Laxalt Settles Libel Claim Against McClatchy Papers

WASHINGTON —  Former Nevada Sen. Paul Laxalt announced Thursday that he had settled his $250-million libel suit against McClatchy Newspapers out of court less than three weeks before trial, removing a potentially threatening shadow from his bid for the Republican presidential nomination.

The agreement, disclosed in twin press conferences by Laxalt here and Publisher C.K. McClatchy in San Francisco, involved a carefully ambiguous statement that allowed both sides to claim victory and a plan to allow a panel of retired judges to determine who will pay Laxalt’s legal fees.

The last-minute settlement ends Laxalt’s effort to show that the Bee newspapers of California libeled him in November, 1983, by alleging that federal tax agents had found evidence of illegal skimming of profits at a Nevada casino that Laxalt and his brother owned in the early 1970s.

Beginning of Story

The original Bee story began: “Substantial sums of money were illegally skimmed from the proceeds of Carson City’s Ormsby House Hotel Casino during the time it was owned by Paul Laxalt, now the powerful senior U.S. senator from Nevada and head of President Reagan’s reelection campaign, according to federal tax agents who gathered the evidence 10 years ago.”

Laxalt’s suit challenged that any skimming had taken place, any implication that Laxalt had acted to crush an investigation into skimming, and any implication that organized crime figures had been involved with Laxalt in financing the casino.

In their joint statement, the two sides claimed their “fundamental dispute” was over what the articles “actually said and meant.” On Thursday, however, the two sides also disagreed over what their settlement statement meant.

The key paragraph of the statement said that “extensive discovery taken in this libel action has not shown that there was in fact a skim at the Ormsby House.”

To Laxalt, this amounted to a concession that “there was no skim” at the Ormsby House.

McClatchy, however, argued Thursday that this meant only that the pretrial discovery phase of the case documents had failed to prove one way or the other whether skimming had occurred.

McClatchy also tried to argue Thursday that his paper never actually alleged skimming had occurred. Instead, “The news story said that there was evidence from federal agents of skim. The news story did not say that there was a skim. The news story did not say that we believed there was a skim.”

The settlement statement did not directly address the third element of Laxalt’s libel charge, involving allegations that figures associated with organized crime had helped Laxalt finance and later operate the Ormsby House.

Laxalt contended that this issue was covered by the narrower statement that the case “produced no evidence that Senator Laxalt, or any other persons acting on his behalf, granted anyone the right to skim the casino in exchange for improper or illegal financing.”

The statement, however, did allow both sides to declare victory.

“We’ve received everything we wanted,” Laxalt declared.

Sees ‘Vindication’

Laxalt’s principal lawyer, James Beasley, called the settlement “total vindication for a good man.”

“He can put whatever label on it he wants to, but the fact is he has dismissed (the suit) without (receiving) any apology, without any retraction and without any payment of money (for damages),” said McClatchy, publisher of the Bee papers.

“We won,” said Denny Walsh, the Bee reporter.

The two sides also differed on how the settlement came about. Beasley told the press conference that McClatchy’s team had approached him on Monday, but Walsh said in an interview that it was attorney Dan Paul of Beasley’s law firm who approached McClatchy’s attorney last Friday with word that the firm wanted the suit settled. The talks were nearly scuttled, Walsh said, when Beasley, who had taken the case on a contingency basis, wanted his fee guaranteed in case of settlement, though Laxalt’s team ultimately prevailed on him to go along.

Laxalt said in his press conference that he agreed to the settlement because he finally had won everything he wanted. However, when Laxalt unofficially declared his presidential bid in April he vowed that he wanted the Bee to print a front-page retraction and endow a chair in journalistic ethics at the University of Nevada. No talk of such renumeration came Thursday.

Suggests Motives

McClatchy also suggested that Laxalt settled because “I would imagine that having what would be a long trial in the middle of a presidential campaign is not the most comfortable way to run for President, particularly if the trial was going to go into issues such as the ones that were in our news story.”

By coincidence, on Wednesday, the same day that attorneys hammered out the settlement, a key witness in the case, Laxalt’s former sister-in-law, Katharine Laxalt, was found dead in Napa, an apparent suicide.

Court documents have revealed that in a taped conversation Katharine Laxalt had talked about a Palm Springs meeting with organized crime figures and an infusion of money from the Teamsters Union into the Ormsby House through Teamster consultant and reputed crime syndicate financier Allen Dorfman.

Alleging that Katharine Laxalt had lied in her deposition in the case, McClatchy’s attorneys were pressing to reopen her deposition to pursue this information. She was resisting.

Katharine was married to Peter (Mickey) Laxalt, brother of the former senator and a partner in the Ormsby House, from 1956 to 1977.

Investigating Death

Napa Police Capt. Robert Jarecki said he is still investigating Katharine Laxalt’s death but “as of now, I would say there appears to be no connection with the libel settlement.”

McClatchy attorney Robert Warren also said that those involved with the case did not even know of the death when they completed the settlement at noon Wednesday.

Nonetheless, one source involved in the case said Katharine Laxalt’s potential testimony may have been a source of concern to Laxalt that could have affected the timing of the settlement.

The lawsuit trial was scheduled to begin June 23 and last six to eight weeks, depriving Laxalt of valuable campaign time in New Hampshire and Iowa, and possibly trotting out damaging allegations about associations and campaign contributions with purported organized crime associates.

Now that it has ended, Laxalt said: “I’ll be in New Hampshire next week and I’ll be in Iowa very often in the next few weeks.”

In addition, “a cloud has been removed in connection with our fund-raising,” Laxalt said.

Raises $500,000

Laxalt announced an exploratory bid for the White House April 28, saying he would stay in the race for good if he had $2 million in the bank by Oct. 1. He said Wednesday that his campaign committee had raised about $500,000, “some” of it in pledges.

The panel of three retired judges now will decide whether Laxalt will be reimbursed for legal fees. One judge will be selected by Laxalt, one by McClatchy and the third by the first two judges.

Both sides will present written documentation and make oral arguments, but no witnesses will be called or evidence presented, Warren said.

Laxalt said he hopes that the panel will award sufficient legal costs for him to reimburse all who contributed to a defense fund of about $500,000. The contributors included former Senate colleagues from both political parties. He said that he returned a $10,000 contribution from Ivan F. Boesky shortly after the Wall Street financier was indicted for insider trading.

At one time, legal scholars thought the Laxalt case might set new precedent in libel law. McClatchy countersued Laxalt, charging the former senator with using the suit and his office to scare away the press from writing about him.

The federal court in Reno, however, dismissed that counterclaim early in the proceedings.

Paul Houston reported from Washington and Thomas B. Rosenstiel from San Francisco.