Ethics Panel Widens Probe of Wright's Fast Oil Profit

Times Staff Writer

In a new setback for Speaker Jim Wright, the House Ethics Committee decided Wednesday to expand its investigation of an unusual Texas oil well deal that gave him a quick profit of $340,000 last year, although other investors in the well still have not made any money from it.

The panel apparently was not satisfied with an explanation of the complex transaction provided last week by Morris D. Jaffe, a San Antonio financier and veteran Democratic Party fund-raiser, and his son, Douglas, who have termed it an "entirely legitimate business deal."

Chairman Julian C. Dixon (D-Los Angeles) said additional witnesses would be called to give testimony next week on the so-called Sabine Lake investment by Mallightco, a firm in which Wright and his wife, Betty, held a half-interest. Dixon did not provide any names.

Handled by Blind Trust

Although the decision appeared to be a blow to Wright's hopes for an early end to the 11-month-old investigation, Mark Johnson, a spokesman for the Speaker, said:

"We still don't think Sabine Lake will lead to anything. It was entirely handled by the blind trust set up by the Speaker and approved by the Ethics Committee."

In other developments, Wright's lawyers Wednesday asked the panel to drop the major charges against him on grounds that the committee ignored its own rules and legislative history in approving the "statement of alleged violation" against the Speaker.

His attorneys said there is no legal basis for one charge that he schemed to evade a House limit on outside earnings by bulk sales of his book because of a "total exemption" for book royalties in the ethics standards.

They also argued that lawmakers never intended that a person like George A. Mallick Jr., a Ft. Worth developer and friend of the Speaker, would be considered a person with a "direct interest" in legislation. Wright is accused of improperly accepting $145,000 in gifts from Mallick, who, according to the accusation, had such an interest.

Acting on other requests filed Tuesday by Wright's expanded defense team, the panel agreed to provide him immediately with any evidence that would tend to clear him of the allegations and modified a previous rule that would make witnesses at the preliminary inquiry more available for interviews by the defense.

But the committee rejected his plea to prevent the committee's special counsel, Richard J. Phelan, from having informal contacts with panel members unless one of the Speaker's lawyers was present.

Wright and his attorneys argued that Phelan, a Chicago lawyer hired especially to run the investigation, was having an undue influence over the committee during one-on-one dinners with several of its members.

Dixon excoriated Wright's expanded team of defense lawyers for charging that Phelan had distorted testimony of witnesses and shown poor legal scholarship in his 276-page report that recommended the filing of charges.

The accusations, according to Dixon, are "totally inaccurate, totally wrong and an exercise in bad judgment by the respondent's attorneys." Asked whether his remarks also applied to Wright, who made a similar stinging attack on Phelan on Tuesday, Dixon declined to comment.

Comment From Jaffes' Lawyers

In the Sabine Lake inquiry last week, attorneys for the Jaffes said they were not aware of Wright's involvement when the Jaffes sold a 4% interest in the well to Mallick, who was acting on behalf of Mallightco. Mallick and his wife owned the other 50% of Mallightco.

Most of Mallightco's interest in the well--2.5%--was transferred to a West German firm for a loan of $440,000 that was to be repaid only from drilling revenues. Despite favorable geological reports on gas reserves, however, no production followed, despite $4 million worth of drilling, and the well was capped last September.

After deducting about $90,000 of the loan proceeds for drilling costs, the remaining $350,000 was transferred to Mallightco on May 10, 1988. Wright's shares in the firm were bought from his blind trust for about $340,000.

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