Justice Department Inquiry Clears Pena of Wrongdoing : Probe: Pact between firm he founded, L.A. transit pension fund at issue. Secretary ‘pleased . . . not surprised.’

WASHINGTON —  Atty. Gen. Janet Reno announced Thursday that a review of allegations about Transportation Secretary Federico Pena has ended with no evidence of wrongdoing on his part.

In a brief statement, the Justice Department said that the review by its criminal division, opened on Feb. 15, “found no specific and credible evidence of any violation of federal law. Accordingly, the matter has been closed.”

The Justice Department’s statement did not identify which matters involving Pena it reviewed. Government officials had said earlier that the inquiry was initiated by the Transportation Department’s inspector general and encompassed efforts by a money management firm founded by Pena to win a contract with a Los Angeles transit pension fund.

Pena, who has denied any wrongdoing, said he is pleased.

“I have always maintained the highest level of integrity in my life,” Pena said. “I am pleased, but not surprised, that the Justice Department has found no evidence of wrongdoing in this matter. My focus has been and remains on serving the President and the American people as secretary of transportation.”

President Clinton, who chose the former Denver mayor for his Cabinet more than two years ago, called Reno’s announcement “good news for a secretary of transportation who’s doing a great job. I’m pleased for Federico.”

A Justice Department spokesman said he was not at liberty to discuss what investigative steps may have been taken in the review or which matters were examined.

The Times reported Feb. 10 that Pena Investment Advisors Inc., a money management firm founded by the transportation secretary, won a contract to manage $5 million from the pension fund in Los Angeles.

Pena sold his stake in the firm in late December, 1992, or early January, 1993. The Los Angeles pension contract was approved in February, 1993, without competitive bidding, 19 days after Pena took federal office. Officials in Los Angeles, including the former manager of the pension fund, told The Times that the Pena firm was hired as part of an effort to curry the goodwill of the incoming transportation secretary.

A review of the matter by the inspector general of the Los Angeles County Metropolitan Transportation Authority is still being conducted. Roughly half the cost of building the multibillion-dollar Los Angeles subway is being paid by the federal government.

Pena has said his withdrawal from his former investment firm averted any conflict of interest. He has said he has given no preferential treatment to any aspect of the Los Angeles project.

Under federal law, Reno had 30 days after opening the initial review of Pena to determine whether taking the next formal step, a “preliminary investigation,” was warranted. Reno closed the review on its 29th day. The inquiry otherwise could have led to the appointment of a special prosecutor.

The announcement came two days after Reno upset some Clinton Administration officials by recommending that a special prosecutor be named to investigate Housing and Urban Development Secretary Henry G. Cisneros.

Reno said the investigation concluded that Cisneros lied to the FBI during his selection and confirmation process. On Tuesday, Reno asked a special federal court to name an independent counsel to investigate whether Cisneros had committed a felony when he gave false statements to the FBI about payments that he had made to his former mistress, Linda Medlar.

Some Administration officials criticized Reno, contending that she could have resolved the question of whether Cisneros’ lies were “material” and not left this to an outside prosecutor to determine.

And President Clinton, while expressing regret over Cisneros’ mistakes, said through his spokesman that the facts uncovered by Reno would not have dissuaded him from selecting Cisneros for his Cabinet.

At a press conference Thursday morning, Reno described the Cisneros decision as difficult, but noted that an independent counsel would have tools of investigation to apply that she was barred under law from using in such a case. These include grand jury testimony-taking and subpoena powers and the ability to grant immunity to witnesses.