his memo, Connelly wrote he had "recently received information" from Texas state officials that two of the funeral commissioners charged with regulating the state funeral business actually worked for SCI-the largest funeral firm in the state. Although one of the commissioners was openly an SCI officer (the one appointed by Bush), Connelly stated that state banking records he inspected showed that another of the commissioners worked for a firm in which SCI had become the largest stockholder.

This represented "a possible statutory conflict" because state law prohibited any two commissioners from having ties "directly or indirectly" to the same funeral company.

'INFORM THE GOVERNOR'

Connelly concluded his memo to Dick McNeil, the Bush-appointed chairman of the agency, by stating: "I recommend that you immediately inform the Governor of this apparent conflict and also recommend that the Governor take action to remove both [the two SCI-related commissioners] from the commission because both individuals knew or should have known of this conflict yet failed to notify the governor's office."

May's lawyers have seized on Connelly's memo as important evidence showing SCI's power within the state agency charged with regulating it. But their efforts to find out what became of it has been repeatedly frustrated.

McNeil in a recent deposition stated that after he received the Connelly memo, he faxed it to Polly Sowell, who then served as Bush's appointments secretary. When she was questioned, Sowell was asked what she did with the memo. "I sent it to the General Counsel's Office," she said. But Sowell said she did not remember what happened after that and, in his interview with NEWSWEEK, Gonzales said such a memo was merely one of many that might have crossed his desk and was otherwise not memorable. In any case, Bush never acted on the memo's recommendations that the SCI affiliated commissioners be removed.