March 11, 1968
Page 5922
MORE CONFLICTS OF INTEREST
Mr. GROSS. Mr. Speaker, I ask unanimous consent to extend my remarks at this point in the RECORD and include a newspaper article.
The SPEAKER. Is there objection to the request of the gentleman from Iowa? There was no objection.
Mr. GROSS. Mr. Speaker, it appears that the case of conflict of interests involving three Maine men -- a congressional employee, a local urban renewal authority director, and a Commerce Department employee -- is worse than I imagined when I referred to it here last Thursday.
Certain aspects of this case have been brought to light in the March 10 edition of the Maine Sunday Telegram which demand that some committee of the House or Senate -- the Small Business or Government Operations or one of the so-called ethics committees -- undertake an immediate investigation of this matter.
I include at this point a copy of the newspaper article just mentioned:
U.S. LOANS TO MUSKIE ASSOCIATES CALLED "UNETHICAL"
(By William Langley)
Remarks inserted in the Congressional Record this week have implicated aides and associates of U.S. Sen. Edmund S. Muskie in a conflict of interest controversy involving Maine nursing homes.
The question of unethical conduct was raised by U.S. Sen. John J. Williams, R-Delaware, and U.S. Rep. H. R. Gross, R-Iowa, both long-time watchdogs of federal spending. Named in the Record information are:
1. John P. Jabar, identified as a $10,000 a year assistant clerk to Muskie and a Waterville attorney.
2. Paul J. Mitchell, identified as the $12.500 a year director of the Waterville Urban Renewal Authority. He is a brother to George Mitchell, who is chairman of the Democratic State Committee, and is a former Muskie aide in Washington.
3. Jerome H. Barnett, named as the $15,000 a year federal field coordinator for the Economic Development Administration with headquarters in Augusta.
Both William and Gross questioned the ethics of government employees seeking government loans.
Gross made the following statement in the Record:
"I had hoped that the Bobby Baker case would have served as adequate warning to Congressional employes that they should avoid the conflicts of interest inherent in seeking government business loans, or other government decisions, for their own benefit.
"It is cause for great concern when it is discovered that the message did not get across in some Democrat political circles, and a number of public officials felt there was no impropriety in serving as officers and directors of firms seeking government loans.
"The fact that the individuals involved severed their relations with the firm after questions of 'conflicts of interest' were raised is little credit to the men involved.
"I consider it unconscionable that one John P. Jabar, a Congressional employe, was an officer and part owner of a firm that made application for government loans.
"It is particularly shocking when it is noted that he was a kind of field representative for a Congressional office with responsibility for helping citizens with their problems with government programs.
"Mr. Jabar and some of his associates, also government officials, severed their relationship with the controversial nursing home projects after questions of 'conflicts of interest' were raised.
"However, the mere fact that they had initiated these deals with the government and then sold their interests to others is a demonstration of the total lack of sensitivity on ethical questions.
"I think there is reason for grave concern when the ethical climate is such that these conditions exist:
"First, that Jabar, a $10,000 a year staff assistant in Congress, was president of a nursing home corporation that sought a $415.000 loan guarantee from the Federal Housing Administration.
"Second, that Paul J. Mitchell, a $12,500 a year local Urban Renewal Authority director, was treasurer of the same nursing home corporation.
"Third, that Jerome H. Barnett, a $15,000 a year federal field coordinator for the Economic Development Administration, was president and director of a firm seeking a $339,000 Small Business Administration loan on another nursing home project."
Williams submitted copies of his correspondence with the SBA and FHA on the situation, plus the following statement in the Record:
"Several years ago I received a report that the Small Business Administration and the Federal Housing Administration were arranging loans on certain projects in Maine which in turn were sponsored or partly owned by individuals connected with the U.S. Government.
"I submitted these allegations to the appropriate agencies and in their replies they confirmed that the transactions did take place, that certain government officials were connected with the loan applicants, but that they apparently saw no conflict of interest in such arrangements.
"It is my understanding that the law precludes government agencies from negotiating loans with any company controlled or partially owned by government officials, and I most respectfully disagree with the explanations furnished in justification of their decisions."
The Williams and Gross reports in the Record are coincidental with a month's study of the situation by the Sunday Telegram.
Although complex, these facts have been revealed through copies of Williams' correspondence with the SBA and PHA, photostats of Maine records, and interviews.
Jabar and Mitchell first formed Medical Care Centers Inc. to secure a $415,000 loan guarantee from the FHA for the construction of a Waterville nursing home called Lovejoy Manor.
Maine's FHA field office director at the time was Richard J. McMahon, a former treasurer and tax collector in Waterville. In 1955 McMahon had been appointed Democratic member of the Maine Public Utilities Commission by the then Gov. Muskie and in 1962 his appointment to the FHA post was announced by Muskie's office in Washington.
The FHA loan guarantee was subsequently approved for Medical Care Centers Inc., which listed Jabar as president and Mitchell as treasurer. They were also both stockholders in the firm.
The FHA project number was 022-43001, and the construction was performed by Giguere and Hubert Inc. of Waterville.
Then, the Augusta Medical Development Corp. was formed as a benevolent, non-profit firm to borrow $395,000 from the SBA, with bank participation, for the purpose of constructing another nursing home in Augusta.
The first president of AMDC was Barnett. He was asked to resign as president by the SBA because of the possible conflict of interest situation. The SBA now lists Ronald Doyon, manager of an Augusta carpet store,
The SBA said the loan was for $345,000, with the Depositor's Trust Co. of Augusta picking up the balance of the total $395,000. Regional director of the SBA in Augusta as president.
at that time was Maurice F. Williams, formerly administrative assistant to the then Gov. Muskie, and currently Maine's Finance and Administrative commissioner at an annual salary of $20,000.
When the SBA loan application was made, a new corporation, Memorial Manor Inc., was formed with Jabar as president and Mitchell as treasurer.
Memorial Manor Inc. was to use the SBA funds to construct and operate the new Augusta nursing home, which was also to be built by Giguere and Hubert Inc.
Jabar later resigned as president of Memorial Manor Inc., and was replaced by Eugene Pooler, of Hartford, Conn., a relative of Paul Mitchell's wife.
In the meantime, Jabar and Mitchell purchased a four-acre plot of land in Augusta for the nursing home site. At the time, the land was valued at $400 by the Augusta tax assessors.
According to recorded tax stamps, Jabar and Mitchell acquired the land for $17,000 from Mayfair Corp., owned by Stanley Sproul, an Augusta builder.
Twenty-one days later Jabar and Mitchell tranferred the plot of land to AMDC (of which Sproul is a director) for $19,700.
Jabar and Mitchell both said there was no profit involved in the transaction.
Mitchell said there "have been no profits made to date on this thing."
Jabar said the $2,700 difference was "part of a contribution to the Augusta Medical Development Corp. It was a profit on paper only, as there was no actual money received."
Jabar said he had "lost money on these deals." He also said he had received "no legal fees for anything," but the SBA disagrees.
National SBA Administrator Robert C. Moot said, "Our files indicate Jabar was paid legal fees in the amount of $1,500 for services in the preparation and closing of this loan. Our records indicate that Jabar was an original incorporator of Memorial Manor Inc., and that he was involved in the development and consummation of this project.”
Moot also said SBA had specifically approved payment of Jabar's legal fees.
Jabar said he went into "these projects with the idea of making money. It was a potential money-maker on a long-range basis. More people would be working, and it would create more payroll and taxes."
He said he has severed his connections with both the Waterville and Augusta nursing homes. The Waterville Morning Sentinel reported in October, 1967 that Jabar and Mitchell had sold both homes to Hadley R. and Charles J. Chandler, of Pittsfield.
Mitchell said he still owns two-thirds of the Augusta home, and Pooler owns one-third.
It is unclear who presently owns the Waterville home, even though both establishments are named Chandler Nursing Home.
When asked if he and his brother owned the Waterville nursing home, Hadley Chandler said, "I won't say."
Continuing, Chandler said:
"There are lots of things that involve lots of different people in this situation. On government records the homes appear as one thing, and on other records they appear as something else.
"Look, we've had trouble with these two projects. We took them over as a favor for someone, and we've taken a beating, to put it bluntly," Chandler said.
He declined to say who the "someone" is. "We'd like to be as non-involved as we can in this situation," Chandler said. "We're in the clear and we've made sure of this.
"Whatever position they want to take is up to them," he said.
Chandler also declined to identify "they" or "them."
The Chandler brothers also operate nursing homes in Pittsfield and Bangor. Commenting on the Waterville home, Mitchell said, "I divested myself of my interest last September."
Jabar said, "The Chandlers have not bought either of the homes, they are just running them on a temporary basis."
In a statement issued from his Washington office, Muskie said he has asked the SBA
and FHA for a review of both cases in view of Gross' statement in the Congressional Record.
"When I learned of Mr. Jabor's involvement in the Augusta and Waterville nursing homes, I discussed the matter with him," Muskie said.
"I advised him that I thought he should divest himself of his interest in both projects. He did so.
"It is my understanding that in the Augusta situation Mr. Jabar withdrew before the loan application was processed," Muskie concluded.
According to SBA records, the loan was approved on Oct. 24, 1966, and Jabar didn't resign until Nov. 15, 1966.
In the midst of these dealings, Jabar, Mitchell, AMDC, and Memorial Manor Inc. were sued for $3,000, plus interests and costs, by Mrs. Jacqueline H. Murphy, of Augusta, in a state District Court.
Mrs. Murphy sued on three counts; that the defendants still owed her $500 as a commission balance on the sale of land for the Augusta home, and for failure to provide salary and other compensation for jobs that were performed by her as secretary of AMDC and later as administrator of the Augusta nursing home.
Jabar, acting as attorney for the defendants, denied all three counts. But the case was settled out of court with a $1,500 payment going to Mrs. Murphy.
Mrs. Murphy is currently a secretary to Barnett in the Augusta EDA office. Questioned on the conflict of interest issue, Jabar said:
"The question was raised, but we didn't think there was any conflict of interest." Mitchell said, "Unfortunately, the question should have been raised long before. No one raised any objections until construction of the home was started."