WASHINGTON -- Devastated by the death of her infant, Julie Hiatt Steele journeyed to Romania in the waning days of the Soviet empire to take solace in a baby boy she would adopt and name Adam.

Eight years later, the Richmond, Va., woman's journey of grief and hope has become the subject of swirling capital intrigue, Exhibit A in the Democrats' case against independent counsel Kenneth W. Starr and a prime example of what Starr's supporters see as a concerted effort by President Clinton's backers to twist the facts in their favor.

Democrats charge that Starr's investigators riffled through Steele's adoption records, quizzed her neighbors and possibly threatened to annul her adoption in a desperate and vicious effort to persuade Steele to testify against the president.

"It shows the extraordinary lengths he is willing to go to attack people who contradict his view," said James Kennedy, a spokesman for the White House counsel's office.

Clinton's opponents counter that Starr was investigating whether White House aides had used the overseas adoption to pressure Steele into impugning the integrity of one of the president's accusers, Kathleen Willey.

And Starr has expressed extreme frustration that he cannot go public with his side of the story because the matter is subject to grand jury secrecy rules.

"We had questions to ask her," Starr spokesman Charles G. Bakaly III said, "and it was not to embarrass her or to take her child away."

"I'm comfortable that ultimately, if the facts come out, people will be assured there were no heavy-handed tactics," he said. "I would hope as federal prosecutors, we would be given some presumption of regularity."

In any case, the tale of this peripheral figure and her adopted son caught between the two mighty antagonists in a political duel may prove to be one of the most enduring mysteries of the White House sex scandal:

Why did she change her story, turning from witness for the prosecution to witness for the president? Why did she drop two prominent lawyers in her native Richmond in favor of two Democratically connected lawyers in Washington? And why did the adoption of a Romanian orphan become so profoundly interesting to an independent counsel determined to find evidence that the president obstructed justice?

Could it be that Starr investigated an unfounded charge of Clinton trying to intimidate Steele but wound up inadvertently committing the same offense?

Starr has not precisely denied Democratic accusations of heavy-handed tactics against Steele, but he has not confirmed them either.

In last week's impeachment hearings, the president's attorney, David E. Kendall, grilled Starr on the matter. "Have investigators investigated the adoption of an 8-year-old boy from Romania?" he demanded.

"There is an enormous amount of misinformation and false information with regard to that witness," Starr snapped back. "Some of her claims are utterly without merit and utterly without foundation."

"Is this one of them?" Kendall replied.

"No, I did not say that," Starr concluded.

Steele, 52, has said she never intended to become embroiled in the high-stakes impeachment battle. Indeed, she declined to comment for this article.

'I made two mistakes'

In June, after testifying before the Starr grand jury, she told reporters: "Over a year ago I made two mistakes. I did a favor for a person I thought was my friend, and I trusted a reporter. As a result, my good name has been damaged, my health has deteriorated, I have had to hide myself and my child from the news media in my driveway, and I have been called here today."

In March 1997, Steele's longtime close friend Willey approached her, warning that a Newsweek reporter was on his way to her house. Steele said Willey asked her for a big favor.

According to Steele, the former White House volunteer asked her to tell the reporter, Michael Isikoff, that Clinton had made an unwanted sexual advance on Willey four years earlier. Indeed, Willey asked Steele to say Willey had been so distraught over the groping that she told her friend all about it the night it happened. Steele said she had lied for Willey about other relationships, and she lied again, never dreaming the Willey story would prove so important.

Five months later, as Isikoff prepared to print Willey's allegations, Steele said she had a fit of remorse and called Isikoff to recant the story, saying her corroboration was a lie. In January 1998, White House attorneys obtained a sworn affidavit from Steele accusing Willey of asking her to lie.

Son's adoption questioned

In becoming a key witness for the president, Steele also became a target of the independent counsel, who was convinced that the president's allies pressured her to change her story. Starr has come down hard on her, summoning her daughter and brother before one of his grand juries, questioning her before the grand jury twice, subpoenaing bank records and her credit history, tracking down friends as far as Colorado, threatening to indict her for perjury -- and, most notoriously, grilling neighbors about the possibility that Adam was adopted illegally.

"Kathleen Willey knew Adam was the be-all, end-all of Julie's life. Attack Adam and it can hurt Julie," said a legal source close to the Steele investigation who spoke on condition of anonymity. "That's where it came from, and I know it."

Another legal source just as knowledgeable dismissed that claim as utterly untrue, saying none of the information on the adoption came from Willey. But the source declined to say from where it came.

Jim Roberts, one of Steele's attorneys in Richmond, said he saw no evidence that Starr had improperly used the adoption issue against his former client and no evidence that the adoption had been anything but "perfectly legally handled."

"I certainly never had any pressure aimed at me by Ken Starr on that issue or any other issue," Roberts said.

From witness to target

After weeks on the cable talk-show circuit, Steele's current attorneys have grown wary of speaking out on their client's behalf -- and with good reason, said Nathan Landow, a wealthy Maryland real estate developer also embroiled in the Willey investigation.

Landow said that last summer, Steele's Washington lawyers, Nancy Luque and John Coale, dashed off a strongly worded letter to Starr, protesting his treatment of their client. In August, one of Starr's deputies, David Barger, answered the charges and informed Luque that Steele's status in the investigation had changed -- from witness to target.

Steele's statements were also a provocation. She told reporters last summer: "Although I did not vote for Mr. Clinton, I want to apologize to the president and to his family. I deeply regret that my mistakes were used to cause them harm."

A flurry of television appearances and news articles this month ,, may have raised the independent counsel's ire again. Starr sent the House Judiciary Committee four boxes of evidence regarding the Willey matter, and he has yet to lift the perjury threat against Steele.

Starr's defenders are not without fodder of their own. Steele admits that she sought to profit from Willey's allegations by selling a photograph of her former friend and the president to the National Enquirer for $7,000.

And Starr has collected evidence that could suggest Steele's recantation was untrue. Bill Poveromo, another Richmond resident, testified before Starr's grand jury that Steele had told him over dinner last year about Willey's encounter with the president, saying the former White House volunteer was "flattered" by Clinton's pass.

Poveromo, a news producer for Richmond's NBC affiliate, said he was so intrigued by the story that he tried to persuade Willey to break it on Richmond television. She declined but ultimately told the nation of the alleged encounter on "60 Minutes."

Steele has denied telling Poveromo about the encounter, but Poveromo said he vividly recalls Steele yelling at him for approaching Willey and breaking the confidence.

"She has to remember telling me," he said.

Poveromo said he believes Steele simply got frightened of the prospects of becoming embroiled in a presidential scandal when she learned that Newsweek would print the allegations, so she recanted. He could not say whether the White House pressured her in any way.

But Coale dismissed the charges of White House pressure out of hand.

"It's absolutely, 100 percent not true," he said. "To me it sounds like something out of a chat room on the Internet."

According to Coale, White House aides could have known nothing of Steele's existence between the time she first corroborated Willey's story to Newsweek and the time she recanted. Coale said that even if she did tell Poveromo, she could have simply been passing on Willey's lie again.

The president's lawyers later asked Steele to sign an affidavit, but they did not have to pressure her because the affidavit was consistent with her earlier recantation, Coale said.

And, he asked, if there was any evidence that the president's team had used the adoption to pressure Steele, why did Starr decline to accuse Clinton of impeachable offenses in the Willey matter?

"That would be the stuff of a handful of indictments," Coale said. "If he had anything like that, we would've heard."

Pub Date: 11/27/98