November 1, 1998

Peripheral Figure Feels Heat of Starr's Inquiry

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By JILL ABRAMSON

ASHINGTON -- Julie Hiatt Steele is only a peripheral figure in the investigation of President Clinton. But she is still attracting a lot of attention from Kenneth Starr, the independent counsel.

Last week, Starr's office called Ms. Steele's daughter and brother before a grand jury in Alexandria, Va., questioning them for hours. Her former lawyer has also been summoned, as has her accountant.

Ms. Steele herself has made two grand-jury appearances. Starr's office has subpoenaed her bank records and credit history, while FBI agents working for the independent counsel questioned her neighbors and have tracked down friends as far away as Colorado.

Ms. Steele, 52, is divorced and lives with her adopted son in Richmond, Va. She has found herself in Starr's investigative cross hairs because of her association with Kathleen Willey.

Ms. Willey, herself a secondary figure in the Starr investigation, is a former White House volunteer who accused the president of making an unwelcome sexual advance toward her at the White House in 1993. Ms. Steele initially confirmed aspects of Ms. Willey's account, but now disavows it and swears that her former friend asked her to lie.

Lawyers involved in the case said Starr was actively exploring whether anyone associated with Clinton, who has denied the Willey encounter, has intimidated Ms. Willey or tried to influence her testimony. Ms. Steele has become a subject of that investigation -- Starr wants to know why she changed her story -- and is worried that she may be charged with perjury.

Starr is investigating whether Clinton lied when he denied the Willey matter both in his deposition in the Paula Jones sexual misconduct suit and in his grand jury testimony. Starr could refer additional impeachment charges to Congress, according to recent correspondence between his office and the House Judiciary Committee.

"For me it's been more than I can handle," Ms. Steele said during an interview in her lawyer's office, explaining how she stands in the way of a possible Starr referral. "You feel like an entrapped animal."

That Starr would go to such lengths to investigate a relatively minor player like Ms. Steele struck some lawyers as illustrative of what Starr's critics call his overzealous approach, although several former prosecutors said such questioning of former associates and relatives was routine.

Charles Bakaly III, a spokesman for the independent counsel's office, said, "We cannot comment on the grand jury investigation and neither confirm nor discuss particular witnesses nor the course of the investigation."

During a four-hour interview, Ms. Steele described her intensifying problems, frequently referring to six color-coded notebooks that contain documents relating to her case. She has nicknamed the notebooks "Pandora," and said they illustrated how Starr's investigation had taken over her life.

Ms. Steele described the last year as "a thoroughly despicable experience" because of the investigation. During her last job earlier this year, as a part-time employee for a small communications company, Ms. Steele said she was told not to use her last name when she made customer calls. "I've always been proud of my name," she lamented.

Ms. Steele's lawyer, Nancy Luque, who has been representing Ms. Steele on a pro bono basis since March, said Starr's investigators had been asking questions about the adoption arrangements for Ms. Steele's son.

Investigators have also been examining Ms. Steele's finances. Ms. Steele said she was aware of rumors that she was paid to challenge Ms. Willey's story, and rumors that she was being threatened with a disclosure suggesting that her son's adoption was illegal. Ms. Steele said there was no truth to any of this.

She said that she had received no financial inducements for her testimony and that she legalized the adoption of her son in both Romania and the United States. Ms. Steele said she had no association with the White House and did not even vote for Clinton.

She conceded that it was wrong of her to lie for Ms. Willey and to sell a photograph of Ms. Willey and Clinton to The National Enquirer for $7,000. But Ms. Steele said Starr's dogged pursuit of her was "invasive and scary."

Her problems began in March 1997, Ms. Steele said, when Ms. Willey, who had been her close friend in Richmond since the late 1970s, asked her to speak with a Newsweek reporter, Michael Isikoff. Isikoff was pursuing an article about a possible encounter between Ms. Willey and Clinton.

Ms. Steele said Ms. Willey called her and begged her to tell Isikoff, who was on his way to Ms. Steele's house, that the president had groped her. She said that Ms. Willey wanted her to say that she was so upset about the encounter that she told Ms. Steele about it the night it happened, four years earlier. Ms. Steele now says none of that was true. She said she had lied for Ms. Willey about other relationships and agreed to again.

"I never thought it would get into print or become the god-awful thing it's become," Ms. Steele said. Ms. Luque, her lawyer, added, "Julie wouldn't minimize the stupidity of lying to Michael Isikoff, but she never imagined in her wildest dreams that all of this would be visited on her."

Five months later, as Isikoff was proceeding with an article about the Willey matter, Ms. Steele recanted. Isikoff reported Ms. Steele's initial account and her recantation in his Newsweek article.

In January, Ms. Steele was drawn into the Jones case when one of Clinton's lawyers called her and asked if she would provide an affidavit stating that Ms. Willey had asked her to lie. Ms. Steele agreed. She said she felt she had hurt the president by lying to Isikoff and felt obliged to correct the record.

Then, in March, two FBI agents from Starr's office appeared at her door. "I didn't think they believed me," she recalled. "They wanted to believe Kathleen."

In June, she was subpoenaed to appear before Starr's grand jury in Washington. After being questioned for almost a day, Ms. Steele told reporters that she had made a mistake, and that as a result, "my good name has been damaged, my health has deteriorated, I have had to hide myself and my child from the news media in my driveway, and I have been called here today." She said she had testified truthfully and added, "Hopefully, this ends my involvement in the matter."

That was not to be. She was subpoenaed again. In August, Ms. Steele's lawyer, Ms. Luque, received a letter from one of Starr's deputies, David Barger, informing her that Ms. Steele's status in the investigation had changed, from witness to subject.

At that point, Ms. Steele became more aggressive. She filed a breach-of-contract lawsuit against Isikoff and Newsweek, charging that they had violated a promise that Ms. Steele's interviews with the reporter were off the record, a contention the magazine denies.

"Her claim is pure fantasy," said Newsweek's Washington bureau chief, Ann McDaniel. Ms. Steele also appeared on the "Larry King Live" show with her lawyer in the Newsweek suit, John Coale, who complained that she was being "bullied" by Starr.

Ms. Steele's more defiant posture did little to dampen Starr's interest in her. "They were now out to discredit her," said Ms. Luque, who was concerned that Ms. Steele might be charged with perjury if any of her answers during her second grand-jury appearance conflicted with her earlier testimony.

Ms. Luque insisted that her client cite her Fifth Amendment rights against self-incrimination, advice that Ms. Steele said she followed. On Sept. 23, she agreed to take a lie-detector test, which both Ms. Luque and Ms. Steele said she passed.

Since Ms. Steele's second grand-jury appearance, her brother, daughter and former lawyer were subpoenaed. On Thursday, her daughter, Liza Steele, was questioned for six hours before the grand jury.

It remains unclear whether Starr will charge Ms. Steele, but he has collected evidence that she told at least one other person that Ms. Willey had told her she was groped by the president. Bill Poveromo, a one-time friend of Ms. Steele, said in an interview that at dinner in 1997, Ms. Steele told him that Ms. Willey was "flattered" by the pass.

Poveromo was subpoenaed and testified before the grand jury in Alexandria in July. Last week, a representative from Starr's office questioned Poveromo's boss at a Richmond television station. Ms. Luque said Ms. Steele did not recall discussing the matter with Poveromo.

Ms. Steele's version of events is only one of several accounts of the Willey matter. There is Ms. Willey's accusation of a pass and the president's absolute denial. There are the accounts of two friends of Ms. Willey, Linda Tripp and Harolyn Cardozo, who have both said that Ms. Willey was happy about a pass she described from the president.

As for their one-time close friendship, Ms. Steele and Ms. Willey no longer speak. Months ago, they had an angry encounter at a market in Richmond. Of all her mistakes, Ms. Steele said, believing that Ms. Willey was her friend was the biggest.