House Panel Set to Accuse Wright : Ethics Unit to Cite Improper Gifts, Outside Income, Sources Report

The House Ethics Committee concluded Wednesday that House Speaker Jim Wright (D-Tex.) improperly took gifts from a Texas business partner and evaded House limits on outside income through bulk sales of his book, congressional sources said.

Voting behind closed doors after a 10-month investigation, a bipartisan majority of the panel appeared to deliver a devastating blow to the Speaker and his hopes of remaining in his leadership post.

A report of the committee’s preliminary inquiry--equivalent to an indictment or formal listing of charges that the panel believes are true--is expected later this week or early next week.

Defense Permitted

House procedures permit Wright to defend himself at a hearing. Afterward, the committee will deliver its verdict and decide what punishment to recommend, if any, to the full House.

But the political impact of Democrats and Republicans joining in a report severely critical of the Speaker is expected to be overwhelming.

“We’ve been waiting for the other anvil to drop,” said Rep. Thomas J. Downey (D-N.Y.), even before the committee’s action was reported. “The mood is depressed. He (Wright) can’t be a little bit pregnant--that’s the problem.”

A spokesman for the Speaker declined immediate comment on the reports of committee action but promised a statement today, adding: “All options remain open.” And one associate of Wright said: “He’s in a feisty mood.”

Sources close to the investigation said that a solid majority of the 12-member panel lined up on key issues in support of the panel’s special counsel, Richard J. Phelan, and rejected arguments by Wright that he did not violate House rules in his financial ties with Ft. Worth developer George A. Mallick Jr.

Committee Chairman Julian C. Dixon (D-Los Angeles) scheduled another session today that he said may wind up the first phase of the Wright case. But he added that an announcement of the findings may be delayed until next week.

Wright, outwardly cheerful, despite increasing signs that he is not winning his battle for exoneration, delivered an impromptu defense of himself to reporters as he left the House floor. He said that he was especially offended by the allegation that his wife, Betty, did little or no work for an estimated $72,000 she received from an investment company they formed together with Mallick and his wife.

Committee counsel Phelan charged that Betty Wright worked only 12 days in four years for Mallightco, the Wright-Mallick corporation. This assertion was angrily disputed by the Speaker, who said that his wife “surely did her work and earned her pay. Quite clearly that was not a gift.”

Required Disclosure

The panel has concluded, however, that her $18,000 annual pay, the use of a Ft. Worth apartment and a luxury car should have been reported as gifts on Wright’s financial disclosure reports, sources familiar with the investigation have said. Wright reported the salary as income but did not disclose the apartment or the car on the filings.

Even so, the reporting violation was relatively minor compared to the more serious finding that Wright accepted a gift of more than $100 from Mallick at a time when the Ft. Worth developer had an interest in federal legislation, congressional sources said.

While the Speaker has insisted that Mallick was one of his closest friends, who never asked him for a legislative favor, sources said the committee decided that Mallick had an interest in Congress’ work through his ownership of oil and gas properties, real estate ventures and an unsuccessful attempt to get financing for a Ft. Worth stockyards development plan.

A defense document prepared by William C. Oldaker, Wright’s attorney, said that Mallick “put out feelers” and tried to raise private money for the stockyards project in September, 1986. Wright helped steer legislation through Congress to provide an additional $7.5 million in federal loan funds for the stockyards’ development. Mallick was unable to raise enough private money, however, and did not get a share of the project.

Wrote Report for Wright

Investigators also determined that Mallick wrote a report for Wright in 1987 on the crisis in the Texas savings and loan industry. At the time, Wright was pushing for federal regulators to show “forebearance” in its dealings with the industry. Mallick also had taken out a $2.2-million loan from one Texas S&L; in 1985. When no payments were made on the loan, the property was liquidated for $1.2 million by the Federal Savings and Loan Insurance Corp. and the agency now is seeking the additional $1 million from the Mallicks.

These links apparently formed a basis for the conclusion that Mallick had an interest in congressional action.

House rules bar members of Congress from accepting gifts worth $100 or more in any year from anyone with a direct interest in legislation. Wright argued that the rule should apply mainly to lobbyists or corporations with political action committees. He insisted that he had never interceded in Congress on Mallick’s behalf.

Wright has defended his unusual publishing contract for a slim 1984 volume entitled “Reflections of a Public Man,” which provided him with royalties equal to 55% of the book’s $5.95 price.

He noted--even on Wednesday as the committee was voting against him--that royalty payments were specifically excluded from a limit on outside income equal to 30% of congressional salaries.

But the panel apparently agreed with its counsel that Wright improperly circumvented the ceiling on speaking fees by arranging for some speaking payments to be used for bulk purchases of his book at a profit of $3.25 per copy for himself, without any income limit.

Apparently sensing an adverse report, Wright and his key supporters have tried to rally defenders in the last week through a series of briefings that involved more than one-third of the 260 Democrats in the House.

Oldaker prepared a 110-page briefing book that rebuts a long series of allegations made by Phelan in his 456-page report to the committee on the marathon investigation of the Speaker’s conduct in office and financial dealings.

In his talk with reporters, Wright quoted from an advisory opinion by the House Ethics Committee that he said applied to his relationship with Mallick. “It clearly applies only to people who are lobbyists, who work for PACs (political action committees),” he said. “It is not intended to apply to ordinary citizens.”

Wright also said: “I am absolutely certain that I have not knowingly or intentionally violated any rules.”

Mallick’s effort at raising private capital for the Ft. Worth stockyards project, at a time when Wright was exerting his influence to channel more federal funds to build public improvements in the historic area, may have convinced the panel that the Speaker’s friend did have an interest in federal legislation.

Mallick set up a “Ft. Worth Stockyards Corp.” by filing papers with the state of Texas and signed an agreement to get a 17% interest in the development company if he could raise $148 million to bail out the foundering “Stockyards ‘85” concern. A few months later, however, he gave up trying to raise the funds and withdrew from the agreement.

Wright’s attorney, however, argued that Mallick had no financial interest in the project at any time and received no benefit from the Wright-backed legislation that provided $7.5 million for loans to small business firms at below market rates if they invested in the stockyards project.

Oldaker also argued in his defense brief that the alleged gifts to Betty Wright in the form of salary, apartment and job were provided before 1985, when her employment ended.

The events that might have caused Mallick to have a direct interest in legislation, Oldaker argued, did not occur until the 1986 search for funds for the stockyards and a later involvement with foreclosure by a savings and loan association on the $2.2-million loan to Mallick’s son, Michael.

“It would be unfair to apply the gift prohibition retroactively to events that happened between 1981 and 1984,” Oldaker argued.