New Allegations Probed in House Post Office Case

In a new twist in the emerging House Post Office scandal that may involve obstruction of justice, federal authorities are investigating the possibility that funds found to be missing from the post office till were surreptitiously replaced last summer.

At the same time, investigators are said to be examining allegations that members of the House used the post office to launder campaign contributions and convert the money to their personal use--thereby sidestepping both House and Federal Election Commission rules against such conversions and income tax liability on the money.

In the alleged laundering scheme, campaign money would be used to buy large quantities of stamps--$5,000 worth or more in a block--from a local post office in a congressman’s home district, ostensibly for postage on campaign mailings. Instead of being used, however, the stamps would be turned in at the House Post Office for cash.

Giving a cash refund for stamps is prohibited at regular post offices, but sources said it could easily be done through the House facility.

“If you were a member, there was no problem,” one source familiar with the inquiry said.

The alleged obstruction of justice under investigation by U.S. Atty. Jay B. Stephens involves a monthlong period last summer in which inquiries were halted into possible shortages in the accounts of the House Post Office.

The U.S. Capitol Police, an arm of Congress, had begun an investigation of the post office and had found evidence that money and stamps were missing. Last summer, however, House officials ordered the Capitol Police investigation stopped and had the matter transferred to the U.S. Postal Inspection Service--an executive branch agency. About a month elapsed while the transfer was being made.

The official who ordered the transfer, House Counsel Steven R. Ross, said he did so out of concern that the House might appear to be inspecting itself.

But sources said federal authorities are now trying to determine whether money and stamps were replaced during the hiatus.

On Wednesday, House Speaker Thomas S. Foley (D-Wash.) also acknowledged that his wife, Heather, who serves as an unpaid aide in his office, had testified last week before a federal grand jury investigating the House Post Office.

Foley quickly added that his wife had been told that she was not a target or a subject of the investigation, even though she was being interviewed. She apparently was questioned about matters involving possible obstruction of justice, but details of what she was asked could not be learned.

“She has cooperated in that review, as we have cooperated in every matter relating to investigating of post office activities and will continue to do so,” Foley said.

Three employees of the House Post Office have pleaded guilty to embezzlement in connection with the theft of more than $35,000 in cash and stamps. One suspect apparently told U.S. Postal Service inspectors that he sold illegal drugs while working at the House facility.

House Postmaster Robert V. Rota resigned last week after allegations that the facility was loosely run and that employees cashed personal checks in violation of postal policy. A six-member House task force investigating the office, which operates as a contract agency of the U.S. Postal Service, is scheduled to issue a report by May 30.

Former Capitol Police Chief Frank A. Kerrigan resigned in protest last July after his inquiry was halted by Ross.

Sources said the U.S. attorney’s office was investigating an incident in which Kerrigan allegedly used an electronic device to record a meeting he attended in which the House Post Office scandal was discussed by top-level House employees, possibly including Heather Foley.

Federal authorities are understood to have obtained the recordings, but it is not clear exactly how they bear on the post office inquiry--or whether Kerrigan’s conduct in making the recordings is under scrutiny.

Kerrigan could not be reached for comment.

The revelations involving the House Post Office parallel the scandal involving the House bank, which routinely allowed members of Congress to cash checks for which they had insufficient funds on deposit--sometimes involving thousands of dollars.

Atty. Gen. William P. Barr last week named a retired federal appellate court judge, Malcolm R. Wilkey, to serve as special counsel, taking the bank case out of the hands of Stephens.

Barr acted in the wake of claims by Democrats that Stephens’ inquiry had partisan overtones.

An audit of the House Post Office already has been conducted by postal inspectors, but it reportedly did not go into the question of whether stamps were being redeemed for cash.

The House Administration Committee is also investigating the post office scandal.