Judge says Sundquist was reason for federal probe Investigation led to indictments of ex-governor's friends in past year; Judge: There's evidence Sundquist improperly acted with contract

By SHEILA BURKE
Staff Writer, The Tennessean

7/10/05

Tennessee - Former Gov. Don Sundquist was "the impetus" for the federal investigation into state contracts that has led to the indictments of two of his friends, a federal judge says in court documents.

Federal prosecutors have evidence that Sundquist "improperly interceded" on behalf of a firm called Education Networks of America, or ENA, that wanted to do business with the state, U.S. District Judge Karl Forester wrote in a court filing.

ENA had a $106 million contract with the state to provide Internet service to public K-12 schools. It was headed by Sundquist's friend Al Ganier, who has been indicted on federal charges of obstruction of justice. John Stamps, an investor in ENA and another longtime Sundquist pal, pleaded guilty in May to tax evasion and making fraudulent statements to secure a government contract while Sundquist was governor.

The judge did not say whether Sundquist was still under investigation. The former governor, 69, yesterday said he was not under investigation.

"I have not been involved," Sundquist said in a telephone interview. "I think it comes up because I've known Al a long time. I'm confident I'm not under investigation. I've not been approached or asked. The only thing we were asked to do before I left office, they wanted copies of our e-mails. We furnished all of those."

The former governor, a Republican and former congressman who led the state from 1996 to 2003, now works as a lobbyist and consultant. Only yesterday he was named to head a national panel to recommend suggestions for improving Medicaid.

Sundquist "apparently was the impetus for the investigations," Forester wrote. He did not elaborate.

The statement came in a 31-page opinion and order that actually isn't about Sundquist — it is a ruling on Ganier's request that jurors be banned from hearing some evidence at his Aug. 2 trial. The former governor's name is mentioned in a context in which the judge says jurors can hear the prosecution argue its theory that Ganier had connections to the state's chief executive.

The judge's statement about Sundquist doesn't mean the ex-governor committed any crime nor has he been charged with any crime.

However, Forester's statements were the first signal of Sundquist's possible involvement in the criminal case.

A federal court judge in Kentucky, Forester is handling the Ganier case because all seven federal judges in Middle Tennessee recused themselves. They did not give a reason why.

Forester wrote mostly about evidence and other court filings in the case that remain sealed and have not been made public. The court order does not explain how the former governor allegedly became involved or under what circumstances. It also does not say whether Sundquist is still under investigation.

Forester described the investigation as "linking together Sundquist, Stamps, (former Sundquist aide Alex) Fischer, (Ganier) and ENA."

The judge's statements come at a time when many Tennesseans are questioning the ethics of the state's elected officials. Four sitting state legislators and a former lawmaker were arrested May 26 in a federal bribery sting dubbed "Operation Tennessee Waltz," a case that involved a private company — formed by undercover FBI agents — wanting to do business with the state.

Ganier, who is charged with four counts of obstruction of justice, is accused of deleting or concealing e-mails while he was the target of an investigation, according to court records. He has not been charged with getting ENA's contract illegally. His lawyer says he is innocent.

In his writings, the judge said prosecutors have evidence that Ganier tried to delete e-mails that reveal a close relationship be-tween himself, Sundquist, Stamps and Sundquist's chief of staff, Fischer.

"While the (prosecution) is not interested in throwing out the governor's name gratuitously in the hopes it will inflame the jury, the fact is that this case is, by definition, about a grand jury investigation into the circumstances surrounding the award of state contracts to those close to Sundquist," the judge wrote.

Forester named Fischer, who was also once the state commissioner of Economic and Community Development under Sund-quist, as another person whom
the investigation was "focusing on."

Fischer said yesterday that he testified before a federal grand jury and was told that he was not under investigation. He also noted that the federal government had already investigated extensively.

"Look, it looks to me that they've looked at everything under the sun that's gone on in the Sundquist administration," he said.

Documents also were destroyed that would have shown the link between Sundquist, Fischer, Stamps and Ganier, the judge wrote. "Half of the deleted documents mention Fischer and Stamps by name, and almost all relate to ENA ventures in which Fischer and/or Stamps were heavily involved," Forester wrote.

Stamps invested in ENA and worked for the firm as a lobbyist. His indictment and eventual plea stemmed from his involvement not with ENA but with his own firm, Workforce Strategists. That company won its own $664,000 no-bid state contract in 1999 to provide career counseling services to unemployed workers. The firm didn't really exist before it won the contract.

A former state official, Joanna Ediger, was convicted last year of wire and mail fraud for using her job as grants director in the state Department of Labor and Workforce Development to help secure the $664,000 contract for Stamps. She has been sentenced to three years in prison.

In ruling on what evidence should not be heard by the jury, Forester wrote that prosecutors had wanted the jury "to hear evidence of the circle of friendships that includes (Ganier), Stamps, Fischer and Sundquist." Ganier wanted evidence of his friendship with Sundquist, as well as some of his dealings with Stamps, held back from the jury.

The prosecutor in the case was asked last night about Sundquist's and Fischer's possible involvement in the investigation.

"The court's order, which we respect, speaks for itself in that regard," Assistant U.S. Attorney Eli Richardson said. "And beyond what the court has stated in its order, it would be inappropriate for us to comment at this time."