Prober blasts Bill
Cites coverup on Cisneros


WASHINGTON - A special prosecutor's long-delayed report charges that a coverup at senior levels of the Clinton administration killed a tax fraud case against ex-cabinet member Henry Cisneros, the Daily News has learned.

David Barrett's 11-year, $23 million probe, which will be released tomorrow, states in stinging terms that this Clinton coverup succeeded.

Cisneros was forced to admit in 1999 that he had made secret payments to a mistress before serving as Clinton's secretary of Housing and Urban Development.

Barrett investigated tax fraud charges stemming from those under-the-table payments.

Then-IRS Commissioner Peggy Richardson, a close friend of Sen. Hillary Clinton (D-N.Y.), was involved in efforts to quash the probe, a source close to the case alleged.

But Richardson's role was cut from Barrett's report, which went through 26 drafts, because Democratic law firm Williams & Connolly successfully pressured Barrett to remove a section of the report naming her, a source said.

The law firm represents Cisneros, former President Bill Clinton and Hillary Clinton.

A Williams & Connolly attorney declined to comment.

Before Cisneros' 1999 guilty plea, Barrett's office began a second phase based in part on allegations in a 1997 memo to IRS headquarters by whistleblower John Filan, an IRS criminal investigations chief in Texas.

In a memo obtained by The News, Filan accused top Clinton officials, including senior IRS lawyer Barry Finkelstein, of covering up Cisneros' tax fraud case by transferring it to two inexperienced lawyers in Washington.

Filan wrote that the two got orders "to kill the case from Barry Finkelstein at the outset."

Reached last night, Finkelstein declined to comment.

One of Cisneros' then-defense attorneys, Cono Namorato - who is now chief of IRS internal affairs - referred a reporter to Barrett's report.