THE ETHICS CHARGES AGAINST JIM WRIGHT : Panel Will Probe $210,000 Profit in Complex Oil Deal

Raising new questions about House Speaker Jim Wright’s finances, the House Ethics Committee said Monday that it is investigating a previously undisclosed oil deal that enabled the Texas Democrat to turn a $210,000 profit on a $58,000 investment.

The ethics panel indicated that it wants to determine whether Wright knew about the 1988 deal--his holdings were in a blind trust at the time--and whether the Texas firm involved in the transaction with Wright’s business partner, George A. Mallick Jr., had a direct interest in legislation before Congress.

The committee will continue looking into the deal even as it decides what punishment, if any, to recommend in connection with charges already filed against Wright on other matters, panel Chairman Julian C. Dixon (D-Los Angeles) said.

The transaction centers on an oil and gas well in Sabine Lake, a body of water off the Gulf of Mexico between Texas and Louisiana.

Paid by J.R. Ewing

The deal’s participants even include a J. R. Ewing--not the one on TV’s “Dallas,” but a real Texan who set up an oil firm that paid Wright’s and Mallick’s investment company as much as six times more for its interest in the Sabine well as the committee believes it may have been worth.

A Times inquiry discovered Monday that the deal occurred in odd circumstances not mentioned by the Ethics Committee in its preliminary report.

Ewing’s Union Rheinesche Petroleum Inc., which bought the Wright company’s Sabine interest for $440,000, shares the same San Antonio phone number and appears to be linked corporately with Jaffe Energy Corp., which originally sold the oil interest to Wright’s firm for, effectively, $90,000.

Jeff Prestridge and Doug Jaffe, the key officials of Union Rheinesche and Jaffe Energy, respectively, refused to be interviewed. J. Randolph Ewing, listed in state records as the incorporator of Union Rheinesche, and three officials with addresses in Munich, West Germany, could not be reached.

A receptionist at the San Antonio number said that she “thinks” that Union Rheinesche and Jaffe Energy are subsidiaries of the same company. Others at the office would not comment.

The Mallick-Wright investment company, known as Mallightco, bought the interest in the well in January, 1988, from Jaffe and sold it either in late April or early May of that year.

According to the Ethics Committee’s report, a “petroleum expert,” independent oilman Joe Farmer of Houston, told investigators that the Sabine well was worth, not $440,000, but only about $168,000 at most and possibly only about $70,000.

A source close to Mallick, who declined to be identified, contended that Wright had no knowledge of the sale of the Sabine interest to Union Rheinesche Petroleum. The source said that Mallightco was paid such a large amount because Union Rheinesche miscalculated the well’s potential and was “greedy.”

Mallick, who owned half of the Mallightco stock, used $350,000 in net proceeds from the Sabine deal to buy out Wright’s half interest in Mallightco.

Wright’s blind trust received the $350,000 but returned $81,822 to pay off a debt that Wright owed Mallightco. That left Wright with net proceeds from the stock buyout of $268,178.

Wright and his wife, Betty, had put $58,127 into Mallightco when it was formed in 1980. Thus, as a result of the stock buyout made possible in large part by the lucrative Sabine deal, the Wrights were able to turn an eight-year profit from Mallightco of $210,051.

Complex Terms

According to the committee report, the terms of the oil well transaction with Union Rheinesche Petroleum were complex.

Union Rheinesche “loaned” Mallightco $440,000, of which $90,000 was used to pay Jaffe Energy for Mallightco’s share of the drilling and completion costs of the Sabine well. But Mallightco did not have to repay the “loan,” the report said. Thus, it wound up with $350,000 cash.

Mallightco, incidentally, also retained the right to receive 1.5% of any oil and gas royalties that exceeded $440,000.

But the well, which looked to be a good producer when it opened last April 23, proved within several days to be a bust, according to the committee report.

The committee said that Mallick’s son Michael, who was 25 at the time, handled the transactions with Jaffe and Union Rheinesche. A Mallick source said that he was merely acting on behalf of his father.

Staff writer William C. Rempel in Los Angeles and researcher Rhona Schwartz in Houston contributed to this story.