January 21, 1999
Web posted at: 11:13 a.m. EST (1613 GMT)

WASHINGTON (CNN) -- Richard Holbrooke, nominated by President Clinton to be the U.S. ambassador to the United Nations, is accused by the Justice Department of violating federal ethics guidelines. He denies any wrongdoing.

The alleged civil violation involved Holbrooke's business contacts three years ago with the U.S. Embassy in South Korea. Holbrooke, a former State Department official, was an investment banker at the time. Under federal ethics laws, former government officials are barred from a variety of lobbying contacts with their former colleagues.

Sources tell CNN negotiations are under way with Holbrooke to resolve the matter, with Holbrooke perhaps paying civil penalties. Holbrooke, however, has balked at such a solution because he believes he has done nothing wrong, his friends told The New York Times.

One friend said Holbrooke also believes that a financial settlement might be seen as an admission of wrongdoing that could derail his U.N. nomination.

According to the Times, the Justice Department said it would consider filing a civil lawsuit against Holbrooke, delaying his nomination to the U.N. post indefinitely, if he refused to pay the fine.

Holbrooke was nominated by Clinton in June to be the U.S. representative at the United Nations. His nomination has been held up pending a review of his financial affairs.

The allegation involves contacts Holbrooke had with at least one former State Department colleague at the U.S. Embassy in South Korea within months of his resignation from the State Department in February 1996 to join the investment firm Credit Suisse First Boston in New York, the Times reported.

A friend of Holbrooke would not describe the South Korean incident, but told the paper it was "ridiculously minor" and offered no financial reward to Holbrooke or his employer.

Holbrooke currently serves the Clinton administration as a White House special envoy to the former Yugoslavia.

Correspondent Pierre Thomas contributed to this report.