3 Issues Key to Panel’s Verdict in Wright Probe : Committee Focuses on Book Royalties, Wife’s Income, Friend’s Possible Interest in Legislation

When the House Ethics Committee finally concluded its exhaustive, 10-month investigation of House Speaker Jim Wright (D-Tex.) on Wednesday, the verdict hinged on three key issues--his book royalties, his wife’s income and a friend’s alleged interest in legislation.

The 12-member panel, which agreed last June to investigate charges against Wright, examined financial transactions involving the Speaker over the last four decades before making its preliminary determination. Wright now will have an opportunity to answer the charges formally.

As it weighed the evidence contained in a 450-page report compiled by special counsel Richard J. Phelan, the committee eliminated a large number of the original allegations against Wright as unsubstantiated and instead zeroed in on these three key issues:

--Book Royalties: Although House rules strictly limit outside earned income by members, there is no limit on book royalties. The panel concluded that Wright’s book of personal essays entitled “Reflections of a Public Man” may have been published with the primary intention of circumventing the limit on income that members can receive from interest groups.

Partnership Paid Wife

--His Wife’s Income: Between 1981 and 1984, Wright’s wife, Betty, was employed by a business partnership between the Speaker and his friend, George A. Mallick Jr., a wealthy real estate developer in Ft. Worth. It earned her an $18,000-a-year salary as well as the use of a car and a condominium. The committee concluded that the money and benefits may have constituted a gift to the Wrights by Mallick. Under House rules, such gifts must be reported if they exceed $100.

--Mallick’s Legislative Interest: House members are prohibited from receiving gifts in excess of $100 a year from persons with direct interest in legislation. The committee suspects that Mallick had an interest in the legislation authored by Wright in October, 1986, providing a federal grant for development of the old stockyards in Ft. Worth.

While the allegations involving Mallick were developed almost entirely by committee investigators in the final stages of the inquiry, the book royalties were a subject of the investigation from the very first day that the panel began to explore the charges leveled against Wright by Rep. Newt Gingrich (R-Ga.) and the citizens lobby Common Cause.

Under House rules, outside earned income is strictly limited. No individual speaking fee may exceed $2,000 and the aggregate total is limited to the equivalent of 30% of a member’s government salary.

Book royalties are exempt from any such limit, however, and many members have enjoyed additional income by writing books. Wright’s defense relies heavily on the argument that the House has never imposed any restrictions on book royalties of any type.

Published by Friend

But the collection of essays authored by Wright is modest in comparison to most books written by members of Congress. It was compiled by Wright with the help of a congressional staffer and published by Carlos Moore, a friend of Wright’s in Texas.

Wright’s book royalties caught the attention of the Ethics Committee not only because he was receiving an unusually high profit of $3.25 on every book that sold for $5.95, but also because the book was marketed in bulk to special interest groups such as the Teamsters Union.

According to sources, the committee agreed with Phelan’s contention that these books were sold to special interest groups in an effort to circumvent the House-imposed limit on speaking fees. Phelan’s case was bolstered by Wright’s admission that he supplied Southwest Texas State University with 504 books in lieu of a $3,000 speaking fee that otherwise would have exceeded the limit on his outside income.

Although book royalties never have been an issue in any previous cases before the House ethics panel, the question of income earned by a spouse is a familiar one. Wright’s case is not the first in which a House member has been accused of receiving illegal gifts in the form of a salary paid to a spouse.

Between 1981 and 1984, it is estimated by the committee that Mrs. Wright received a salary totaling $72,000 and other benefits exceeding $30,000 from Mallightco, an investment partnership established by Wright and Mallick. This included use of a condominium owned by Mallick’s son, Steven, and use of a brown 1979 Cadillac that the Wrights finally purchased outright earlier this year after using it since 1983.

Sells Partnership Holdings

In addition, according to sources, Wright later sold his holdings in Mallightco in 1987 for double the initial $58,127 he made in the partnership.

Phelan alleged that Mrs. Wright did virtually no work in exchange for her salary. According to sources, he told the committee that she worked only 12 days in four years.

In his own defense, Wright has contended that his wife earned her salary by advising Mallick on a wide variety of investments made by Mallightco, including real estate, stocks and gems. Moreover, Mallick told the committee that he provides rent-free housing for all of his employees.

But even if Mrs. Wright’s salary and other benefits from Mallightco constituted a gift from Mallick, as the committee contends, it would not be a serious violation of House rules unless its preliminary judgment that Mallick had a “direct interest” in legislation is also upheld.

It is legitimate under House rules for a member to accept gifts in excess of $100 if those gifts come from friends or relatives who have no interest in legislation. If the committee viewed Mallick as nothing more than a generous friend of Wright, the Speaker would simply be required to report his wife’s income as a gift. Wright did not report this income as such on his disclosure statements.

Alleges Direct Interest

But Phelan has asserted strongly in his presentation to committee members that Mallick had a direct interest in legislation governing savings and loans, oil and gas development and a $7.5-million economic development grant for the Ft. Worth stockyards enacted as part of an omnibus federal funding bill in October, 1986.

According to sources, the committee’s strongest case against Mallick involved the stockyards project. Phelan contended that Wright’s effort to obtain congressional approval for additional federal grants for the project enhanced Mallick’s efforts to secure an additional $148 million from outside investors.

Wright argues that Mallick never sought the legislation. He notes that while Mallick was contacted by the project developers before the enactment of the bill, he never formally agreed to assist the stockyards developers until at least two months later, on Dec. 31, 1986.