THE ETHICS CHARGES AGAINST JIM WRIGHT : EXCERPTS: ‘Wright Did Not Show Reasonable Care on Gifts’

The following are excerpts from the report by Richard J. Phelan, special counsel to the House Ethics Committee, and from a statement by Ethics Committee Chairman Julian C. Dixon.

Acceptance of Gifts

From statement by Dixon (D-Los Angeles) on Wright’s acceptance of gifts:

Members of Congress do not exist in a vacuum and should be expected to have personal friends with whom gifts can be exchanged. However, the nature and extent of the apparent gifts from Mr. (George) Mallick indicate that Rep. Wright did not exercise reasonable care to avoid even the appearance of impropriety, which is the hallmark of the House gift rule.

Sales of Wright’s Book

From special counsel’s report regarding sales of Wright’s book:

(Publisher Carlos) Moore’s marketing efforts resulted in precious few sales to “average citizens.” In fact, Moore testified that he never intended to sell the book to bookstores where average people could buy them . . .

The real focus of the marketing effort for “Reflections of a Public Man” was on bulk sales to trade associations and other groups. Almost 98% of all sales of “Reflections of a Public Man” were bulk sales of 15 or more books. In some instances, Wright’s staff informed various groups Wright spoke to that because he had already reached the maximum limit on outside earned income for that year, he would not be able to keep an honorarium offered to him. The staff then recommended that instead of paying Wright an honorarium, the organization could purchase books for the same amount . . .

(For example,) Wright spoke at a Satellite Broadcasting and Communications Assn. trade show in September, 1985, just several weeks after SBCA had purchased 1,680 copies of “Reflections of a Public Man” for $10,000. SBCA testified that although it historically has paid honoraria and expenses to congressmen for their appearances, in this case SBCA’s legal counsel, who arranged for Wright to speak at the trade show, suggested that SBCA purchase the books instead. Thus, Wright received a $5,500 “royalty” for his appearances before the SBCA.

Not all bulk sales were in lieu of honoraria. For example, Carlos Moore arranged a sale of 2,000 books to the Teamsters for $12,200 paid out of the DRIVE Political Fund. The books were distributed to Teamster members. Wright had not spoken at any Teamster event.

. . . The resulting income does not therefore become “royalty” income just because Moore calls himself a “publisher” and claims to pay “royalties” on book sales. The royalty contract was not an arms-length agreement between an author and his publisher, but a joint business venture--a means by which Moore could help his friend Wright obtain money in excess of congressional limitations.

Betty Wright’s Job

From special counsel’s report regarding Betty Wright’s employment:

On Jan. 1, 1981, Mrs. Wright went on the payroll of Mallightco Inc. at a salary of $1,500 per month. According to (George A.) Mallick, Mrs. Wright was hired as a consultant to seek out new investment opportunities for Mallightco. However, Mrs. Wright, formerly on the staff of the Subcommittee on Investigations and Oversight of the House Public Works Committee, had no education or prior experience in investment analysis or financial counseling. She performed few, if any, services to Mallightco which has no record of any work product she created.

Furthermore, although Mallick testified that Mrs. Wright “assisted” him and “advised” him, he could not articulate what valuable services she performed. He testified to research she did on several investment opportunities during the four years she was paid by Mallightco, but could not produce any research reports or even point to one investment Mrs. Wright researched which was ultimately made by the company.

Mallightco’s Problems

From special counsel’s report on Mallightco’s business problems and overdue taxes:

Mallightco’s continued troubles with the IRS show that Mallick did not operate the company as a normal business. No businessman interested in making a profit would allow his company to be repeatedly assessed penalties and interest for nonpayment of taxes. Rather, the company was designed and used to give cash to the Wrights, and not as a legitimate business venture for both families. Mallick simply did not treat Mallightco as a serious business, but willfully neglected to follow the requirements of the law.

Mallick’s Interest

From special counsel’s report on Mallick’s interest in legislation:

In order for gifts to violate House rules, they must be received from someone with a direct interest in legislation before the Congress. In this matter, we believe it is clear that George Mallick had such an interest . . .

Mallick is and has been a major real estate developer in Ft. Worth, having developed commercial and residential properties worth over $160 million. Prior to 1986, Mallick also had major holdings in Texas oil and gas ventures. In 1986, he stood to profit from the proposed redevelopment of the Ft. Worth stockyards, which relied heavily on public funds being appropriated by Congress. Thus, he had a direct interest in legislation affecting the taxation of real estate, interest rates, the oil and gas industries and appropriations for the stockyards project.

In addition, Mallick’s financing of certain real estate ventures through savings and loan associations and the subsequent foreclosures on at least one of those properties gave Mallick a direct interest in legislation regarding the savings and loan industry. Nevertheless, in late 1986, Wright designated Mallick to conduct an investigation and prepare a report concerning the “savings and loan crisis” in Texas. The report addressed issues of concern to Mallick and recommended legislation which would curb the industry’s right to foreclose on loans in default.

Calls From Wright

From special counsel’s report citing testimony by Edwin Gray, then the chairman of the Federal Home Loan Bank Board, on calls he received from Wright.

And so I received a call and it basically was another call about the treatment of Texas S&L; institutions. And then (Wright) said that he understood that (names a federal bank regulator in Texas)) was a homosexual. And he understood from people that he believed and trusted (that the regulator) had established a ring of homosexual lawyers in Texas at various law firms, and that in order for people to deal with the Federal Home Loan Bank supervision people, they would have to deal with this ring of homosexual lawyers.

Unfortunately, that is what happened in that call and I must say that I was really stunned to have the Speaker, the person who would be the Speaker, repeating those kinds of allegations about a man who was serving me, I thought, well in a controversial job and to repeat the allegations, complaints, that he was homosexual and had established this ring, which to me was incredible. I didn’t believe it.

Homosexuality Allegation

From special counsel’s report on homosexuality allegation:

(The federal regulator’s) sexual orientation is completely irrelevant to his qualification for employment in the Federal Home Loan Bank system. Every credible witness who claimed knowledge of (the regulators) or his reputation had only the highest praise for the man’s character and ability. Moreover, none gave any credence to the incredible rumor embraced by Wright that (the regulator) “had established a ring of homosexual lawyers” who were receiving all of the FHLB-Dallas’ supervisory work.

Wright’s request that Gray “get rid of” (the regulator) greatly exceeded the bounds of proper congressional conduct. . . . An attempt to destroy the distinguished career of a dedicated public servant because of his rumored sexual orientation or because of a wild accusation hardly reflects creditably on the House.

Wright’s Intervention

From the Ethics Committee report on Wright’s intervention on behalf of Texas S&Ls;:

It is clear that under our constitutional form of government there is a constant tension between the legislative and executive branches regarding the desires of legislators on the one hand and the actions of agencies on the other in carrying out their respective responsibilities. The assertion that the exercise of undue influence can arise . . . jeopardizes the ability of members effectively to represent persons and organizations having concern with the activities of executive agencies.

Accordingly, while it may well be that Rep. Wright was intemperate in his dealings with representatives of the Federal Home Loan Bank Board, the committee is not persuaded that there is reason to believe that he exercised undue influence in dealing with that agency. In sum, such a finding cannot rest on pure inference or circumstance or, for that matter, on the technique and personality of the legislator, but, instead, must be based on probative evidence that a reprisal or threat to agency officials was made.