THE TROUBLE WITH HAZEL

By John Cloud

When Hazel O'Leary's bumpy tenure as Energy Secretary ended in January, some Clinton Administration officials were no doubt happy to see her go. She had mortified her boss by jetting away on lavish trips and hiring a firm to rate the reporters covering her. But perhaps her most embarrassing misstep--a potentially illegal one--is only now emerging, months after she left the Cabinet to become a consultant. Last month the Justice Department began examining Democratic moneyman Johnny Chung's allegations that O'Leary met with Chinese officials in return for his $25,000 "donation" to a charity she supports called Africare. Chung told NBC News recently that an energy lobbyist (Chung didn't name him) suggested the gift, which Chung paid in October 1995 on behalf of his guests, including the head of China's petrochemical industry. (Chung footed the bill because he wanted to do business with the Chinese.) The officials had their meeting with O'Leary.

It has all the appearance of a quid pro quo, and last week the Justice Department decided to move its investigation one step closer to the appointment of a special prosecutor. But sources close to the contretemps tell TIME that there may be even more to investigate than the money-for-face-time exchange involving Africare. Apparently the anonymous lobbyist who wired the deal had his own reasons for wanting to please O'Leary. The sources say he is Wilson Golden, then lobbying for a giant environmental engineering firm, ICF Kaiser International.

The company has won millions of dollars in Energy Department contracts over the years and has a huge stake in getting along well with its Secretary. Company chairman Jim Edwards played host to O'Leary as an "honored guest" during a 1995 Democratic fund raiser at his suburban Washington home. Honored, indeed: just a few months earlier, the department had awarded ICF Kaiser--in a joint venture with another company--a $3.5 billion nuclear-cleanup contract.

And where is O'Leary now? She has her own consulting firm, but she also sits on ICF Kaiser's board. Her former head of environmental cleanup works for the company too. O'Leary denied Friday that she "participated in or authorized any other person to undertake a solicitation or receipt of a charitable contribution in return for a meeting" with the Chinese officials. For his part, Golden, now chief Washington lobbyist for ICF Kaiser, declined to be interviewed for this article. A source says he is talking to the FBI, however.

--By John Cloud. Reported by Michael Weisskopf/Washington

With reporting by MICHAEL WEISSKOPF/WASHINGTON