Minority Pacts Benefited Wife of Ethics Panel Head

The wife of House Ethics Committee Chairman Julian Dixon (D-Los Angeles) earned more than $100,000 in each of the last two years on Los Angeles International Airport concessions contracts designed to help economically disadvantaged businesses, The Times has learned.

In at least one contract, neither Betty Dixon nor her partners in two firms apparently have served in the type of direct management role intended by a government program for minority- and women-run firms.

Betty Dixon is one of 10 partners who were selected by Duty Free Shoppers Group Ltd. Partnership, the world’s largest duty-free concessionaire, to boost its minority and female participation and thus its chances of winning contracts to operate gift shops at the airport.

Dixon, who until last year operated her own gift shop in Washington and still has a business there, said in an interview that she has not served in any hands-on management position in one Los Angeles airport contract and has been involved only “on a limited basis” in another.

“We set policy, but I have not taken part in any hands-on management as such,” Dixon said of her partnership. “However, I’m going to try to work at our two (airport) terminals sometime during the summer.” She added that she is learning about the airport concessions business as required by the federal government.

On Monday, Julian Dixon, who recently gained national prominence while presiding over the Ethics Committee probe that led to the resignation of House Speaker Jim Wright, amended his 1986 financial disclosure form to list his wife’s initial investment in the two firms as less than $15,000. The action came after the Dixons were questioned by The Times and the Associated Press.

Dixon told the Associated Press on Monday that there was nothing improper about his wife’s business arrangement and that she was the “ideal person” to sit on the companies’ boards because she has a background in retailing.

Saying that the California investment has been “better than we ever expected,” Dixon said he was “sorry that I made that mistake” in not disclosing the cost of the investment.

“Obviously I feel badly about it,” said Dixon, who was not available to The Times on Monday.

The more than $100,000 in earnings Dixon reported was his wife’s share of the minority firms’ income from the concessions agreements. According to the same financial report, his wife also received unspecified annual directors’ fees of more than $1,000. In addition to the earnings, Dixon reported, the value of his wife’s less-than-$15,000 investment in the firms had increased, in about six months, to between $100,000 and $250,000.

‘Disadvantaged’ Participants

Federal contracting policies established in the early 1980s require that some government contracts be awarded to “disadvantaged businesses” run by minorities and women. Under the program, minority and women contractors are required to play a direct role in management and operations in order to gain first-hand experience that eventually will allow them to compete for contracts on their own, said Vincent Joubert, civil rights officer for the Federal Aviation Administration’s Western Pacific Region.

Betty Dixon and her partners have “no direct operating responsibility” under one contract for several airport gift shops and newsstands while sharing 18% in total gross sales for these shops, said Joe Lyons, vice president of business development for Duty Free Shoppers.

Dixon said she has served in an advisory capacity as a director of the two firms, known as Mir Kanon Inc. and Peideau Inc., since 1986, but holds no other titles. She said that she has been “partially” involved in operation of the airport concessions by attending quarterly board meetings and on occasion monthly management sessions to oversee Mir Kanon and Peideau as well as the duty-free and gift shop businesses.

“I’m definitely interested in learning the business from the ground up,” she said.

Mrs. Dixon contended that, despite participating “on a limited basis” in the airport shops, she has been “involved in a great deal to understand that business.” She said her involvement included spending about one week of every month reviewing business operations for the duty-free shops, but no time at the news and gift stands.

She said she could not work inside the airport shops because she operated her own retail shop in Washington, “Much Ado About Something,” until it was closed a year ago.

Dixon also said that she did not feel she needed to spend time in the gift shops or newsstands because she already had retail experience.

Guidelines Explained

Joubert, the FAA civil rights officer, said that serving on an advisory committee is “not acceptable” under government guidelines as a level of participation for minority- or women-owned businesses. He said that the FAA requires “meaningful management and control” by such partners.

Joubert said the firms ought to be participating in the everyday operations of the concessions in proportion to the amount of the firms’ ownership. Those amounts are 20% for Mir Kanon and 12% for Peideau.

“Keep in mind that the whole point of the program is to get disadvantaged partners involved in industry where they have not been involved before,” Joubert said. “Without some involvement there’s no way learning is going to take place (and) no way to eventually become competitive.”

Mir Kanon and Peideau were formed in 1985, shortly before Duty Free Shoppers brought the group members into their proposal, as joint venture partners, to win a competitively bid Airport Commission contract for Duty Free to run tax-free gift shops for international travelers. Mir Kanon qualified as a minority-run business enterprise, while Peideau qualified as one run by women. Both firms have the same 10 partners.

Duty Free’s Lyons said those gift shops had $69 million in sales last year. Mir Kanon and Peideau shared in 28% of the profits, he said.

The following year, Duty Free, seeking to get a five-year extension on another of its airport concessions contracts--for news stands and regular gift shops--promised the Airport Commission it would increase minority participation and later brought in Mir Kanon and Peideau for that contract. There was no competitive bidding.

Airport officials could find no records that showed Mir Kanon or Peideau were given the gift and newsstand contract.

“How those (minority) companies came in and what they are doing, I don’t know,” said Barbara Williams, the airport official who normally reviews minority business programs. “Nothing in my records indicates what they do.” Had airport officials known about the arrangement, Williams added, it would not have been approved without evidence of direct participation.

The 10 minority partners include private business associates and political allies of Mayor Tom Bradley, including Myrlie Evers, a member of the mayor’s Board of Public Works. Although the contracts were approved by Bradley appointees on the city’s Board of Airport Commissioners, there is no indication that the mayor played any role in selecting the minority partners.

In addition to Betty Dixon and Evers, the partners are: Desmonia Reese, wife of Bradley’s former law partner, James N. Reese; Chih Hsing Pei and Hiawatha Harris, both principals in a real estate investment company, Peiming Inc., in which Bradley is an investor; insurance executive Iris D. Rideau; Alabama businesswoman Gwen Scott-Taylor; prominent Atlanta businessmen Jesse Hill Jr.; Felker W. Ward Jr. and Herman Russell.

Campaign Donations

All 10 individuals in the partnership have contributed a total of $85,531 to the mayor’s political campaigns since they first incorporated in 1985, records show. In addition, Duty Free Shoppers has given $42,700 in campaign funds to Bradley over the last four years.

FAA guidelines in awarding minority contracts require that individuals should be “socially and economically disadvantaged individuals.”

Airport officials said Monday they are reviewing their contracts with Duty Free Shoppers and the two minority firms to determine whether they are legal and meet the intent of the city’s minority contracting policy.

Commissioner Johnnie L. Cochran Jr. expressed concern in an interview about the contracts involving Mrs. Dixon’s firms and said the airport has a responsibility to audit the arrangement.

In filing his amended financial statement Monday, Julian Dixon disclosed that his wife paid between $5,000 and $15,000 for a 12% interest in the two minority firms in July, 1986, three months after the companies were given the concession for duty-free shops at the airport. He said that he initially omitted stating how much his wife paid to get into the investments because of a misunderstanding about what had to be disclosed.

“I was not and am not personally or legally involved in this business transaction of my wife’s,” Dixon wrote in an accompanying letter to the House clerk.

The paid activities of congressional spouses have come under increased scrutiny because of the ethics debate touched off by former Speaker Wright. Among the charges Julian Dixon’s Ethics Committee brought against Wright was that his wife received an $18,000-a-year salary, use of a condominium and a used Cadillac from a Ft. Worth developer while doing a minimum of work.

Only one of the 10 minority partners besides Betty Dixon returned phone calls to The Times.

Los Angeles insurance executive Rideau said, “I’ve been in business for myself for 22 years and I’ve never had to tell a reporter what I do. I’m very successful in my businesses that I manage, and I’m very private. I don’t care to say anything more than that other than it’s working very well . . . and we have no complaints at all.”

It is not clear how much money each of the minority partners has earned because the city Department of Airports has never audited its contractual arrangements with Mir Kanon and Peideau. No audits have been ordered because neither Duty Free Shoppers nor its minority business partners appeared dissatisfied with the arrangement, said Donald Miller, executive deputy director of the city’s Department of Airports.

“I think the feeling is if anything is amiss . . . we would have heard from them,” Miller said. “On the surface, everything seems to be working. . . . There are no complaints.”

The minority firms have operating responsibilities for duty-free shops in Terminals 3 and 5, Duty Free’s Lyons said. “They have control and are responsible for staffing and management,” he said, explaining that the manager of the shops reports through Pei, a principal in both minority firms.

Lyons said the minority firms are gaining experience in the duty-free shops through Pei’s involvement, participation in management committee meetings and Duty Free Shoppers’ agreement to train several minority workers in its warehouse and merchandising operations. The airport’s Williams also said she was satisfied with the minority involvement in the duty-free portion of the business.

But the shops managed by Mir Kanon and Peideau appear to function identically to other airport duty-free shops--using the same Duty Free Shoppers logos, uniforms and signs. An employee of one of the minority-managed shops said it was run by Duty Free Shoppers.

Lyons acknowledged that Duty Free Shoppers hires workers, issues the payroll, orders merchandise and keeps the books. He said Pei “doesn’t pay any bills. We would pay the bills. But she would approve the bills.”

As for the newsstands and gift shops contract, the firms involving Mrs. Dixon have no operating responsibilities. “They could, but they don’t,” he said. “We just didn’t set (part of the operation) aside. I don’t know why not.”

Neither of the two firms has a city business license to currently operate retail shops in Los Angeles, records show.

The office locations of Mir Kanon and Peideau and the nature of their business are not known.

State corporation records list a Culver City address for the two firms. The office at that location bears the name of Rideau & Associates Insurance. Iris Rideau is listed as the president of Peideau in state records.

But a woman listed as the registered agent of Mir Kanon and Peideau, Joyce Green, said Friday that the two firms are headquartered elsewhere in the city. But she would not say where.

A second address for Mir Kanon on Wilshire Boulevard turned out to be the psychiatry office of minority partner Hiawatha Harris. Harris is listed as president of Mir Kanon, although there was no indication that the firm is doing business out of the psychiatrist’s office.

Harris refused to speak with a reporter.

Contributing to this report were Times staff writers Robert L. Jackson in Washington and Frank Clifford, Elizabeth Mann and Henry Weinstein and researcher Cecilia Rasmussen in Los Angeles.