In an unusual public assertion, federal prosecutors in North Carolina last week denied that they have been prohibited from questioning Rep. Charles Taylor, the seven-term Tar Heel State Republican whose banking business has come under scrutiny after the conviction of three people involved with fraudulent loans.

“Neither the Attorney General, nor any of his assistants, barred the investigating agencies or the United States Attorney’s Office from speaking to Congressman Taylor,” Assistant U.S. Attorney Richard Evans wrote in a court brief filed June 4.

But lawyers for a North Carolina attorney who was convicted in April of submitting false paperwork in connection with a fraudulent loan contend that Taylor is being protected.

“You have a great deal of evidence pointing directly to Taylor and his knowledge of the activity that has been the subject of a long-running criminal investigation,” said Forrest Ferrell, who represents the attorney, Thomas Jones. “Yet there is no indication in all of this time and in any of the evidence that Taylor has ever been questioned or interviewed by the FBI.”

Ferrell said in a telephone interview that the Congressman evaded their efforts to subpoena his testimony during Jones’ April criminal trial. “We had a private investigator that we hired who was unable to serve a subpoena on Taylor,” Ferrell said.

Taylor, in addition to his lawmaking duties as a cardinal on the House Appropriations Committee, maintains a vigorous hand in running an Asheville, N.C., thrift, the Blue Ridge Savings Bank.

Taylor, whose office did not return phone calls inquiring about the criminal investigation, founded the thrift in 1978 and serves as its chairman. He has never addressed the investigation or criminal matters publicly.

Charles Cagle, a Taylor friend and campaign contributor, pleaded guilty to charges of bank fraud and conspiracy to commit money laundering after borrowing $1.3 million from Blue Ridge. Lending rules limit individual loans to $500,000, but Cagle evaded that limit by forging the names of relatives and submitting false loan applications. Jones served as an attorney assisting Cagle in preparing some of the loan documents.

The bank’s former president, Hayes Martin, has also entered a guilty plea in connection to the Cagle loans. And it is Martin’s testimony and interviews with the FBI that point most directly at Taylor.

According to The Asheville Citizen-Times and Ferrell, court testimony and a September 2000 FBI interview of Martin revealed that Taylor had extensive knowledge about the loans to Cagle.

Martin, who had also served as Taylor’s campaign treasurer from 1992 to 1996, described Taylor as “a micro-manager.” He said that Taylor “maintained constant contact with the bank, either physically or telephonically — 10 to 11 calls per day,” the paper reported.

Also, Martin said, Taylor “would regularly call him and ask, ‘How much money have you made for me?’ And, ‘When can you pay me dividends …’ i.e., how profitable is the bank?”

Martin also told FBI agents “that he spent a good bit of his time” at Blue Ridge Savings Bank “helping Charles Taylor to skirt issues” with the Office of Thrift Supervision. Martin charged that Taylor knew Cagle was attempting to take out a loan in the name of Cagle’s mother. Cagle testified that Taylor was contacted when he first sought a loan from Blue Ridge.

Martin also testified that Taylor ordered the removal of a bank employee who was suspected of cooperating with federal investigators looking into questionable loans.

“Despite all this evidence pointing to Taylor, he was never called to testify, never was sent a subpoena, never called before the grand jury and, even more incredibly, never interviewed by the FBI,” Ferrell said. “If they planned to talk with the Congressman, don’t you think they would have done so by now?”

In their formal response filed last week, prosecutors acknowledged that Taylor had not been interviewed and they asserted that they are under no legal obligation to question the Congressman. However, prosecutors asserted at the close of Jones’ trial in April that the investigation is continuing.

The prosecutors could not be reached for further comment.

In a motion asking a judge to hold an evidentiary hearing into Taylor’s role, Ferrell and his co-counsel, Gene Sigmon, argued that the only explanation for Taylor’s silence is that he is being protected by Attorney General John Ashcroft and senior Justice Department officials.

Taylor “knew about and was cognizant of all the loans made by Hayes Martin to any person in relation to Charles Cagle. Charles Cagle and the Congressman were political cronies. Charles Taylor knew about the loans, knew that they were made for the alleged benefit of Charles Cagle and yet the United States, through its highest law enforcement officer, to wit, United States Attorney [General] Ashcroft or his assistants would not give permission for the Federal Bureau of Investigation to ask questions of Mr. Taylor,” the attorneys wrote in a May 15 motion.

“The United States knew and still knows that Charles Taylor was a critical participant in the facts alleged in the Bill and in fact, if Hayes Martin and Charles Cagle are conspirators so then is Charles Taylor. It’s not a mere matter of selective prosecution but rather it’s a matter on the part of the higher officials of the United States government to prohibit and bar its local United States Attorneys from acting consistent with the requirement of effective law enforcement.”

Robert Conrad, the U.S. attorney for the western district of North Carolina, is no stranger to Capitol Hill politics. He is the former chief of the Justice Department’s campaign finance task force that investigated scandals arising out of the 1996 elections. The task force was created by then-Attorney General Janet Reno in 1997 to probe allegations of campaign finance improprieties. The unit charged 29 individuals or corporations with violations of federal laws and obtained 24 convictions, mostly of Democrats.

In their 12-page motion responding to Ferrell and Sigmon, the prosecutors said that the “defendant’s claims of prosecutorial misconduct are contrary to the facts, and are ‘nothing more than a shot in the dark’” when alleging that there must have been some improper intervention or prohibition from Washington. Moreover, as a matter of law, even if the defendant were correct in his factual allegations, there would have been no violation of any right granted him by the Constitution, statute, or rule of procedure. There has simply been no prosecutorial misconduct here, factually or legally, and the defendant’s motion should be denied.”