Justice Dept. Lease Probed for Link to Mrs. Meese’s Pay

The independent counsel investigating Atty. Gen. Edwin Meese III is looking into the Justice Department’s renewal of a 10-year, $50-million office lease that was signed after the building’s owner had provided a $40,000 annual salary for Meese’s wife for her work at a public service organization, sources close to the inquiry said Wednesday.

Independent counsel James C. McKay has subpoenaed Ursula Meese’s employment records and is investigating whether the salary for her previously unpaid work was the result of any quid pro quo for the lease contract with the Justice Department, which her husband heads as attorney general.

James E. Rocap, a lawyer representing the attorney general, refused to comment when asked about McKay’s inquiry. However, Rocap insisted that Meese was innocent of any conflict of interest because “he wasn’t involved” in the agreement, which re-leased space for employees of the department’s Immigration and Naturalization Service.

McKay is examining Mrs. Meese’s employment with the Washington chapter of the Multiple Sclerosis Society, which she joined as a volunteer staff member in 1981 when she and her husband came to the city with the Reagan Administration. She worked on the expansion of a program aimed at finding jobs for physically disabled persons.

On Jan. 1, 1986, Mrs. Meese began to collect a salary for her work with the society, provided by funds from the Bender Foundation, a tax-exempt philanthropic organization headed by the family of real estate developer Howard S. Bender, authorities said.

In May, 1987, the government signed the lease, keeping the Justice Department’s INS employees in the aging building, which environmental experts had cited for a faulty air-filtration system.

Made $22-Million Profit

Thirteen days later, a partnership headed by Bender sold the building, including its lease as an asset, for $60.1 million, or a $22.7-million profit over two years.

Although the lease has not emerged as a major focus of McKay’s overall investigation thus far, sources said that he is still examining the matter in the remaining month of his inquiry.

Federal law prohibits a government officeholder from taking any official action to benefit himself or his family. In addition, a Justice Department regulation states that department officials must take pains to avoid even the appearance of impropriety.

The Bender partnership had acquired the rundown seven-story Chester Arthur building in March, 1985, for $37.5 million, nearly twice its assessed value, according to public records cited by the Associated Press, which first reported the transaction Wednesday.

Lease Was Main Asset

The building’s most valuable asset at that time was an existing Justice Department lease that was due to expire.

But the government had given notification that it intended to move some of the immigration service offices to newer quarters when the lease expired. In fact, according to the Associated Press, Congress had even approved a specific Administration plan for such a move, which included a 1986 lease providing only 63% of the space the government had previously rented.

Moreover, in June, 1985, just three months after the Bender group purchased the building, immigration officials reportedly began complaining of illness among their employees that was believed caused by the building’s antiquated air-circulation system. After the General Services Administration conducted an environmental inspection, the new owners promised to correct the problem.

Nevertheless, one real estate source said, Bender and his group apparently gambled that they could get a lease renewal. In May of last year, after months of negotiations over the property, the strategy paid off and the lease was signed.

Meese ‘Wasn’t Involved’

When asked if Meese, who is personally acquainted with the Bender family, had made any recommendation on the lease matter, his attorney, Rocap, reiterated: “He just wasn’t involved.”

Rocap said that the entire matter was handled by the General Services Administration, the government’s house-keeping agency, and by a division of the Justice Department known as the Justice Management Division.

However, the issue raises more questions about the attorney general amid a controversy about his personal finances and allegations of misuse of his office.

The lease agreement is the latest of several matters being investigated by McKay, including Meese’s role in a controversial $1-billion Iraqi pipeline proposal, his associates’ involvement in the Wedtech Corp. scandal, his stock holdings in the regional Bell telephone companies that were affected by Justice Department action and his former financial manager’s questionable business practices.

Indictment Ruled Out

Earlier this month, the independent counsel ruled out the possibility of an indictment of Meese “based on the evidence developed to date” in those matters. Barring dramatic new evidence, McKay is not expected to bring charges against the attorney general.

In the absence of an indictment, McKay will issue a public report at the end of his inquiry in a few weeks spelling out the results of his multifaceted investigation. Sources have said that they expect this report to be damaging to the attorney general, and there have been indications that Capitol Hill pressure on Meese to resign will continue.

In nearly all the areas he is examining, McKay is understood to be focusing on Meese’s close association with his longtime friend and former lawyer, E. Robert Wallach.

Figure in Pipeline Plan

Wallach, a principal figure in the Iraqi pipeline project, was indicted last December on charges that he improperly sought to lobby Meese on behalf of Wedtech, a now-defunct defense contractor. Also indicted was W. Franklyn Chinn, Meese’s former financial consultant.

Investigators are seeking to learn if Wallach had a role in arranging the salary for Mrs. Meese and whether any quid pro quo with the San Francisco attorney was involved. George G. Walker, an attorney for Wallach, said recently that his client played “a peripheral role” in Mrs. Meese’s job but said that he had nothing to do with arranging the funds for her salary.

In the fall of 1985, the Bender Foundation indicated that it would contribute $120,000 to the MS Society, of which Howard Bender’s wife, Sondra, was a board member, to put Mrs. Meese, then a volunteer, on the payroll for three years at $40,000 annually.

A spokesman for the Benders refused to comment when asked if the lease deal was related to Mrs. Meese’s job.