RENO REFUSES REQUEST TO PROBE FUND RAISING : GOP ALLEGES ILLEGAL ACTIONS BY DEMOCRATS.

Byline: David Johnston The New York Times

The Justice Department rejected on Friday a request by senior Republican lawmakers to appoint an independent prosecutor to investigate whether Democratic fund-raisers illegally raised millions of dollars for their party's treasury this year.

Department lawyers said they had found no basis to suggest, at this time, that high-level officials in the Clinton administration engaged in illegal conduct related to this year's campaign fund raising.

``There is no specific, credible evidence at this time that any individual covered by the provisions of the Independent Counsel Act has committed any federal crime,'' wrote Mark Richard, deputy assistant attorney general for the criminal division at the Justice Department.

It was the third time in recent weeks that the department has balked at demands for an independent prosecutor to examine campaign fund raising. But Friday's decision was the most significant, coming in response to a detailed letter Oct. 28 from Sen. John McCain of Arizona and other top Republicans in both houses. The two prior requests came from McCain alone and from Common Cause, a nonpartisan public interest group.

McCain expressed deep disappointment in the decision, saying: ``It is my strong belief that the facts before us meet the test when other independent counsels have been called for in the past. The Department of Justice's failure to recognize the need for an unbiased independent review of the situation is further proof that congressional hearings may need to be held to investigate these serious allegations.''

Still, the department's action represented only an initial legal conclusion, not a final prosecutorial judgment based on a full investigation into the swirl of issues surrounding Democratic fund raising.

Under the independent counsel law, the Justice Department has 30 days from the date of a complaint to determine whether there is specific and credible allegation of wrongdoing against an official like the president, the vice president or members of the Cabinet. Friday's announcement was the result of that review.

Even if the department decided that there was a specific and credible allegation, the law does not automatically require the attorney general to seek the appointment of an independent prosecutor. The department must first determine, with a preliminary investigation, whether there are reasonable grounds to believe that the official committed the offense as described.

Moreover, Friday's action does not mean that the Justice Department has abandoned all inquiries into political fund raising, officials said. Richard's letter to McCain said political fund-raising issues would continue to be investigated by a newly formed Justice Department legal unit that can use FBI agents as well as traditional measures like subpoenas and grand juries.

Officials said they were prepared to reconsider their decision regarding an independent prosecutor if evidence warranted it. ``If at any time during our continued review of your allegations we obtain specific and credible information that a covered individual has committed an offense, we will follow the procedures set forth in the Independent Counsel Act,'' Richard wrote.

But it remains uncertain whether the uproar over Democratic fund-raising efforts will result in formal findings of criminal wrongdoing. So far, the Democratic National Committee has returned more than $1 million in contributions because the money appeared to have come from questionable or uncertain sources. But no one has been accused of a crime.

Most of the investigative work, including examining bank records and interviewing officials, is just beginning. As of Friday, law enforcement officials said the Federal Bureau of Investigation was still awaiting orders to enter the case.

Despite the Justice Department's effort to portray its inquiry as an aggressive one, Friday's decision could prove to be a painful one for Attorney General Janet Reno, who is in England at a conference on youth violence.

Reno - who approved the decision - has said she is willing to serve another term if President Clinton wants her. But he has passed up chances to say he will keep her on, and White House aides have complained about her performance and her past willingness to refer politically sensitive cases to independent prosecutors.

Friday's action could enhance her somewhat faded image at the White House, but it also leaves Reno vulnerable to Republican attacks that she has tried to hang on to her job by keeping the fund-raising issue out of the hands of an independent prosecutor.

The White House adopted a neutral tone in response to the decision, with the press secretary, Michael McCurry, saying: ``The Justice Department has made its decision for the reasons indicated. The White House will continue to answer questions related to financial contributions candidly and forthrightly, as the president has directed.''

McCurry said that the Justice Department decision would have no bearing on Reno's job and that she and President Clinton would meet on the matter.

McCain and other Republicans had sought the immediate appointment of an independent prosecutor to examine eight specific issues, including the involvement of Clinton, Vice President Al Gore and officials at the Democratic National Committee in questionable fund raising. The lawmakers, including four House committee chairmen, wanted the inquiry to look into several specific donations, including a South Korean company's apparently unlawful $250,000 contribution that was returned after news reports about it.

The Republicans had also asked the Justice Department to investigate the fund raising of John Huang, a top official at the Democratic National Committee, who was suspended after the furor erupted over his fund-raising activities and who has since been dismissed as part of what the committee called normal attrition after a campaign.

Huang, a former executive for a wealthy Indonesian family with a long association with Clinton, was appointed to a midlevel job at the Commerce Department in the summer of 1994. He left the trade post in late 1995 to raise funds for the Democratic Party. Since late September, party officials have returned $1.2 million of the $2.5 million that Huang raised during his year with the committee.

Justice Department officials said Friday's decision was based solely on the law. They said that of the eight issues outlined in McCain's letter, seven related to conduct of people who are not covered by the independent counsel statute, meaning that the department is not required to seek an outside prosecutor.

CAPTION(S):

Photo

Photo: Sen. John McCain

Deeply disappointed