This Year's GSA Scandal: What Goes Around Comes Around

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By Paula Dwyer

When the news broke last week about the GSA's Las Vegas spending spree, I was as shocked as everyone by the scale of the impropriety. When I learned the name of one official involved, I had a different reaction: What goes around comes around.

Let me explain. In 1997 and 1998, as a reporter for BusinessWeek (now Bloomberg Businessweek), I wrote a series of articles on what looked like sweetheart deals by a network of aides to Vice President Al Gore and campaign contributors. At the center of one article was Robert Peck, a General Services Administration official. The same Robert Peck was one of two officials that GSA head Martha Johnson fired on April 2, just before she resigned over the scandal.

The shindig took place at the M Resort Spa Casino outside Las Vegas in October 2010. The entertainment, for 300 employees of the GSA's Public Buildings Service, spanned four days and cost an outlandish $822,000. As head of the Public Buildings Service, Peck was one of the highest-ranking GSA officials in attendance. His top-floor suite was used to host a private party that cost taxpayers $2,000.

Peck headed one of the world's largest real- estate empires -- the federal government’s building portfolio, including 375 million square feet of office space. Earlier in his career, Peck had been an aide to Reed Hundt, the Federal Communications Commission chairman in the Clinton administration. He left the FCC in late 1995 to join the GSA, when he also ran the Public Buildings Service.

But I am getting ahead of myself. As Hundt's deputy, Peck helped arrange meetings between his boss and Tennessee real-estate financier Franklin L. Haney. When Haney visited Hundt in 1995, he was on a mission. For years, the FCC had resisted moving from its prime Washington location to a new headquarters, the Portals complex, in an isolated pocket of southwest D.C. Haney had recently become a half-owner of the complex, and he needed Hundt's help. Hundt denies he was influenced, but he soon dropped his resistance to the move.

Two months later, Peck joined the GSA. Haney, meanwhile, wanted to securitize his Portals investment by selling tax-exempt bonds backed by the Portals' rent stream. To do so, he needed a GSA lease that stipulated the FCC would be the anchor tenant and that rent payments would begin in July 1997.

With Peck now at the GSA, the agency obliged with a lease granting both requests. It was an unusual move: The GSA normally doesn't specify which federal agency will occupy which building in its leases. And the start date put the government on the hook to pay the rent before the FCC moved in. Indeed, the FCC didn't occupy the Portals for another year, costing taxpayers millions of dollars on an empty building.

Haney sold his bonds in a private placement. Weeks later, he and associates contributed $250,000 to the 1996 Clinton-Gore campaign through the Democratic National Committee and state Democratic parties. All of this was the subject of 1998 hearings by the Republican-controlled oversight subcommittee of the House Commerce Committee, which referred its findings to the Justice Department. Haney, Peck and Hundt all denied wrongdoing. Prosecutors took no action other than to indict Haney on an unrelated charge of reimbursing employees for campaign contributions, for which he was acquitted.

The GSA, it seems, is overdue for a housecleaning. Its chief of staff was convicted in 2006 of lying to Congress about his dealings with lobbyist Jack Abramoff, who later went to prison. President George W. Bush’s GSA chief left under pressure after she was accused of trying to steer contracts to her friends, which she denied. Add the great Las Vegas adventure to the scandal sheet, and it seems the GSA is an out-of-control agency. Perhaps the Justice Department should have cracked down in 1998. What goes around comes around.

(Paula Dwyer is a member of the Bloomberg View editorial board. Follow her on Twitter.)

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-0- Apr/12/2012 16:26 GMT