CHICAGO -- Three years after launching an undercover investigation into alleged public finance corruption in Indiana, federal authorities have closed the case without any prosecutions.

Deborah Daniels, U.S. attorney for the Southern District of Indiana, said yesterday that the office decided not to pursue prosecutions in the case about a month ago and that the Federal Bureau of Investigation had concurred with the decision.

She declined to comment on the reason not to prosecute.

Gary Schoon, a special agent in the FBI's Indianapolis office, would only say yesterday that Wayne R. Alford, the agent in charge of that office, was standing by statements he made last month to The Indianapolis Star.

An article in the newspaper quoted Mr. Alford as saying, "the case is over in the Southern District of Indiana" and that Ms. Daniels decided not to prosecute anyone in connection with the case).

Mr. Schoolman said Mr. Alford had no further comments on the case.

Andrew Cox, the financial analyst who had worked on the investigation with the FBI, has said the operation -- code-named Boncor--expanded into Illinois and Michigan, in addition to Indiana.

But Ms. Daniels said her office was the only U.S. attorney's office involved in the Boncor investigation.

"There could be other, similar investigations, but this one was only in the Southern District of Indiana," she stated.

Spokespeople for U.S. attorney's offices for the Northern District of Illinois and Western District of Michigan said they were unfamiliar with the Boncor investigation, and that if their offices were involved in any investigation they would not be able to make any comment.

A spokeswoman for the U.S. attorney's office in the Northern District of Indiana declined to comment. Officials in the U.S. attorney's office for the Western District of Michigan did not return phone calls.

The end of the Boncor investigation closes a bizarre chapter in Indiana's public finance history.

The operation became public more than a year ago, after Mr. Cox sued the FBI for $73,500 in back pay, plus severance for his work on the probe. In court documents, the FBI verified it had hired Mr. Cox for "a lawful undercover investigation regarding bribery and kickbacks to various Indiana public officials acting in their official capacities as they relate to public finance."

According to previous statements by Mr. Cox, a financial advisory firm called Bruin Inc. -- called Bribes Are Us by investigators -- was incorporated as a front for the FBI probe in May 1989. Mr. Cox has said the investigation produced videotapes ddd"a fair number" of public officials taking bribes. Bruin was shut down by the FBI in October 1990, according to Mr. Cox. But federal officials have said the investigation continued beyond that point.

Yesterday, Mr. Cox declined to comment on the operation's end, but said his claim against the FBI was still pending in the U.S. Court of Claims in Washington, D.C. Mr. Schoon would not comment on Mr. Cox's claim.

Tom Farlow, an attroney for Norval Pickett Jr., a former mayor of Brazil, Ind., whose name was among those linked with the investigation, said he and his client were notified more than a month ago by the U.S. attorney's office that the operation was complete and no indictments would be requested.

Mr. Farlow said the investigation appeared to have been extensive, with "a lot of witnesses" subpoenaed to appear before a grand jury. He added that his client cooperated with the investigation.

When the investigation became public, public finance officials in Indiana expressed disbelief that the FBI would have targeted their state, saying public finance corruption was not a problem there. Yesterday, officials said their viewpoint had been vindicated.

Fred Armstrong, the former Indianpolis controller, said, "It just proves the fact there was nothing there."

"We were surprised there was an investigation," said Russell Breeden, president of Raffensperger Hughes & Co. in Indianapolis. "And if the investigation has ceased and found nothing, it probably falls in line with out thinking that the state is very clean."

Michael Quinn, executive director of the Indiana Association of Cities and Towns, said his group's reaction was "a sigh of relief."

"The history of municipalities in Indiana compared to the rest of the nation is that they are run with the greatest integrity and dignity," he stated. "So it's not much of a surprise to us. There's not a great deal of skullduggery that goes on here."

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