RENO TO TAKE NEXT STEP IN GORE INQUIRY.

Byline: David Johnston The New York Times

Attorney General Janet Reno has decided to expand the Justice Department's inquiry of Vice President Al Gore's fund-raising telephone calls, moving to the next phase in the process of determining whether to seek an independent prosecutor, government officials said Thursday.

The attorney general also has rejected the need for an independent prosecutor to investigate other White House fund-raising practices involving President Clinton - including coffees with Clinton and stays in the Lincoln Bedroom for top Democratic donors, the officials said.

Her decisions are contained in a letter to be sent today to House Republicans who have demanded for months that she seek the independent counsel and move the investigation outside the Justice Department. While it remains uncertain whether she will ultimately make such a request, her decision takes the Justice Department one step closer to it.

The letter, which is still under review at the Justice Department, does not say whether she will undertake a similar expansion of the investigation into Clinton's telephone solicitations. His calls are now the subject of a 30-day initial review, and Reno must decide whether to expand that inquiry by Oct. 15.

Reno's decision, although not unexpected, is a setback for the administration and comes at a time when Clinton and Gore have been trying to shift focus of the campaign finance debate away from themselves and toward Republican opposition to a bill languishing in Congress that would change some political fund-raising rules.

Still, her decision to widen the inquiry of Gore's telephone solicitations is unlikely to dampen the furor in Congress, where Republicans have demanded for months that Reno appoint an independent prosecutor to examine the long list of questionable fund-raising practices used by Democrats in the Clinton-Gore re-election campaign.

Gore and his advisers have seemed resigned to the decision. The vice president's aides have said an expanded inquiry would give them an opportunity to present Justice Department lawyers with information showing that he did not break the century-old law that limits fund raising by government officials on federal property. That law is at the heart of the department's inquiry.

As the Justice Department prepared to advise Gore of the inquiry's extension, Republicans criticized the vice president for getting free legal advice on campaign finance issues under scrutiny.

James Neal, a former Watergate prosecutor who practices in Nashville, said he was providing his services to Gore without charge, saying the practice was legal and ethical under federal regulations, which permit officials like the vice president to receive gifts from family or personal friends.

In a statement, Neal said: ``The idea to volunteer my time to represent the vice president during this period was mine, based on my high regard for the vice president and my longtime friendship with his entire family.''

But after the Republican National Committee circulated a letter from Neal to Gore declaring Neal's intention of working on a ``pro bono basis,'' James Nicholson, the committee chairman, criticized the vice president for exercising poor judgment.

Reno's letter is a reply to one Sept. 3 from Rep. Henry Hyde of Illinois and other Republicans on the House Judiciary Committee. Under the independent prosecutor statute, if Reno receives a request from more than half the members of the majority party on the Judiciary Committee, she must respond in writing to their complaint within a month.

Hyde's letter, signed by 19 other Republicans, outlined a host of alleged wrongdoing by Democrats during the presidential campaign. His letter, relying mainly on news reports, asked Reno to consider the appointment of an independent prosecutor to examine a host of issues, including the possibility that China sought to improperly influence American election campaigns and whether Democratic fund-raisers illegally laundered foreign money into the Clinton-Gore campaign.

In those instances, Reno's letter rebuffs the need for the independent prosecutor mainly on the ground that there is no evidence of wrongdoing by any of the nearly two dozen high-level officials who are covered by the statute, the officials said.

Some government officials privately criticized Hyde's letter as too vague. They said it referred to dozens of incidents and issues for possible investigation, but in many instances alluded to questionable events without saying how these activities could be considered a crime or why they were covered by the independent prosecutor law.

During the 90-day preliminary investigation, the Justice Department must determine whether there is enough evidence of criminality to believe Gore actually violated the law. If the inquiry finds such evidence of wrongdoing, Reno must seek the appointment, which would be made by a three-man panel of appellate judges.