It is a classic case of how Washington works--of how insiders can use their connections to circumvent the bureaucratic procedures that can pose obstacles to those without special access.
At the same time, it demonstrates that political clout is a two-edged sword that can cut surely through bureaucratic red tape but can also turn on the wielder, with painful results.
The tale began in 1987 when Yeshiva Rav Isacshon, a well-regarded private Orthodox Jewish primary school in the Beverly-Fairfax area of Los Angeles, decided to seek federal aid to start a day-care center.
Instead of approaching the faceless Washington bureaucracy directly, the Los Angeles group's first call was to a politically well-connected Brooklyn, N.Y., rabbi named Milton Balkany, who boasted that he met regularly at the White House with then-Chief of Staff Donald T. Regan. Balkany went to Regan on the yeshiva's behalf, and Regan put him in touch with the undersecretary of health and human services.
In a matter of weeks, Oakwood Child Development Center Inc., the corporation that the yeshiva had created to seek federal aid, had won a $1.8-million Department of Health and Human Services grant to buy a building at 555 N. La Brea Ave. and start a day-care center.
Wants Money Returned
Unfortunately for the Los Angeles group, however, what looked at first to be a successful maneuver has turned into a tangled controversy and the government is now demanding its money back. The yeshiva, in turn, has called out even more political clout, including Sen. Pete Wilson (R-Calif.) and several of his congressional colleagues.
At Balkany's urging, Wilson has sponsored a bill, opposed by the Department of Health and Human Services, that would permit the Los Angeles group to use the money in a manner that does not have the government's approval.
Wilson, a candidate for governor, received $2,000 in contributions--the maximum allowable under law--from Balkany and his wife, Sara, during his primary Senate reelection campaign last year. But he says the contributions did not influence his decision to offer the bill.
Yeshiva Rav Isacshon's initial decision to seek federal funds for a day-care center grew out of its effort to expand its own operations, which are located across the street from the La Brea Avenue building. According to local officials, Yeshiva Rav Isacshon has recently been searching for ways to expand.
Rabbi Yakov Krause, education director at Yeshiva Rav Isacshon, said in an interview that the school created the Oakwood organization primarily to seek government funding for the day-care center. He said the group contacted Balkany because it needed advice on how to obtain federal funds.
Balkany, an old school friend of Krause, is a conservative Republican who during the last election contributed thousands of dollars to Vice President George Bush's presidential campaign and to 14 GOP Senate candidates. By his own account, Balkany is so well known in Washington that he has been chosen to offer the invocation at an annual dinner honoring the President for the last several years, and he once even declined an invitation to become the rabbi chaplain of the Senate.
It was Balkany's close relationship with Regan that prompted Oakwood to contact him, he said. "The reason that they called me to get involved was because I had, at that time, with the chief of staff in the White House, a meeting every two or three weeks," he said.
When Balkany first talked with Regan in early 1987 about Oakwood's desire for a federal grant, according to the rabbi, Regan summoned a White House car to drive him across town to meet personally with Donald Newman, then undersecretary of the Department of Health and Human Services.
Balkany recalled that department officials instructed Oakwood to hire Robert Brandwein, a Boston consultant, to put together the funding request, and Brandwein received $6,500 for preparing the application.
On Feb. 11, 1987, Oakwood formally applied for a $2.3-million community services block grant. Although the request far exceeded the $500,000 limit that the department had set for such grants, the department awarded Oakwood $1.8 million on an "urgent" basis two weeks later without having an independent review of it or comparing it with other grant applications.
On the day that the Department of Health and Human Services handed over Oakwood's grant check, Balkany recalls, top-level department officials--some of them wearing yarmulkes in his honor--hosted a champagne reception in Newman's office. The rabbi was asked to say a prayer.
The community services block grant program makes about $300 million available each year for projects designed to create jobs for low-income people. While the money normally goes to state and local governments, Health and Human Services officials are permitted to grant some money directly to local groups such as Oakwood. Knowledgeable sources said a portion of these discretionary funds usually go to reward political supporters of the Administration.
To receive the grant, Oakwood had to sign a pledge stating: "No portion of any property or facility acquired or renovated in whole or in part with funds awarded or otherwise acquired pursuant to this application will be used for religious worship, sectarian instruction or any other religious purpose."
Conflict With Pledge
Shortly after acquiring the building, however, Oakwood officials sought permission to use private funds to build additional floors on the structure, to be used as classroom space by the yeshiva. The government first accepted but ultimately rejected the plan as a violation of Oakwood's pledge to conduct only non-sectarian activities in the building.
More than a year after receiving the grant, Oakwood applied for a one-year extension and was turned down--the first such recipient of a department grant ever denied an extension. Instead, department officials ordered Oakwood to sell the property at 555 N. La Brea Ave. and return all the money to the government.
Oakwood appealed that order, and a department appeals board is reviewing the appeal. Meanwhile, the La Brea Avenue building stands idle, except for one room that is being rented as office space.
As government attorneys see it, Oakwood officials were more intent upon using the building for Yeshiva Rav Isacshon students than creating day care for preschool children. "Oakwood didn't do its project because it was so very busy trying to do another project," declared Madeline Neese, a Department of Health and Human Services attorney.
Supporters of the Oakwood project contend that the department treated their project unfairly. They charge that the department contributed to the delay by failing to respond quickly to their requests for changes in the plan.
"The main reason why the project was not completed in the one-year period was because (the department) has never replied to any of our requests for clarification, etc., in a timely fashion," Joseph Bobker, an Oakwood official, complained in a letter to the department in August, 1988.
Judging from testimony at the department's appeals board hearing, much of Oakwood's trouble with the bureaucracy appears to stem from the way its grant was obtained. Government sources said Oakwood would never have received such a large grant without the help of Balkany.
Department of Health and Human Services employees testified that Balkany even tried to ease the way for Oakwood at the department by promising to help one top official obtain a better job in the Administration. That same official testified that he received free tickets to a $1,500-a-plate political dinner for President Ronald Reagan, where Balkany offered the prayer.
New Officials Involved
But the rabbi's political influence apparently began to wane as the officials who approved the grant were replaced by others less sympathetic to the Oakwood project. Balkany sought Wilson's support for the project shortly after Oakwood received the grant in February, 1987.
Wilson, in an interview, said he decided to support the project many months before receiving campaign donations from Balkany and his wife in late 1987. He dismissed the $2,000 in contributions as insignificant--nothing more than "a tiny fraction of 1%" of the total cost of his $14-million reelection campaign budget.
Wilson offered his legislation in the Senate last March 8, six months after Oakwood was ordered by the government to return the grant on grounds that it was not being spent in accordance with the original proposal the group had submitted to the Department of Health and Human Services.
The bill would permit Oakwood--if it wins its legal battle with the department to keep its grant--to use the building as a community center for senior citizens as well as for child care. It also would allow both programs to be staffed by local university students, who would be housed at the Oakwood center. The bill is silent on whether the center could be used for sectarian purposes.
Department officials strongly oppose the bill. Spokesman David Siegel said it "would circumvent the department processes for making and administering grants" and "would afford preferential treatment to one grantee over other organizations and agencies which likewise seek support for their projects."
Wilson has tried other ways to help Oakwood. In 1987, according to aides, he sought unsuccessfully to obtain additional money for Oakwood in an appropriations bill.
Capitol Hill Connections
Likewise, Balkany had previously called upon his political contacts on Capitol Hill to help Oakwood. A number of other recipients of Balkany's campaign contributions, such as Sen. Gordon J. Humphrey (R-N.H.), have made appeals to the Department of Health and Human Services on behalf of Oakwood.
In addition, Rep. Vin Weber (R-Minn.), another recipient of campaign contributions from Balkany, tried last year to give Oakwood an additional $1.8 million for the child-care project without seeking the approval of the Department of Health and Human Services. Weber's efforts to write the appropriation into law failed, apparently as a result of opposition from Rep. Henry A. Waxman (D-Los Angeles).
Waxman, whose congressional district includes the Beverly-Fairfax area, said in an interview that he originally supported the Oakwood project but changed his mind on the basis of Oakwood's dismal record of dealings with the department. He added that he also opposes the plan for Oakwood as outlined in Wilson's legislation.
In a recent letter to Health and Human Services Secretary Louis W. Sullivan, Waxman described Wilson's support for Oakwood as "illogical and inappropriate" and added: "I do not believe any federal expenditures should be made on the basis of political or personal friendship."
Nevertheless, if the department's appeals board rules that Oakwood can keep the money, Wilson expects the Senate to approve his legislation quickly.