The three-judge panel rejected Rostenkowski’s contention that the entire indictment should be dismissed as an unconstitutional intrusion on Congress’ right to set its own rules. But the judges ordered a lower court to review six counts of lying to Congress, an act the Supreme Court recently ruled is not a crime.

The 40-page decision by the U.S. Court of Appeals for the District of Columbia Circuit cheered defense attorneys representing Rostenkowski, the once powerful chairman of the House Ways and Means Committee, and appeared likely to further delay his trial based on the May 1994 indictment. But Justice Department sources predicted federal prosecutors would still build a strong case on embezzlement and other serious charges that remain unchallenged.

I am ecstatic, said Howard M. Pearl, Rostenkowski’s Chicago-based attorney. I believe it emasculates a significant portion of the government’s case.

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U.S. Attorney Eric H. Holder Jr., noting the court rejected Rostenkowski’s blanket challenge to the indictment, said the ruling affirmed once again that members of Congress are not above the law and are accountable to the American taxpayer. We’re ready and eager to go to trial in this case.

The 17-count indictment, which grew out of a federal investigation of the House Post Office, accuses Rostenkowski of engaging in a pattern of corruption for two decades and converting to his personal use more than $600,000 in federal funds and $50,000 in campaign contributions. He is charged with exchanging official postage vouchers for cash at the House Post Office, buying gift and personal items with goverment funds at the House Stationery Store, paying more than a dozen employees who did little or no official work and buying vehicles with government funds authorized for leasing official cars.

The corruption charges led to Rostenkowski’s defeat last November by Republican Michael Patrick Flanagan, then a political unknown. The 36-year veteran of Congress has since returned to Chicago, occupying himself with speechmaking and consulting.

In an opinion written by Judge Douglas H. Ginsburg, onetime Supreme Court nominee, the appeals panel ruled on constitutional grounds that Rostenkowski could not be prosecuted on allegations that several of his congressional employees had performed personal tasks, not official duties.

The appeals court found that although the House prohibited use of a member’s office payroll to defray any personal, political or campaign-related expenses, that rule did not spell out the difference between personal and official activity. For courts to supply that definition, the judges said, would violate the constitutional separation of powers and the House’s right to set its own rules.

The life of a congressmanas incumbent legislator and perpetual candidate for office, whose official days end only after a round of nominally ‘social’ events at which he is obliged to appear, and his weekends and holidays are only an opportunity to reconnect with his constituentsmakes the line between ‘official work’ and ‘personal services’ particularly difficult to draw, the court said.

The judges ruled Rostenkowski could not be prosecuted on several allegations but let others stand:A charge that one employee was picking up laundry, driving his family members around Washington and working at campaign events was dismissed because those activities might directlyeven vitallyaid a congressman in the performance of his official duties. The government was permitted to pursue an allegation that another employee performed regular bookkeeping duties for an insurance company Rostenkowski owned, an activity the court said fit no reasonable interpretation of ‘official work.’ Prosecutors were allowed to seek to prove Rostenkowski used official funds to purchase gifts from the House Stationery Store because a rule clearly prohibited such gift-giving. But he cannot be charged with converting any items purchased to his personal use.

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A succession of Rostenkowski lawyers have argued that House rules were too unclear for violations to constitute crimes. District Court Judge Norma H. Johnson rejected that argument last October, and the appeals court agreed no absolute bar to such prosecutions exists on constitutional grounds.

While charges remain, Pearl said, those charges will be much more difficult to prove and our ability to defend against them is enhanced.

The appeals court suggested Johnson could dismiss six counts accusing Rostenkowski of lying to Congress or the Federal Election Commission because of a Supreme Court ruling in May. In that decision, involving charges against former Rep. Carroll Hubbard (Ky.) that grew out of the House Bank scandal, the Supreme Court held that a federal law against making false statements to the government applies only to the executive branch, not Congress or the courts.