A bipartisan majority of the House Ethics Committee voted Wednesday that House Speaker Jim Wright has evaded congressional limits on outside earnings and wrongfully accepted gifts from a onetime business associate who had a direct interest in legislation, according to two committee sources.
One source declined to say which of the six Democrats on the 12-member committee joined the six Republicans to vote against Wright, but the New York Times reported they were Reps. Bernard J. Dwyer, a veteran House member from New Jersey, and Rep. Chester G. Atkins of Massachusetts.
The committee accepted the conclusion of its special counsel that Wright violated House rules by disguising speaking fees from lobbyists as royalties from sales of a book he wrote to evade congressional limits on outside income.
It also accepted the contention of its counsel, attorney Richard Phelan of Chicago, that Wright accepted large gifts from friends who had an interest in legislation over which he had some influence, specifically bills addressing the savings and loan crisis.
The committee has been meeting privately every day this week and is expected to make public by Friday a ”statement of alleged violations”
outlining the charges, potentially devastating to Wright, one of the nation`s top Democrats.
Phelan`s report, a separate 456-page document, is at the center of the panel`s findings, and committee Chairman Julian Dixon (D., Calif.) said earlier Wednesday that most of that report will be released at the same time as the findings.
After Wright is given a chance for rebuttal, the committee will make its official recommendation, which could range from a letter of reprimand to expulsion from the House. The recommendation eventually will end up onthe House floor for a vote. Many Democrats say Wright may not survive as speaker if he is reprimanded.
For several days this week, members of the committee and other key Democrats have looked at the charges in a lengthy rebuttal prepared by Wright`s lawyer, William Oldaker. The Tribune obtained a copy of Oldaker`s memo.
According to the memo, Phelan has advanced a ”theory . . . that the speaker`s income from the sale of the book violated the limit on outside earned income.”
Wright`s book, ”Reflections of a Public Man,” on which he receives a hefty 55 percent royalty, was purchased in large numbers by many special interest groups that had arranged for Wright to address them. Phelan has concluded that Wright asked the groups to buy copies of the book in lieu of paying him a fee, called an honorarium. Under House rules, fees are considered outside earned income, but royalties from sales of books are not.
House rules limit members` outside earnings each year to the equivalent of 30 percent of their salaries. In the speaker`s case, that would amount to a limit of $34,500.
”He (Phelan) argues that the purchasers bought the book only to obtain the speaker`s appearance, and that the speaker was attempting to evade the outside earned income limitation by recharacterizing honoraria as royalties,” Oldaker`s rebuttal memo says. Oldaker contends the charge is ”without merit. There is no evidence that the 11 appearances were in any way contingent upon the purchase of books.”
In one 1985 instance involving the book, Gerry Cassidy, a lobbyist for Ocean Spray Cranberries Inc., told his client that Wright would not accept an honorarium for a speech and said he would prefer it if Ocean Spray bought books instead, according to the Oldaker memo.
Oldaker disputes Phelan`s apparent conclusion that Wright knew about the arrangement. Roy Meyers, a spokesman for Ocean Spray`s lobbying firm, said Wednesday that Cassidy never talked directly to Wright about the honorarium.
Meyers said Cassidy had a discussion with Marshall Lynam of Wright`s staff in November, 1985, about a personal appearance Wright was to make. He said Ocean Spray was going to pay $2,000 for the appearance and in fact had written a $2,000 check made out to Wright.
But Lynam asked Cassidy if it would be acceptable to his client to buy $2,000 worth of books instead. Meyers said Lynam made it clear that, if Ocean Spray didn`t want to buy the books, that would be all right, too. The group agreed to buy the books.
He said that the initial check was torn up and a new one was made out to the publishing company. The agreement was that the cooperative would pay $2,000 for the books, but the books would be delivered to Wright`s office to be distributed as Wright saw fit.
Conversations with representatives from other organizations that bought Wright`s book also indicated that the speaker`s aides, rather than Wright himself, suggested the book purchases.
Besides the allegations involving Wright`s book, Phelan argues that Wright violated laws that prohibit a member of Congress from accepting gifts valued at more than $100 from a person with a ”direct interest in
legislation.”
The allegations involve Wright`s relationship with George Mallick, a Ft. Worth real estate developer who is a close friend of the speaker and a business partner in a company called Mallightco.
Phelan`s view is that Wright and his wife, starting in 1979, received numerous ”gifts” from Mallick, all worth more than $100. The gifts, which totaled more than $100,000 in value, included:
– Mrs. Wright`s free use of a Ft. Worth condominium from 1979 to 1984 when she was working for Mallick, and the use of a condominium by the speaker and his wife from 1984 to 1988 at a cut rate.
– Her free use of a 1979 Cadillac Seville, first in Ft. Worth as a Mallick employee and later when she took the car to Washington.
– Her $18,000-a-year salary as a Mallick employee, for which Mrs. Wright performed no legitimate services.
In addition, the report says Phelan believes the partnership that Wright and Mallick formed in 1979 as Mallightco was really a ”sham set up to pass gifts” along to the speaker and his wife.
The report said that the Wrights put up $57,127 worth of stock as their initial contribution to Mallightco, but Phelan belittled the value of the stock and said Mallightco shareholder distributions to the Wrights over the years amounted to gifts.
Gifts to members of Congress from personal friends are permissible, but lawmakers can`t accept gifts of more than $100 from anyone who has an interest in legislation, and Phelan argues that Mallick had such an interest.
The report said Mallick was involved in an effort to locate financing for a project to revive the Ft. Worth stockyards at a time when Wright was pushing for federal grants for the project.
Phelan also argues that Mallick had an interest in savings and loan legislation that Wright bottled up in Congress after receiving numerous complaints about federal regulators from many of the Texas savings and loan institutions in financial difficulties.
Oldaker argued that Phelan was wrong. In his report, he said Mrs. Wright`s salary, car and free use of the condominium were not ”gifts.”
He said that Mrs. Wright performed legitimate business services for her salary and that Mallick provided the use of the condominium because he liked to have key employees close at hand. Mrs. Wright was one of several Mallightco employees who had free use of a company car, he said. Once Mrs. Wright left the company, she and the speaker paid $21.67 a day to use the Ft. Worth condominium when they returned to the district, he said. Oldaker said the rent was the going rate in Ft. Worth.
Oldaker also argued that Mallick didn`t have a ”direct interest in legislation.” He said Mallick`s interest in the stockyards project was limited to seeking financing for it. ”George Mallick had no financial or ownership interests in any entity operating in the stockyards area,” Oldaker said.
He said Wright asked Mallick to look into the savings and loan controversy because the speaker wanted a trusted friend familiar with the issue to give him a report he could rely upon about a controversial issue that affected many Texans.
