By STEVEN GREENHOUSE

November 18, 1999

A former Democratic official has testified that Terence McAuliffe, President Clinton's friend and chief fund-raiser, played a major role in promoting an illegal scheme in which Democratic donors were to contribute to the Teamster president's re-election campaign, and in exchange the Teamsters were to donate large sums to the Democrats.

The official, Richard Sullivan, the Democratic National Committee's former finance director, testified in Manhattan at the trial of William Hamilton, the Teamsters former political director, that McAuliffe urged him and other fund-raisers to find a rich Democrat to donate at least $50,000 to the 1996 re-election campaign of Ron Carey, the Teamsters president.

During the three-week-long trial, Sullivan testified that McAuliffe had said that if a Democratic donor made a large contribution to the Carey campaign, then the Teamsters would contribute at least $500,000 to various Democratic Party committees.

Federal prosecutors have focused on what they say are two conspiracies, one involving a swap scheme with Democratic officials and one in which they say Hamilton steered more than $700,000 in Teamster money to liberal groups, and in exchange donors to those groups gave $200,000 to the Carey campaign.

The prosecution has described a desperate attempt by Carey campaign aides to prop up Carey's faltering campaign by using union money as a vehicle to get donors from outside the union to donate heavily to Carey. Two top Carey campaign aides have pleaded guilty, and Carey's 1996 election victory was overturned because of the finance fraud. One of those aides, Martin Davis, originally proposed the scheme to persuade Democratic donors to give to Carey.

In 1996, McAuliffe was the finance chairman of the Clinton-Gore Re-election Committee. He is a top fund-raiser for Vice President Al Gore, and he had agreed, until the Clintons obtained another mortgage, to guarantee the mortgage for the Clintons' new house in Westchester County with $1.35 million of his assets as collateral.

Describing McAuliffe's comments at a meeting on October 1996 with the Democrats' fund-raising staff, Sullivan said, "He said that if we could get a $50,000 contribution for the Carey campaign, he knew we could get $500,000 for Unity from the Teamsters." Unity was a joint fund-raising effort by the Clinton-Gore campaign and the campaign committees for the House and Senate Democrats.

McAuliffe's lawyer, Richard Ben-Veniste, said his client had done nothing wrong.

Hamilton is charged with fraud and conspiracy, accused of illegally diverting $885,000 in union money to help Carey's campaign.

Robert Gage, Hamilton's lawyer, has repeatedly asserted his client's innocence at the trial in Federal District Court in Manhattan. The jury began deliberations yesterday after Gage argued in his summation that the prosecution's main witness was not credible and that Hamilton was the victim of manipulations by the two Carey aides who pleaded guilty.

Ben-Veniste said McAuliffe had raised the idea of finding a wealthy donor to give to the Carey campaign at a meeting in October 1996 when he was reviewing fund-raising options for the Democrats.

"This review occurred at a time and in the context of his raising literally thousands of more fund-raising opportunities at the very end of the campaign," Ben-Veniste said. "It was not dwelled upon. Terry McAuliffe did not encourage anybody to pursue this possibility. Nor did he personally attempt to raise any funds in this manner for Carey."

He said McAuliffe was cooperating with prosecutors.

Sullivan's testimony suggested that McAuliffe repeatedly urged that a Democratic donor be found to help Carey. Sullivan said he had five or six conversations with McAuliffe about the Carey campaign in the spring or summer of 1996. He said McAuliffe had raised the idea of Democratic donors' giving to Carey two or three times that October.

At one point, Democratic officials found a wealthy Philippine woman who had wanted to donate to the Clinton campaign, but she could not because she was a foreigner. Democratic officials suggested that she instead give $100,000 to the Carey campaign, but she was not allowed to because as an employer, she was barred from donating to union campaigns. Ultimately the Democrats did not produce a donor for Carey, and the Teamsters never contributed the $500,000 to the Democrats.